Facilitating Financial Health: Tools for Financial Planners, Coaches, and Therapists, 2nd Edition

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Financial Professionals and Interior Finance

In recent years the financial planning profession has evolved significantly, expanding traditional financial planning services to include helping clients address the emotional and non-tangible aspects of money. Futurist and financial planner Richard Wagner, J.D., CFP®, is credited with naming this trend interior finance. Current terms for this emerging subset of financial planning include life planning, financial life planning, financial coaching, and financial therapy.

While financial coaching and financial therapy are different from financial planning, we maintain that all financial planning is life planning or financial life planning, because it is simply not possible to deal with finances as a separate and distinct aspect of a client’s life. Money is inescapably interwoven into the fabric of a client’s relationships, dreams, fears, loves, hates, successes, failures, and struggles. It is one of the few elements of life that has an effect on every aspect of existence, from meeting basic needs for food and shelter to satisfying the higher order needs related to the meaning of life and a spiritual connection. Money affects, either directly or indirectly, all aspects of one’s life.

Financial planners intuitively know this is true. A growing number of them also understand that providing exterior information about how money works (saving, investing, spending, and managing) is not enough to help clients succeed financially. In fact, financial success is a term that by itself has been traditionally limited to the exterior. A more integrated concept that forward-thinking financial planners are adopting is the notion of an individual having a relationship with money. These planners view the integrated financial planning process as one that helps their clients build healthy relationships with money and, having achieved that, healthy relationships with other important aspects of their lives. They realize that all the financial knowledge in the world will not benefit clients if they are unable or unwilling psychologically to act on that knowledge. Exactly how to help clients overcome these psychological barriers has been much less clear. Planners may suspect that a client is repeatedly sabotaging a financial plan, but lack the training to help the client change that behavior.

In 2004, researchers at Lethbridge University conducted a study of thirty financial planners in Western Canada.¹ The financial planners interviewed for the study agreed that clients’ financial health and psychological health were related. They agreed that clients came to them with personal issues as well as financial concerns. The majority of them, however, chose to attempt to address those personal issues themselves, rather than referring clients to therapists or coaches.

This research illustrates two contradictory beliefs that govern the way financial planners work with clients. Planners realize that clients need more than just exterior services, yet those same planners are reluctant to collaborate with coaches or therapists to provide effective interior services. Financial planners would understandably criticize anyone who attempted to provide exterior financial planning services without the necessary training. No doubt they would also criticize a financial planner who offered to provide therapy without the necessary credentials. Yet many of the same planners who wouldn’t think of providing insurance advice without appropriate training do not stop to consider that they may actually be attempting to provide therapeutic services despite not being qualified to do so. This approach is analogous to someone with a heart condition going to an anesthesiologist for help, and the anesthesiologist attempting to provide treatment instead of referring the patient to a cardiologist.

A significant concern for financial advisors is, How do I know when I have crossed the line from financial planning to therapy? This question is critical. For example, traditional financial planners or financial coaches would be ill-equipped and in dangerous territory if they attempted to provide direct assistance or advice to clients struggling with clinical anxiety, depression, marital distress, or family conflict. Yet there is no clear line to let advisors know when they have wandered into territory outside of their training or capability. Instead, the boundary between financial planning, coaching, and therapy can be a porous one.

Facilitating Financial Health assists financial professionals in appropriately addressing the important interior side of finances without going beyond ethical bounds. It clarifies the differences between financial planning, coaching, and therapy, clearly defining what therapy is and what it is not. It includes step-by-step exercises to help financial professionals work more effectively with their clients. It introduces a Decision Tree with guidelines for deciding when it is appropriate for planners to work with a client’s interior issues and when it is appropriate to partner with or refer the client to a coach or therapist. This book offers specific suggestions for making these referrals without rejecting clients or labeling them as inappropriate for financial planning. It includes ways to design interventions to match clients’ various levels of readiness to change and provides effective tools for working with client resistance. It also offers ideas for incorporating interior services into a traditional financial planning practice.

Mental Health Professionals and Money

For most of us, money is strongly tied to stress and difficulty. Of those responding to a survey conducted by the American Psychological Association, 73 percent named money as the number one cause of stress in their lives.² Americans currently have the highest rates of debt and some of the lowest saving rates in history. Money is the leading source of conflict within marriages. Some 40 percent of Americans admit to lying to their spouses about money.³ All this financial stress comes at a cost. Research has shown that financial strain leads to depression, anxiety, loss of personal control, poor health, poor role-functioning, poor work performance, and low self-esteem.⁴

Logically, then, money issues should be considered an important aspect of mental health when people seek psychological help. Unfortunately, this is not the case.

In recent years, our society has become increasingly comfortable with and aware of the value of therapy for emotional difficulties. Therapists are trained to help clients recover from conditions such as depression and anxiety and address issues such as trauma and addiction. Despite the fact that money issues often contribute significantly to emotional difficulties, money remains a relatively unexplored theme in therapy.⁵

An exploration of the field of psychology suggests several reasons why money is rarely addressed by therapists. It has been suggested that many mental health professionals have taken unconscious vows of poverty. Therapist and author Olivia Mellan refers to them as money monks. They have generally chosen their professions because they want to help people, and in our society, helping people and making money tend to be seen as contradictory purposes.⁶ Money is something therapists are neither trained nor encouraged to deal with, whether it relates to managing their own practices in a business-like way or helping clients address disordered money behaviors. It is rare to find money as a topic of individual therapy sessions, college psychology classes, or professional training conferences. Therapists tend to believe that money does not belong in the realm of personal growth. Since they typically have little or no training or experience in addressing their own money issues, it follows that they will remain unaware of, be unwilling, or be unable to help clients address theirs. Therapists rarely explore clients’ behaviors and beliefs around money.

Despite the prevalence of disordered money behaviors, research on financial beliefs and behaviors has received little attention in the psychological literature,⁷ and little has been done to attempt to treat these behaviors through psychological interventions. From 2004 to 2006, the authors conducted a study of clients who had participated in the Healing Money Issues program at Onsite Workshops. At that time, outside the realm of pathological gambling, the research literature did not include even one study attempting to research the effectiveness of specific psychological interventions designed to change problematic money beliefs, financial behaviors, and related psychological distress.

It is not surprising, then, that few interventions exist and little research has been done, considering that the mental health field itself may be in denial about the problem. In his groundbreaking 1999 article, The money taboo: Its effects in everyday life and in the practice of psychotherapy, published in the Clinical Social Work Journal, Dr. Richard Trachtman describes money matters as perhaps the most ignored subject in the practice, literature, and training of psychotherapy.⁸ He argues that when psychotherapists can not address our own money issues, we also can not control our own countertransference reactions to our patients’ money or their money related attitudes and behaviors. In other words, if therapists have not addressed their own money issues, they will not be able to help clients address theirs. Perhaps therapists know this at a conscious or unconscious level, and therefore seldom explore the issue of money with their clients. In addition, therapists and coaches may feel inadequately trained to help clients deal with the more practical aspects of money, and thus avoid the topic.

Facilitating Financial Health provides tools to help therapists, counselors, and coaches work more effectively with a client’s money issues and also to help clarify and understand their own. It also provides guidelines to help these professionals decide when and how to refer a client to a financial planner, debt/credit counselor, or other financial advisor.

The Components of Integrated Financial Planning

Cross-disciplinary training, collaboration, consulting, and understanding can help financial professionals address both the exterior and the interior aspects of a client’s financial health. Both areas, as combined in Integrated Financial Planning, are essential to creating and maintaining a client’s healthy relationship with money. To understand the concept of Integrated Financial Planning, it is helpful to see it in terms of the past, the present, and the future.

Exterior finance, the right-hand column, includes the mechanics of money—what we can see and touch. The past exterior includes historical financial data such as tax returns. The present exterior takes in such information as balance sheets, cash flow statements, insurance, and current investment statements. The future exterior involves retirement projections, estate planning, and stated goals. We traditionally view the exterior column as best taken care of by financial planning professionals.

Interior finance, the left-hand column, is the way clients relate to money emotionally. In the earlier days of developing nomenclature for integrated financial planning, many financial planners and coaches described interior finance as life planning, financial life planning, or financial planning done well. These terms describe helping clients look at the interior future—dreams, possibilities, and authentic goals—and the interior present—coming into authenticity, clarity, and awareness in order to create abundance beyond just having money. It is these two areas where most financial planners and coaches who do life planning operate and feel comfortable.

Finally, the interior past consists of the client’s beliefs, feelings, stories, and unconscious thoughts around money. Increasingly, financial planners and coaches seek the training and tools to appropriately explore this essential area. While many financial planners protest they do not belong in or want to venture into the interior past with clients; they indeed do so. They just may not have done so consciously or knowledgeably.

We designed the techniques in this book to give financial planners, coaches, and therapists the skills to improve a client’s financial health across the entire grid, including the interior past. Incorporating the past, present, and future of both interior and exterior finance is what defines Integrated Financial Planning.

Figure 1.2 illustrates how financial planning, financial coaching, and financial therapy services fit into the interior and exterior aspects of the past, present, and future. This is the Klontz-Kahler model for Integrated Financial Planning. The exterior column, on the right, reflects where traditional financial planning fits into the model. It represents past exterior services such as accounting, present services such as portfolio management and financial advice, and future-oriented services such as estate and retirement planning.

The interior, on the left side of the diagram, is the focus of financial coaching and financial therapy services. Much of financial coaching involves a future orientation. Financial coaches help clients create the future they want. The financial planning profession tends to think of this future orientation as life planning, life coaching, or financial life planning. Although it is rooted in the realm of working to achieve future goals, financial coaching, as shown by the arrow, may also encompass the present and the past. Coaching includes practical considerations in the present and an exploration of the past experiences that may hinder or help clients in setting and achieving their goals.

In the same way, financial therapy has its foundation in the past, but also takes into account the present and the future. The interior past is the area that is most commonly left unexplored in the financial planning process. Traditionally, this is the domain of therapy, as illustrated in the work of the father of modern psychology, Dr. Sigmund Freud. While traditionally therapy is rooted in exploration of the past, modern approaches are putting more emphasis on a client’s present and future and how current behaviors affect psychological health. Events and emotions from the past shape what clients think, feel, and believe about money. This, in turn, affects their financial behavior and choices in the present.

Addressing the past can be a critical component of achieving financial health, especially for clients with long-term patterns of problematic money behavior. Yet standing with the client in the present and looking into the past requires skills that most financial planners and many financial coaches lack. Facilitating Financial Health provides training in those skills, as well as clarity about when to use those skills and when to refer clients to, or partner with, other professionals, particularly therapists.

The Value of Exploring the Past

Financial coaching and financial therapy are certainly not necessary for everyone who seeks financial advice. Clients who do not need these services are easy to recognize. They are the ones who listen to what financial planners tell them needs to happen, take that advice, and follow it. They know who they are, where they’re going, and what to do. Research says that at best 20 percent of clients will respond like this.⁹

Neither is it necessary for every financial planner to have training as a financial coach or therapist. However, financial coaching and therapy are valuable services for most clients and a necessity for others. For some clients a financial planner’s office may be the closest they will ever come to getting emotional support. Many people who would benefit from the services of a therapist would never consider darkening a therapist’s door, but would willingly engage the services of a financial planner. Thus, a financial planner trained to effectively offer emotional support and guidance may be well positioned to dramatically improve the quality of a client’s life. Financial planners often find themselves in a powerful position to influence the emotional and financial well-being of their clients and clients’ families.

Clients who have experienced traumatic or painful events around money are often unaware of the ways in which their past experiences cloud their future. They often think they just do not understand money and need more technical information on the planning process. Frequently the professionals working with those clients are equally unaware of how the clients’ past affects their current behavior. It is easy for financial planners to blame a client’s seeming inability to change on either the client’s non-compliance or the planner’s lack of doing it right. Most often, neither assumption is completely accurate. Clients cannot look to the future until they are able to look at, understand, and come to terms with, the past. They are stuck in their current financial stress due to obsolete or ineffective beliefs from the past. They cannot follow the financial plans their advisors help them create.

In addition, financial planners who do not understand the influence of their own past on their beliefs and assumptions about money limit their capacity for compassion and ability to hear what clients are actually saying. Despite its importance, looking to the past is a piece that is missing from the process most financial planners use. Looking back into a client’s money history is the part of the interior journey that most clients, planners, coaches, and even some therapists avoid. This process of avoidance was eloquently described by Thomas Moore, in Care of the Soul: Rarely easy, work with the soul is usually placed squarely in that place we would rather not visit, in the emotion we do not want to feel, and in that understanding we would prefer to do without.¹⁰

As Moore points out, fearing this exploration is normal. We generally spend a significant part of our lifetime trying to avoid looking back on events that were painful. We laugh about the past, make jokes, and trivialize it away. Get over it. Get on with life. Get a grip. It’s water under the bridge. Those are the attitudes many of us have about looking backward. We have an innate fear of looking into the uncomfortable aspects of our past.

Yet, without looking back into our past, we cannot understand where we have come from. Without understanding our past relationship with money, we cannot understand our current relationship with it, and we may have great difficulty changing our future relationship. It is important to uncover those unresolved money issues, erroneous beliefs, and resulting financial behavioral adaptations of which clients are often unaware. Getting past our fear of dealing with the past—a fear that is common to professionals as well as clients—is essential for those who hope to achieve true financial health. Most often, this does not require years of intensive therapy. For many, simple insight into how family patterns around money manifest in their own lives is enough to change their financial beliefs and behaviors.

Financial Planning, Financial Coaching, and Financial Therapy

Throughout this book, the term financial planning is used to refer to what is most commonly considered traditional financial planning: advising clients, with a primarily exterior focus, in six main areas:

1.    Estate Planning

2.    Retirement Planning

3.    Cash Flow Management

4.    Risk Management

5.    Tax Planning

6.    Investments

At the other end of the spectrum, the term therapy is used to refer to two specific types of professional services:

1.    Diagnosing and treating clients’ emotional and behavioral disorders

2.    Providing individual, group, couple, or family psychotherapy.

For the wide range of services in between, this book uses the umbrella term financial coaching. To most people outside of the mental health profession, the word counseling might seem to be a more fitting term. It is not used here, however, because in many states counseling refers to a number of professional specialties with specific educational and licensing requirements. For example, someone might be a certified chemical dependency counselor or a licensed professional counselor. Offering to provide counseling services without having the appropriate certification may be a violation of state law.

The relatively new field of coaching is developing its own certification and educational requirements. However, because there are no state laws governing the term, and therefore no regulatory control over the type of training, education, or supervision requirements needed to call oneself a coach, the term coaching has a broad meaning in terms of providing mentoring or advising services. Financial coaching is used here to describe the range of interior financial services between financial planning and financial therapy that may be used to help clients move toward financial health or the discovery and attainment of their financial and life goals.

Coaching is based on an advisory model. The coach assists clients in gaining certain skill sets to help them achieve their goals. Coaches give advice, encouragement, and information to assist clients in changing their limiting beliefs and in optimizing their behaviors to achieve personal and professional goals.

As it is currently practiced, therapy is steeped in the medical model. A therapist assesses and diagnoses a patient with a mental disorder; a treatment plan is then developed and treatment begins. Therapists use various approaches depending on their theories of mental health, mental illness, and treatment; they attempt to heal a patient’s mental illness by achieving insight, reaching emotional catharsis, or changing destructive beliefs and behavioral patterns. Treatment ends when the patient’s disorder is in remission.

Figure 1.3 summarizes some of the differences between coaching and psychotherapy.

Many aspects of coaching may at first feel outside the comfort zone of professionals whose background and training have focused exclusively on traditional financial planning and the exterior aspects of financial health. Financial advisors especially may find it challenging to let go of the idea that they only provide value to their clients when they are actively giving financial information and advice. Yet much of the value of advising and coaching comes from supporting, encouraging, and listening to clients. Facilitating financial health requires serving as a guide rather than a director. The role often requires walking alongside clients as they explore and discover their own directions and goals, rather than telling them what directions to take. Such a role is foreign to many financial planners, who often feel their role is solely that of setting the agenda and dispensing the solutions. A financial planner’s professional training typically reinforces the director role over the guide role

The approach in this book is not intended to suggest that financial professionals stop dispensing advice or offering solutions to their clients. It does suggest that financial professionals will benefit from learning new skills with regard to the timing of advice and solutions. This includes learning to set aside their agendas for a while and let their clients take the lead. Most of all, this approach encourages planners to listen to their clients in a new way.

The approach and exercises in this book assist clients in examining their underlying beliefs and dealing with their emotions. It is a hands-on way of educating clients and helping them change. An essential concept behind many of the exercises is to show and feel rather than to explain or tell. They are designed to help clients understand an idea, accept the reality of a situation, or identify a life goal by involving their senses and emotions as well as their thoughts.

For many professionals outside of the mental health field this approach at first may seem intimidating. Yet, many professionals, sometimes without realizing it, already use tools similar to the ones provided here. Examples of these tools are:

•     Using a metaphor to describe a concept. A comprehensive financial plan serves the same purpose as an umbrella. It can protect you from stormy weather.

•     Suggesting that a client read a book. I have this book written by someone in a situation similar to yours; it might give you some insights.

•     Asking a client to watch a film. "Take this DVD of A Christmas Carol home with you and watch it before our meeting next week. I want you to especially pay attention to Bob Cratchit’s self-defeating financial behaviors."

•     Showing a client a picture. I came across this picture of the type of retirement home I’ve heard you talk about. Is this close to what you have in mind?

•     Helping a client recall a dream or an event. "What makes your time at the lake so meaningful?

•     Helping a client imagine the future. So where would you live if you could live anywhere?

Some of the exercises are similar to activities that therapists might do with clients. Yet, it is important to remember that these activities can be used at many different levels of intensity and in many different situations. Questions intended to help clients define goals for the future or make decisions about estate planning (i.e., How much money would you feel comfortable leaving to your church?) are relatively simple tools commonly used by financial advisors. At the other end of the spectrum are sophisticated therapeutic processes, requiring advanced training. Many of the tools included here can be used by therapists as launching points into deeper therapeutic work. While professionals without training in therapy should not try to do this complex work, they can appropriately use the same tools in more limited ways.

The goal of this book is to help professionals who provide Integrated Financial Planning services become more comfortable and effective in their work with clients. This includes learning methods of facilitating that allow them to disengage without doing harm if they encounter a situation where a client would be best served by a referral to a therapist. The tools in this book will also help them recognize when a referral to, collaborating, or working conjointly with another professional might be the best course of action. Professionals who use the techniques described here will find that, even if they aren’t able to help certain clients cure their disordered money behavior, they can at least be assured of not making a bad situation worse.

Concern over inadvertently causing harm is exactly what stops many coaches and planners from even venturing onto the relatively safe ground of moderate coaching activities such as helping clients identify their beliefs and feelings about money. The fear of straying into therapy is pervasive among financial planners. Learning how to be a more effective facilitator of change can help planners who do choose to provide coaching recognize appropriate limits around interior work so they know when to stop. Just as important, learning interior facilitation skills can help them recognize when they have not gone far enough and when additional interior work is necessary to help clients achieve their goals.

Endnotes

1.    Taylor, T. D., Bernes, K. B., Gunn, T. M.., and Nixon, G.; How Financial Planners Can Collaborate with Professional Counselors; The Journal of Financial Planning (Online edition, April 2005).

2.    American Psychological Association Online As tax deadline approaches Americans say money is number one cause of stress. (March 31, 2004), available at www.apa.org/releases/moneystress.html.

3.    Medintz, S.; Secrets, lies and money; Money, 34(4), 121-128 (2004).

4.    Krause, N., Gina, J. & Liang, J.; Financial strain and psychological well-being among the American and Japanese elderly; Psychology and Aging, 6(2), 170-181(1991). Price, R.H., Choi, J.N., & Vinokur, A.D. Links in the chain of adversity following job loss: How financial strain and loss of personal control lead to depression, impaired functioning, and poor health; Journal of Occupational Health Psychology, 7(4), 302-312 (2002).

5.    Although the terms therapy and therapist can be used to describe many types of physical and emotional treatments, these terms will be used throughout this book to refer to psychotherapy and psychotherapists.

6.    Mellan, O.; Money Harmony: Resolving Money Conflicts in Your Life and Relationships. Walker & Company (1995).

7.    Furnham, A.; Why do people save? Attitudes to, and habits of, saving money in Britain; Journal of Applied Social Psychology, 15(4), 354-373 (1985). Mumford, D.J. & Weeks, G.R.; The money genogram; Journal of Family Psychotherapy, 14(3), 33-44 (2003).

8.    Trachtman, R.; The money taboo: Its effects in everyday life and in the practice of psychotherapy; Clinical Social Work Journal, 27(3), 275-288 (1999).

9.    Prochaska, J.O., Norcross, J.C., & DiClemente, C.C.; Changing for Good: A Revolutionary Six-Stage Program for Overcoming Bad Habits and Moving Your Life Positively Forward. New York, NY: Avon Books