I felt calm as I sat on a blue couch for my close encounter with the nascent field of financial therapy. I watched as Joel Reimer, a fit, 50-something man in a golf shirt, put sensors on my thumb and fingers.
I was in the middle of Kansas, in one of the exam rooms at the Financial Therapy Clinic, a counseling and research center run by the Institute of Financial Planning at Kansas State University. The clinic was on Poyntz Avenue, the main street in Manhattan, Kan. The office, like the town, the street and the building, was clean, spare and quiet.
“So I appreciate you coming in today,” Mr. Reimer said. “I’m just going to ask you some questions. Some background questions first and some financial goal-setting questions. Do you have any questions?”
I didn’t. He began by asking about my marital status, children and employment. Then he went into questions about my family’s finances and about our goals.
Which of the following best describes your financial situation at the end of the month: Do you have several unpaid bills, do you break even or do you have some money left over?
We have money left over, I said.
Suppose you were to sell all of your possessions, including your home, so you have turned all your assets into cash and you were going to try to pay off your debt. After doing that, would you be in serious debt, break even or have a lot of money left over?
I asked him what he meant by a lot since that was a relative term. He wouldn’t say, but I chose it anyway, since we would have money left.
When he got to my financial literacy, I gave myself high marks. I took a moderate grade for my willingness to take risk on an investment. And I spoke in detail about our financial goals for the year.
After 30 minutes or so, he unhooked me from the machine. “That’s it for our questions at this point,” said Mr. Reimer, with the same friendly but unreadable expression he had evinced since the start. “We’ll let you go on out and answer some additional questions.”
The written questions should have been easier. They were focused entirely on basic financial concepts, responsibilities and anxieties around money. But they asked for actual numbers, like our monthly housing costs and income after taxes. I had been honest up to this point. But I felt uncomfortable revealing this information, even though Mr. Reimer was a complete stranger.
I shouldn’t have worried. The researchers didn’t care about any of my answers. They cared about my stress level when I answered the questions.
“Do you think you were stressed or not stressed?” asked Sonya Britt, the chairwoman of the personal financial planning department at Kansas State.
“I don’t think I was stressed,” I said. “I think I was cold.”
“Hmmm … you actually were quite stressed,” she said. “It doesn’t matter what the room temperature is. After about two minutes, you should be able to adjust and go back to your homeostasis level. You got more stressed as you went on.”
She then showed me a graph of temperature at my fingertips. It started at 74 degrees and dropped to 72 during the questioning. The ideal temperature, she said, was 92 degrees. Most people who were relaxed were around 82 or higher.
“This has nothing to do with the temperature of the room?” I asked.
“No,” she said. “What’s happening in that situation is your blood is going back to your heart. It’s the fight or flight response. There’s no blood left in your fingers.”
As if that were not bad enough, she added that my “skin conductance level” — science-speak for sweaty fingers — doubled during questioning. I was cold and clammy.
“The purpose of that experiment was to see how people reacted to talking to a financial adviser,” Ms. Britt said. “It is stressful. And it’s more stressful having to answer questions about your goals, which is not that surprising.”
It may not be surprising, but it is problematic. Getting people to be less stressed when thinking, talking and making decisions about money should be any adviser’s focus. In financial therapy, it is the goal, but it can be a tricky sell.
Financial therapy is a lot like what it sounds like, a combination of psychology and financial advice, but centered on people’s relationships to money. Practitioners have to be part therapist and part financial adviser to be successful.
They are not to be confused with accredited financial counselors. While the two fields have overlap, a counselor usually comes in at a point of crisis — like bankruptcy or intractable arguing between spouses. Both financial therapists and counselors are small in the universe of advisers. There are about 250 members of the Financial Therapy Association, formed by Ms. Britt and others in 2010 during a breakaway meeting of the Association for Financial Counseling and Planning Education, which administers the accredited financial counselor designation. That number is a fraction of the 1,100 accredited financial counselors, whose numbers are dwarfed by the more than 71,000 certified financial planners and more than 300,000 advisers in the United States, according to Cerulli Associates.
A financial therapist’s role is to understand the stories we tell ourselves, true or not, about money — or in the parlance of the field, our “money scripts.”
Brad Klontz, a financial psychologist in Hawaii and an associate professor at Kansas State, thought up the phrase. In his research, Mr. Klontz has found four basic scripts: money avoidance, money worship, money status and money vigilance. Each has its own complications.
People with money avoidance tried to distance themselves from money. The result was predictable: They undermined their financial well-being.
Those who worshiped money believed it would cure all their problems, if they only had more of it.
People with a money status script seemed similar to money worshipers, except they connected money to their sense of well-being. Or as Mr. Klontz put it, self-worth was linked to net worth.
The last script was money vigilance. These people did not flaunt what they had; they paid their debts on time and were generally cautious about overspending. If anything, they were the ones who could deprive themselves for no rational reason.
Like mental health problems, these money scripts often existed outside of people’s consciousness and were formed in reaction to events that occurred in their lives.
One example Mr. Klontz gave was of a family on the verge of losing its house because of past bad decisions. In one case, a grandparent comes in and saves the family. In another, the parents save the house themselves. In a third, the family loses the house.
The precipitating event was the same in all three cases, but how people in those scenarios will feel about money will be quite different. And those different feelings are what make helping people overcome money disorders difficult for advisers.
Edward Horwitz, a former insurance executive who now works as a financial therapist and instructor of financial planning at Creighton University’s Heider College of Business, is consulting with a company that administers employee retirement plans. The company, which did not want to be named because it was in the early stages of the program, has hired Mr. Horwitz to provide financial therapy to plan participants as a way to get more employees saving in their retirement plans but also to distinguish itself in a crowded field.
Mr. Horwitz has eschewed the traditional 401(k) approach of talking about fund choices, contribution limits and income-replacement targets — difficult to imagine for someone thinking 30 years out.
“We’re trying to go in there and work more from the emotional and behavioral aspects to help them first connect emotionally with what their retirement is going to look like,” he said. “I use emotional triggers that tap into the sensory experience that people want to have in retirement. We have them understand retirement with no quantitative aspects involved.”
The experience is not exactly like lying on a couch. But as with traditional psychotherapy, the message is not always what people want to hear, and that is when the real work starts, Mr. Horwitz said.
“When people face the numbers, it may come at a price that is more than they can possibly afford,” he said. “But at least they know that. Then they’ll say, ‘O.K., what can I afford?’ They’ll have a better expectation.”
A big challenge with financial therapy, greater in some ways than financial advice or counseling, is that it lacks formal accreditation, like the certified financial planner or accredited financial counselor designations. (Mr. Horwitz has a doctorate in personal financial planning.)
And that creates the risk that people will just call themselves financial therapists and start delving into someone’s psychological feelings around money by simply offering lessons from their own lives. The results could be far more damaging than underfunding a retirement plan.
“You see a lot of financial planners who say we care about the emotions,” Ms. Britt said. “Are they doing it in a way that is helping the client or a way that is only going to bring up problems later?”
Ms. Britt offered an example in which a man was always trading securities and attributed his appetite for risk to his grandfather, who was a successful risk taker. But then, she said, the adviser asks something about the man’s father and learns that the relationship was an abusive one.
“And do you say, ‘Oh, well, I’m sorry about that,’ and you move on about this day trading business because you think that’s what your competency is?” she said. “Maybe the adviser is the first person this person has disclosed that information too. As a financial therapist, you’d be trained to set up an appropriate referral and address it for the rest of the meeting and get that person to a safe place.”
In private practice, financial therapy is a time-consuming process that can be difficult to charge for. It is far more intensive than a quarterly portfolio review, but when it comes to paying for it, financial therapy is an out-of-pocket expense that can be more difficult for investors to grasp than paying a management commission.
Mr. Horwitz said he charged $200 to $1,000 an hour, but he said not everyone he pitched therapy to understood the value.
Anthony Canale, chairman of the Financial Planning Association of New York, has taken financial therapy courses and has incorporated it into his planning business. He charges about $1,000 to $2,000 for a financial plan and includes therapy, if needed, in the fee.
“I felt financial planning should be available to everyone, but it’s hard to make a living when you work with clients who are of modest means,” he said.
He recalled a case where a woman was playing what he called “credit card roulette” to keep herself afloat but still supporting two sons in their 40s. This was a straightforward case to counsel. But he did not take her on as a paying client when he realized she couldn’t even give him a monthly list of expenses.
Unlike psychotherapy, where determining the effectiveness of the advice is difficult, financial therapists have tried to quantify the impact of their work. In a clinical trial published in The Journal of Psychological Services, Mr. Klontz and four other researchers found that in two key areas — psychological distress around money and ratings of financial health — people who underwent financial therapy maintained the gains three months after treatment ended.
Financial therapy is meant to get people thinking about the financial decisions they make — and not about their investment returns. These methods of addressing clients could help give people of various income levels the financial security that only the wealthy enjoy.
And there is an interest in this sort of financial work beyond a small niche. Large financial firms are making a push to talk to clients more explicitly about broader investing biases drawn out in the field of behavioral finance, which looks at the ways predispositions influence and distort financial decisions.
“All of these biases that you find in investors is a direct result of their experiences and their preferences that they’ve had in financial markets,” said Barbara Reinhard, chief investment officer of private banking Americas at Credit Suisse. “Asking ‘What’s your bias?’ doesn’t get you anywhere. It’s, ‘Mr. Smith, tell me, what’s the fear?’ ”
As I sat there that day at Kansas State, I knew if I had answered the questions again, knowing what I now knew, I doubt I could have masked my stress any better. Being open and honest about money, even around complete strangers, is hard.
“My stress isn’t, ‘I’m not going to be able to pay my bills,’ ” I told Ms. Britt and Mr. Reimer. “My stress is, ‘I know how people perceive money.’ It was more stressful filling out the money parts of this survey. …”
“Just divulging the numbers,” Mr. Reimer said.
“Exactly,” I said.
As I was leaving I asked Ms. Britt who had the lowest stress level in this experiment. She turned to Mr. Reimer, and they agreed it was a chatty teacher.
“Basically she had never talked to anyone about her finances before, and she wanted to keep talking,” Ms. Britt said. “We felt bad that we had to move her along.”
Maybe the teacher didn’t know enough to worry. Or maybe she knew that she had a pension, had saved some money and would have no worries. Either way, she was living a financial life with an openness that could be a model to others.
An earlier version of this article misidentified an accrediting organization for financial advisers. It is the Association for Financial Counseling and Planning Education, not the Association of Financial Counseling, Planning and Education.