Pride Month is a great time to evaluate and enhance your approach to financial planning for LGBTQ+ clients.
In a world where financial advice can seem like a one-size-fits-all model, the unique needs of the LGBTQ+ community demand a more nuanced approach. With over 25 million U.S. adults identifying as LGBTQ+, financial advisors must be equipped to address the distinct challenges and priorities of this growing demographic.
Think about this: On average in the U.S., LGBTQ+ individuals earn about 90% of the median weekly wage for a typical worker, and LGBTQ+ people of color, transgender and non-binary people earn even less. This — without any other challenges or issues — automatically creates a wage gap that puts them at a disadvantage.
And that’s just one of the many reasons you need to tailor your guidance and services in actionable ways to best serve this community.
If you don’t know where to start, here are a few suggestions to equip you with the knowledge and tools needed to provide comprehensive and effective financial planning for your LGBTQ+ clients.
1. Start by getting a better understanding of LGBTQ+ clients’ financial needs.
In general, there is a lack of comprehensive data and research on economic experiences in the LGBTQ+ community, and because of this, it can be difficult to fully grasp the unique needs of this community. What we do know from the limited data available is that LGBTQ+ individuals often face lifelong financial, legal and cultural challenges that impact their ability to save and invest.
For example, lesbian partners experience the double impact of the gender pay gap because women, on average in the U.S., earn about 83% of what men earn, according to the Bureau of Labor Statistics last year. In a lesbian household, this pay gap is compounded.
LGBTQ+ individuals are more likely to experience workplace discrimination, which can lead to lower wages or being passed over for promotions. Even within the federal framework legalizing same-sex marriages, same-sex couples face a dizzying array of legal complexity that is costly and time-consuming to navigate, further impeding financial security and complicating legacy-building.
The stakes are even higher in the health care realm, as LGBTQ+-specific care costs, such as transition support, are often not covered by insurance. And this is just the start.
Take some time to read up about the unique challenges facing LGBTQ+ individuals and understand the unique state-by-state implications that can further complicate their situations as you prepare to build their financial plans. Some actionable advice for financial advisors in this area includes the following:
- Focus on understanding the unique financial challenges and goals of LGBTQ+ clients.
- Stay informed about the specific challenges faced by the LGBTQ+ community, such as discrimination in the workplace, housing and credit markets, and the impact of these issues on financial well-being.
- Help clients navigate the complex landscape of identity documentation and credit reporting, which can be particularly challenging for transgender and gender-nonconforming individuals.
- Focus on strategies that maximize the financial resources of both partners, such as optimizing career development.
- Work to connect clients with supportive networks and specialized financial tools.
Financial planning is about more than investment strategies; it’s about creating a roadmap that helps turn the “what ifs” into reality. For many in the LGBTQ+ community, financial goals go beyond traditional milestones. For example, the journey to parenthood for LGBTQ+ individuals and couples often involves substantial financial commitments.
Intrauterine insemination (IUI) alone can amount to thousands, with in vitro fertilization (IVF) cycles ranging from $25,000 to $50,000. Surrogacy can start at $150,000 private adoption can cost anywhere from $20,000 to over $100,000.
These costs, coupled with the ongoing expenses of raising children, can be a significant deterrent or delay in starting a family, impacting overall financial planning and stability.
The legal framework around parental rights and legacy is also complex for the LGBTQ+ community. For example, in healthcare settings, a non-biological parent listed on a child’s birth certificate may not have established parental rights and could be refused healthcare directives.
A key part of your role as an advisor is to help your clients understand and proactively address these kinds of family issues before they become an emergency.
You already know that the best results come from investment strategies that are tailored to your clients’ goals, but this cannot be overstressed for the LGBTQ+ community. Incorporating a wide range of investment choices, products and options that reflect their values and unique needs helps these clients feel more connected to their financial decisions. What else can financial advisors do?
- Stay informed about the legal landscape and the specific needs of LGBTQ+ individuals, especially those with children from previous relationships.
- Regularly update your clients’ knowledge and documents to include them in effective and sensitive financial planning.
- Recommend strategies such as carefully planning for contingencies with proper documentation reviewing and updating wills and trusts and consulting with a lawyer to navigate the legal landscape, especially regarding parental rights and asset protection.
- Help clients document and plan for caregiving arrangements based on their 'family of choice.'
3. Focus on supporting LGBTQ+ clients’ future goals and legacy.
Joint retirement planning for LGBTQ+ couples is particularly challenging. Same-sex marriage was legalized in the U.S. in 2015, but many same-sex couples have been in exclusive partnerships for decades before then. Also, while some states allowed for same-sex marriage before 2015, these marriages were not recognized in all states, complicating how these couples navigated spousal laws.
This has incredible implications for married same-sex couples navigating retirement. For example, if a long-term same-sex couple married after the 2015 legalization, they will need to take additional steps to secure full benefits from their retirement accounts, pension survivor benefits or spousal Social Security benefits.
Crafting a legacy plan that mirrors your client’s values and family structure is a cornerstone of retirement planning for any client, especially for those in the LGBTQ+ community. You can help these clients prepare for retirement and manage estate planning by helping them carefully identify and document their goals and wishes, including wills, trusts and beneficiary designations.
Healthcare proxies and powers of attorney are essential documents that offer both peace of mind and legal protection. Here are some related steps financial advisors can take:
- Ensure that all legal documents are up to date and reflect the client's current situation and wishes.
- Recommend tax-advantaged estate strategies and help clients build increased healthcare costs into their retirement planning.
- Help bulletproof estate planning documents against potential challenges by including strong anti-challenge provisions and regularly reviewing and updating all beneficiary designations.
As a financial advisor, you play a critical role in helping LGBTQ+ individuals and families pursue financial freedom and confidence. Let’s commit to providing this level of comprehensive support for all of our clients as we work to provide everyone with the best possible financial advice.
Jen Hollers, CFP, CEPA, is head of High-Net-Worth Planning Services and chair of LPL Financial’s LGBTQ+ Employee Resource Group.
(Credit: Adobe Stock)
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.