The fundamental purpose of financial planning is to help clients make better financial decisions to achieve their financial goals – and hopefully to feel happy or empowered along the way by having made those decisions. Yet as most financial advisors know from experience, getting clients to make better decisions (and ones that they feel happy about) is not so easy in practice.
Clients do not always listen. Clients don’t always follow through on the advice they are given. And sometimes clients even do things that truly worry us, and actually endanger their financial health in the process. And unfortunately, there is remarkably little training on what financial advisors should actually do in such instances!
In this guest post, Meghaan Lurtz, our Senior Research Associate at Kitces.com, explores how the tools and techniques of Financial Therapy could be that research-based solution that financial planners may want to give some serious consideration to for training on how to deliver better advice that actually sticks, and to learn to better help clients actually help themselves. Perhaps even more so than the recently in-vogue Behavioral Finance research, which in practice is more focused on categorizing the problem behaviors that clients tend to express, than what financial advisors can and should actually do about it.
For instance, Financial Therapy utilizes techniques like Solution-Focused Therapy (SFT) to help clients figure out what skills they may already possess to overcome their own (financial) challenges. Financial Genograms provide a means to unearth clients’ financial family history and how the relationships around them may be influencing their money behaviors. And exercises like “What Do You Believe” help to unearth and explore money scripts that may cause clients to get stuck in a financial rut, as their sometimes subconscious limiting beliefs sabotage their ability to make good financial decisions.
Of course, the reality is that at some point, problematic financial behaviors cross the line from something that a financial planner can help with (even one trained in financial therapy techniques), into a bona fide psychological disorder that merits a referral to a qualified mental health professional. Nonetheless, a wide range of financial therapy tools and techniques can be applied by financial planners in their routine work with clients, in an effort to help ensure clients actually follow-through on the advisor’s recommendations, and the client’s own financial decisions and commitments.
And fortunately, with the rise of organizations like the Financial Therapy Association, and new educational programs like the Certified Financial Therapist (CFT) designation, there are more opportunities than ever for financial planners to explore the tools and techniques of financial therapy and how they can be applied in a financial planning context with clients!
source https://www.kitces.com/blog/financial-therapy-association-tools-techniques-solution-focused-therapy-sft-financial-genogram/
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