LGBT Financial Advisory
The ultimate guide to understanding financial issues common to the LGBT community
|Written by Tom Yeung, CFA | CDFA
Investment Advisor & Fund Manager, Jurnex Financial Advisors
In this ultimate guide, we’re going to cover the importance of LGBT financial advisory.
If you’ve heard it once, you’ve heard it a thousand times.
You should save more money for retirement
But why does it sometimes feel so hard to save money? According to TD Ameritrade, more than half of all Americans feel unprepared for retirement. Many people blame themselves. That they don’t have self-control in how much they spend or save.
And it’s even harder for LGBT individuals.
It’s often hard to save because we find talking about money awkward. According to a study by Wells Fargo, people see personal finance is even more challenging to discuss than politics or religion. It’s even worse for LGBT people because there’s usually already a current level of awkwardness with family.
That’s the reason why so many LGBT families fall behind in financial planning: we often don’t have the right support. We earn money and then spend it, hoping that things will “work out in the end.” And most of us do this because we’ve never been taught any other way.
That’s why having the right LGBT financial advisor can be so valuable.
Financial advisors are professionals whose job is to help people manage their finances.
Nothing is embarrassing about asking for help when you need it.
And if you are an LGBT individual or family, having an LGBT financial advisor can make this process even more comfortable. Not only will having an LGBT advisor remove the awkwardness of talking about money. They will also understand issues that are specific to the LGBT community.
Imagine the power of having someone on your side who understands your challenges, goals, and dreams. That’s the benefit of finding a good LGBT financial advisor!
Who needs financial advisory?
It turns out everyone could use a sound financial plan.
- Too young? It’s never too early to start saving for retirement. The power of compound interest that every dollar saved in your 20’s will turn to seven dollars in today’s money by the time you retire.
- Too old? We hear people say that you must be young to save for retirement. This is entirely untrue! It’s never too late. Someone saving in their 50’s will still see their net worth double by the time they retire.
- Already retired? Even for those who have already retired, a sound financial plan can help them get the most out of their savings and Social Security. Good cash-flow intentions can make sure people don’t outlive their assets.
- Already have your plan? Even individuals who understand finance can benefit from having an advisor who can help them navigate tax savings and local regulations.
But what about LGBT individuals and families?
We’ve asked this question too.
There are very few resources for LGBT-specific financial issues. It’s almost as if LGBT issues aren’t necessary!
LGBT people need competent financial advisory, just like everyone else. And our needs are unique. Issues such as same-sex healthcare, adoptions, and managing dual-incomes are all special issues that can benefit from sound advice.
This article will cover the three critical issues of LGBT financial advisory
- What is LGBT financial advisory?
- Why is it so important?
- Do you need an LGBT financial advisor?
By the end of this guide, you will have a good sense of what LGBT financial advisory is, and whether a specialized advisor is right for you.
What is LGBT financial advisory?
It sounds simple enough.
LGBT financial advisory is a service that specializes in helping LGBT people navigate their financial futures.
In other words, they help LGBT individuals and families manage money.
LGBT friendly ≠ LGBT specialists.
Many firms will market themselves as “LGBT friendly.” This is a beautiful thing – having businesses that are accepting of LGBT clients. But you must remember that LGBT-friendly does not mean they have experience
For example, imagine a wedding planner with no experience in LGBT weddings. They might be friendly in helping you plan your wedding. And they might do a fantastic job at it as well. But they’re going to be learning their role on the fly.
Do you plan for bridesmaids or groomsmen? Which side of the aisle should you put each family? How to handle two mother-of-the-brides?
The stakes are even higher for financial planning
In financial planning, mistakes made today might not show up for decades. Forgetting to plan for same-sex long-term medical care, for instance, might only show up halfway through retirement.
LGBT financial advisors are experts in dealing with LGBT finances. This means having a keen understanding of topics such as discrimination laws, adoption rules, and same-sex retirement planning.
Your financial plan today may influence your lifestyle for the rest of your life. So make sure you spend the time to plan it well.
Why is LGBT financial advisory important?
As an LGBT individual, have you ever felt left out? It could have been for any number of reasons. Perhaps you just felt different from others growing up. Or maybe you didn’t have an LGBT support network to help guide you through in the beginning.
So while everyone knows it’s important to say for retirement, the LGBT community faces additional challenges that others don’t.
1. LGBT people are less likely to be prepared for retirement
According to the Transamerica Center for Retirement, LGBT people score about 10% lower than heterosexuals on ARRI scores, a measure of retirement preparedness. There’s a stereotype that gay men and women spend more. But this is a myth. LGBT people are less prepared for retirement…
…because they earn less than their peers
Despite making large strides in marriage equality, LGBT people still face workplace discrimination daily. And over time, this discrimination means LGBT people get paid less than their peers.
According to the U.S. Census data, LGBT people earn may earn 10-32% less for the same job performed. Over time, this difference creates enormous distortions in the investment world.
Imagine driving a car race where everyone is driving the same type of car except you. You have a vehicle that goes 10-32% slower than everyone else.
Does that sound depressing?
It’s no wonder why LGBT people tend to be less prepared for retirement!
So how can you keep up?
You find a better route!
With the right shortcuts in place, it becomes possible to keep up with the faster cars.
Similarly, having the right financial plan can help you keep up with your peers. There are plenty of tax savings and retirement vehicles that most Americans overlook. There are also LGBT specific resources that can help people in the community get ahead.
If you’re coming in at a disadvantage, we need to make your dollar stretch further. And having a good plan can help.
2. LGBT people are more likely to lose their jobs
Not only do LGBT people earn less than their peers. They are all so more likely to leave the workforce. There are several reasons for this.
Both gay men and women report retiring earlier than expected due to health reasons. 39% of LGBT people reported retiring sooner due to ill health, compared to just 32% of heterosexuals.
LGBT people are also more likely to lose their jobs. A study published by the online journal BMJ Open found that both male and female sexual minorities were twice as likely to have been unemployed and uninsured as their straight peers.
The authors commented: “Most of the study participants were white and their families had middle-to-high household incomes. It is striking that these sexual orientation disparities are pervasive among participants who predominantly hold high social status. Given this high social status, we may have underestimated levels of unemployment, being uninsured, and having poor health-related quality of life.”
Therefore, LGBT families need better contingency plans
Imagine you’re back in that car racing example. Not only is your car slower, but it’s also more likely to break down!
This means you need better contingency planning.
Every family should prepare for the possibility of unemployment. But this is especially true for LGBT families. As an LGBT person, you need more disability and life insurance than the average person to help offset these risks.
3. LGBT people often have smaller support networks
Have you ever felt like you need to work harder than everyone else to create a support network?
You might be onto something.
Traditionally, the LGBT community has had fewer support networks in place. A gay or lesbian individual who suddenly gets sick doesn’t have a community to turn to unlike, say, Seventh-day Adventists.
In fact, according to a study by the Williams Institute, LGBT youth are ten times more likely to be homeless than their straight peers. 68% of them have experience rejection of some kind by their families.
That’s why it often feels so difficult to find and create support networks. And that’s what makes building your support network so important!
Creating your support network
Growing a good network takes time. Relationships and investments you plan they may take decades to show their true works. That’s why it’s never too early to start.
- Financial: Having personal savings to help overcome life hurdles
- Relationships: Building lasting family and friend relationships for companionship and care
- Community: Knowing where you will live and your role in your community
What makes LGBT financial advisory different?
LGBT financial advisory is far more than merely having an LGBT friendly advisor. It means having an advisor that understands your situation.
Gay and lesbian families face very different challenges from heterosexual couples. Your advisor must understand:
- The potential discrimination you might face in the workforce.
- The greater need for contingency planning
- That both spouses may earn less than their heterosexual counterparts
You need a plan that fits you. So what exactly makes LGBT financial advisory different?
1. Different values
Everyone has had this experience: it’s Thanksgiving again. You and your family have assembled to have a meal together. The mood is jovial, but everyone is on edge. Because everyone knows that someone will bring up politics or religion at the table. Every family has that one person…
…That one person who you disagree completely with.
This family member may be far right or far left in their political leanings. But the thing these people have in common is that they are
- Extreme in their views
- Unwilling to budge in their opinions
Even a brief search on Google turns up millions of results about surviving politics at Thanksgiving.
Having a conversation with these people is not only annoying. It makes your head want to explode.
Now imagine having that negative type of person as your financial advisor…
Terrible, isn’t it? That’s why so many LGBT individuals and families decide to do things themselves. Why subject yourself to judgment by a stranger whose worldview doesn’t align with your own? And unfortunately, the financial advisory world is filled with people who are like this. Financial advisors tend to come from a conservative background.
There’s always another person at the Thanksgiving dinner table though…
…That one person you DO agree with
Back to the Thanksgiving dinner table…. Now, imagine talking to one of your favorite family members. This could be your favorite aunt or uncle. Nephew niece or brother. Just someone who you *enjoy* talking to.
Often, this is the first family member you might have come out to. Their reaction was probably either nonchalant or pricelessly funny.
Sister: “Oh, you like guys too? I guess that’s just ANOTHER thing we have in common now! Is your boyfriend cute? Can I borrow him for a day?”
Imagine having that type of a person as a financial advisor. All of a sudden, talking about finance can be FUN.
Simply having a financial advisor who understands you will help immensely. Rather than being an awkward topic, money can be talked about openly.
Not only will you have a better understanding of your financials, but you will also have a better plan by the end of the process.
2. A greater understanding of unorthodox relationships
According to the Transamerica Center, only 32% of LGBT people are married, compared to 58% of heterosexuals.
Not only are LGBT people more likely to stay unmarried. They are also more likely to enter unorthodox relationships. And each of these relationships requires specialized knowledge and planning.
Simply walking into your nearest Fidelity branch and hoping for the best is often not a right solution. You may get someone who empathizes with you. But do they understand how to help you navigate these types of relationships?
A. Single, unmarried
For LGBT people who are single and unmarried, long-term financial stability can pose a challenge. Although having financial freedom can be beautiful, the territory comes with having to rely on yourself to generate income. Single people are keenly aware of the risks of falling ill or becoming disabled.
How to manage?
Single LGBT individuals should consider disability insurance. This will protect you from losing all your income should you be unable to earn. You should also have a higher savings rate since a larger nest egg can help smooth transition between jobs.
B. Long-term relationship, unmarried or split finances
Even though gay marriage is now legal in all 50 US states, many LGBT couples decide not to get married or combined finances. But being in an unmarried long-term relationship poses another set of challenges.
How to divide assets?
Here is where an LGBT financial advisor can help. Managing split or shared portfolios can require specialized tracking.
- Separate finances. Some couples may share certain expenses such as rent but split everything else. An experienced LGBT financial advisor must understand how to manage two different portfolios.
- Combined finances. Other unmarried couples may combine funds. Because unmarried couples do not qualify for marital tax exemptions, they have to be careful about triggering gift taxes.
How to transfer assets?
Besides gift taxes, asset titling can also become complicated between unmarried couples. If one partner passes away without a proper will, the assets may transfer to next of kin instead of to their long-term partner. A good LGBT financial advisor will recognize these issues and help you navigate the legal options.
Some gay couples decide to add a third or even more members to their family. While polygamy (marriage) is not permissible in the United States, living with two or more loved ones in the same household is perfectly legal.
Polyamory can present challenges that most financial advisors don’t have experience in. How do you divide assets between three or more people? How can you make sure each person’s financial goals are met? But having three or more working people in the family can smooth out income. And once you have the general concepts in place, managing polyamorous relationships financially is similar to managing assets of unmarried couples.
D. Open relationships and domestic partners
Sometimes, LGBT couples keep separate finances, but still want to protect each other.
Couples in these situations need well-written estate plans and living wills. If one of them were to become disabled, the other may need not only visitation rights but also a power of attorney to decide medical proceedings and probate processes.
3. Gay couples are four times more likely to adopt children
Studies have shown that compared to the non-adopted, adopted kids:
- Have better health
- Have more one-on-one attention from a parent
- Are more involved in their extracurricular activities
- Become as well-adjusted as their peers
LGBT families still face legal and financial challenges to adoption. Legal rights to adoption and parental rights vary significantly across the United States. According to the New York Times, some states like Maryland and Massachusetts prohibit discrimination based on sexual orientation. Others such as South Dakota can create religious exemptions
The inconsistencies of state laws create a tangled network that LGBT couples must navigate.
When LGBT couples find that they are unable to both adopt a child, what do they do? In the US, they often resort to having just one parent adopt. The other partner is not named on the child’s birth certificate.
This certainly feels unfair.
But for families who are forced to take this route, multiple financial issues can come around. How does the other spouse (not on the birth certificate) transfer money to their child without incurring gift taxes? What about being named on a will or estate? If you find yourself in this situation, you need to create financial plans and documents that reflect the legal status of the parent-child relationship.
Some states have a process that allows a second parent to adopt a child without terminating the first parent’s legal status as a parent. 15 states in the US allow this
- District of Columbia
- New Jersey
- New York
You should know which law applies to you and your family. And know what it means for your financial plan.
4. Greater chance of discrimination in the workplace
According to the Pew Research Center, the majority of LGBT people have reported being the subject of slurs or jokes based on their sexual orientation or gender identity.
Unacceptable! Especially in the workplace.
But any LGBT individual can tell you that these slights are still all too common. There is still no federal law specifically designed to prevent discrimination based on sexual orientation. Half of LGBT employees in the US remain closeted at work.
“And the top reason LGBTQ workers don’t report negative comments they hear about LGBTQ people to a supervisor or human resources? They don’t think anything would be done about it — and they don’t want to hurt their relationships with coworkers” – Human Rights Campaign.
LGBT individuals need to plan for discrimination
If you can’t change the world yourself, you can at least plan for it.
LGBT people are at a considerable disadvantage. So what should you do? Many would speak up. It’s undoubtedly a massive injustice! But others might stay quiet to protect their livelihood.
Regardless of your decision, you still need a more significant financial cushion. There’s a higher chance that you need to prepare for periods of undeserved unemployment or under-employment (when you’re not employed at your full potential).
And most importantly, you need a financial advisor who understands that LGBT people still routinely face discrimination. It’s an issue that most heterosexual people never think about.
Greater medical needs
Surprisingly both LGBT men and women families tend to have greater healthcare needs.
This means gay and lesbian couples need to plan for higher healthcare expenditures in life.
- Men: Gay men are 44 times more likely to contract HIV over their lifetimes.
- Women: tend to live longer and spend 30% more than men on healthcare.
Having same-sex couples in a family can also magnify gender-specific risks. Both partners are more likely to suffer from the same disease.
Higher health risks also mean that insurance becomes far more valuable. Someone who *knows* they will need more healthcare should purchase more coverage. That’s why car insurers charge more for drivers under 25. The insurance companies know that younger drivers are far more likely to get into accidents.
As an LGBT individual, you should consider additional health insurance to boost your current coverage.
What are the benefits of LGBT financial advisory?
Now that we have covered why LGBT individuals have different financial needs than their straight peers, we will now cover the benefits of having an LGBT financial advisor.
1. You have someone who understands your needs
Opening up your financial life can feel strange. It’s already awkward talking about your salary in front of friends. But imagine telling someone about everything.
By everything, we mean not just your salary. But you are also talking about your savings, your spending habits, your financial goals, your life fears…everything. That could make anyone feel uncomfortable.
But that’s what a financial advisor needs to know if you want their help.
As an LGBT individual, it is often easier to open up to someone who’s walked in your shoes and understands your needs. Louis Brandeis famously said that “Sunlight is said to be the best of disinfectants.” He might not have had financial planning in mind, but shining a light on financial issues can help you illuminate the solution too.
Have a retirement issue you’re not sure how to fix? Having someone examine the problem can help!
2. You will have better financial outcomes
Those willing to fully share their financial status with advisors can reap enormous dividends. The better an advisor understands your needs, the better they can advise you.
Think of the opposite. Imagine, for a moment, a patient going to see a doctor. The doctor asks, “hey, what’s hurting?”
The patient could say
- Unclear answer: “Nothing’s wrong. I’m excellent!”
- Clear answer: “Well, it hurts right here, and I’m worried it’d get worse…”
Which one would the doctor find more helpful in diagnosing? The clear answer, of course!
The more open people are with their financial advisor, the better outcomes they can get.
One of the most common questions asked by financial advisors is “what is your greatest financial fear?” These are HARD questions to answer.
- Running out of money
- Not being able to afford healthcare
- Accruing too much debt
Having someone who understands you makes it easier to open up about these topics. And the more you open up, the easier it can be to SOLVE these issues.
3. You will enjoy your wealth more
In the end, financial advisory should help you better enjoy your money.
Often, this involves making budgets and saving for retirement. Things that sound not fun at all! But a competent financial advisor should show you this in a different light:
Once you have a budget, you can spend guilt-free!
Imagine having a $10,000 budget for a big trip around the world. You KNOW exactly how much you can spend. So go ahead and book that five-star hotel. Live the way you want, knowing you’re still spending within your means.
That’s because once you have a budget in place, there’s no need to second-guess yourself. “Well, I know I have enough money… but maybe I should spend less on the hotel or flight…”
No, no, no! You can go ahead and enjoy your fabulous trip around the world. Your savings have already been taken care of.
That’s the magic of financial advisory
Signs you need LGBT financial advisory
Now you know the importance of an LGBT financial advisor, you should consider whether one is right for you. Here are the three main signs that you should work with one.
1. You like working with people who understand you
Have you ever met someone who you instantly get along with? You might have just met someone for the first time. You strike up an interesting conversation, and within minutes, the two of you are sharing thoughts like old friends.
Imagine a third-person wandering by and asking the two of you: “wow, how long have you two known each other?”
You’d answer: “well, we had just met 15 minutes ago!”
It turns out that some people are wired to enjoy close relationships more than others. These are relationships where you connect deeply with others — ones where you can talk openly about your views, emotions, and dreams.
If you’re the type of person who appreciates these kinds of relationships, this is a clear sign you could benefit from having an LGBT financial advisor.
People are defined by more than just their sexual orientation. But you’ll certainly notice working with someone from a similar background as yourself.
2. You have a special life circumstance
When you are looking for a financial advisor, you should ask yourself this important question:
Do I have something in my life that’s different from others?
It doesn’t have to be LGBT related. Just anything different from everyone else.
- Financial: dual-income or non-traditional work
- Social: desire to relocate or different spending habits
- Investments: avoidance of investing in anti-gay companies
- Family: non-traditional relationships or adoptions
Exceptional life circumstances often warrant having a specialized financial advisor. Someone who understands your particular case.
No two individuals have the same financial plan. But LGBT individuals and families tend to have more unique needs when compared to the general population. And having a specialist to understand these special needs will save you the trouble of having to explain everything to a stranger.
3. Your financial planner doesn’t even know you’re gay or lesbian
Most LGBT individuals don’t let their sexuality define them. And that’s fine. We’re all multi-faceted people, and that’s what makes everyone unique.
But sexuality is still an essential part of anyone’s life. It can determine who you build a family with. Or where you live, or what your lifestyle looks like.
Hiring a financial planner who doesn’t know your sexuality is like reading a book with half the chapters missing.
So if you haven’t come out to your financial planner, it’s time you find a new one!
Why haven’t you come out to your financial advisor?
1. They haven’t bothered to ask
Many financial advisors might forget to ask you about your sexual orientation. But more often, it’s a natural fear of being rude. They understand that many people aren’t comfortable talking about their sexual lives, and so advisors often tend to skim over this important subject
2. You have been shy about telling them
Don’t blame yourself if you haven’t come out to your advisor. Coming out is hard, and you don’t know how your advisor might take it. Fear not though, an LGBT-specific financial advisor should be unsurprised when you tell them you’re gay. “Why else would you be calling?”
3. They are a robo-advisor
Robo advisors are fantastic as basic financial planning tools. But they have limitations. Usually, robo advisors don’t ask because they aren’t designed to advise on specialized issues. And this includes many problems common to the LGBT community.
LGBT financial advisory is a specialized practice that helps LGBT individuals and families navigate life’s challenges. And having a competent financial advisor you connect with can help produce far better outcomes.
Also, financial planning isn’t just about saving money – it can help improve your life TODAY as well. Having a well-thought-out budget can help you spend guilt-free today, knowing you have enough saved for tomorrow.
Your financial plan will have an enormous effect on your life. So it makes sense to have a good plan written up.
There are also intangible benefits to knowing your financial future is secure. Knowing that you have enough saved in the bank so you can enjoy spending what you have today.
Whether you’re heterosexual or part of the LGBT community, you deserve to have a sound financial future. It’s your money. And you should be in control.
Where to find more resources
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