Christopher Street Financial faces increasing competition for gay and lesbian business from wirehouses

October 26, 2010 — 4:31 AM UTC by Steve Garmhausen

1 Comment

Christopher Street Financial is based in Manhattan’s Union Square, but geography is not the point of the name. Culture is. Christopher Street, the location of the 1969 Stonewall Riots that kicked off the gay rights movement, is one of the cultural centers of the gay community. Jennifer Hatch, a lesbian who hated her Wall Street bond sales jobs, has made a second career that she loves focusing on the particular needs of the lesbian and gay community. The patchwork of marriage and inheritance laws that apply to domestic partners means that an advisor with expertise in the area has a marketing edge into a relatively wealthy community – and indeed a growing number of wirehouse advisors focus on the market. A Tiburon Advisors report issued in December 2009 estimated that the gay & lesbian community consisted of between 15 and 25 million people, or 6% of the U.S. population.

Name: Jennifer Hatch, managing partner, Christopher Street Financial

Location: 215 Park Ave S., New York, NY 10003

Years in Business: 13

Assets under management: $175 million

What did you do before becoming an RIA?

I was in institutional bond sales 12 years. I worked for J.P. Morgan, then for Bear Stearns. My clients were portfolio managers.

How did you end up with Christopher Street Financial?

The firm is actually 30 years old. I bought it 13 years ago. The former owner passed away in 1996 and left the firm to the ACLU, and the ACLU needed to sell it. This was sort of a dream opportunity to invest in part of the same industry I was very experienced with, and to have the opportunity to work with people in my community. The firm had a brand name and was an institution in the gay and lesbian market.

Talk about a major change in environment! I love getting up in the morning now. I had investment experience, but working with individual clients was completely different, and frankly a lot more rewarding. They tend to be grateful and not act like they know it all, so it’s completely refreshing.

Sounds like you like the new career you’ve chosen.

I like being needed. I like the fact that clients won’t make major financial decisions without talking them through with me—that’s really cool. You get to feel really important—although it doesn’t pay as much!

What was the biggest challenge in taking on this new role?

Probably the biggest shift is that there’s a tremendous amount of responsibility in making recommendations for individuals. Their livelihood really is in your hands.

I actually worked as the manager for a couple of years to get my feet wet. I actually didn’t take on a book of clients until 2001. When I bought it, it was a mutual fund-selling machine. It was all things to all gay people including lots and lots of $2,000 IRAs for people all over the country. We transitioned it into from being kind of like a wirehouse to being a fee-based wealth management and financial planning firm, with a $500,000 minimum for clients. At this point we’re 95% fee-based.

What asset custodian do you use and why?

We use SEI and NFS. The RIA we go through is NFP (Securities, Inc.). They hold our licenses, process our continuing education, provide technology and all that great stuff.

Your firm has a unique niche, doesn’t it?

Yes—75% of our clients are gay and lesbian individuals, couples and families, and that’s always been our client base. So we have a very deep expertise in the issues that are really vital to same-sex couples owning assets together.

And they have a distinct set of needs.

If you’re single and gay, what you need to do financially is very much the same as is for a straight single person. If you are in a relationship and have children, and you want to own assets together or protect them or make (a partner) your beneficiary, there are all kinds of things you need to know about how to avoid gift taxes, how to title things to avoid estate taxes, how to maximize any income tax benefits. There are a lot of planning issues that are critical to go through to make sure you have the optimal plan.

Certain states now recognize gay marriage, but the IRS doesn’t.

You’ve got people in Massachusetts actually filing state taxes jointly, and then again separately for federal taxes. All the really big benefits come with federal recognition. States can consider (a partner) your next of kin for inheritance. That’s part of what the state controls. In terms of the feds, you don’t have marital exemption from the estate tax, so they’ll have to pay estate tax on the first death, and the second as well—so estates end up being double taxed.

Who are your biggest competitors, and why?

In every major city there is someone at every wirehouse who is focusing on this (gay and lesbian) market. They may or may not have expertise in that particular area. Our resources include an estate planning attorney, a CPA, and an insurance person who are experts in these issues. People like the fact that we can take care of all their needs. That set of resources is not typical among our competitors.

Do you win new clients mostly through word of mouth?

For many years we just did referrals. Two years ago, we picked up our marketing. A lot what we do are webinars aimed primarily at LGBT families. They are a group who knows they have to address their issues—it’s not a luxury, they’ve got to take care of their children. We actually get a lot of clients through their doing Internet searches—‘gay financial planner,’ ‘gay investments, et cetera.’ We probably get at least one of those a week.

What was the worst day in your RIA career so far?

Lehman, AIG, and the bottom falling out of the market. It just gives me an awful feeling in the pit of my stomach thinking about the impact that had on clients.

What was the best day of your RIA career so far?

They’re all great. Most of them are, anyway.

Share your thoughts and opinions with the author or other readers.


Gerri Leder said:

October 26, 2010 — 1:49 PM UTC

Christopher Street identified the needs of an underserved segment and burrowed into the financial issues they face. They brought insight, solutions that accelerated their knowledge base with which to serve other clients. This firm is a live example that the rewards of practice specialization often outweigh any missed opportunities from trying to serve a broader audience (or being all things to all investors of all stripes). Well done, Jennifer…

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