Financial Advisor, Stefanie Pickard, talks about Financial Therapy, and how she utilizes her training to help clients understand their financial past, how those biases impact their outlook on money and decision making, and how they can work through those barriers towards financial freedom.
An ideal client for financial therapy is someone who recognizes that they are having mental and emotional blocks towards finances, and who can have an open mind to changing.
It’s believed that most money behaviors are rooted in family and experiences with money throughout a lifetime. Financial therapy focuses on exploring and digging out those various relationships and events so that when you do behave in a certain way that goes against your best interest financially, you can identify the reason.
Financial therapy can also help couples who have different opinions and approaches towards money, in turn creating conflict. Applying therapy techniques to both parties within the relationship can help them explore their individual relationships with money, understand the other party’s perspective and experiences, and provide perspective on how to support each other.
Problematic financial behaviors that might be a red flag include overspending, compulsive buying, apathy towards money, workaholism, anxiety surrounding money and the feeling of not being able to get finances under control, and financial abuse towards a partner.
There are a few tools used within financial therapy to help clients:
· The primary tool is called Klontz Money Script Inventory (KMSI), which is an assessment questionnaire, which will reveal certain money tendencies and beliefs, called “scripts”. The four scripts are: Money Avoidance, Money Status, Money vigilance and Money Worship.
· The money genogram is when a client draws a family tree that includes any person who has had a financial influence within their life. Doing this allows the client to then assess how each of these individuals impacted their beliefs and biases.
· The Dow Jones exercise is when a client draw plot points on, above, or below a center line that are positive or negative money experiences in their life. Doing so allows the client to identify trends and visualize the incidents throughout their life that had a financial impact on them and are still influencing them today.
· Another tool is having a client write out life aspirations and authentic goals. The client starts by writing down goals with no parameters or censoring whatsoever. They then narrow them down according to their level of enthusiasm, and eventually focus on the goals that are feasible, determine a dollar amount that is required to achieve it, and what steps need to be taken to make that goal concrete.
If you have questions regarding how Stefanie can help you reach your financial goals, please do not hesitate to contact us at (503) 227-0200, and we can connect you accordingly.
Welcome to Modern Family Matters, a podcast hosted by Steve Altishin, our Director of Client Partnerships here at Landerholm Family Law. We are devoted to exploring topics within the realm of family law that matter most to you. Our discussions will cover a wide range of both legal and personal issues that accompany family law matters. We strongly believe that life events such as marriages, divorces, re-marriages, births, adoptions, children, growing up, growing older, illnesses and deaths do not dissolve a family. Rather, they provide the opportunity to reconfigure and strengthened family dynamics in healthy and positive ways. With expertise from qualified attorneys and professional guests, we hope that our podcasts will help provide answers, clarity, and guidance for the better tomorrow for you and your family. Without further ado, your host, Steve Altishin.
Steve Altishin 1:12
Hi, everyone. I'm Steve Altishin. Thanks for joining us for another broadcast of Modern Family Matters. Today I have Stefanie Pickard. Stephanie is a Financial Advisor with Johnstone Financial Advisors, and she's here to discuss financial therapy, what it is, how it works, and who can benefit from it. So Stefanie, before we start in, can you fill us in a little bit about yourself?
Stefanie Pickard 1:38
Sure. Hi, Steve. Yeah, let's see. So I studied Financial Therapy in my master's degree at Kansas State University. It's a fascinating topic, and I love it. I love applying it to clients and helping clients meet their financial goals with this extra tool that a lot of financial advisors don't have. So it's really great.
Steve Altishin 2:05
Well, let's then just start with the obvious question. What is financial therapy?
Stefanie Pickard 2:14
Financial therapy is exactly what it sounds. It's a combination of finance or financial planning and therapy. Within the field, which is an emerging field, there's only been a Financial Therapy Association for about maybe 10 years. And within that it's about 50/50 split between therapists, to use kind of a broad term, and financial planners. So it kind of gives you an idea that it's really this intertangling in between those two fields, and you can see where this field emerged. The idea being that financial planners were finding themselves having difficulty working with our clients to get them over this kind of hump where you're like, "Why in the world are they not doing the plan that we came up with?", and therapists coming in constantly saying, "A lot of my clients, their problems are rooted in money. And so I need to understand more about money". And so you see that crossover there is where financial therapy emerged.
Steve Altishin 3:24
It sounds sort of like the old poem, "the best laid plans of mice and men often go astray". You can make up a great plan, it can be perfect, but you've got to make it work. So it sounds like that's what financial therapy is there to do. It's not necessarily to make a plan, but rather to sort of implement a plan.
Stefanie Pickard 3:51
Right? Yeah, it can come into a number of the different steps of financial planning. Another one would be maybe setting goals where you would have clients that were kind of still creating barriers to even setting financial goals for themselves. Such as, you know, they don't think they could ever retire so they won't set that plan. Or, you know, almost grim things like, "I just don't even think that I'll live that long, I'm going to work forever", type of thing where they just don't want to even get into it. So it could potentially even come in with the goals, but more likely, you've set the goals. And then now you're finding every six months when you're meeting with a client, this is not happening. They're overspending, it's just things are not matching up with what they're saying to you. And so it's like, well, what's behind that? You know, what's going on?
Steve Altishin 4:41
Hmm. So then that's where the therapy kind of comes in. And so kind of an odd question, do you call yourself a therapist, or do you call yourself a financial advisor?
Unknown Speaker 4:52
I call myself a financial advisor for sure. And I guess you could say, "Well, how could you call yourself a therapist if you say 'I am Financial Therapist'". Well, the word therapy can get thrown around in a much more informal sense. You know, nobody says, "Well, a massage therapist isn't a therapist". Well, it's just kind of a different application of the word therapy. And for most folks, like I said, there's that 50/50 split, that therapists will come into financial therapy as therapists first, and financial planners would come into financial therapy as financial planners first. Then you kind of bump up into scope, I guess, which would be kind of the next thing where either one, either side, would need to have a good grasp of when to refer out. So, you know, a financial planner might say, "Hey, I'm seeing some real disordered behavior here, where I think a therapist might benefit", and they might partner then with that person. And then on the other side, the side of the therapist might say, "You're getting into some financial questions. You have a lot of tax problems or something that I just don't understand". Well then they might reach in and partner with a financial planner. So kind of getting into the issues of scope there, where if you're going to dabble in this, anything that's kind of a gray area, you really need to understand what your limits are so that you're absolutely only serving the client and never overreaching beyond what you can do to help.
Steve Altishin 6:31
Well, that makes total sense.
Stefanie Pickard 6:32
Steve Altishin 6:34
No, I mean, it really does. You're kind of looking at it from two different viewpoints, depending on where your background comes from. And as a financial planner, you're looking at it as, "How can we solve your financial problem through therapy?" And that leads to the question: who's your target benefit client from financial therapy?
Stefanie Pickard 7:07
I guess a target benefit client would be someone who wants to change, who recognizes that they are having this problem and they want to change. Because you really can't treat somebody who doesn't want to go there, if that makes sense. And so you can certainly see clients who you might want to explore something with them. But it's pretty clear. And certainly, you'd never want to do something in a way that is somehow sneaky, I guess, like, "Oh, I'm therapizing you"--I'm putting that in air quotes, which is obviously not a word--without them knowing it. Because goodness, you would completely erode trust by doing anything. And so that's why you want to approach anybody that you know, I'm always really on the forefront with my clients. My coworkers will joke "Oh, you have the therapist in the office, so that's probably a good match". Be very clear with them, "Hey, I have a background in this and it's only to your benefit". Because you definitely don't want somebody that doesn't want it. So really, any client who would be ideal would be somebody that presented themselves as, "Hey, I have this issue that's not coming together for me, and I can't figure out why. And so now I need your help." They're reaching out about it. And the financial advisor and the client could come to that conclusion together for sure. By doing some light digging to say, "Hey, you know, this is still not happening. Do you want to look into the background of this?", and you know, they have to be open to it. But I think the ideal client more than anything, just summed up, is someone that really wants financial therapy.
Steve Altishin 8:59
What do you normally see as some of the causes that people aren't able to do what they want to do? What kind of fears or anxieties or relationships they have with other people or money? What sort of drivers do you see with people coming in?
Stefanie Pickard 9:25
Sure, just like you think of with classical therapy, almost in a silly stereotypical way where somebody goes and sees a therapist, and they're saying, "Tell me about your childhood". That's a lot of what we're doing also in financial therapy. It's truly believed that most money behaviors are rooted in your family and your experiences with money throughout your life. And so it's just exploring and digging out those various relationships and events so that when you do find that you're behaving in a certain way, financially, that goes against your best interest, then you have something in your mind that then turns on to say, "Oh, I've explored this before. And now I understand that that's not my best interest talking, that's my mother talking who didn't have hers or my best interest in mind", or "That's my trauma talking where something similar has happened before, but now I'm going to find a different result". So that's kind of where we're looking into opening up.
Steve Altishin 10:41
So then, what kind of tools, or how do you use financial therapy, just in your interactions with your clients?
Stefanie Pickard 10:50
So a few things. With every client, not necessarily ones who have approached about financial therapy or maybe even really need financial therapy because for the most part they're logically following their financial plan, I kind of like to separate it into a little bit of a less noticeable therapy. Which is just really good skills that any therapist or financial planner should have, just really good listening techniques and within that, observing their behavior, looking for any sort of red flags that might then lead towards needing some sort of therapy. But within that, you're also building trust with the client and the relationship. And then more than anything, just kind of facilitating, rather than forcing, any sort of change within the client. Those are all things where you're just kind of doing that within the financial planning relationship. You're essentially just sitting on the same side of the table as the client. Always, always on their side, never against. So that's kind of for everybody.
Then when you go to actually apply, like I was saying before with that ideal client, where they come in and they say, "Hey, I'm not getting past this thing that's hanging me up", or "You've given me this financial plan and it makes sense, but I can't implement it". Something like that where you're getting into actually applying therapy techniques to that person because we have decided, within our relationship, that we are going to do financial therapy together. So those are two different things.
And then more specifically, when it applies, because this happens so much and can apply to couples as well, is where you might have two clients coming in and they clearly have this conflict between them. So maybe individually they could apply their financial goals, but together they're not able to. And so then applying therapy techniques to both of them to explore that relationship, their individual relationships with money, and how those can either support each other or where they have conflicts within that. So, kind of three different levels. Basically to sum it up: applies to everyone sitting on the same side of the table, really good listening, always in tune with the clients and then that more overt therapy where, yes, we're going to do therapy together.
Steve Altishin 13:30
On the overt therapy to start, especially the couples therapy kind of stuff, this sounds like a lot of stuff that we at Landerholm Family Law see. It's very much the same kind of issues that divorcing couples kind of come to. It's the two of them having different ideas. They have different concepts about, you know, how they should spend their money. And that that's a root in a lot of problems.
Stefanie Pickard 14:06
Absolutely. It is. Yeah.
Steve Altishin 14:09
The other thing, and the covert that strikes me, is looking for red flags. Because again, something we do a lot is look for red flags both in issues with potential couples having trouble but also with estate planning. There are a lot of those red flags. So what are some of those red flags? If someone comes in for instance, and their first 20 minutes all they're talking about is, which is not totally unusual right now, what's happening today, or they're afraid to go out of the house, maybe they've been furloughed, maybe they're afraid that their business is going to go under. I mean, these things seem to me to be red flags. But what what sort of red flags really strike at you?
Stefanie Pickard 15:08
Oh, sure. I guess a little bit more specifically on red flags as it applies to therapy. It might be something as simple as, probably the most obvious would be overspending or compulsive buying, something like that, where you're seeing that somebody is really working out of their best interests with their money. On the other side of that might be something like workaholism, where they really feel like they can't get under control. The idea that they have to keep making more money or they keep working. Something along those lines where you can really kind of see something where somebody has really stepped out of the ordinary. Certainly some other things you could look at. Financial abuse could be another big red glag where you're seeing, especially as applies to couples like you were talking about, where you only have one person talking. Sure, it might not be a red flag to have only one member of a couple doing the talking. That isn't necessarily on its own a red flag. But if you're seeing someone who is being completely left out of the conversation. It might be different if they're sitting at the table and they're clearly uninterested, like, "Oh, I hate money". Okay, fine. And they've clearly just divided up the labor. And you might still be like, "Hey, I know you're not interested, but I want you to sit at the table". And no one has a problem with that. In which case, yeah, you're probably not really seeing abuse happening here. But you know, we deal with IRAs all the time, and I always say the "I" in IRA stands for individual, so that's going to be your own account, not ever a joint account. But if you've got someone, one spouse, who is constantly saying "No, no, I'm the one that manages my spouse's money". Well, it's her money. And she should have some say on how its invested or whatever else. I want to know what her risk tolerance is. And if they're saying, "No, I don't want you to even talk to her about risk, because it's all me". Well, goodness, that'd be a red flag. So within relationships, seeing somebody really left out of the table or left completely away from the table. But really being able to recognize the difference between the two because, like I said, you certainly get a lot of couples where somebody is just not interested as long as they're in the conversation sometimes. And there would be some techniques even then, to kind of go on a little bit of a tangent but to address this topic, which I think is important to your listeners, to kind of say, you might even fib a little bit and say, "Well, you know, for compliance reasons, I need your phone number". This is to the person who's been clearly left out. "Is this your cell? Okay, great". And then you kind of listen to when they might be available and the other person isn't. And then that's when you give them a call and you say, "Hey, can I talk to you about your account?" And they might say "Oh yeah, I know that he usually talks, but I needed to ask you and I need to know right now". I mean, there might be some little ways of kind of getting in and getting that person to open up a little bit as far as their financial situation goes. So yeah, it's pretty interesting how far it can go, as far as red flags go, because people like to say money isn't everything, it's whatever, which I agree with, sure. But at the same time, money is kind of everything because it's our resource. We don't go out and forage for berries really anymore. We work and we get money to buy those berries. And so that becomes everything to us. And so if you have money problems, then it's everything. And that's the reason why it is such a problem for people in relationships and everything else.
Steve Altishin 19:09
Oh, I think so that makes so much sense. For a lot of people money is a symbol as much as anything else. It's like it's a status of itself.
Stefanie Pickard 19:18
Ah you're getting into what we'll be getting into a little bit later here!
Steve Altishin 19:24
What are some of the tools that you use?
Stefanie Pickard 19:26
Okay, perfect segue. So the number one big tool with financial therapy is called the KMSI, or KMSIR meaning revised, which just stands for the Klontz Money Script Inventory, which is an assessment questionnaire. It's something that you can actually give to somebody where they go in and they score the various questions. So it's a whole bunch of different questions, such as "I think that people that have money are terrible", you know, something like that. I mean, it's not exactly that but those types of questions and you score them I think it's between one and five. And this was put together by a guy named Brad Klontz, who's kind of one of the main people in financial therapy. And what the answers to those questions reveal are this kind of baseline in financial planning called money scripts. And money scripts are like a script, like you're an actor in a play, and you've been handed a script. Well, it's the script that you've been handed as an adult on how to how to deal with money, basically. And there are four money scripts, and you will not necessarily test at zero for every single one of them, but you'll probably see some tendencies towards certain scripts. And of those scripts, the first one is money avoidance, which is that you avoid taking responsibility for your money. You have a negative view of money, you avoid discussing money, you won't open your bank statements, "I just assume it's there. I don't want to deal with it". Money avoidance, that's one. The next one, money worship, which is sort of like money brings you power and happiness, it'll solve all your problems, that type of thing. The next one, as you were saying, is money status. So it is kind of like the guy or the gal that wants to own the best sports car or whatever else because they want to show that "I have money. This gives me really good status in the world", money status. And the last one being money vigilance, the one that's maybe considered to be the least negative, because the idea is that you're financially alert. You're less likely to avoid financial conversations, things like that. You're a saver, but then it can also kind of lead towards some things like workaholism, anxiety around money, you don't have enough money, things like that. So those are kind of the four-- avoidance, worship, status, vigilance--that you will kind of fall on a scale with with this Klontz Money Script Inventory questionnaire. Just super interesting. So there is kind of some science, this is the middle ground between therapy and finance, where they've kind of honed it into "Hey, there's these money scripts that we've figured out and if we can kind of put somebody into a category then we can start working towards opening them up". So that's kind of one of the tools of financial therapy.
Steve Altishin 22:50
It's funny because you say that and you see that in yourself, you see that in other people and you know, you get a couple where one's a money worshipper and ones a money hater. Talk about a red flag.
Stefanie Pickard 23:02
Absolutely. Actually, I'll share, before we had this conversation, I kind of went back and because I had to, of course, take the KMSI for myself. And I came in, not surprisingly with being a financial planner, that I'm strong in money vigilance. But then the next one down for me was money avoidance, which seems really conflicting, because one of them is like, "I want to talk about money". And the other one is "I don't want to talk about money". And so then trying to figure out, and disentangling within yourself, "Why did I test high in those two areas?" Well, you know, it kind of goes down to there might be some overlap there with some anxieties and things like that, for sure. It is interesting, But yes, within couples, this is where you can really come out and go, "Oh, I see it". Even just in a couple's relationship, that awareness of the other side. I mean, it might even be enough to really help with a lot of problems, right? Just being like, "Oh, but you know, she's this way." And then the other thing being is that the other person isn't necessarily wrong, they're just different than you.
So what kind of other tools have you got?
Okay. The other one, which you and I have talked about a little bit before, the money genogram, which I love. It's basically drawing a family tree, and anybody that's ever had any influence on your money life, or your money story, can go on that tree. So you don't have to necessarily include every aunt and uncle, because maybe you hardly talked to them. But you could include a step-aunt-once-removed because they did have a lot of influence on you. And so what you do is you kind of draw that out and you talk about their income, you talk about how they saved, how they retired, whether or not they even retired. You could even get into if they had health issues, anything like that. Then you can kind of look to see how these money behaviors then passed down from generation to generation if you see that. The idea is hopefully to go up a couple of generations and go, "Okay, in my family, there's a lot of union workers." And that's kind of interesting to explore. Like, "Okay, they were a union worker, retired with a pension. Then the next generation, union worker who retired with a pension". And so you can see how somebody in the next line might think, well, that's the key to success, right? Whereas you might have another family where they own their own business, and then they own their own business, and then they own their own business. Well, these are really clear financial decisions that get passed down from generation to generation, but you might be able to open up for you to say, "Oh, that's not me talking. That's my mom talking". To use a stereotype, "She was a shopaholic, and now I'm a shopaholic", type of thing. So that's the money genogram.
There are a couple of other ones that are kind of small that I still like. One of them is called, and this is a little bit hard on radio to explain, but the Dow Jones exercise, which is when you draw plot points on, above, or below a center line that are positive or negative money experiences in your life. So, for example, your dad lost his job when you were five, well, that's a low point and you plot that kind of low. Or somebody won the lottery, so that was super high. And then you kind of go up and down and it looks a little bit like the Dow Jones. So that's why they call it that. And then you plot those points and you kind of look for trends. And even just the concept of exploring that history and seeing where various incidents in your life that had financial impact on you, and where those are still influencing you today. I kind of like that one, that's a fun little exercise. And the last one that I'll get into, because there are more, but the last one that I thought would be interesting to explain would be writing out life aspirations and authentic goals. And that's just writing out 20 to 30 goals that I want and not holding back. Anything that I want. I want to move to Tahiti. I want to own a spaceship. And then honing that in. So at first you start by not censoring yourself whatsoever, then you narrow it down based on how much enthusiasm you have for it. Then you start looking more and more feasible, assigning $1 amount and then tasks. So then it becomes about how do I actually concretely get to these things? If that makes sense. You start really broad, anything that you possibly want in life, and then you start narrowing it down slowly more and more towards things that are feasible, how much they cost, money wise how they will get there. So, does that make sense?
Steve Altishin 28:15
That makes so much sense. So we had a podcast earlier with Will Jones, who's an attorney Landerholm, about the divorce process. And it's very similar, where you start by asking for the moon or wanting the moon, and work down toward the realistic goals and getting to a final settlement. And it's that same sort of concept. I really liked that. It sounds like you were taking some of these tests. So why are you practicing on yourself?
Stefanie Pickard 28:52
Right, exactly. No, very good. So I think every financial planner should do a little bit of financial therapy. But especially if you want to be a financial therapists, applying financial therapy to yourself first needs to be the first step, that's for sure. Because you, as the planner, need to understand your own money story. Like I said, I have this strong tendency towards the money vigilance script. And so sometimes for me, I might see somebody who's more of a spender and they're not going outside of their goals whatsoever. It's still within their plan. But I might insert myself in some small way by judging or having some sort of bias or want to push them in some sort of way. No, I need to get myself out of there. Because it's the client only. I need to focus on the client, not myself. So if you, as the advisor, have explored these issues, done some of these exercises yourself, and reflected a lot on yourself, then you're going to recognize so much more easily when you're in a relationship with a client to see, "Oh, here I go, here's me getting in there. Nope, you need to get yourself out of there". Because we need to focus completely on the client. So that's kind of why I think I've done these exercises for myself. And I think that probably every financial advisor should do something or some sort of exploring of their own thoughts and biases.
Steve Altishin 30:41
So then you integrate that into your financials plan.
Stefanie Pickard 30:47
Yeah. So, the other thing that it kind of goes back to is just being able to to help them within the financial planning process. Using the financial planning process to kind of get around some of these issues that the client may have. Such as things we do on a very regular basis. A very normal thing to do would just be to rebalance their account, rebalance their investments. And the idea being, of course, that you sell high, and you buy low, which is counterintuitive to a lot of people. But these are more automatic processes that would come in for a client that would help them stay out of the process a little bit, and to help them stay out of their own way because you are just doing the financial planning, and they are not in the way with their own thoughts, biases, whatever. And that's going to be one thing that will help them move in. The other thing being, besides rebalancing, using different buckets, like this is your short term budget bucket, this is your long term bucket, whatever that might be. Because then you can kind of convince them, well, with this short term we're not going to take much risk. And then that's going to open you up to taking much more risk with this more long term funds that you have set aside for retirement. Your short term, it's sitting in your checking account, we're going to take like no risk, whereas, you know, this is your IRA that you're not going to use for 30 years. So we're going to take a lot of risk with it. So those kind of basic financial planning techniques and tools, obviously, will kind of go around anybody's financial thoughts, feelings, biases, and will help them without causing them any issue,and without causing them to get in the way.
Steve Altishin 32:39
You're putting people back on the rail who got a little bit off, and you're looking at them in a little bit of a different light than maybe some other traditional financial planners were. It's not all just about the numbers. Yeah, we can talk about this forever. We're now sort of coming to the end of our time, but thank you, Stefanie. This was really good. I can certainly see how, not only is this a fascinating subject, but it can be helpful to a lot of people who are struggling to stay on their financial plans for a variety of reasons. And the next time we get together, we are going to talk about the money story because that is fascinating. Thanks so much for being here. It's just great. And I want to thank everyone who is listening to this episode of Modern Family Matters. I want to remind people who are listening, if you have any family related topics that you'd like us to address, legal or otherwise, or if you're interested in being a guest on our podcast, please feel free to contact me, Steve, at [email protected] So once again, thanks everyone for joining us, and we'll see you next time on Modern Family Matters.
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