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

Many people who stress about their finances wrongly believe their peers outshine them when it comes to handling money. Most banks and credit unions are eager to help people with financial wellness, but how far they should go in dealing with the emotional aspects of that challenge?

The concept of financial therapy has existed for more than a decade, but has only recently seen some notable uptake 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 individual customers to understand them emotionally and financially. There’s even a Financial Therapy Association to support the approach of integrating mental and financial wellness.

One financial institution — KeyBank’s digital bank Laurel Road — is gung-ho about financial therapy. Laurel Road hired its first financial therapist in January 2021 to strengthen its financial wellness programs.

Other banking providers — like the personal financial management unit at Goldman Sachs — are skeptical of the concept, arguing that financial advisors should not be confused with therapists.

The Financial Brand spoke to experts at both Laurel Road and Goldman Sachs, in an effort to learn if 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 that weighs heavily on their mental health, according to research conducted by Laurel Road. Several factors contribute to this stress, including making (and sticking to) a monthly budget, checking bank accounts, and checking credit card statements.

But “there’s a self-esteem connection to financial health” as well, says Christina Klenotic, a senior vice president and head of brand and strategic partnerships at Laurel Road. The younger generations “make a lot of comparison to others.”

According to the survey, “69% of our respondents feel like other people their age are more focused on their financial future than they are,” she says. “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 financial wellness programs. Few, however, have made a conscious effort to address people’s emotions as they relate to money management.

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.

By evaluating what is going on with someone psychologically, a financial therapist may be able to help them better understand their money 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,” financial therapist Amanda Clayman told Forbes.

Though these conversations may be therapeutic, the title “therapist” is a source of controversy. “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,” Clayman said.

She also noted that “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 assessing 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?”

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?

Evans acknowledges that it can be difficult to distinguish the traditional therapist from the financial therapist. “For me, it’s a little tricky because I can go into the deeper things for somebody because I am licensed,” Evans says.

But even if she can take that step with her own clients, it’s different in a partnership like the one she has with Laurel Road, she says. “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.”

In her role, Evans also is responsible for updating Laurel Road’s blog and social media with financial advice.

Read More:

Does Financial Therapy Work?

Not everyone is aboard the financial therapy train, as previously noted. Joe Duran, head of personal financial management at Goldman Sachs, says he is often asked about financial therapy. But, “I don’t think that we, advisors, have the qualifications,” he says. “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 or of helping people 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.

“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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