Scudder Kemper Investments Inc. has initiated what may be the financial service industry’s most-focused effort yet directed at attracting gay and lesbian customers in Los Angeles.
While there are certainly gay and lesbian investment professionals at major financial service firms, catering to both homosexual and heterosexual clientele, Scudder may be the first firm to hire an openly gay L.A. professional specifically to target the affluent gay market here.
“There is a lot of money in the New Economy that is being created by gays and lesbians,” said J.R. Mathena, who recently joined the L.A. office of Scudder’s private investment counsel division, which manages more than $15 billion for affluent individuals and foundations. “There are dot-com millionaires and regular businessmen and women (who are gay). And not only do I have the financial expertise to give, I’m a gay person who can relate to the experiences that these people go through.”
Scudder’s move comes at a time when other industries are reaching out to the gay community. Fortune 500 companies like IBM, Anheuser-Busch, United Airlines and Bank of America Corp. are all actively seeking business by advertising in the national gay press.
Meanwhile, few financial companies have courted this diverse and generally well-off segment of society. Perhaps the most aggressive has been American Express Financial Services, which has been advertising its expertise in the national gay press for a decade and draws praise for breaking ground in targeting the gay community. James Law, who heads one of the firm’s branches in New York and helps run its outreach efforts, applauds Scudder’s decision to appoint Mathena.
“I think it’s a great opportunity,” Law said. “There are gays and lesbians who work at all of the Wall Street firms and who have gay and lesbian clients. But they don’t have the umbrella of the firm’s resources” that American Express and Scudder can bring to bear.
And the economic potential for any company able to tap into the gay and lesbian market is considerable.
“It really comes down to this market being less likely to have children so there’s more disposable income,” said Joel Lawson, vice president at Window Communications, a Washington, D.C., consultancy that helps companies target gay consumers. “(Such companies) get high returns because if you appeal to this market, (consumer) affinity is very high. The same gays and lesbians with large portfolios today are the same people who remember what it was like to be ignored.”
Data on the financial worth of gays and lesbians in the United States is hard to come by, but a conservative estimate of the U.S. homosexual population is 5 percent, or about 13.5 million people, and it might be twice that. Gays control more than $800 billion in assets, according to the Gay Financial Network, a Web site that provides financial service information to the gay and lesbian community.
About 3.2 million gays and lesbians own stocks and about 3.7 million have a home mortgage. According to GFN’s survey of gay and lesbian online users, 31 percent, or about 1.5 million people, earn more than $50,000 a year; 4.9 percent, or about 235,000, earn between $100,000 and $150,000 a year.
Mathena, who came to Scudder after several years as an executive in business development with Bank of America Private Bank in Southern California, wants to tap into the higher-income segment of this society. He is targeting individuals and couples with a net worth of at least $2 million, who are seeking, like anyone else, ways to protect their assets. Using L.A. as a base, he is traveling all over the country, meeting with wealthy people whose needs may be better served by someone who shares their point of view.
“High-net-worth gays and lesbians haven’t been treated well” by mainstream financial firms, Mathena said. “What I tell (clients) is, ‘Listen, you have some things to take care of because you’re not afforded the same rights as a heterosexual.’ Many (gays and lesbians) prefer a certain modicum of anonymity but are also comfortable sharing information with someone like me.”
While many homosexuals who invest like to put their money into companies that have gay-friendly policies in terms of hiring and benefits, their basic aim is the same as anyone else: to make money. Where things differ is in ensuring that their wealth goes to whom they want.
If a member of a married couple dies, his or her investments, including individual retirement accounts, stocks and the like, automatically transfer to the surviving spouse, tax-free. That’s not true of same-sex couples. And that can become very costly when the size of the estate is considerable.
“The government looks at a husband and wife as a single unit, but for our clients who have been together for decades, the government says taxes are due,” said Jennifer Hatch, general partner at Christopher Street Financial Inc., a New York boutique investment firm with $300 million in managed assets whose brokers and clientele are gay. “If your worldly possessions are over $675,000, the estate tax is as high as 55 percent. Let’s say a couple has a house and IRAs. You can’t cash out the IRAs (without paying taxes) and you can’t just sell your house. It’s an oppressive condition that only affects couples who aren’t allowed to marry. You need the right guidance.”
Thanks to Mathena, Scudder is about to close a deal under which Christopher Street’s high-net-worth clients will set up a separate managed account with Scudder.
Mathena hopes such deals will encourage other affluent gays to use Scudder’s services.
“Sometimes you need to talk to someone who understands your situation, personally as well as financially,” Mathena said.