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?”

For workshop leader George Kinder, founder of the Kinder Institute of Life Planning, that means requiring the client to ponder a series of questions, the last one a showstopper: “If you found out you had one day left to live, what would be your biggest regrets? What did you not get to do, who did you not get to be, what did you miss?”

There are other ways to get deep. At a daylong Merrill Lynch retreat, advisers meet clients outside the office for six hours of conversation that starts with the biggest money issues and challenges but moves quickly to a discussion of the personalities at play in the family. Outside Seattle, an adviser-training program called Money Quotient has developed questionnaires that ask clients to rank their satisfaction with their life, evaluate their life balance and relive money memories. Whatever the method, the goal is to get clients to stop thinking about their money and start talking about their lives.

Of course, all the empathy in the world doesn’t make any more money for clients. Planners tend to have one investment philosophy—and often, stocks and mutual funds they use over and over again—and they stick to it. A psychological gut check might reveal that a couple needs more short-term money for emergencies or that their retirement dreams require life insurance, but when it comes to actual investments, they’re all treated basically the same, says Stacy Allred, director of the wealth-structuring group for Merrill Lynch. “It’s like choosing from a fleet of cars.” All that talk about clarifying values is like a leather interior or a fancy sound system—it’s nice to have, but it doesn’t get you more mileage.

That’s what Martha Nossiff found when her adviser started adding “life planning” techniques to his practice. A Portsmouth, N.H., voice teacher, Nossiff noticed their conversations becoming deeper and more personal. But her planner used the same investments he’d been using for years, and when the market crashed, she and her husband didn’t do any better than anyone else. In fact, after a 38 percent loss, the Nossiffs, who are both self-employed, considered working harder and longer to make up for what they’d lost. They did a long session of soul-searching with their planner and decided instead to work part-time during their retirement and allocate less than they’d planned on college for their children.

To other people, though, the money is far more important than any self-discovery process. Even advisers admit their attempts to connect with their clients don’t always fly. In Marblehead, Mass., Chris Dowley recalled having disagreements with a client over things like how much life insurance the client should have and what Dowley saw as his “mechanical approach” to money. But the relationship really went downhill after Dowley suggested couples counseling for the client and his wife. “He got very angry,” says Dowley. “He thought I was saying he was sick.”

In New York, Lois Braverman, who runs the Ackerman Institute for the Family, says that while money managers are trained and licensed based on their ability to evaluate a client’s tolerance for risk and invest his money accordingly, they’re not trained to treat traumatic childhood memories or adult anxiety. Indeed, many advisers found themselves ill-equipped to handle their clients’ panic and fear after last fall’s crash. In January more than 800 advisers turned to an online seminar called “Volatile Times, Volatile Clients” for help. Offered by the American College, which trains financial planners, empathy was high on the tip sheet. Advisers were encouraged to call their clients and acknowledge their own feelings of anxiety and fear. “Be an empathic sharer,” Larry Barton, the college president, told the audience.Psychologists say all this sharing creates the appearance of closeness, which breeds trust. Sure, investors want to have confidence in their adviser, but critics say that should come from consistent, ethical performance, not tearful self-disclosure. And Sherri Morgan, associate counsel for the National Association of Social Workers, says putting too many emotions on the table can cloud clients’ judgment. An adviser typically has complete access to client accounts; if an adviser also has access to a client’s personal weaknesses, Morgan says, “the consumer is just that much more vulnerable.”

As clients fret about the future, advisers are finding new ways to talk to them. A sampling:

Staff Ph.D.s: Wells Fargo employs two psychologists to counsel its wealthiest clients and smooth out family disputes, though a bank spokesperson says they don’t provide therapy. And as Wells Fargo absorbs Wachovia, it will also adopt the “family dynamics” practice at its Calibre unit, which employs a philosopher and a psychologist to work with that bank’s ultrarich families.

Software solutions: Independent advisers are experimenting with new software like “myFinancial Reflection,” a program developed by a social-worker-turned-banker in Michigan. Instead of dollars-and-cents calculations, users answer questions like “What do your values say about you?”

Accredited Financial Counselors: Adding to the mix-and-match certifications designed to show an adviser is qualified, an increasing number of brokers, planners and accountants are paying $850 for training that leads to the AFC designation. The self-study program includes sections on “listening skills” and “problem solving and intervention strategies.”

Outside help: Citigroup hired the counselors at the California-based Money, Meaning and Choices Institute to train salespeople who help the well-to-do handle trusts. By teaching advisers how to talk to clients about family relationships and inheritance issues, the idea is to address the emotions often raised by trusts, like “If Mom and Dad loved me, why didn’t they just leave me the money all at once?”