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Published on June 27th, 2013 | by Healthy Gay Lifestyles


A Closer Look at LGBT Retirement Planning Costs

by Steve Schullo and Dan Robertson

With the Supreme Court decisions on same-sex marriage, the major financial institutions have their eyes on the LGBT community as a niche market. Wall Street investment banks and the brokerage firms are undergoing specific training to address the “complexities” of managing your money in three crucial areas: estate planning, taxes and retirement planning.

The good news is they are cleaning up their act within their own houses by providing a safe working environment and benefits for LGBT employees and their families. According to the Human Rights Campaign (HRC) Equity Index annual survey, Wall Street financial institutions have created safe working conditions for LGBT employees and provided health and pension benefits for their families. The HRC survey gives Five Stars, their highest rating to employers of LGBT employees, to most of these Wall Street banks and to 88% of the S&P 500 corporations. What wonderful news for our community!

The not-so-good-news is when it comes to our finances-Wall Street is still Wall Street. These same financial institutions have Wall Street values, looking out for their own best interests over their clients. There is no secret about this. After all that has happened in the financial markets anything remotely concerning their clients has not changed (NY Times-Op-Ed). While we suggest it’s magnificent that these institutions do the right thing for their LGBT employees and their families, it’s quite another to offer ethical and transparent services to our community. As prospective clients, it’s “buyer beware.” Don’t let this trust ploy to distract you from their high, full service, retail costs. When it comes to estate planning, tax consulting and retirement planning, be informed about their fees before jumping into a “full-service” financial bed with these smartly suited and quaffed reps.

There is a model which can be used to explain how trust can be used against us. In our profession as educators, it’s not uncommon for K-12 teachers to change careers to become “financial advisers/insurance agents” working for large insurance companies. These former teachers in-turn sell expensive and inappropriate retirement products, mostly annuity products, to their former colleagues! Teachers routinely trust this former teacher to do the right thing–NOTHING IS FURTHER FROM THE TRUTH. Just because a Wall Street investment bank or brokerage firm has LGBT reps does not mean they are looking out for our best interests. Understanding our financial complexities is wonderful, but always know what you are paying. Since Wall Street does not have to disclose their costs, we keep our finances and investment far away from Wall Street institutions. We use our local credit union for checking and saving and learn about investing with Vanguard (Vanguard is explained below). It’s that simple. Here is our story.

The authors have addressed these complexities over our 38 year relationship with particular attention to costs. Retirement planning, taxes, trusts, health directives, power of attorney, child adoption, etc. require much more than signatures. When we want help with trusts and power of attorney, we pay an hourly rate to local professionals. We know many older same-sex couples also have addressed financial futures without support or recognition from Wall Street.

Ripped off at first we meandered through our mistakes (purchasing annuities, investing in a non-traded real estate trust scam, and blowing a wad on tech). As a result we discovered how easy it is to avoid paying a ton of money to any big financial institution or our friendly local money manager. This is the challenge in our commentary.

“Saving for retirement” is rated the “top concern” by 38% of LGBT respondents to a survey conducted by Wells Fargo. At the beginning of our marriage, in 1975, retirement savings were hardly a thought. Education remains our most important primary long-term investment.

We became teachers, knowing the safety and acceptance in this profession. We liked working in the classroom — it’s performance art, fun (often), important, and in Southern California, safe. Like many teachers we were turned off by focusing on finances. The LGBT community’s attention was on the AIDS epidemic, a growing reminder of our social pariah status. At the time our home, hospital visitation rights, etc. would be non-existent if some financial or medical disaster happened to either of us. We were lucky to escape awful surprises.

We hired an attorney to create a revocable living trust to protect our house, retirement plan and health care directives to ensure visitation rights if needed. Both of our names are on all possessions and credit union accounts: homes, cars, checking and savings accounts and as beneficiaries of our spouses’ investments and pensions. The hassle is collecting all the necessary information, knowing what you want, agreeing on how the estate might divide if you’re both ex post facto. We paid a fixed fee for the professional services to complete this paperwork.

We started saving with tax shelter annuities thinking we would never have to look at retirement saving again until “we were slammed in the gut,” (Quote from Steve in PBS Frontline: The Retirement Gamble). We realized we were being ripped off by high costs and inappropriate insurance contracts. We eventually got out of our annuities and invested in low-cost mutual funds. We bypassed Wall Street Investment banks, well-known brokerage firms and brokers. Brokerage money managers are expensive and have the job of building a large “bottom line” for shareholders, not us!

Wall Street’s values and financial schemes wrecked havoc on the middle class. Without a thank-you for their bailout they have been without conviction, hardened bedfellows with congressional banking committees, the Securities and Exchange Commission, weak Department of Justice and other federal regulators. Obama’s appointees have each done their stint with Goldman Sachs or Morgan Stanley. You might think we don’t like them. You’re right, even while we applaud their changes within their institutional walls on the behalf of treating their LGBT employees fairly.

Soon the legal landscape will change as LGBT folks become “sanctified.” Some of us may have domestic partnerships, others married, some with children and still others might remain in legal limbo. This will be a cause for angst as we sort out the changes, but it doesn’t mean we jump into a rescuer’s arms, but rather, seek out a local, fee-only fiduciary advisor. These people put your interests ahead of any shareholders or fat cat.

Tax and estate planning can be addressed separately by professionals who charge by the hour and have fiduciary standards. A fiduciary is a legal term which requires professionals, such as an Attorney or CPA to look after the client’s best interests over their own. Unlike Attorneys and CPAs, Wall Street brokers and the huge brokerage firms have no legal requirement to look out for your best interests. A fiduciary standard was part of the recent Dodd/Frank regulations. Then Wall Street fought long and hard with millions spent on lobbying to take out the fiduciary standard and replace it with the “suitability” standard. (Wall Street helps write financial regulations! and Former SEC Secretary Arthur Livett’s Take on the Street).

What the hell is “suitability?” Your guess is as good as mine. But I think we all know as long as Wall Street continues its status quo of looking out for their bottom line the clients will get screwed. Don’t be part of it.

Let’s remember, the LGBT community has important advantages:

  • A history of navigating social requirements on our own,
  • A natural motivation to keep financial matters in our own control, such as keeping debt low,
  • Higher household couple incomes with more discretionary money, even in low salary professions. Eighty percent of the same-sex couples don’t have children.

We keep our money in a low-cost investment company which looks out for their clients’ best interests: The Vanguard Group. Unlike the vast majority of Wall Street’s financial firms, Vanguard does not have shareholders. We, the clients, are the beneficiaries in a unique corporate structure that matches with their Mission Statement-to put clients first! Vanguard shares any profits with investors through lower costs. They have penalties which discourage speculators’ high turnover trading, and pour those penalty fees into keeping costs low for their long-term savers.

Started by the venerable John Bogle in 1975, the first index fund has grown tremendously. Investors wised up-we can’t beat the market averages by chasing last year’s top mutual fund performers. Those returns diminish when you deduct fund costs. An average 8-9% return each year, compounded and left alone will give you a peaceful solution to your retirement dilemma. Note most brokers and advisors continue to charge their high fees no matter how low your portfolio goes. It doesn’t matter to them.

Vanguard is the largest mutual fund company in the world for good reason. It’s low cost structure with no commissions, little trading and the index strategy propels them to be the most competitive investment company in the world. With millions of investors and two trillion in assets, Vanguard is doing something right, right for the clients above anybody else.

By following the costs, discovering investing and retirement basics you can learn to manage your retirement plan so you keep more of your money. If you need help, contact either of these organizations NAPFA (Once there, click on “Finding an Adviser” and then check “Planning issues for same-sex and unmarried couples”) and Garrett to locate a fee-only, fiduciary financial advisers near you.

Best of fortunes!

(Note: This article is an expanded version of our Huffington Post, Gay Voices article published on June 13th, 2013).


Steve Schullo and Dan Robertson, authors of Late Bloomer Millionaires (Amazon)

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