Where money meets feelings: financial therapy finds its footing

Planners weren’t equipped to address the emotional roots of how clients dealt with money, and therapists couldn’t guide finances; now, there’s a bridge

In the early days of the pandemic, Nora Herting decided to try financial therapy. "I didn't even know what it was, exactly," she said. "I heard about it and thought, 'That sounds like something I need right now.'" A small-business owner whose revenue had been decimated by lockdowns, she faced agonising choices between her own financial security and that of her company, including her 14 employees.

"At the time, my personal finances and my business finances were inextricably tied together," said Herting, who lives in New York. "I needed help - not in a business sense, but more in a personal sense. Like, what decisions align with my values? Are these decisions I can live with?"

She made her way to Amanda Clayman, a financial therapist with a private practice in Los Angeles. Clayman did not offer financial advice; instead, she directed Herting to make a timeline of her relationship with money. Over several sessions, they discussed Herting's family history, her career and how she communicated about money with her boyfriend. Then they developed a plan.

First, Herting set aside a chunk of savings for emergencies and her retirement. Next, she determined how much she would spend to self-fund her company, which creates visuals for meetings.

"I felt good about the amount of money that I was willing to potentially lose on my business, because we had talked it through," Herting said. Her company eventually rebounded, and is now fully operating with all of its employees.

For years financial therapy has occupied a little-known, vaguely defined niche. One of its earliest practitioners, Clayman became a licensed clinical social worker in 2006 with the goal of integrating financial and emotional wellness.

"I saw a clear need for it, but there was no institutional path or system for addressing that need," she said. "The teachers in my master's programme had no idea what to do with me. I kept asking, 'Why doesn't this exist?' "

Clayman eventually learned that she wasn't alone. Brad Klontz, a certified financial planner and psychologist, has been researching the overlap between his two disciplines since the early 2000s. But there was no official recognition of the field until the 2008 financial crisis, when a handful of financial and mental health professionals banded together to form the Financial Therapy Association, which aimed to spread awareness of the connections between psychology and personal finance.

Their timing was ripe. "The financial crisis helped the mental health profession understand that money is an area of deep concern to our clients," Klontz said. The problem was, many therapists weren't prepared to talk about it. "Most people in the mental health community are trained to ask our clients about their marital stress, whether they can sleep at night," he said. "We're not trained to say, 'So, how about your money?'"

Financial advisers were experiencing the opposite problem. "During the Great Recession, all these financial planners had clients melting down and emotionally distraught during sessions," said Megan McCoy, who leads the financial therapy graduate programme at Kansas State University. "Financial professionals love numbers and clean answers and solutions, and they didn't know how to deal with these messy emotions. They needed more tools."

Today, those tools exist. In 2019, the Financial Therapy Association introduced an accreditation programme for both financial and mental health professionals to become certified in financial therapy. The coursework, which takes three to six months to complete remotely, covers financial topics as well as therapeutic techniques. To earn the designation, students must pass an exam and promise to adhere to a code of ethics, which includes a fiduciary standard and a ban on selling or earning commission from financial products. The Financial Therapy Association also formed a disciplinary committee that enforces its rules.

If the 2008 crisis lit a flame under financial therapy, the pandemic doused it with fuel. "When Covid hit, there was a lot of uncertainty and anxiety around finances," McCoy said. "The pandemic also decreased some of the taboo around discussing mental health. The combined result is that financial therapy has flourished."

The number of students in her graduate programme has quadrupled, even as higher education enrolment has shrunk. The University of Georgia and Creighton University have recently incorporated financial therapy into their financial planning and family therapy curriculums as well.

Traci Williams, a board-certified psychologist in Atlanta, became an accredited financial therapist this year. She did so after seeing how financial disparities affected hospital patients amid the pandemic.

"There was a stark difference between the haves and the have-nots, and how they were able to cope," she said. "Once I started to see that, I couldn't look away."

Demand also played a role. "There is only one other financial therapist in Atlanta, and she has a three-month wait list," Williams added.

Not all certified financial therapists are licensed mental health workers. Some, including the Financial Therapy Association's president, Preston Cherry, are certified financial planners or coaches.

"I don't do financial therapy as an isolated practice," Cherry said. "I invoke financial therapy tenets within my financial planning. If there's a situation that is out of my scope - say, a marital issue that is blocking their financial goals or communication - then I can help uncover that and refer my client to a specialised person, like a couples counsellor."

Like traditional therapy and financial planning, financial therapy can vary widely in cost. Practitioners in the US charge from US$100 to US$800 per session, depending on their fee structure and services.

Financial advisers certified in financial therapy should be clear about the boundaries of their mental health training, McCoy said; the same goes for mental health workers and their financial knowledge.

"The financial therapy programme trains people to recognise when an issue is outside of their expertise, and how to make a referral to someone else when necessary," she said. Many financial planners deal with clients when they are facing major life events, such as marriage, divorce, career changes, retirement or a death in the family, and it's normal for them to suggest a lawyer or an accountant. Why not a therapist?

Larger institutions are also adopting more touchy-feely angles with clients.

"Financial planners have always known that clients have trouble implementing goals even when they have been clearly outlined and demonstrated," said Sonya Lutter, a founding member of the Financial Therapy Association who leads research and education at Herbers, a consultancy for financial advisory firms. "The part that's been missing is the personal, behavioural element - a computer can't just spit that out. A lot of big firms now recognise this, and are starting to integrate behavioural training into their work."

Even the CFP Board, which oversees the accreditation process for certified financial planners, has embraced the "soft skills" of money management. In January, the board added a section to its education programme called "The Psychology of Financial Planning", which covers "principles of counselling" and "client and planner attitudes, values and biases", among other topics.

"Now anybody who wants to be a certified financial planner has to show competency in the psychology of financial planning, which is more or less financial therapy," Lutter said.

With many feeling high financial anxiety, perhaps it's inevitable that therapy and money should mix.

"Most of us no longer have stable careers for 30 years and then retire," Clayman said. "We juggle multiple different jobs and income sources. We need to manage and plan for our future. And if we have a partner, we need tools for merging those two complex systems together. I would argue that's a process that's bigger than any spreadsheet can contain." NYTIMES



BT is now on Telegram!

For daily updates on weekdays and specially selected content for the weekend. Subscribe to t.me/BizTimes