Should Banks Add ‘Financial Therapists’ to Their Wellness Programs?

More than ever, people stress about their finances and struggle to keep up with the perceptions of their peers, who they think handle money much better than they do. Banks and credit unions can certainly help people with financial wellness, but how far they should go is an open question.
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Fads and new trends come and go in banking, and financial therapy is no different. The concept has existed for over a decade, but has only recently been adopted in banking.

Financial therapy differs considerably from generic financial health and wellness programs. These programs often track only banking data a few months out to provide the customer with insight about their spending habits. Financial therapy, on the other hand, takes a deeper look at the customer as a whole to understand them financially.

One financial institution — Key Bank’s digital bank Laurel Road — are gung-ho about financial therapy. Laurel Road hired its first financial therapist in January 2021 to strengthen their financial wellness programs. Additionally, entire associations have been born out of this concept of enhancing the financial experience through integrating mental health, such as the Financial Therapy Association.

Other banking providers — like the personal financial management unit at Goldman Sachs — argue financial therapy might not be the right approach.

To learn more, The Financial Brand spoke to experts at both Laurel Road and Goldman Sachs to uncover whether financial therapy works (for both institution and customer) or if it’s an idea that the rest of the banking industry can pass by.

Learn More: BBVA Sees Strong Results from Focus on Financial Wellness

What Is Financial Therapy?

Almost three-quarters (72%) of Gen Z and Millennial Americans say that managing their financial lives is a heavy burden influencing their mental health, according to research conducted by Laurel Road.

Christina Klenotic, SVP and Head of Brand and Strategic Partnerships at Laurel Road, explains that there are several factors playing a role in this stress, including: making (and keeping to) a monthly budget and checking bank accounts and checking credit card statements. She adds that “there’s a self-esteem connection to financial health.”

The younger generations “make a lot of comparison to others,” says Klenotic. “69% of our respondents feel like other people their age are more focused on their financial future than they are. It’s that self-esteem and comparative aspect that really contributes” to the anxiety.

That’s why Laurel Road hired licensed financial therapist Aja Evans, who tells The Financial Brand that financial therapy is crucial to providing people with the tools they need to feel comfortable with their finances. “There’s a lot of things that [banks] haven’t always paid attention to — particularly in the mental health field — around money,” Evans says.

The Missing Puzzle Piece:

Most banks and credit unions have started financial wellness programs. Few, however, have made a conscious effort to address mental health and money as part of those efforts.

Financial therapy isn’t a linear process nor will it look the same from client to client. In essence, a financial therapist is trained to understand both a person’s emotional state and their financial situation in order to merge the two and offer solutions.

As one financial therapist, Amanda Clayman, explained to Forbes, by evaluating a person’s psychological habits, a financial therapist may be able to help them better understand their financial habits.

“With my clients, some of the most common issues that come up center around problems with managing cash flow and debt, chronic under-earning or overspending, making emotion- and anxiety-based financial choices, as well as allowing money to become a source of conflict in relationships,” Clayman said.

“Issues with money aren’t considered a discrete mental health disorder, so they’re not subject to diagnosis and treatment, unless they are tied to another issue,” Clayman stated. “The field of financial therapy is still very much in its infancy.”

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What Are (and Aren’t) Financial Therapists Doing?

Evans says when she first begins working with a client, she starts with their emotional state, adding that one can only look at the symptoms of financial stress after evaluating what comes up when a person thinks about money.

Questions she asks include: “Are you having a hard time checking your banking account? Are you nervous when it comes to the middle of the month?” “Where is the anxiety coming from?”

Read More: The Brutal Truth About Savings Habits: Covid Didn’t Teach Us Anything

But there must be boundaries that financial therapists can’t cross into, right? How deep into a person’s behavior does one have to go?

“There’s considerable debate within the field about who should be able to call themselves a financial therapist, and whether we need a separate credentialing process and code of ethics,” Amanda Clayman explained.

This very issue is still at the heart of the financial therapy debate. Evans acknowledges that it can be difficult to distinguish the traditional therapist from the financial therapist in these settings.

“For me, it’s a little tricky because I can go into the deeper things for somebody because I am licensed,” Evans says. Although she can take that step with her own clients, it’s different in a partnership like the one she has with Laurel Road. “It’s not appropriate for me to be opening up childhood traumas and wounds to someone who is trying to have a more general conversation.”

There is more to financial therapy than sitting down and advising clients. While Evans will be counseling Laurel Road clients, just as importantly she will also be responsible for updating social media and the website’s blog with financial therapy advice.

Does It Work?

Not everyone is on the financial therapy train, as previously noted. Joe Duran, Head of Personal Financial Management. “I don’t think that we, advisors, have the qualifications,” Duran says, adding he is often asked about financial therapy. “You enter a totally different world when you start to really assess and go back into history and try to get people to change who they are.”

It’s not that Duran is skeptical of a holistic approach to finances and of helping people achieve their goals and reduce their financial stress. A self-proclaimed yogi of 25 years, Duran started United Capital Financial Partners in 2005 with the mission of helping people optimize their life choices. Goldman Sachs acquired United Capital — which had grown to $25 billion in assets — in July 2019 and Duran joined Goldman’s personal financial management team.

Read More: What’s Next for Goldman’s Marcus Banking Strategy?

“Money is an emotional category,” he says. “Yeah, people think it’s an intellectual category, but in fact, money is deeply tied to our values and our choices and can be a cause of great tension or great relief, depending on how you use it.”

On the Other Hand:

The head of Goldman Sach's personal financial management unit says he doesn't think most financial advisors are qualified to also play the role of a therapist.

Duran advocates for guiding people down a path toward financial health. “I’ve been a huge proponent of behavioral economics and helping advisors become better at helping their clients live better lives.”

At the end of the day, Duran believes money does three primary things: “It helps to protect you from bad outcomes. It helps you to do the things that help you to be happy, and it helps you take care of the people that you care about. That’s all money ever does.” He says banking can invigorate customers and get them to a place of financial health, but financial therapy goes too far.

“That not our business. It’s not my business,” he adds. “I know there are some who believe that’s a really valuable thing to do. I just don’t think that’s something I believe is as useful as actually helping people to make the most of where they currently live today and how they think and feel.”

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