Anyone who's argued with a spouse over credit card bills or wrestled with their own spending habits knows that money and emotions are often inextricably linked. Yet until recently, most therapists focused on the emotional side of the equation without talking numbers, while financial planners stuck to retirement plans or investment strategies without considering their client's preconceptions or emotions toward money. A new practice called financial therapy is bridging the gap between those two worlds.
"A lot of financial planners are very quantitatively focused and don't feel comfortable talking about emotions," says Sonya Britt, founder of the Financial Therapy Association. "Most therapists are not quantitatively focused." As she explains, most therapists are not trained in money. "How are they supposed to help somebody else with their financial problems?"
Some educational institutions are now working these issues into the curriculum. For example, Britt is the program director for Kansas State University's Institute of Personal Financial Planning, which includes coursework on the psychology of personal finance and behavioral finance. The master's program in financial planning at Golden Gate University in San Francisco also includes a course on facilitating financial health.
Rick Kahler, a registered financial advisor in Rapid City, S.D. and president-elect of the Financial Therapy Association, teaches the course at Golden Gate University. "There's a misconception that most people who come to a planner know what they want, they know what their goals are and are ready to do anything the planner suggests," he says. "That couldn't be further from the truth."
Kahler compares this disconnect to diet and exercise. Most people know that eating nutritious foods and getting regular exercise is important to their health, yet high obesity rates across the country show that not everyone acts on that knowledge. "It's not a financial literacy problem, it's an emotional problem, and that's where the therapy comes in," Kahler explains. "How do I stop doing something that I really don't want to be doing?"
That something could be gambling, overspending or even underspending. Kahler estimates that a third of his clients fall into the latter category "where you're driving a car that's almost not safe, or you're not taking care of your health because you don't want to spend the money."
When financial therapy is put into practice, a financial planner might partner with a counselor or therapist (as Kahler does) or the planner might have a counseling or psychology degree of his or her own. Kahler says planners with these dual degrees are still fairly rare, but some do exist.
Take Susan Zimmerman, a chartered financial consultant and a licensed marriage and family therapist who runs the Minnesota-based financial planning firm Mindful Asset Planning with her husband. Using a money personal assessment tool she developed in graduate school, Zimmerman assesses clients' top money motives to understand the emotions underlying their financial decisions. "It opens a dialogue that creates some deeper bonding early on in the process and shortens the time it takes to get to know peoples' human aspects," she says.
Zimmerman coaches clients on issues such as setting boundaries with adult children who have grown used to financial handouts or making fair financial decisions in a blended family. The client may be an individual or couples who are at a standstill in making financial decisions.
Joseph Goetz, current president of the Financial Therapy Association and a partner with Elwood & Goetz Wealth Advisory Group in Athens, Ga., says financial therapy can help clients gain a better understanding of their money biases or their partner's. "People invest or don't invest for a reason," he says. "Maybe their parents always lived month to month and had this belief that everything would work out. That person is less likely to want to have a financial plan."