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Reviewing Financial Infidelity in A Financial Planning Context

Financial infidelity is one of the more complicated issues that financial planners face when meeting with couples. The hurt and betrayal that often comes up in the planning room is made even more complicated by the different perceptions that planners have about it.

Therefore, here is a quick overview. Financial infidelity does not have any real set definition, but Brad Klontz, Kristy Archuleta and Anthony Canaly broadly defined it in Financial Therapy: Theory, Research, and Practice as, “purposeful financial deceit between two or more individuals wherein, there is a stated or unstated belief in mutual honest communication around financial matters.”

Financial infidelity can include financial cheating including, “hiding purchases from spouses, having secret credit cards or keeping secret personal bank accounts,” according to a 2018 Journal of Financial Therapy article titled, “Financial Infidelity in Couple Relationships.”

Understanding your beliefs about what is and is not financial infidelity will have a huge impact on how you handle it when it comes up and how much your clients will trust your help. So let’s dig into this a bit.

It is important not to minimize “small” incidents of financial infidelity as it can reflect larger relationship problems. It may be more about how individuals assert their needs, manage conflict and trust each other more than the actual money.

Rates of financial infidelity vary by definition, but the 2018 Journal of Financial Therapy article referenced above found that 27 percent of individuals admitted to keeping a financial secret from their partner. The effects of the financial infidelity can vary from financial planning problems, interest on hidden debt and postponing major life events, to decreased marital satisfaction, loss of trust, depression and defamation of character.

Steps to Address Financial Infidelity

What can you do if you discover financial infidelity? Here are some steps that are likely to help you as you help your clients move forward:

1.) Ground yourself. Notice your own feelings with this issue. Are you angry? Sad? Scared? We all bring ourselves into our work with clients. It is important to process your own feelings and thoughts so that you can be grounded when you interact with your client.

2.) Be direct, there is no point in delaying. If it does not come out in session, it will later. So do not postpone a conversation because it is uncomfortable.

3.) Try to be open-minded. It is best if you can look at the reasons why this happened without judging the person. The more you know about the clients’ emotions and thoughts, the better you are going to be at addressing their needs and helping ensure that it does not happen in the future.

4.) Normalize and validate. Both partners are likely feeling hurt and need to know their feelings are normal and okay to have. Try to empathize with both partners’ experiences, while holding accountability and not taking sides.

5.) Problem solve. This is an opportunity for you to instill hope. Most tangibly, you will help them come up with a plan, but you need to know everything to help them. This will not only make them feel more hopeful about their work with you, but also help them see their role of disclosing as part of the healing. Remember everyone (at some level) wants to be the “good guy” so let them help you by coming clean.

6.) Tell them to do their research before disclosing to their partner. The partner who has not disclosed is probably fearful of the reaction. It is crucial that you discuss and prepare them to approach the topic in a way that will not incite violence.

Financial infidelity does not look the same and does not come from the same motivations. It can come from addiction, abuse, an affair, fear, shame or pride. Your actions will not be one-size-fits-all but should reflect what your clients need from you. Doing your own research on how to handle these topics or by watching a replay of our webinar for the Financial Planning Association and Financial Therapy Association (which will be available soon), you can gain skills in approaching these situations.

This is a challenging topic, but as you address your own emotional reactions and learn to connect with clients in pain, you can effectively navigate this issue and others. Most importantly, you can and will provide your clients with support in a helpful way.

On a final note, remember that you do not have to do this alone. Financial infidelity is a complex issue that may provide the need for a couple counselor or marriage and family therapist. There is still a stigma against therapy in many places, so you can be an invaluable resource to your client by doing your own research and finding a mental health professional you trust near you that can serve as a referral source.

Editor’s note: The authors of this post explored this topic more in-depth in a Financial Planning Association and Financial Therapy Association webinar called: “Difficult Conversations 3: Couples Dealing with Financial Infidelity.” The other two parts of the three-part webinar series dealt with ambiguous loss from Alzheimer’s disease and financial enabling. All three webinars will be available on-demand for members in the fall of 2019.

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Nathan Astle is currently pursuing a master’s in couple and family therapy from Kansas State University with a graduate certificate in Financial Therapy. He is currently researching the interplay of couple attachments, financial transparency, and money scripts on financial stress.

McCoy

 Megan McCoy, Ph.D., LMFT, is an adjunct faculty member at Kansas State University where she teaches courses for the financial therapy certificate program. Her research focuses on financial therapy and has been published in several journals including the Journal of Financial Therapy and the Journal of Financial Planning. She serves on the board of the Financial Therapy Association and is associate editor of book reviews and profiles for the Journal of Financial Therapy.


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5 Things to Know About Financial Empathy for Client Relationships with Michael G. Thomas, Jr.

Michael ThomasToo often, financial professionals find themselves in a position where they’re judging how their clients want to spend. The truth is that not every client is alike, and not every client has the same money mindset. It may take several meetings to dig down to the core of why they feel the way they do about money—and the stories that are driving their decisions. When planners and financial counselors are able to take a step back and listen, they’re better able to understand the culture and background of the client they’re working with.

Michael G. Thomas Jr., an Accredited Financial Counselor (AFC®) and Ph.D. candidate in financial planning at the University of Georgia, recently joined me on my podcast 2050 TrailBlazers to discuss how financial empathy can improve financial services.  

Thomas is passionate about understanding the story behind money decisions, and how financial counselors and planners can better balance their response to people’s financial goals and decisions.

1.) You’re a lecturer at the University of Georgia and a Ph.D. candidate. You work with students in a way that is called active learning. Tell us about that. How is that different and how are they learning about working with clients in an empathetic way? 

There may be instances where, as a financial counselor and doing financial coaching, we make recommendations, but we’re not always mindful of the barriers. And then we aren’t helping individuals think through the barriers and how to overcome those as they’re working towards their financial goals. So, I’m very barriers focused because it’s easier to create a linear path between do this and get here and it doesn’t always work out that way.

So in my active learning class it never does work out that way. We have learning scenarios in class. For instance, we tell people all the time, you know, just set up a Vanguard account or just set up a Charles Schwab account. And I was like, you know what? I could tell you that yes, that is an optimal strategy to have a diversified portfolio. But one of the things that I’m leaving out is that I know that as soon as you go to that website, you’re going to be absolutely lost. You’re not going to understand the language. And even if you find the different portfolios in which you can invest in, you’re going to be like, what’s a VTFX?

So I want students to see it, to struggle with it. I want you to go through this process. And then I want us to come back and have a conversation about it. Was it as easy as I made it seem? And the vast majority of my students will say, no, it wasn’t. 

2.) You mentioned when we focus on the numbers we miss out on the story that’s driving it. In your TEDxUGA talk, you share the example of a woman who was getting her taxes done by a volunteer, tax prep person and mentioned that she was going to buy a big flat screen TV with her refund. What was the story driving that decision and what can planners learn from that? 

She lived in an urban neighborhood where the crime rates were fairly high, and her children were getting older. Generally, as kids get older they want to leave the nest and do more. For her [the television] was a way to help protect her children. By having the flat screen television, she thought rather than her kids wanting to go out and over to other people’s houses, they could just come over to her house—watch movies and play games. She was trying to protect her children and even her children’s friends from the environment in which they were living. We never place these things in this type of context, but she was purchasing insurance. That [television] was an insurance policy to protect her children. 

When you frame it in that way, any person, I don’t care what background you come from, can say, “Oh, I completely get that.”

3.) What were some personal experiences that sparked your interest in the topic of financial empathy and what can planners learn from them? 

I struggled significantly in school growing up, to the point where my parents were constantly called in by the principal or my teacher. And I would be standing there and the teacher would look dead at me and say, “If he doesn’t get this information, he’s not moving on.” It had gotten so bad to where I would go to class and just put my head down and the teacher would not care.  

I’m the type of person where it takes me a little time to process things. I’ve always been that way. And it’s something that I accept now. It’s not a deficiency, it’s just a part of who I am. 

Now, I always think about myself when I’m working with clients. What if someone got a chance to really know that maybe the way that I’m teaching something doesn’t work with this particular child’s learning style? Let me think of a more creative way to educate this person. To have that type of mindset means that you believe that the person can grow. And what happens a lot of times—especially as professionals—we know so much to where we don’t really hear our clients and we’re just trying to work toward what our objective is.

I always think of the best learning experiences and those who really got me over the hump—the type of people who were always searching for more and to find what could help me get there as opposed to just being incredibly rigid and thinking that there’s only one way to get there. And I’ve benefited from that. I’m here now pursuing a Ph.D. But I also treat my clients with that type of empathy. And even sometimes I’ll feel as if maybe I’m not the right person for a client, but I never feel as if that client can’t grow. 

If you’re a financial planner, you should find what I call the need behind the need because there’s always a reason why someone is doing something. Why is it important that we find out the story behind client behavior? 

If clients don’t do what we’re encouraging them to do, it’s not that they don’t want to grow, they don’t want to do better, to have financial well-being, to retire—but that’s the narrative that we play. In doing that, it takes the responsibility off of us and it puts it on the client. But the client came to see us so that we could help them navigate this process. And in creating and implementing a plan that’s taken these things into consideration and when a client sees it, they’ll say, you know what? I feel heard. 

4.) Empathy does not equal complacency. Listening to clients’ stories doesn’t mean that we’re accepting excuses. Not every client has the same upbringing when it comes to money. Why does that matter? 

What we’re talking about is financial socialization. Financial socialization happens in so many ways. The systems in which you exist impact socialization. I have two boys and we talk about money all the time. We try to have fun with it. Obviously, this is what I do and we have these conversations, but I don’t need to. And until I have established and demonstrated trust with them, how could they ever trust a 401(k) growing into this substantial amount of money into the future? 

If you grew up in a household where promises are consistently broken, where someone says, “I’m going to do this,” and they never do it, or “I’m going to give you this,” and you never get it, or “We’re going to go there,” and we never go. Those become deeply seated and ingrained in such a way where it becomes difficult to trust the financial process. That’s something that takes a lot of time to work through with clients, to get them to stick with something long enough to experience the benefits. But if we don’t establish trust or there’s no trust in a household, I completely understand why somebody won’t be banked or why someone doesn’t trust investing in a market. 

In discovery meetings, really discover not just what a person thinks, but the context around their thinking. 

Rianka Dorsainvil

Rianka R. Dorsainvil, CFP® professional is the founder and president of Your Greatest Contribution (YGC), a virtual, fee-only comprehensive financial planning firm dedicated to serving entrepreneurs, first-generation wealth builders and thriving professionals in their late 20s, 30s and 40s. She also hosts 2050 TrailBlazers, a podcast aimed to address the lack of diversity in the financial planning profession by engaging industry experts and leaders in conversation.


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9 Things Advisers Can Do to Connect with Younger Clients

There’s a lot of information out here about the characteristics of millennials and Gen Z (millennials were born between 1980 and 1994, and Gen Z from the mid-1990s to the early 2000s). But, there’s not much out there on how these characteristics impact financial advisers and what advisers should do to make sure they’re well positioned for these future clients.

So, here are some characteristics of younger clients along with some (relatively easy) ideas to help financial advisers to be more relatable to younger generations.

They’ve never used a desktop computer. Imagine them walking into your office and thinking, “What are those big boxes under everyone’s desk?”

Easy fix: Have laptops and iPads. Don’t have desktop computers in your office; at least not in client meeting rooms.

They take notes on their smart phone. But, they know that older people, particularly people in positions of authority, think they’re texting.

Easy fix: During a meeting, say “…and hey… if you want to take notes on your phone, please go ahead.”

They’ve never watched cable. They didn’t “cut the cord”—they never had a cord to begin with.

Easy fix: If you’re looking to find common ground over a TV series, pick something you know is on Netflix; or just stick to “Game of Thrones”—everyone watches that.

Being an influencer or a gamer is a current or future job opportunity. And, it can be quite lucrative. There are even a few advisers already specializing in this niche. To that point, Merrill Lynch had a booth at this year’s Twitchcon.

Semi-easy fix: Know the top social platforms, gaming platforms, and games – at least by name. Here’s a link to the top streamed games on Twitch in 2019.

They have a “fight the power” mentality. I mean, look at the political environment they’re growing up in.

Easy fix: When talking about financial decisions, always have an alternative. In fact, use your preferred approach as the alternative. For example, “People your age usually go with a 60/40 portfolio, but if you really want to push the envelope, you could go with a 70/30.”

They respond to edgy campaigns.

Easy fix: Slow down on the uber-professionalism. Not so much that you’ll be perceived as fake, but maybe try something edgy like having an Instagram account. Or…have some funny memes on the wall (if you don’t know what a meme is, well, you might be too far gone).

They prefer videos.

Easy fix and not-so-easy fix: Offer to meet over FaceTime. Then, use interactive video reports in lieu of quarterly paper reports. (I suspect we’ll see a bunch more vendors popping up who specialize here very soon.)

They’re global and more diverse than ever.

Easy fix: Make sure your office looks the same. And if it doesn’t yet, at least avoid the company pictures on the website where the whole team is together on a golf course with sunblock and polos. You know what I’m talking about.

They love giving their opinion! They grew up in a world where Instagram accounts become viral influencers by having nothing other than polls. This means, younger generations are following accounts for the sole purpose of giving their opinion.

Easy fix: Ask their opinion. About everything. Often. There are affordable—or free—survey tools that you can use, like Google surveys. And, they can be sent via text.

It also wouldn’t hurt to learn some of the lingo, or else your younger clients may be sus.

Stay cool.

Dani Fava

In her role as the director of innovation at TD Ameritrade Institutional, Dani Fava oversees the development of advanced investment management and technology tools designed to help independent registered investment advisers compete and thrive in a world of accelerating change. Having managed the launch of TD Ameritrade’s award-winning iRebal on Veo portfolio rebalancing technology, Fava rolled out the award-winning Model Market Center, TD Ameritrade Institutional’s innovative approach to bringing outsourced investment management capabilities to RIAs. Fava is also responsible for implementing voice-first capabilities at TD Ameritrade, which will employ conversational AI that can communicate with advisers. Fava joined TD Ameritrade in 2012 where she puts more than 15 years of wealth management knowledge to work. She was recently named one of the top 16 Women in Wealthtech, and one of the top influencers in Fintech and AI. She loves to talk about big data, finserv start-ups, artificial intelligence, CrossFit and basketball. Follow Dani on Twitter @DaniFava_TDA, for the latest in wealth tech.