The world’s LGBT population is estimated to be more than 400 million people. This spending power works out at $3 trillion. In spite of this, financial services firms globally have been ponderous in focusing on this market.
Earlier this year, LGBT Capital, a specialist asset management and corporate advisory business for the sector, launched LGBT Wealth. This firm is the first in wealth management to target the LGBT community in Asia and tap into the clear gap in the market.
LGBT Wealth, a joint venture with Financial Partners, a financial advice firm based in Hong Kong, focuses on a growing market but one which is not without challenges, particularly in the context of Asia.
429Magazine discussed with the founder of LGBT Capital, Paul Thompson, the unique aspects of wealth management as regards both the LGBT community and the market in Asia. Thompson firstly described the characteristics of the former.
Thompson: Many people may not be comfortable about talking openly about their sexuality to their Bank or Financial Adviser and a key part of the puzzle would be missed. Talking about financial issues is a very private area and being in a safe environment where our issues are understood is considered very important by most people we have spoken to. In more developed markets such as the US and UK specialist financial services companies have been developed and even some of the major Institutions have introduced ‘LGBT desks’ to provide a service to the LGBT community.
429Mag: Which countries are you tarketing through LGBT Wealth?
Paul Thompson: LGBT Wealth is initially focused on the Asia region with an initial launch in Hong Kong followed by Singapore and the Greater China region. We plan to gradually roll this out throughout the region with quality partners in each country. We have also been approached about rolling this out in other, especially developing, markets.
429Mag: What specific needs would you identify regarding LGBT customers of yours?
Thompson: Generally the LGBT community will have a different life cycle to the mainstream market. Not having children and all the focus that gives, can provide specific challenges but also significant opportunity. With higher disposable income and without the 20 years plus supporting children there is an opportunity to better plan for the future and even retire early.
Research has shown that despite the higher disposable income, the LGBT community does not plan sufficiently for the future and as such retirement is a very important consideration for the LGBT community.
Partner protection is another significant issue for the LGBT community that is very often overlooked. Without the traditional marriage structure, special attention needs to be paid to partner protection. Even those who are married or formally partnered may not have the same benefits. There are many issues to be aware of when buying a home, especially with a partner.
429Mag: What are your thoughts on whether greater individual privacy in Asia is a challenge for your business?
Thompson: Individual privacy is a challenge for an LGBT business in Asia, though this is also an opportunity for a respectful business that truly understands the needs of LGBT clients. Many people will feel very uncomfortable in talking about their sexuality to their bank or traditional financial advisor and as such the advice they receive will not take into account their specific life plan and needs or indeed their partner.
A well managed financial advisory firm that understands their needs and provides a safe confidential place to discuss their Financial requirements could present a significant opportunity in addressing this.
429Mag: Are there other barriers you would highlight as being more prominent is Asia versus the US and Europe?
Thompson: Asia is a vast region with a big percentage of the world’s population with an estimated LGBT population of more than 200 million. It is also culturally very diversified and in most parts of Asia LGBT issues are not so open and most people tend to be very private about their sexuality.
There can also be significant parental pressure on the LGBT community to get married and have children, especially in China with a one child policy. This generally leads to more secrecy than in the US and Europe and requires a different approach in serving this community.
Having said that this is a dynamic and fast growing region, particularly in China, and the LGBT markets are opening up and developments are taking place. We have seen a number of opening gay celebrities becoming public and a number of LGBT diversity oriented events. Change is definitely coming but in a localised way.
429Mag: With changing dynamics in the LGBT context worldwide, what can wealth managers do to stay ahead of the curve?
Thompson: We believe that as the LGBT community becomes stronger and more open, it will be important for wealth managers to understand the specific needs of LGBT clients and provide a respectful service.
Without a clear understanding of life aspirations and issues like partner protection, wealth managers will not be able to properly service this fast growing market. The LGBT market represents an estimated $3 trillion of spending power globally and as with other areas of their life, the LGBT community will go with the right product for them.
429Mag: Do you expect financial advisory for the LGBT community to be a substantial growth area globally?
Thompson: We expect this to be an area of growth globally. We have already seen mainstream financial organisations in the US looking to target this area.
We also anticipate specific products targeting this market. For example, we are launching a socially responsible investment fund, with investment based on LGBT diversity, which is due to be launched in the US in partnership with an Investment Bank and followed with a Global launch.