Financial Planning Gets Personal

Shortly after Andrea and Rick Campbell got married, when Rick was fresh out of graduate school, Andrea’s parents suggested the young couple could benefit from a trip to their financial planner. Before they knew it, the Reading, Mass., couple were being poked and prodded—gently, but still—by a man they’d just met. They had a kid on the way. Any plans for more? Had they considered how they’d want to live if one or the other died? Rick found himself talking about his parents’ divorce, his dad’s death and his childhood messages about money. “Are we going to get Prozac at the end of this?” Rick wondered. He caught Andrea’s eye across the table: Was this financial planning?

Financial advisers have always considered themselves hand-holders and confidantes, and with the economy in flux, it’s no wonder they’re logging extra hours playing crisis counselor. But more and more planners think a sympathetic ear and a pat on the back don’t go far enough, especially with clients nursing weak portfolios, even after the bounceback from the March lows. Instead, thousands of planners and brokers are taking a cue from Dr. Phil, promising to improve your life while they manage your portfolio.

In spite of criticism that this new approach comes dangerously close to therapy, advisers are getting more comfortable asking the kinds of questions that would ruin Thanksgiving dinner. Shame, guilt, embarrassment—it’s all on the table, says James Weiss, a Connecticut-based planner who encourages clients to divulge their childhood money memories and practice meditation to focus on their priorities. Financial goals? Those are lower on the list. “It’s not about the money,” Weiss says. “It’s about how you want to live your life.”

If it sounds touchy-feely, that’s because it is. But it’s not just the domain of ex-Deadheads; recently, it has moved firmly into the mainstream. Merrill Lynch Wealth Management trains its advisers to do “values clarification” exercises and daylong retreats with clients. Wells Fargo and its newly acquired Wachovia unit have hired psychologists and “family dynamics” counselors to detangle the thorny personal issues of their wealthiest clients. The firms say it’s more than just new-age pabulum; it helps them get to know their clients better, which leads to better financial planning. And, of course, it’s a selling point. “Anyone can allocate your portfolio,” says Keith Whitaker, head of the family-dynamics practice at Calibre, Wachovia’s financial-planning practice for its ultrawealthy clients. “We can help you talk to your kids.”

Not everyone thinks that’s a good thing, however. Financial advisers are trained to recommend investments and manage money; for most, probing for deeply personal, sometimes painful details isn’t in the curriculum. It’s a process critics fear can go wrong without warning, making client and adviser uncomfortable. “If you’re going to open a can of worms, you’d better be prepared to do some good,” says Michael Fitzhugh, a principal in the San Francisco office of money-management firm Aspiriant.

The bigger danger, though, may just be the awkward feeling that it’s inappropriate and that sharing all those details effectively tangles the heartstrings with the purse strings. That’s one reason advisers like it so much: The intimacy creates trust, making clients less likely to defect and more willing to ignore the dollars-and-cents minutiae. But it’s possible to trust too much, as the investors who lost their life savings with fraudster Bernard Madoff discovered. And that raises a question: What does all that soul-searching do for the client?

To learn how to unravel clients’ emotional knots, more than a dozen financial planners and a few curious civilians gathered in a ballroom at the San Jose, Calif., Doubletree hotel. Over a day and a half, they discussed parental betrayal and feelings of professional anxiety and inadequacy, practiced empathic listening (“When you said [blank], I felt...”) and, for a brief moment, engaged in a strange ritual called “vigor dancing.”

Advisers in the room say they wanted to learn how to engage their clients in a conversation about their unfulfilled hopes and, eventually, to encourage them to use their money to meet them. True, investment advisers have always talked loftily about meeting clients’ goals. But that conversation is typically dominated by dollars and cents and a retirement timetable—how much will it take to retire, and how soon can you get there? Let a “life planner” steer the process and it’s more like a parent encouraging a wayward college student by asking questions like “What do you want to do with your life?”