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).

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.

Whether gay people are more affluent than straights, gay and lesbian financial advisers and entrepreneurs say there is still a significant opportunity for smaller, gay-owned financial services firms to market to them.

"[Targeted] financial services are there for gays and lesbians [at national companies], but they have to ask for it and seek it out, and many gay people in their lives are not out," says Steven Dunlap, founder of G&L Bank.

Dunlap says gay-owned and gay-operated firms are still better equipped than the larger companies to handle the often complicated nuances of gay people's financial lives. For example, G&L Bank took special care not to inadvertently out customers when verifying employment history for mortgage applications.

"It is difficult to say that what we do is unique, because to some extent financial advice is financial advice," Johns says. "But we do have experience when it comes to the issues that face unmarried couples, such as proper procedures for setting up trusts, estate planning, the titling of assets."

And gay financial experts say gays and lesbians have a greater comfort level speaking with their own kind. "It's kind of like if you are a girl and you need a girl checkup, are you going to go to a girl or gay doctor?" says Stephanie Meket, an investment adviser for Christopher Street Financial. "Some people are like that with the issue of gay-owned businesses-they just like it more."

Still, as G&L Bank's closure may indicate, there are limits to the level of service a small firm can provide, Tobias says. "Some people may be leery of putting their money in a small start, up, either because they can't imagine it can offer the kind of services and competitive deals as a large national firm or because they fear the CEO will be having too much fun on the week-ends," he says.

But Johns says those concerns are groundless, adding that small, gay-owned firms offer more independent choices and stronger relationships. "A large house like Merrill requires their representatives to sell proprietary products, and independent companies like Christopher Street' offer money managers from every resource," he says. "Most accounts under $150,000 at Merrill get assigned to a team in New Jersey, and the clients don't have a personal relationship anymore."

It's precisely these personal relationships that lie at the heart of Dunlap's next business venture. Undeterred by the closing of G&L Bank, he intends to open another bank sometime next year, this time in Fort Lauderdale, Fla.

Though he says gay and lesbian probably won't be in the name of his new bank, the institution will try to do of the things for gay people that G&L tempted. Only this time, instead of basing the business on the Internet, he intends to operate it as a community bank with a brick-and-mortar presence. "Maybe this is my second chance to build the community bank I,,want to build for the gay community, Dunlap says. "I believe we will ultimately be successful tapping into this market."

Quittner has also written for Business Week.