Where to Put Your Money; Small Gay-Owned Financial Firms and Powerhouse National Companies Alike Tailor Their Services to Lesbian and Gay Consumers. (Personal Finance)

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In February, G&L Internet Bank, a Web-only bank head-quartered in Pensacola, Fla., announced it would shut down after just three years in business. The bank's chief mission was to serve financial needs specific to gay men and lesbians.

The closure signals not only the end of gay participation in the moribund Internet banking industry but perhaps something more significant as well--the changing role of gay-owned and gay-operated financial service companies.

As an increasing number of mainstream financial service companies turn their attention to the gay and lesbian market, smaller, gay companies have found they have to work harder to prove their importance to gay consumers. "I don't think [gay people] have much trouble finding financial institutions to bank with or, by now, gay and lesbian stockbrokers and financial planners within mainstream firms to deal with," says Andrew Tobias, the openly gay treasurer of the Democratic National Committee and author of The Only Investment Book You'll Ever Need. "We're pretty comfortable flying on mainstream airlines, shopping in mainstream supermarkets, and banking at mainstream banks."

Some officials at gay-owned and gay-operated financial firms don't disagree. Simply being a gay company marketing to gay consumers is not necessarily enough, they say. This is especially true now that "the larger companies with deep pockets realize it is much more expedient to be sensitive to [gay issues]," says Kermit Johns, president of Christopher Street Financial, a New York-based investment and advisory firm.

And it hasn't helped that these larger firms have used their deep pockets to actively pursue the gay market. Ken Schaefer, a financial adviser with Merrill Lynch's New York City-based Private Client Group through the United States, which caters to high-net-worth individuals, says nearly 95% of his client base today is gay or lesbian.

"Historically, people went to gay for the comfort level," he says. "They were not comfortable sitting down with a straight planner who asked embarrassing questions. Now at every finn you will be able to find a gay or lesbian financial adviser, and even if you can't find a gay or lesbian adviser, you will find a straight adviser who is very well-versed in domestic-partner planning.

"The bottom line," Schaefer adds, "is that gay people have a lot of disposable income, and if you are a prudent marketing person, you will figure that out."

That theory--that gays and lesbians have more disposable income than straight people--has long been the subject of much debate. Some economists, such as Lee Badgett of the University of Massachusetts, question the validity of such a blanket statement. "We don't have higher incomes," says Badgett, who serves as research director for the Institute for Gay and Lesbian Strategic Studies, an Amherst, Mass., nonprofit group. She points to a mid-1990s University of Maryland study she authored that showed gay men on average earning about $34,000 annually and lesbians $20,000. "But that does not mean there is not an affluent subniche that is profitable to go after," she adds. …