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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.

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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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Design A Great Client Presentation to Get Results in 7 Steps

Whether you are thinking about a workshop or something simple to use one-on-one with clients, here are seven steps to help you structure a presentation that communicates your message and is designed to produce the results you want.

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  1. Know your purpose. What do you want to happen after your presentation? It shouldn’t be merely about increasing awareness or educating your audience. Rather know in advance specifically what you want your audience to do as a result of what they see and hear.
  2. Define the problem. What is the problem your clients and prospective clients want to solve? Is it retirement income they can’t outlive? Or managing risk? Or maybe it’s the problem they didn’t know they had! The first thing you should do is define the problem as your clients would describe or understand it.
  3. What is the conventional wisdom about the issue? What mistakes do clients often make in dealing with it? How do you see it differently?
  4. Sufficiently challenge your audience so that they realize that they can’t handle it on their own. Help them recognize that they need your help. Oftentimes this is best accomplished by asking key questions that challenge common assumptions people have or errors they make when trying to do it themselves.
  5. Assemble your points clearly and logically in a way that creates the structure or storyline for your presentation. What are the five (or six or seven) areas of needs and concerns that your target audience has? What are the key questions that people should ask? What are the mistakes that people often make?
  6. Provide your perspective. Once you’ve helped them understand that they have a problem, and why trying to tackle it on their own would be a mistake, it’s time to provide your perspective. This slide should say, “How I (or We) Can Help,” followed by some specifics that describe what you do to help people address the concerns you described.
  7. Describe next steps. This is your call to action – what you want them to do next, and what you will do to help them get started down the road to success.

Once you’ve created the overall structure, look for stories and images that create connection points with your audience and support your purpose. Limit your use of PowerPoint to illustrate rather than duplicate what you plan to say. Now you have a presentation that is designed to be memorable and produce your desired results.

Adam Kornegay

Adam Kornegay is a co-founder of Pathfinder Strategic Solutions. He has a background in marketing and business analytics. Coupled with his experience as a financial adviser, he helps a broad array of clients, from relatively new advisers to experienced planners, and consults with various financial services firms. He is a coach in the Messaging and Marketing Strategies FPA Coaches Corner

Susan Kornegay Headshot

Susan Kornegay, CFP® professional, is a partner at Pathfinder Strategic Solutions. After more than 30 years as a financial adviser, branch manager and practice management consultant, Kornegay enjoys helping financial planners define a comprehensive and consistent client experience and then market that experience in clear, client-friendly language. She is a coach, along with Adam Kornegay, RCC™​ in theMessaging and Marketing Strategy FPA Coaches Corner.