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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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Why Knowing Your Client Is Key to Success

There’s a hairdresser in Arvada, Colo., who likely knows more about her clients than their doctors. She listens to them and makes them feel valued. She’s honest with them when pixie cuts aren’t right for their face frame and her referral business is booming.

Getting to know your clients and making them feel you are in tune with their needs is key to more referrals and more business growth, according to a 2018 study. Also key is being comfortable with tension.

The “Know Your Client” benchmarking study by FPA, Capital Preferences, and T. Rowe Price found that clients might respect and like you more when you are a “behavioralist”—someone who tells them in a diplomatic way when they say one thing yet do another.

A behavioralist, the study noted, is a planner who has “will, skill and means” and can handle tension productively. This leads their clients to appreciating their honesty, referring them to more people and it results in more business growth, the study found.

But planners have to know their clients well in order to pull this off.

“The better we know and understand our clients, the better we are at providing financial planning services,” Frank Paré, CFP®, chair of the FPA board of directors, told InvestmentNews. “Having a deeper understanding of our clients helps us to point out where there might be some inconsistencies in terms of what they do versus what they say. I’ve seen that where clients are looking to the future but still going to Vegas on a regular basis.”

He added that clients want to be called out when they are not acting in alignment with their goals. And although that might be tense, if a planner is a behavioralist with will, skill and means, they thrive in that situation.

“In identifying behavioralists, we’re looking, for example, at how planners deal with the tension that creeps into a client relationship. Behavioralists are comfortable with that tension,” said Pat Spenner, chief marketing officer at Capital Preferences, in an InvestmentNews article.

The takeaway is to put in the time to get to know your client, their partner and their families—including pets (ever talk to a 30-something millennial with only fur kids? Hello, unsolicited dog pictures.)

A Financial Planning article reporting on the survey noted that the sweet spot is to spend around six extra hours working to know your client and their loved ones in the first year of the relationship. That six-hour commitment led to a referral rate of 27 per 100 clients and a net growth rate of 24 percent.

Editor’s note: This article originally appeared in the August issue of the Journal of Financial Planning in the Observer section. The Journal of Financial Planning is a member benefit for Financial Planning Association members. Not a member yet? Become one today.

Ana TL Headshot_Cropped

Ana Trujillo Limón is senior editor of the Journal of Financial Planningand the editor of the FPA Practice Management Blog. Email her at alimon@onefpa.org, or connect with her on LinkedIn


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3 Best Practices for Creating an Attitude of Gratitude

Gratitude can be defined in numerous ways. Some view it as an attribute with the power to decrease fear and attract abundance, while others view it as a constant awareness that one should live by.

Successful advisers know that showing gratitude has a profound effect on themselves, others and their business. The secret to creating an attitude of gratitude is to continually be looking for the opportunity to be thankful and to express that appreciation in communications and actions with clients, colleagues and even with ourselves.

Author Melody Beattie said it best when she said, “Gratitude makes sense of our past, brings peace for today and creates a vision for tomorrow.”

Let’s take a deeper look at some best practices for how you can incorporate gratitude into your business:

Best Practice No. 1: Gratitude for Clients

I truly believe that the leading reason clients leave their adviser is because they feel their unique needs are not acknowledged or catered to. When a client has not been contacted regularly, they tend to feel unappreciated and neglected. This inevitably ensures that they will eventually move their business to another adviser.

Let’s look at what one successful adviser is doing to avoid this happening to him.

Steve C., is a 25-year veteran financial adviser who had lost his motivation. After discussing why he is in the business, he said that he loved his clients. However, he also admitted that he wasn’t contacting them as often as he knew he should be.

Steve immediately went on a large-scale client servicing campaign to contact all his clients every three months to check-in and see if they had any questions, comments or concerns. In addition, he developed a systematic way of scheduling client reviews. Within a few months his client base began to take notice and he was feeling the effects of their appreciation as well!

Best Practice No. 2: Gratitude for Colleagues

One of the most overlooked opportunities is to be thankful with colleagues. Most advisers get so caught up in their own day-to-day activities that they don’t take time to simply express their appreciation toward those who have helped make business a success.

In Steve’s case he started to realize that there was a number of people he relied on, yet he rarely took the time to express his appreciation. So, he made a list of the top 10 colleagues to thank. He wrote down the reasons why he was grateful and then he made it a point to call each of them and let them know specifically how much he had appreciated their help.

Best Practice No. 3: Gratitude for Yourself

Most people are hardest on themselves and thus very infrequently do we take the time to consider why we are grateful for our own actions or wins.

After Steve transformed his relationships with his clients and colleagues, I suggested there was still one more person he needed to appreciate: himself. For years he had put tremendous pressure and set up unrealistic expectations for reaching his goals. But to be truly happy in this industry he needed to be less demanding on himself and be more loving. So, I had him make a list of the top 10 qualities that he believed he possessed that were the reason why his clients worked with him. He was to keep that list handy and affirm those qualities often.

Why Creating an Attitude of Gratitude Works

Creating an attitude of gratitude works because the focus is on adopting a positive perspective for why clients work with you and colleagues assist you. It’s this conscious act of looking on the bright side that directs your energy toward successful outcomes.

If you would like a complimentary coaching session with me, please email Melissa Denham, director of client servicing.

Dan Finley

Daniel C. Finley is the president and co-founder of Advisor Solutions, a business consulting and coaching service dedicated to helping advisers build a better business.