Helping LGBTI clients get the best financial advice

Ben Power

By

July 20, 2016

A new report from Prudential Financial has found the historic decision to legally recognise same-sex marriage in the US has significantly addressed many LGBTI (Lesbian, Gay, Bisexual, Transgender/Transsexual and Intersexed) concerns around financial matters.

Same-sex couples can file joint tax returns, list partners on health insurance and pay health benefits with pre-tax earnings. They can also ensure their spouse’s interests are protected in the event of their death.

Australia is yet to legally recognise same-sex marriage, but in most areas of financial planning same-sex couples don’t face discrimination.

But LGBTI clients still face some unique financial challenges, and are seeking added trust and openness from their financial advisers.

Clinton Smith, a financial adviser at Melbourne’s Abound Financial & Lifestyle Planning, has been in a same-sex relationship with his partner for 11 years.

He entered financial planning 18 years ago after completing a Bachelor of Business, majoring in financial planning at RMIT. He says financial advice combined his love of teaching, psychology, helping people and numbers.

Smith says his sexuality has created a natural affinity with LGBTI clients, who are a growing proportion of clients.

“I think most of my clients come to me because I am part of the LGBTI community and also because our firm clearly identifies itself as gay-friendly.”

Money can bring out ‘worst in people’

Just 10 per cent of his existing clients are LGBTI, but some 80 per cent of new clients are LGBTI.

Smith says same-sex clients are no different from other clients. “They are just as individual as each of my clients,” he says.

But same-sex couples do have some added considerations, particularly around distribution of assets. “Death can bring both the best and the worst out in people,” Smith says. “I recommend LGBTI clients firstly work out how they want their estate to be distributed in the event of their passing and then consider if there are any potential roadblocks to this – ie, family not accepting/acknowledging their relationship – and potentially contesting their estate. While no one wants to believe this will happen, generally money can bring out the worst in people.”

Smith says if their decision is to have their superannuation pass to their spouse, then a binding nomination can be the easiest way to help get around these roadblocks and give them peace of mind.

For housing, same-sex couples are treated the same as de facto couples. If they are held as a joint asset, the house automatically goes to the remaining spouse in the event of death. If it’s held as tenants in common, a will deals with the portion of the deceased’s property.

Mostly the same but some unique needs

The Prudential Financial report found that, basically, LGBTI Americans have the same financial concerns as the rest of the population. But 45 per cent still said they “need to follow a different path to meet those same needs and urged financial advisors to consider unique needs of LGBTI clients”.

Smith says that LGBTI clients are seeking trust and openness with their advisers. He suggests advisers don’t assume gender when discussing relationships. “Most advisers just assume gender,” he says, adding by referring to ‘partner’ when discussing relationships, the client isn’t pushed into discussing their relationship if they don’t want/aren’t ready to.

Advisers also shouldn’t assume children aren’t involved. In 2011 some 6,300 children lived in same-sex couple families, almost double from 2001. Most of the children (89 per cent) were in female same-sex families.

“Every other aspect is a typical client relationship,” he says. “There is no difference in how we would treat them. We do the same fact find[ing] approach, we learn about them and what they’re comfortable with, and understand what their goals are.”

‘Targeting’ LGBTI clients

The Prudential report has one surprising finding: LGBT income inequality in the US. Lesbian women reported earning less than heterosexual women; and gay men reported earning an average of $56,936, significantly less than heterosexual men earning $83,469.

Smith says his experience is the opposite. “The vast majority of my GLBTI clients would probably be in a better financial position than anyone else coming in,” he says, adding most of them are debt free and have a good earning capacity.

That’s backed up the Australian statistics. Same-sex couples were more highly educated than people in opposite-sex couples, according to the ABS, and were more likely to be working. They were also more likely to work in highly skilled occupations such as managers or professionals and more likely to earn more.

But Smith says advisers shouldn’t target LGBTI clients “because you think they have double income and no kids,” he says. “But because you want to help them and make sure you put them in a better position’

While Smith says his LGBTI clients are no different from other clients, he does get satisfaction helping them. “Last week I had a visit from a same sex couple who after eight years of planning are just about to retire, they are on track to achieve all of their retirement goals,” he says.

He is recasting their super and pension for the last time (with each other as reversionary beneficiaries in line with their wishes). “They have enough income to support their retirement needs with the inclusion of joint age pensions (which we are in the midst of applying for) and they are planning a big trip to Europe next year!”

“The key to engaging with LGBTI community – as with all clients – is to ensure you provide an environment that allows them to be themselves and feel that they can be open in all aspects of the financial planning process, without fear of prejudice,” he says.


TOPICS:   client relationships,  LGBTI

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