Clients acting irrationally? Hire a therapist - for them

Amid sinking markets, bleak economic outlook, advisers are calling in the money shrinks

Jul 11, 2010 @ 12:01 am

By Lisa Shidler

Forget about pulling out that straight-backed chair when a client walks into the office; these days, some financial advisers are directing clients to the couch.

Amid all the chaos and anxiety wrought by the tumultuous stock market and murky economic outlook, a small but growing number of advisers are enlisting the help of therapists — not for themselves but for their clients. Having a therapist on hand, they said, helps advisers and clients get past emotional roadblocks that may get in the way of sound financial decision making and put a strain on their relationship.

“Advisers who use therapists forge better bonds with their clients,” said George Tamer, director of strategic relationships at TD Ameritrade Holding Corp.

“Clients are more skittish about the markets,” he said. “If they have a personal bond with their advisers, it's more likely the assets will stay with that adviser.”

A therapist can also help advisers avoid awkward conversations with clients about circumstances that are simply beyond their expertise.

As more advisers embrace “holistic planning”— that is, dealing with all aspects of a person's life, rather than trying to fill a narrow need by selling him or her a particular financial product — they are more likely to find themselves confronting a host of problematic financial behaviors, including overspending, underspending, serial borrowing and even financial incest (holding money over relatives' heads as a way of controlling their behavior).

“We're not trained to handle these emotions,” said Irwin Rothenberg, an adviser with Wealth Management Consultants LLC, who occasionally collaborates with a therapist. “I'm not comfortable discussing some really touchy issues like ... a family member's feelings of favoritism.”

Mr. Rothenburg's company oversees $500 million in assets.

To be sure, the number of advisers steering clients toward a therapist is relatively small, said Sonya Britt, assistant professor of personal financial planning for Kansas State University. In fact, Ms. Britt pegs the number at about 5% of all advisers.

But interest among advisers is growing.

In January, Ms. Britt and her colleagues at KSU formed the Financial Therapy Association to promote the collaboration of therapists and financial advisers. The group plans to hold its first conference in September.

“This is on more advisers' radar because people have been pulling out of the market,” Ms. Britt said. “Advisers who work with therapists develop deeper relationships, and those who have a good relationship can keep their clients invested in the market.”

Maybe so. But the vast majority of advisers feel that clients' emotional baggage should be checked at the door, said William “Marty” Martin, president of Reflections Professional Corp., which offers counseling to clients of advisers.

“Advisers have their own myths and stereotypes about what psychologists do,” said Mr. Martin, who is a psychologist with a master's degree in financial planning. “Advisers acknowledge their clients have emotional problems, but that's as far as many of them go.”

Getting over that skepticism isn't easy. Just ask Rick Kahler, a certified financial planner and owner of Kahler Financial Group.

“When I first heard about this — I'm being flat honest — I was completely against it,” he said. “Back then, I didn't even know I had a right brain.”

Then, about five years ago, Mr. Kahler began working with a couple that had been doling out about $20,000 a month to help their three adult children meet their living expenses.

Frustrated that he couldn't persuade the couple to stop supporting their children, he enlisted the help of a therapist.

Within three months, the therapist helped the couple resolve the emotional issue and, more importantly, develop a three-month plan to cut off the kids.

“I've seen what happens to people who go through an intense financial-therapy experience,” Mr. Kahler said. “They make progress much faster than if they were just working with a planner.”

Today, most of Mr. Kahler's 75 clients also see a therapist that he recommends.

Here are some tips for how to integrate a therapist into your practice:

First, find a therapist with a strong financial background. “It has to be someone who understands how to go in and deal with wealthy families,” Mr. Rothenburg said. “There's a lot of complexity with these families.”

The ideal therapist should be able to discuss financial matters with clients, while also helping them to open up emotionally, said Nate Wenner, an adviser with Wipfli Hewins Investment Advisors LLC, whose firm advises on $2 billion in assets.

Determine how you will use a therapist. Advisers need to figure out exactly how they want to involve a therapist into their practice. For some, such as Cicily Carson Maton, an adviser with Aequus Wealth Management Resources LLC, it is useful to have a therapist sit in on meetings with clients.

“One of the biggest advantages for me is getting to know the clients deeper and faster,” said Ms. Maton, who works closely with Mr. Martin. “Working with a psychologist also helps you feel more confident that you're on the right track.”

Others, such as Mr. Rothenberg, call on therapists sparingly.

“We just bring in therapists in specific situations where we know there are issues, and we realize if we don't do something, we'll have a mess, and the only winners will be the legal system,” he said.

Figure out how you will pay the therapist. Advisers need to decide early whether they will pass on fees to their clients or absorb the costs themselves.

For advisers who use a therapist on a case-by-case situation, they may be prepared to pay the fee out-of-pocket.

But industry leaders said that advisers should consider passing on the costs to clients, particularly if they use a therapist on a regular basis.

“I wrap it into the fee, and it's an invisible part of the services,” Ms. Maton said.

E-mail Lisa Shidler at lshidler@investmentnews.com.

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