In the early days of the pandemic, Nora Herting opted for financial therapy. “I didn’t even know exactly what it was,” she said. “I heard about it and I was like, ‘Sounds like something I need right now’.”
As the owner of a small business whose revenue had been decimated by the lockdown, she faced a difficult choice between her own financial security and that of the company, including her 14 employees.
“Back then, my private and business finances were inextricably linked,” says Herting, who lives in New York. “I needed help not on a business level, but more on a personal level. Which decisions align with my values? Are these decisions I can live with?”
She turned to Amanda Clayman, a financial therapist in private practice in Los Angeles. Clayman did not offer financial advice; Instead, he instructed Herting to create a “timeline” of his relationship with money. Over several sessions, they discussed Herting’s family history, her career, and how she communicated with her boyfriend about money. So they made a plan.
Initially, Herting set aside some of his savings for emergencies and retirement. He then determined how much he would spend to selffund his business, which creates visuals for meetings.
“I agreed to the amount I’m willing to lose at the company because we talked about it,” Herting said. The company eventually recovered and is now fully operational with all employees.
For years, financial therapy has occupied a littleknown and vaguely defined niche. As one of the first practitioners, Clayman became an authorized clinical social worker in 2006 with the goal of integrating financial and emotional wellbeing.
“I saw a clear need for this, but there was no institutional way or system to meet that need,” she said. “My master’s professors didn’t know what to do with me. I was like, ‘Why doesn’t that exist?'”
Clayman eventually discovered that she wasn’t the only one. Brad Klontz, a financial planner and psychologist, has been researching the intersections between the two disciplines since the early 2000s, but there was no official recognition of the field until the 2008 financial crisis, when a handful of financial and psychiatric professionals formed the Financial Therapy Association, the aims to raise awareness of the connections between psychology and personal finance.
Her moment was ripe. “The financial crisis has helped psychiatrists understand that money is an area of great concern for our clients,” Klontz said. The problem was that many therapists were not willing to talk about it.
“Most people in the psychiatric community are trained to ask clients about their marital distress to sleep at night,” he said. “We’re not trained to say, ‘What about your money?'”
You need to know how to understand emotions
Financial advisers faced the opposite problem. “During the Great Recession, all financial planners had clients who would melt away and be emotionally deranged during their sessions,” said Megan McCoy, who directs the graduate program in financial therapy at Kansas State University.
“Finance professionals love numbers, answers and clear solutions, and they didn’t know how to deal with these mixed feelings. They needed more tools.”
Today there are these tools. In 2019, the Financial Therapy Association launched a certification program for financial and psychiatric professionals to become certified in financial therapy.
The correspondence course, which lasts three to six months, covers financial topics (like estate planning and budgeting) and therapeutic techniques (like recognizing behaviors and attitudes that can impede financial progress).
To earn certification, students must pass an exam and agree to abide by a code of ethics, which includes a standard of fiduciary duty and a prohibition on selling or earning commissions on financial products. The federation has also formed a Disciplinary Committee that enforces its rules and can withdraw or suspend certification for violations.
If the 2008 crisis lit the flame of financial therapy, the pandemic has doused it with fuel. “When Covid came there was a lot of uncertainty and fear for finances,” McCoy said. “The pandemic has also eased some of the taboo around discussing mental health. The combined result is that financial therapy is thriving.”
The number of students in its graduate program has quadrupled even as college enrollment has declined. The University of Georgia and Creighton University in Omaha, Nebraska recently added financial therapy to their financial planning and family therapy curricula.
Traci Williams, a boardcertified psychologist in Atlanta, Georgia, became a boardcertified financial therapist this year. She was inspired to do this after seeing how financial differences have affected her hospital patients during the pandemic.
“There was a big difference between those who had it and those who didn’t and how they managed to deal with it,” she said. “Once I started seeing the situation, I couldn’t look away.”
Demand also played a role. “There’s only one other financial therapist in Atlanta, and she has a threemonth wait list,” Traci said.
Translated by Luiz Roberto M. Gonçalves