Trust and empathy: How financial professionals can best serve the LGBTQ+ community

Despite progress, discrimination persists

In terms of broader acceptance, the LGBTQ+ community has made strides over the last few decades, particularly with marriage equality and workplace discrimination cases decided favorably by the US Supreme Court. Despite these positive developments, the community continues to face discrimination and is less financially secure than the general population, according to a 2022 report from the National Endowment for Financial Education (NEFE).

The survey found that 60% of respondents who identify as a member of the LGBTQ+ community say they typically live paycheck to paycheck. In addition, according to a 2023 paper published by The Williams Institute at the UCLA School of Law, the proportion of those living in poverty remains higher among LGBTQ+ individuals (17%) as compared to heterosexual cisgender people (12%). Bisexual women and transgender people of all sexual orientations report poverty rates above 20%.

“One in three respondents has experienced discrimination in financial services”

Furthermore, despite the existence of certain legal protections for LGBTQ+ people, discrimination still exists. The NEFE study states that one in three respondents has experienced discrimination in financial services, and a 2018 Experian survey found that 62% of respondents within the community said they had experienced financial problems because of their gender identity or sexual orientation. Challenges they faced included housing discrimination, wage discrimination, and lack of career advancement. This has led to retirement shortfalls, where many are playing catch up from periods of unemployment due to the country’s long history of anti-LGBTQ+ laws. Unfortunately, the relatively new legislation cannot erase the many years without protections from discrimination in employment. And recent setbacks across the nation such as the so-called “Don’t Say Gay” law in Florida, anti-drag bills in more than a dozen states, and limits and bans on books with LGBTQ+ content in school libraries are reminders that the community is still threatened.

The risk of higher expenses

In addition to financial hurdles caused by discrimination, individuals within the LGBTQ+ community often incur higher expenses. Many feel they must move to cities where they can feel safe, which carry a higher cost of living.

“Most of us in the queer community have gravitated toward high-cost metropolitan areas because they are the most accepting and progressive,” said Jennifer Dazols, a financial planner in San Francisco, in an interview for Mic magazine. These high costs can be compounded by unequal mortgage terms: A 2019 report by The Proceedings of the National Academy of Sciences (PNAS), found same-sex couples were offered inferior terms and paid, on average, 0.0 2% to 0.2% more in interest and fees than different-sex borrowers.

Healthcare presents another challenge for some members of the LGBTQ+ community. According to Cigna Healthcare, LGBTQ+ people are “at higher risk of certain conditions, have less access to health care, and have worse health outcomes.” Dazols noted that “The LGBT community has high medical costs in areas such as transgender health care, cost for HIV/AIDS treatment, and fertility treatment.” The Philadelphia Center for Transgender Surgery, for instance, lists menus of procedures for both male-to-female and female-to-male transitions that total well over $100,000. Gender-affirming surgeries can cost approximately $100,000. Continuing care, including hormone therapy, can cost between $25,000 to $75,000. And according to a Yale School of Public Health study, transgender individuals are up to six times more likely to seek mental health care resources for anxiety or mood disorders and often require prescription medication as a result.

The importance of financial literacy

Because of their lived experience, LGBTQ+ people may not have had the same access to information as the general population. For example, many lack positive role models, such as their parents, if they were kicked out of their homes for coming out. As a whole, the LGBTQ+ community feels less prepared to reach their financial goals, with retirement as a high priority. A study from Prudential Financial states that LGBTQ+ respondents overwhelmingly say that they need more information and experience in order to tackle their financial goals. They are much more likely than general population respondents to say that they need to gain more knowledge or experience across all goals and across generations. The study also concluded that they are less likely than the general population to have a will or estate plan (19% vs. 26%), less likely to have 401(k) savings (35% vs. 40%), and are saving less of their paycheck (20% vs. 25%) in retirement accounts.

“Our strength has always been the ability to community organize and advocate,” Dazols said. “We definitely need more financial literacy programs in our non-governmental organizations and community centers. We need to build mentorship programs and diversity & inclusion groups in our businesses.”

What are they looking for in a financial professional?

Marriage equality and expanded workplace protections have changed lives in profoundly important ways, but there are still additional considerations for LGBTQ+ investors regarding retirement, estate planning, and inheritance. These individuals are seeking an LGTBQ+-friendly financial planner who can help uncover potential hurdles that many members of the community face. A study conducted by the Spectrem Group found that although LGBTQ+ investors use the same financial providers as the general population, 65% of them say they would choose a financial professional who is familiar with the community’s estate planning needs regarding estate planning, trusts, and wills.

“It all boils down to who you can trust, who puts your interests first, and who can communicate your financial plan in a way that you understand.”

“It wouldn’t matter to me if [my financial professional] weren’t gay, but the fact that he is adds to my comfort level since he’s ‘family,’” says Randy Slovacek, a Las Vegas-based LGBTQ+ journalist who has been working with his financial professional for almost 20 years. “I think it’s easier for us to work together as our sensibilities are the same.” However, a lesbian entrepreneur in West Hollywood who does not currently work with a financial professional, pointed out that working within the community can be a plus and a minus. “On one hand, you can feel good that you are supporting one of your own, but even with confidentiality agreements, the community is so tight that it can be uncomfortable for them to know your business,” she says. “It all boils down to who you can trust, who puts your interests first, and who can communicate your financial plan in a way that you understand.”

Ron Hensel, senior vice president and divisional sales manager, retirement, for Global Atlantic agrees, noting that “The most important things that are needed between any investor and a financial professional are trust, good communication, and a plan that is designed to address all of the investor’s financial needs.”

Still, despite progress for the community on many fronts, there is still much work to be done to improve financial resources to adequately serve this market. According to Billy Hensley, Ph.D., president and CEO of NEFE, “The financial education field still has significant work to do to gather sophisticated data exploring financial issues and challenges within the LGBTQIA+ community.” However, he notes, “through a deeper understanding of how this population is being economically restrained, intermediaries like financial planners, counselors, educators, and advocates can better meet the needs to support this community.”