Psychology of financial planning core to profession: study

Financial planners are spending more time discussing supposedly non-financial topics with clients, and they’re seeking more training in psychology, according to a new study.

Planners want more training in “addressing financial abuse, control and power dynamics” in client households, learning “how to identify appropriate mental health referrals” and managing the tension within their customers’ families, according to a study published last month in the Financial Planning Association’s Journal of Financial Planning. The study, based on the analysis of five planners and professors of a poll of 172 members of the FPA, came three years after the CFP examination added the psychology of planning to its primary group of subjects on the test.

More planners have been adapting lessons from psychology and the related field of behavioral finance to their practices in recent years — whether through their own research, referrals to therapists or other mental health professionals or designations such as the certified financial therapist or the certified financial behavior specialist. The FPA members are spending about a quarter of their time interacting with clients talking about nonfinancial topics, they told researchers. And 74% of the planners said that amount has grown in the past five years.

“Financial planners in this study expressed a desire for more training related to understanding how to mediate financial conflicts within client families and deal with financial abuse,” according to the authors, Megan McCoy of Kansas State University, Billy Spencer of Boston-based Crestwood Advisors, Blake Gray of Kansas State, Shane Heddy of Grand Blanc, Michigan-based Legacy Financial Group and Donovan Sanchez of the University of Illinois Urbana-Champaign and Wheaton, Illinois-based Model Wealth.

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Key takeaways

“In their own way, each of these areas carries a gravity that can be intimidating to many planners, and targeted training on identifying and addressing issues related to these topics may be beneficial,” the findings said. “This paper suggests that research on how planners can better support clients through grief, divorce, job loss, family conflict and financial transparency is also warranted. Results from additional research on these topics can inform CFP Board-registered training programs on how to help planners support clients who are experiencing these, and other, pain points in their practices. The pain points that planners see in their practice can be highly sensitive and emotionally charged.” 

Those findings point to the potential need for training in mental health referrals, family dynamics and behavioral theory, and dispute mediation to address the most commonly cited “pain points” among planners, the authors said. The top five of those out of 22 themes collected in the poll were: financial abuse, family conflicts, therapy referrals, honesty between spouses about money and wealth, and the impact of cognitive biases on client decisions.

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Confronting the issue

The fact that planners are noticing these challenges and deficiencies in itself represents “a really good thing,” according to Aja Evans, a therapist who’s the current president of the Financial Therapy Association, the author of the 2024 book “Feel Good Finance” and the founder of financial therapy firm Aja Evans Counseling.

“It just shows that you’re really trying to look at your clients more holistically so you can understand how you can support them better,” she said. “It’s really just about building a community of people who are doing this work across the board.”

She and other financial therapy advocates were excited by the CFP Board’s decision in 2021 to add the psychology of planning to the eight principal topics of the exam the following year, she noted. 

In general, the topic of money may bring “a lot of shame” that many people feel they must keep secret, Evans noted. So she invited more planners to find resources through the association’s website and consider attending learning courses or pursuing its certification. Service professionals in any field must prepare for the emotional side of their business, but some financial advisors may hesitate to send clients elsewhere for counseling, she said.

“I’m not touching the money, but I am specifically here for clients who really want to start understanding their own money narratives,” Evans said. “Money is far more emotional than planners may have been prepared for going into it. … They do feel very much so that they’re sometimes acting as their clients’ therapists.”

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An ‘ongoing’ issue in planning

And that’s why the study’s authors also concluded that planners “should always be careful to clearly articulate” the boundary of their work with that of licensed, trained therapists. Their “primary frustration” in the psychological realm stemmed from the classic advisor frustration of clients “ignoring advice or directly contradicting recommendations.” But they identified mental health referrals and the difficulties of client divorces, loss of loved ones and sudden windfalls as other key areas that the CFP Board may consider adding to its learning objectives for planners.

So the research paper could “help determine best practices” for how to “guide clients through some of the most emotionally charged financial crossroads of their lives,” the authors wrote.

“The CFP Board’s new ‘psychology of financial planning’ domain signals that crises, behavioral biases and interpersonal conflicts are not fringe topics but core aspects of modern advising,” they wrote. “As more clients seek holistic, life-centered guidance, the profession will likely continue evolving toward a balanced blend of technical acumen and empathetic, psychologically informed practice. Yet, translating these curriculum updates into daily professional competency remains an ongoing challenge.”