Psyched Out - psychology and financial planning

Kiplinger's Personal Finance Magazine, Feb, 2000 by Robert Frick

TRENDS | Freud meets finance, as FINANCIAL PLANNERS take on the role of therapist.

FINANCIAL planner Elizabeth Barrett once had a client who, six months after collecting a fat inheritance, was appalled that she'd frittered much of it away. The standard financial-planner fix might have been to tell the client to take a hard look at her credit card bills, record expenses for a month and draw up a budget.

But Barrett is no standard financial planner; she's a licensed mental health counselor with a master's degree in counseling psychology. Always interested in money, she started taking financial-planning courses out of personal curiosity and then became interested professionally. After 12 years as a therapist, she joined a financial-planning practice in Fort Lauderdale. "I feel that money is such an emotional issue that it really needs to be addressed on that level, as well as on an intellectual-financial level," says Barrett.

Instead of nagging the profligate heir, Barrett spent some time talking with her about her feelings toward wealthy people. The client's view of the rich was colored by memories of an affluent yet parsimonious--and miserable--neighbor from her childhood. In her client's view, Barrett says, the wealthy "felt guilty about having money, believed that their friends resented them, and resented that they had more decisions to make." So her client was sabotaging her own wealth to avoid morphing into her neighbor. Once the client realized this, she was able to scale back her spending because she knew that her money wouldn't necessarily create all the problems she feared.

In an ever-more-affluent society, money is a far more complicated problem than in leaner days when our only preoccupation was with earning it. As a result, financial planners find themselves delving into their clients' heads as well as their pocketbooks. Why does a wealthy person continue to live like a miser? How do you reconcile spouses with radically different views of using money? How do you break bad money habits rooted in childhood, or help contentious families plan their estate?

Addressing such questions is becoming as central to planning as running retirement projections, and planners are being bombarded with books and seminars on how to combine psychology and counseling with finance. "The next frontier is finding ways to break down barriers with your client," says financial planner Scott Neal.

But not every planner is a trained counselor--or, for that matter, feels comfortable in playing the role of Sigmund Freud with a spreadsheet. Planners tend to be analytical, logical and mechanical--"the old charts and graphs," as one planner put it--while this new branch of financial psychology is far more touchy-feely. And so, to varying degrees, are its practitioners:

The guru

FINANCIAL PLANNER George Kinder is the author of Seven Stages of Money Maturity. His mantra is part psychology, part coaching and part personal finance, bound in a wrapper of Buddhism and Taoism.

Kinder is a one-time tax accountant and current teacher of Buddhism with no formal training in psychology. But he is a founding member of the Nazrudin Project, a group of financial planners whose goal is "seeking out ways to help people discover their own identities and bring that discovery to bear on their presence in the world of money." Treading on popular personal-finance author Suze Orman's foundation, Kinder says he has tried to build "a more complete model" that helps people move past the pain of the conflict, guilt and shame that are often associated with money.

The therapist

CHARLIE HAINES, a financial planner in Birmingham, Ala., has no psychological training himself, but has brought two therapists into his practice, in which he deals with very wealthy families. Among his clients, says Haines, "there's an attitude that goes like this: `I don't know that there are any problems or issues in my family, but if there are I sure want to deal with them while I'm alive.'"

One of the counseling professionals in Haines's practice is Marty Carter, whose background is in marriage and family therapy and who calls herself a family communications consultant. Carter describes a client family in which the father was "very controlling, a benevolent dictator." When family members got together to discuss money, they ended up talking as though the five adult children were still kids, with the youngest sibling shut out of the discussion entirely. Instead of lecturing the parents, Carter took the children aside and held a retreat for them to help build their confidence as adults. Now, she says, when family members get together to talk about financial issues it's less contentious, because "there are seven adults sitting at the table."

The friend

SCOTT NEAL of Lexington, Ky., got a master's degree in divinity from Southern Seminary in Louisville. Pastoral care, he emphasizes, isn't counseling; it's not a long-term treatment, nor does it have anything to do with diagnosing mental illness. Neal says his training lets him help "healthy people who are experiencing some kind of distress."