If Wynonna Judd Needed Financial Therapy, Maybe Your Clients Do Too

Sex and money are, ironically, what both men and women psychologically struggle with most, research says. Can financial advisors help clients overcome money issues that impede their investing? Yes, by offering financial therapy to help turn destructive behaviors into logical investment decisions.

Indeed, FAs’ failure to address the reality that clients base 90% of financial decisions on their emotions will “probably be their undoing professionally.” So says wealth advisor Rick Kahler, a founding board member and past president of the Financial Therapy Association, in an interview with ThinkAdvisor.

Kahler, who helped rescue country star Wynonna Judd from the brink of bankruptcy in 2003, argues that FAs’ incorporating financial therapy into their practice is an effective way to boost and retain the human side of advisory amidst the fast-moving techno-revolution.

Moreover, without clients’ awareness of the way they self-sabotage their finances, investing goals may never be reached.

Fee-only Kahler, with $200 million in assets under management, has a high-net-worth clientele, and financial therapy is included in his fee. The Kahler Financial Group also offers this separately to individuals who do not meet the account minimum.

When family background regarding finances and ingrained money attitudes unconsciously cause clients to make financial blunders, it’s time to “lie down” on the financial therapist’s couch, as it were. A cost-effective way to offer this service, if possible, is to staff a financial planner who is also a licensed counselor — as does Kahler — versus outsourcing the therapy component.

Financial therapy blends planning and behavioral finance to examine a person’s relationship with money. The goal: to change behaviors to make better financial decisions.

It is a nascent discipline that’s growing slowly among advisors. Some have stepped into financial coaching or euphemistically use the term “coaching” for what is in actually therapy. Kahler is on the Financial Therapy Association task force that is developing a Certified Financial Therapist designation.

As financial advice becomes increasingly commoditized, advisors offering financial therapy as one of their services become increasingly relevant, Kahler, 62, contends. Based in Rapid City, South Dakota, half his clients are located outside the state. (Financial therapy can be conducted via Skype or a similar system.)

Kahler, a CFP, was the financial advisor in a high-impact intervention that saved singer Judd from dissipating what was left of all the wealth she had created up until then: She’d already blown $26 million in nine years and was about to deplete half the remaining $6 million.

So much for show biz. What about “ordinary folks” — clients who resist their advisors’ recommendations to, for instance, spend less to save more? Financial therapy is often the remedy.

Kahler, who teaches a graduate course in financial health at Golden Gate University, is a popular speaker at events held by organizations including the National Association of Personal Financial Advisors (NAPFA), the Financial Planning Association (FPA) and the American Group Psychotherapy Association (AGPA).

He has co-authored three books with psychologist-financial planner Brad Klontz, including “Facilitating Financial Health, 2^nd Edition” (National Underwriter 2016), also co-written with Ted Klontz, Ph.D. — the therapist in the Judd intervention — and which is used as a university text.

ThinkAdvisor recently spoke by phone with Kahler, who discussed, among other issues, how to know when a client can benefit from financial therapy and why Judd, astonishingly, had no clue she was about to go bankrupt. His comments concerning her non-relationship with money prior to financial therapy reflect revelations in the foreword she wrote to Kahler’s book, “Conscious Finance: Uncover Your Hidden Money Beliefs and Transform the Role of Money in Your Life,” co-authored with Kathleen Fox (Foxcraft 2007).

Here are excerpts from our conversation with Kahler:

THINKADVISOR: What happens when a financial advisor dismisses the idea and need for clients to have financial therapy?

RICK KAHLER: They’re probably going to fire a third of their clients and call them nonperforming because they’re stuck and resistant. [But] 90% of money decisions are made emotionally. Most people have a huge underbelly of emotions and beliefs. When that’s known, why they act illogically makes sense. A planner ignores that to their own detriment.

Why would that be harmful?

In these times, when financial planning is going down the road of commoditization — for example, robo-advisors — what’s left? The human element. For a planner not to acknowledge the human emotional underbelly — and think clients operate from logic — is probably going to be their undoing professionally.

But most financial advisors just shrug off financial therapy.

The profession is discovering that the emotional element of money is a big deal, and that’s where the relevancy of a financial planner will lie in the future. It’s where the profession is heading.

What part will financial therapy play?

In five to 10 years, I think there will be a degree in financial therapy. It’s already offered as a minor at Kansas State, and there’s a Certified Financial Therapist designation under development.

So does an advisor need to start providing that service now?

While today you don’t need to offer financial therapy to be relevant, you’d better offer financial coaching. That looks at the future; therapy, or counseling, looks at the past.

Why would a client need financial therapy?

Most people do, and most can benefit from it. There are folks that are pretty functional around money, but they may have a blind spot or a sticking point. Others are just mired and stuck in a lot of pain and are really hurting financially. They can use a lot of financial therapy.

What’s a clue that a client is in need of financial therapy?