TAKING ON AMEX FOR GAY BUSINESS

Gay Financial Network’s name says it all.

Wall Street’s newest on-line player has aspirations of being the broker of choice for gays and lesbians looking to buy stocks, mortgages and insurance.

“The gay community is very loyal to those who reach out to them specifically,” says GFN president Jeffrey Newman, who joined the company late last year from TheStreet.com, a financial news site.

Founded by Walter Schubert, the first openly gay member of the New York Stock Exchange, GFN began selling stocks and insurance on-line last year and just signed a deal with insurance giant Conseco Inc. that will allow it to sell GFN brand annuities. The firm is also in the process of negotiating deals with two other financial institutions that will enable it to offer credit cards, checking accounts, mortgages and other financial products.

But GFN recognizes that it has a major off-line competitor standing in its way.

GRASSROOTS CAMPAIGN

Over the past three years, American Express Financial Advisors has quietly emerged as the top financial services firm in the gay community, particularly in New York. A grassroots campaign started several years ago by one AmEx broker in Manhattan led to corporate decisions by American Express to advertise in national gay and lesbian publications and extend domestic partner benefits to gay employees.

“Walter initially thought that (gay investors) would flock to the site to trade just because he’s gay,” says Mr. Newman. “But then I explained to him that when it comes to money, you can’t just be gay; you have to be good. And it takes time to build trust.”

That said, Mr. Newman is optimistic about the network’s prospects. Founded with $1 million in angel money — another $2 million-plus is on the way — it has produced little in terms of revenue, but the number of registered users has tripled to 20,000 since last December. Mr. Newman expects the company to turn a profit by early next year, and there could be an initial public offering even earlier. “We’re looking at an August IPO,” he says.

While GFN does not have the marketing muscle of American Express, being on the Internet may give it an edge with some consumers who like its anonymity. “Say you don’t live in New York or Miami but rather in a part of the country where living an openly gay lifestyle is not as accepted,” Mr. Newman says. “You may not want to go to a bank and announce, ‘Hey, my lover and I want to get a mortgage together — what do we do?’ ”

GFN’s original business plan called for it to operate mainly as an online stock brokerage, but that was scrapped in favor of a portal model. The firm strikes deals with banks, brokers and other financial services companies, and these partners pay the firm a finder’s fee for every customer they acquire via GFN’s site.

In order to attract eyeballs, GFN offers daily financial news, which is geared primarily to stock and municipal bond investors who want information on corporations’ and municipalities’ positions on gay issues.

American Express isn’t concerned by the new competition, says James Law, the AmEx financial planner in Manhattan who is most responsible for the company’s foray into the gay market.

Howard Buford, president of minority marketing firm Prime Access, says that GFN needs significantly more name recognition within the gay community to succeed.

“The fact is that right now if you ask people in the gay community, ‘Who is the financial company for us?’ the answer you’re most likely to get is American Express,” he says.

Crain News Service