What Your Clients' Finances Reveal About Their Mental Health

Managing money well or making a mess of it, addicted to gambling or lumbered with financial paranoia or obsessive-compulsive disorder — and so on — people’s mental health is revealed in the state of their finances. To help determine if clients’ appetite for risk jibes with their asset level and other critical considerations, advisors should pose pointed questions.

So says psychologist John Huber, the chair of Mainstream Mental Health who was a psychology professor for 21 years at Texas State University, in an interview with ThinkAdvisor.

Mainstream, a nonprofit, seeks to destigmatize mental health issues and helps provide services for disadvantaged young people and military veterans who suffer from them.

In the interview, Huber, a consulting clinical psychologist at two long-term acute-care hospitals and an expert witness in federal and state court cases, offers insight into how money behavior reveals mental health and how best to handle clients who show signs of dementia or other cognitive issues.

ThinkAdvisor recently interviewed Huber, on the phone from Mainstream offices in Austin, Texas, from which he hosts a popular podcast, Mainstream Health Radio. A shocker that surfaced during our conversation: Most big lottery winners are broke three years after they score that big jackpot.

Here are highlights of our interview:

THINKADVISOR: As a psychologist, how do you initially assess someone’s mental health?

JOHN HUBER: I look at it as painting by numbers: I try to find out about Color No. 1 and fill in all the spots I can. Then I go to Color No. 2 and so on. All of a sudden, I see a picture of someone who’s really together or someone who’s paranoid or depressed [etc.]. You don’t necessarily have to fill in all the colors once you realize you have a panda, not a giraffe.

What does the state of someone’s finances say about their mental health?

I have one client with net assets of around $300 million who starts spending money like nobody’s business when he gets depressed. I have other patients who feel completely devastated because they’ve lost everything and can’t get caught up. One had a psychotic break and is now living on state disability.

Though financial advisors aren’t typically psychologists, should they try to evaluate clients’ mental health to determine how to best help them invest?

I would like to see simple questions asked. For instance, when a client says they want to make an investment, if they can express the risk and potential rewards in their own terms, then I think they’re OK. If the advisor has concern that this is a trade or investment that’s outside the client’s normal pattern to withstand risk, they [should] look into it. That’s what I do. I look at behavior — what’s the normal functioning for this person? When they’re outside of that, I start asking [probing] questions.

Suppose an advisor observes that a client is losing touch with reality. Is there anything they should do? 

It’s a scary thing, especially for a money manager: At what point should they ask the person to get themselves checked out? I have this discussion with my money manager all the time: What’s the responsibility in this situation? He has some clients that could be financially hurt long term if they sell their best assets, as they sometimes want to do.

So what should be done?

Contact someone in the family and say, “Is your uncle OK? He’s not making a lot of sense right now.” But there’s a fine line. At what point are you stepping over it and violating the trust that you developed with the client as their money manager and are becoming a pseudo-psychologist? But if you don’t do something and you allow the person to [make a bad investment or trade], are you now liable? Will someone in the family come after you because you allowed all the client’s assets to disappear?

Let’s look at a few scenarios of how people handle their finances. For example, what’s going on with an hourly paid worker who has a retirement nest egg and wants to make reckless, high-risk investments with it?

They’re a gambler, kind of addicted to that sense of risk versus reward. True, we’ve got to take a little risk to get a little reward, and somebody has the right to put all their money on the color red and hope for the best. But we don’t like to watch that. It’s a scary thing because we know the potential problems.

Then there’s the bag-lady syndrome: Many ultra-wealthy women fear their money won’t last and they’ll wind up living on a park bench. How realistic is that?