Personal Development
Do I Have To Get Comfortable With Emotions To Be A Financial Planner?
Wednesday, April 25, 2012 13:26

For some financial advisors, helping clients cope with the emotional side of money issues can be a little intimidating. As a psychologist with a clinical practice and consultant to advisors and families about money issues, here are some thoughts about an advisor's role in helping clients deal with the "soft" side of money.


Incidentally, I decided to address this issue because, at a recent webinar for Advisors4Advisors, an advisor said that many advisors feel uncomfortable assisting clients with this side of things.  

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Let's start by referencing a study by David Dubofsky and Lyle Sussman, which was written about in the Journal of Financial Planning in August, 2009. Among the findings of the authors' survey of 2,006 financial planners: 
  • 75% of had been in a meeting in which a client became distraught -- crying, trembling, and angry outbursts.
  • 58% had been told a secret in confidence that had never been revealed to another
  • 50% had served as a mediator for a couple when they were in conflict during a meeting.
  • 28% had to end a session and reschedule when a client became too emotional to proceed.
Divorce, family conflicts, addiction, illness and death are all events that will come to the surface in financial advising. Even if you want to avoid it, it is not possible.
Personal life goals are related to personal lives. By nature, humans are emotional beings covered with a layer of rationality. With enough stress, the rational layer disappears. When it does, the minimum skill required of an advisor is to be able to accept the outbursts, comfort the people involved, and be able next time to let the client know that there is nothing to feel ashamed about, and that everyone gets emotional from time to time in advisory sessions.
More importantly, this is your business and you need to run your business according to the model that fits for you. If you are a technical, non-emotional person and uncomfortable with the coaching/life planning/emotive side of things and do not want to learn it, you will still need to learn the bare minimum skills listed above.
If you do not have the skills to handle these situations, you probably will need training to acquire thems. You will also need to make a skilled referral to a person who does have these skills. This may be a psychologist, counselor or other helping professional.
A skilled professional referral means that you have gone out and met with some helping types, vetted their reputations and abilities, and you have a collaboration with them. It also means that you have a skilled way to bring up the topic and make the referral.
Most clients will bristle at the words “psychologist’ or “counselor.” A more skilled tactic is to say that you are referring them to a facilitator or coach who just happens to be a psychologist. About 10% will follow through. This is not a high percentage, so you may end up just doing the best you can with the above mentioned skills.
Communication skills training is available for advisors, often through a professional conference or a program but is not typically offered during the coursework leading to the credential. That's unfortunate.
Like it or not, the emotional side of money will come up in your discussions with clients. Be prepared for it.
Getting coaching on your own or with your study group with a professional who can teach you these skills is another good alternative.
Behavioral Finance on the Golf Course
Sunday, April 08, 2012 21:31

If you watched the Master's golf tournament today, you may have seen Phil Mickelson lose the tournament on the 4th hole. He hit a bad shot off the 4th tee that landed in a jungle to the left of the grandstand. At this point, he could have taken a definite loss and returned to the tee. However, he chose not to do this.

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I have to ask myself, as one who studies behavioral finance, whether he suffered from both loss aversion and sunken cost fallacy as he decided not to do that.


Loss aversion refers to our tendency to risk more rather than take a sure loss, which is a painful experience. Investors who sell their winners and hang on to their losers are illustrating this point. Returning to the tee meant the penalty stroke and the third shot taken at that point and a clear loss.

In an interview, Mickelson revealed that his strategy was to stay left and that he decided not to take the penalty stroke fbecause he was concerned that, if he re-hit from the tee, he might not be able to keep it left. He wanted to stay left, even if he was in a bamboo jungle and would have to hit it out right-handed. Phil is left-handed. Then, disaster struck.
Mickelson hit a bystander, almost hit himself, and ended up taking two shots to land just out of the bamboo in another bad location.
He then hit another bad shot into the bunker.
So far, we are talking four bad shots to keep to the staying-left strategy.
Is this an example of the sunken cost fallacy? A sunken cost fallacy means that we will not change our strategies because we are already committed to the course of action in which we have invested so much. Investors can do this by "throwing good money after bad" when they cannot correct the original mistake because they have put so much into it.
Next time you play golf, remember the principles of behavioral finance and ask yourself about some of your decisions. This one cost him the Green Jacket. Here is a link to the video of the play on the hole:
If You Are Not Bumping Into People Who Want To Help You Because You Are Doing Good Work, Then You Need To Fix That Part Of Your Life
Wednesday, April 04, 2012 20:29

Tags: business planning | business strategy | client acquisition | communication | elevator speech | enterprise value | honesty | integrity | leadership | marketing | prospecting | referrals | Social Media | value proposition


Humility has always prevented me from buying into the notion of American exceptionalism, but change wrought by the Internet is making me rethink.

The Internet now makes it easy for smart people to find each other and work together. I'm experiencing this every day.


It’s why the stock market is rising. It’s why optimism is returning. And it’s actually a really big deal for civilization.

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The Internet, it's fair to say, is an American invention -- not Al Gore's, but the U.S. Defense Department's.
Moreover, in addition to being made in America, the Internet was made for America.
America is good at change. That’s our thing. We also do freedom well, and we reward big ideas. America also wants good to triumph. That’s the American way.
That’s also the way of the Internet.
The Internet is reshaping the world and America is leading that charge.
The accelerated pace of change poses an enormous challenge to institutions and governments worldwide.
America’s history of openness and support for the free expression of ideas is its strength. Those values just happen to be the what's needed to succeed during the Dawn of Internet Age.
Therein lies a lesson.
If you are not regularly getting calls from people who are inspired by your message, you’re not doing enough.
If you are not bumping into people who want to help you because what you are doing is good, then you need to fix that part of your life.
Get in touch with the universe or do whatever is needed to figure it out. But fix that.
If you are patient, I guarantee it will work.


Please Share Your Observations About How Stress Over Money Causes Problems Affecting Couples, Families, And Other Relationships
Sunday, March 25, 2012 14:03
I'm closely involved with the effort to create a Division of Financial Psychology in the America Psychological  Association. This is a labor of love for me. Psychologists trained to work skillfully with financial issues and to collaborate with financial advisors have a lot to offer.

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The No. 1 stressor for the last four years of APA's Stress in America survey is money. Additional research shows that the No. 1 area of conflict for married couples is money.
The financial advisory and psychology professions both have much to offer clients by assisting with these issues. But where will the trained professionals who know how to help with money issues come from?
Most of the psychologists  I know and collaborate with can work well with the emotional issues about money in individuals and couples. But most never explore the values or the math in the money issues.
Recently, I spoke with an advisor at a conference who told me about referring a couple for counseling because the wife wanted her retirement money earlier than the husband thought wise, and this was a source of conflict in the couple. The advisor told me she was disappointed in the outcome when the couple came back with the resolution that the wife would take the early payout. The couple was no longer in conflict but the advisor was not very happy with the outcome.
The advisor's point of view was mathematical and the counselor's was relational. Both professionals need to be able to look through each other's lenses to find a good outcome for the couple.
A trained financial psychologist would know how to frame the decision for the couple, how to communicate and collaborate with the advisor, and how to work to assure that the choice was made with full awareness of all levels operating in the decision.
This is my first post on A4A and I'm looking forward to building a professional conversation between psychologists and financial advisors.
Please help me by sending your observations to me of incidents when you needed access to a financial psychologist.
If you used a counselor/psychologist in the past, was it a successful collaboration?
If you didn't use one when needed, what were the barriers to your getting someone to collaborate with you?
Post your comments below or email them to me at This e-mail address is being protected from spambots. You need JavaScript enabled to view it



As The Internet Rebuilds American Institutions, Be Grateful You Live In An Extraordinary Era Of Progress And Tap Its Potential For Doing Good
Wednesday, March 21, 2012 12:34

Tags: Offbeat

America is in upheaval. Institutions are being crushed and rebuilt all around us and we are living in a time of revolutionary change, but most of us many not even fully realize what's happening. Creativity and destruction wrought by the Internet is changing America in often subtle but deeply significant ways. Here‘s why I’m so excited.

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I was searching my 1,500 LinkedIn connections 10 days ago for experts on financial psychology when I stumbled onto Dr. Mary Gresham’s blog post about her petition calling on the American Psychological Association to start a financial division. Clearly, this is important to financial advisors and consumers. Money, according to APA’s own annual survey, was the No. 1 cause of stress cited by Americans two years in a row, Gresham says. Despite an obvious need for special training in this area, the APA bureaucracy has erected one obstacle after another to inhibit Gresham’s petition.
Now here’s the important part: APA is one of many institutions being destroyed and rebuilt by the Internet. Professional trade associations are in crisis because they are all being reinvented by the Internet. My friends in leadership positions at the American Institute of CPAs, American Bar Association, Financial Planning Association all report membership and financial woes.
Why? Trade associations were once the only place for professionals to gather. A once- or twice-a-year meeting enabled you to download enough new professional knowledge.  In contrast, the Internet networks professionals 24/7.
Gresham says the APA is hampered by a bureaucratic resistance to starting new bodies of knowledge in psychology. With 54 sections of psychology extant, APA’s current crop of divisions would be forced to share their budget with yet one more specialty. Gresham says she phoned APA members and staff week after week for months just to cajole APA to post her (right side of linked page) petition. But what happened next to Gresham is most amazing.
I found her. 
We met at the intersection of personal finance and psychology, a remote crossroad of social science under construction on the Web.
Through her blog and LinkedIn, I found Mary Gresham and interviewed her, gave air to her petition of APA with financial advisors. The inefficiency of APA and its bureaucratic resistance to creating new bodies of knowledge was exposed and Gresham’s movement to help people with psychological problems caused by money is publicized beyond the provincial world of the APA.
Now here’s the kicker.
I’m seeing the same dysfunction and social networking repair effort at many American institutions.
The same difficulties confronting ABA, AICPA, and FPA — leading trade associations in their respective professions -- can be found throughout American society.
Gresham’s struggle, to make the APA do the right thing by creating a section devoted to studying psychological problems caused by money and training psychologists to help people so afflicted,  exemplifies the rotting-institution syndrome and the Internet’s constructive response. The growing influence of sites like Advisors4Advisors among financial advice professionals is another example of the disintermediation of trade associations and other institutions. People much smarter than I are seeing the same pattern of violent change in America.
In a post last week entitled, The Economic Roots of Your Life Crisis, in Harvard Business Review, Umair Haque, who is ranked as one of the world's most influential management thinkers by Thinkers50 and is the author of Betterness: Economics for Human and The New Capitalist Manifesto: Building a Disruptively Better Business, said:
“If institutions, as Nobel Laureate Douglass North once famously described them, are the ‘rules that shape human interaction,’ then the rules are broken. You know it, and I know it: if you play by the rules today, you're probably going to end up broke, lonely, miserable, exploited, and empty. When the rules are broken, never play by the rules. Maybe you should walk away from that underwater mortgage. Maybe that degree doesn't have to be in something ‘employable,’ like finance — and maybe, if you push, it doesn't have to take four years to finish it. Maybe you don't have to get married, don't have to get a ‘job,’ buy two minivans and a McMansion, pack it bulgingly full of stuff you'll never use, and call it a life. Maybe it's only by breaking the dismally broken rules that you can rewrite better ones.
“Yesterday's institutions ask us to make increasingly bad tradeoffs, riddled with painful dilemma. It's one thing to offer a life of meaningless work in exchange for a huge paycheck; It's another to offer it in exchange for a stagnant median wage. Want that education? Here's a lifetime of crippling debt. Want to serve society? Great! Here's the pittance public servants have always received — without the security. If we really want to smash through the straitjacket of life crisis, we must recognize the deeper dilemma and refuse to settle for anything less than breaking it. One tiny, trembling, but decisive step at a time, we can arc our own journeys towards a life searingly well lived.”
It's not easy. I know. It can feel paralyzing, debilitating, panic-inducing. But here's the secret inside the secret. Institutions fail. But life goes on.”
The life crises referred to by Haque are another manifestation of the wrenching change in our society. He is addressing the problem by reaching out on the Web to people who feel the same way. Similarly Gresham and I came together socially on the Internet to fix a problem not being addressed by APA.
That coming together of people with good intentions is happening all over the place.
It’s a powerful movement for good and it’s viral. It’s empowering people as never before to get things done. Progress is unfolding at unprecedented speed. And you can help.
Here's text for an email you can send local psychologists to ask them to sign Gresham's petition.
Be grateful you live in an extraordinary era in civilization and help realize its potential to do good.  


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