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How Advisors Can Support LGBTQ+ Clients with Comprehensive Planning
• Jake Rivas • June 20, 2022
As a CERTIFIED FINANCIAL PLANNER™ who serves people in the LGBTQ+ community, I’m often asked, “What’s different about LGBTQ+ planning?”
From my perspective, it’s not the planning that’s different. It’s the approach. That starts with understanding that people who are a part of the community often have defense mechanisms in place. LGBTQ+ individuals often build up these defenses because of the discrimination they’ve endured in their lives. Developing empathy that can help you get past these barriers is a crucial skill for financial planners.
It’s been seven years since the Supreme Court made same-sex marriages legal in all 50 states, and a year since it ruled that workers can’t be fired for being gay, so things have certainly improved. But the social aspect of it is not the same.
I’ve seen advisors try to rework their entire financial planning process when they start working with LGBTQ+ clients. They start with assumptions like the client may not be married or they may have a nontraditional household with adopted kids. However, these advisors neglect to treat the person. This is still just a person, a client that’s setting goals.
In the spirit of helping financial planners create more inclusive practices, I’m sharing insight into how I approach LGBTQ+ financial planning. The foundation of this approach is how I plan for all clients: I create an environment that’s judgment-free and as comfortable as possible.
Understand the Barriers
Something you might notice is that LGBTQ+ clients may seem less receptive to advice. I often encounter a “DIY” mentality. As gay people, we like to do things ourselves because that’s our safest bet. This just means your client is likely going to have very specific objectives they want to accomplish, which is certainly not a bad thing.
They might also be reluctant to open the books and share their financial details with you. In this case, I would offer an explanation, saying, “Here’s an example of why I would need to know this information and how it could benefit you because I don’t want to assume the wrong thing.”
You can’t make blanket assumptions. You can’t assume a Baby Boomer client is going to want to pass on wealth to family members. They could be estranged from their family of origin, right? You’ve got to review their beneficiary designations and make sure their wishes will be followed.
It comes down to building a connection and a sense of trust first. That’s in part why I started my podcast, Jake of All Trades, in 2017—it’s the perfect platform to deliver financial knowledge with fewer barriers to begin creating that connection with clients.
Finally, don’t rely solely on a client to educate you on the LGBTQ+ experience. You can tap into resources like the Financial Planning Association’s Pride Planners or even earn the Accredited Domestic Partnership Advisor designation through Kaplan. And if you have a genuine commitment to serve, there’s no substitute for making friends in this community.
Tailor Your Communication
Focus on solving, not selling. I make a point of being transparent and relationship-driven in my practice, but with my LGBTQ+ clients I’m even more direct and fact-oriented. This is about quantifying the value you bring. I’m not trying to sell them on traditional financial planning, I’m trying to solve something for them.
You might also need to adjust for generational differences. I have LGBTQ+ clients who are Millennials and I have retired Baby Boomers. The initial onboarding was totally different in these age groups.
The younger clients were more open and not quite as guarded. Where they’re from also has an impact. You can see the difference in lived experience just in how people interact with you and talk about their money lives.
There are simple things you can do to create a welcoming presence. Communicate through your website and social media profiles that you’re an ally or member of the community using inclusive photography and articles that cover nontraditional families, or join the LGBTQ+-affiliated chamber of commerce in your area.
Be Aware of Blind Spots
There are two planning blind spots I’ve encountered with my LGBTQ+ clients. One is their asset allocation and the other is the amount of life insurance they carry. This relates to financial psychology and the money scripts we create for ourselves based on past experiences.
A gay person might perceive a higher level of risk in their daily life, such as the risk that discrimination could cause them to lose a job. The script in their financial life might become, “I need some safety.” That means they might load up on bonds in their 401(k) and feel like that’s the appropriate investment allocation even though they’re 35.
Among gays and lesbians, high perceived income risk has been associated with a 10 percent1 reduction in the probability of investing in equities. Through educating clients about the risk-reward spectrum, you can help them disassociate social risk with investment risk.
Then there’s the issue of excess life insurance coverage. If an LGBTQ+ client has a relationship with their family, they can often carry around a sense of indebtedness. The script might become “I’ve put you through some heartache by being different, so I must pay you back.” Being generous toward your family is great but taking it to extremes will impact well-being.
Be Open-minded About Goals
The usual financial planning story arc includes a traditional couple who spends decades working and raising children before retiring. Gay people may do something totally different with their lives.
For example, a recent study2 of 1,000 adults in the U.S. LGBTQ+ community showed that saving for experiences like travel and hobbies generally ranked higher in importance than planning for retirement or buying a home. That same study revealed that 63 percent feel most advisors don’t understand their financial challenges.
From an advisor’s perspective, this means being both flexible and competent in offering advice for the many paths someone could take. You need to have planning resources that don’t assume it’s a husband-and-wife situation, or that talk about the Social Security benefits for traditional married couples only and exclude nontraditional ones. Illuminate the possibilities for them so they can envision their future.
There are differences between planning for LGBTQ+ people and straight people, but the fundamentals of the plan are the same.
To me, all clients are individuals with goals as unique as they are—and there is space for each one in my financial planning practice. I hope these insights help you create a safe space for clients to share their whole financial lives with you.
1 Bazley, William, Yosef Bonaparte, George M. Korniotis, and Alok Kumar. “Social Risk and Portfolio Choice.” 7th Miami Behavioral Finance Conference 2016. December 4, 2018. https://ssrn.com/abstract=2863351 .
2 “LGBTQ+ Community Falling Behind on Financial Security.” Nationwide, 2022. June 1. https://news.nationwide.com/lgbtq-community-falling-behind-on-financial-security/.
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