In order to receive the services you need, rather than a one-size-fits all solution, it’s important to be honest and upfront about your situation. This is especially true when it comes to financial matters, whether you're talking with a lawyer, insurance agent or financial advisor. In order for financial planning to work to its maximum effect, you can’t section off your life; you have to consider your entire life. What are your goals, dreams and aspirations? How many kids do you want to have? When do you want to retire? How do you want to take care of your spouse, family and loved ones after you’re gone? All those things have to be considered if you want to build a proper plan.
Some of those things can be subtly different for an LGBTQ (lesbian, gay, bisexual, transgender, queer) person, so you need to bring them to the table or the plan won't be as effective as it could be. There are a lot of concerns unique to the LGBT community that your advisor can help with, but only if they know they should be planning for and helping you navigate those concerns. Here are a few reasons why it is important for the LGBT community to “come out” to their financial advisor:
1. Avoid Missing Out on Financial Opportunities
In an industry that skews more socially conservative than society as a whole, being authentic as an LGBT-identifying person could be a personal risk and an act of bravery, and to have the courage to have that discussion can be challenging for people. That’s particularly true for older generations who came of age in less accepting times of the LGBT community.
But you don’t want to miss out on financial opportunities by not being open with your advisor. The more open people are with their financial advisor, the better outcomes they can get. Some of the biggest missed opportunities for LGBT investors are discussions around wills, prenuptial agreements, cohabitation agreements and power of attorney documents. For example, even though marriage equality is now law, there are still some specific estate planning concerns for the LGBT community. By being open and out about your sexuality with your financial advisor, you can avoid some of those planning pitfalls.
2. Find a Financial Advisor that Follows the Fiduciary Standard
It’s imperative that you choose an advisor that is held to the Fiduciary Standard, like the advisors at Wealth Enhancement Group. This will mean that they are obligated to put your financial best interests before their own and must offer unbiased advice. Want to know if they are working under the Fiduciary Standard? Just ask.
Generally speaking, you are building a relationship with your advisor that’s going to last for years, particularly if you are a younger person. In order for them to look out for your best interests, they need to know the whole story. If you omit this major part of your life, they won’t have all the information necessary to help you accomplish your most important financial goals.
Consider a patient going to see a doctor: when the doctor asks what is hurting, the patient could say “Nothing’s wrong,” or “It hurts here and I’m worried about this.” Which one would the doctor find more helpful in diagnosing? The clear answer, of course! The better an advisor understands your needs, including knowing if you have unique planning considerations as a member of the LGBT community, the better they can advise you.
3. Consider Health and Long-Term Care
It’s not unusual for the LGBT community to remain “in the closet,” especially in professional settings. But hiding this detail from your advisor could result in an incomplete comprehensive plan that doesn’t account for your own planning needs and goals.
For example, health concerns can vary between males and females. Same-sex couples are more likely to suffer from the same diseases, making life insurance and health care planning all the more important. Comprehensive planning can be even more important for transgender individuals, who could face staggering health care costs. Combined with health concerns, life expectancy also comes into play.
In financial planning, mistakes made today might not show up for decades. Forgetting to plan for same-sex long-term care accommodations, for instance, might only show up halfway through retirement. Your financial plan today may influence your lifestyle for the rest of your life, so make sure you are open with your financial advisor so they can help plan accordingly.
4. State Laws May Impact Your Financial Planning
When creating your financial plan, it’s important to review and understand the impact federal, state and local laws could have. For example, the landmark Supreme Court decision to legalize same-sex marriage in all 50 states resulted in financial benefits for same-sex couples from federal programs, such as those administered by Social Security, the Internal Revenue Service (IRS), and Immigration Services.
As state laws work to catch-up, married LGBT couples need to pay attention to state laws that could impact their financial plans involving property ownership, parental and adoption rights, inheritance, and medical decision-making. There may be differences in state laws that could require additional legal documents and planning for same-sex couples. Your advisor can only help navigate these laws if you are open with them so they know to take these circumstances into consideration.
5. Increased Sense of Security
A 2015 study by the RBC Retirement Research Centre at the University of Waterloo explored whether the added challenges that LGBT adults face—feeling the need to stay in the closet, for instance—might have an impact on retirement planning. The study found that feeling supported and being out made LGBT respondents feel less uncertain about their retirement prospects and more likely to have financial planning in place for later in life, including wills and personal health directives.
The important thing is to be open and honest and be in an environment where you can speak to an advisor who's going to be able to look at all the pieces of your life and put a plan in place that works for you.
To put it simply, what difference does sexual orientation or gender identity make when it comes to financial planning? 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 being open with a trusted advisor to understand and navigate these special needs will save you the trouble of having to course-correct later in life.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
CFP®, ChFC®; Series 7 Securities Registration,1 Series 66 Advisory Registration,† Insurance License As the key point of contact for the team, Dustin works with the Roundtable team of specialists and advisors to create, monitor and adjust your comprehensive wealth management plan. Before joining Wealth Enhancement Group, he created and implemented custom financial planning strategies at a Fortune 500 financial services company....Read More