Psychology of Financial Planning: The Practitioner’s Guide to Money and Behavior
In PSYCHOLOGY OF FINANCIAL PLANNING: The Practitioner’s Guide to Money and Behavior, distinguished authors Drs. Brad Klontz, CFP®, Charles Chaffin, and Ted Klontz deliver a comprehensive overview of the psychological factors that impact the financial planning client.
Designed for both professional and academic audiences, PSYCHOLOGY OF FINANCIAL PLANNING is written for those with 30 years in practice as well as those just beginning their journey.
With a focus on how psychology can be applied to real-world financial planning scenarios, PSYCHOLOGY OF FINANCIAL PLANNING provides a much-needed toolbox for practicing financial planners who know that understanding their client’s psychology is critical to their ability to be effective.
The PSYCHOLOGY OF FINANCIAL PLANNING is also a much-needed resource for academic institutions who now need to educate their students in the CFP Board’s newest category of learning objectives: psychology of financial planning.
Topics include:
Why we are bad with money Client and planner attitudes, values, & biases Financial flashpoints, money scripts, and financial behaviors Behavioral finance Sources of money conflict Principles of counseling Multicultural competence in financial planning General principles of effective communication Helping clients navigate crisis events Assessment in financial planning Ethical considerations in the psychology of financial planning Getting clients to take action Integrating financial psychology into the financial planning process
PSYCHOLOGY OF FINANCIAL PLANNING goes beyond just theory to show how practitioners can use psychology to better serve their clients.
The accompanying workbook provides exercises, scripts, and workshop activities for firms and practitioners who are dedicated to engaging and implementing the content in meaningful ways.
About the Authors xv Introduction xix Part I The Psychology of Money 1 Chapter 1 Financial Instincts: Why We Are Bad With Money 3 The Survival Instincts of Our Ancestors 3 Sharing Is Caring ... and Surviving? 5 The Anti- Saving Instinct 6 I Want It Now! 7 Herd Instinct 8 What’s Your Financial Comfort Zone? 9 Fear of Missing Out (FOMO) 12 Social Status and Relative Deprivation 13 Two Systems 14 Understanding Financial Instincts 15 Key Concepts 16 CFP Board Learning Objectives Covered in This Chapter 16 Chapter 2 Behavioral Finance: Understanding Cognitive Biases and Heuristics and What to Do About Them 17 What Are Cognitive Biases and Heuristics? 18 The Role of the Financial Planner 34 Eliminate the Friction 35 Techniques for Overcoming Biases 36 Key Points 37 CFP Board Learning Objectives Covered in This Chapter 37 Chapter 3 The Environment 39 Environment: Culture, Generation, Class, and Community 40 What’s Next 44 Key Concepts 44 CFP Board Learning Objectives Covered in This Chapter 44 Part II Understanding a Client’s Financial Psychology 47 Chapter 4 Financial Flashpoints: Exploring a Client’s Financial Background 49 Financial Flashpoints 51 Key Points 60 CFP Board Learning Objectives Covered in This Chapter 60 Chapter 5 Money Beliefs 61 Money Scripts 62 The Role of the Financial Planner 67 Key Points 69 CFP Board Learning Objectives Covered in This Chapter 69 Chapter 6 Financial Behaviors and Outcomes 71 Overspending and Undersaving 72 Financial Denial 72 Financial Paralysis 73 Financial Infidelity 73 Financial Enmeshment 74 Financial Enabling 74 Financial Dependence 77 Money Disorders 78 The Role of the Financial Planner 80 Key Points 81 CFP Board Learning Objectives Covered in This Chapter 81 Part III Principles of Counseling, Psychology, and Communication 83 Chapter 7 Sources of Money Conflict 85 Conflict with Oneself 86 Conflict with Spouse or Partner 88 Conflict with Family 92 Conflict with Others 95 Key Points 97 CFP Board Learning Objectives Covered in This Chapter 97 Chapter 8 The Principles of Effective Communication 99 Being Present 99 Communication Skills to Establish Rapport 100 Effective Communication Techniques in Practice 108 Key Points 112 CFP Board Learning Objectives Covered in This Chapter 112 Chapter 9 Solution-Focused Techniques in Financial Planning 113 The Client Has the Power 114 Financial Self- Efficacy 114 A Focus on Solutions, Not Problems 115 Solution-Focused Techniques for the Financial Planner 116 Lead with Curiosity 119 Key Points 120 CFP Board Learning Objectives Covered in This Chapter 120 Chapter 10 Cognitive Behavioral Approaches in Financial Planning 121 The Cognitive Model in Practice 123 Cognitive Behavioral Techniques for Financial Planners 124 Key Points 129 CFP Board Learning Objectives Covered in This Chapter 130 Chapter 11 Positive Psychology in Financial Planning 131 An Infusion of Optimism 131 The Three Levels of Positive Psychology 133 The Role of the Financial Planner 135 Key Points 137 CFP Board Learning Objectives Covered in This Chapter 137 Chapter 12 Working with Couples and Families: A Systems Perspective 139 The Self- Aware Financial Planner 139 Maintaining Neutrality 140 Transference versus Countertransference 141 Couple Conflict 142 Financial Infidelity 142 Financial Abuse 143 Strategies for Helping Couples Resolve Financial Conflicts 144 Tools for Resolving Conflict in Couples and Families 145 Separate or Combined Finances 147 Scenario Planning 148 Monitoring 148 Key Points 148 CFP Board Learning Objectives Covered in This Chapter 149 Part IV Client and Planner Attitudes, Values, and Biases 151 Chapter 13 Multicultural Competence in Financial Planning: Understanding Your Client’s Cultural Identity 153 The Multiculturally Competent Financial Planner 154 Self- Awareness Around Majority and Minority Status 155 Recognizing Majority Group Privilege and Minority Group Disadvantage 156 Cultural Humility 157 Ten Areas of Culture and Majority/Minority Status That Impact Financial Planning 158 Key Points 164 CFP Board Learning Objectives Covered in This Chapter 165 Chapter 14 Financial Risk Tolerance 167 Risk Tolerance 167 Emotions, FOMO, and Risk Tolerance 170 Development, History, and Family 171 Loss Aversion 171 Assessing a Client’s Risk Tolerance 172 Key Points 174 CFP Board Learning Objectives Covered in This Chapter 175 Chapter 15 Client-Preferred Learning Styles: Getting and Keeping Your Client’s Attention 177 What Is a Preferred Learning Style? 178 A Multifaceted Approach 182 Talk Less; Listen More 183 Key Points 183 CFP Board Learning Objectives Covered in This Chapter 183 Chapter 16 Client Values and Goals 185 Maslow’s Hierarchy of Needs 185 Three Universal Human Needs: Self-Determination Theory 186 Making Sense of Client Needs in Financial Planning 187 Human Needs and Self-Destructive Financial Behaviors 188 Responding Without Judgment 189 Does Your Client Believe That They Have the Ability to Reach Their Goals? 189 Financial Self-Efficacy 191 The Advisor and Client Financial Self-Efficacy 192 Nine Things Every Financial Planner Should Know About Goals 192 Key Points 194 CFP Board Learning Objectives Covered in This Chapter 194 Part V Integrating Financial Psychology into Financial Planning 195 Chapter 17 Getting the Client to Take Action: Motivational Interviewing in Financial Planning 197 The Change Process 198 Encountering Resistance to Change 204 Conversational Pitfalls to Avoid with Clients Who Are Not Ready to Change 205 Nine Evidence-Based Techniques for Overcoming Client Resistance to Financial Advice 207 Taking “No” for an Answer 212 Key Points 212 CFP Board Learning Objectives Covered in This Chapter 213 Chapter 18 Helping a Client in Crisis 215 Crisis Events with Severe Consequences 215 The Importance of the Client–Planner Relationship 217 The Financial Planner’s Role in Helping a Client Navigate Crisis 217 Six Steps for a Financial Planning Crisis Event 218 Before a Crisis 221 After a Crisis 222 Key Points 224 CFP Board Learning Objectives Covered in This Chapter 224 Chapter 19 Assessment in Financial Planning 225 Observations 226 Interviews 227 Key Points 230 CFP Board Learning Objectives Covered in This Chapter 230 Chapter 20 The Role of the Financial Planner: Ethical Considerations in the Psychology of Financial Planning 231 A Financial Planner Is Not a Mental Health Provider 232 Contents xiii When and How to Refer 233 Ethical Considerations 234 The New Financial Planner 235 Key Points 237 References 239 Index 255
DR. BRAD KLONTZ is an expert in financial psychology, financial planning, and applied behavioral finance. He is a clinical psychologist, a Professor at Creighton University Heider College of Business, and a Certified Financial Planner® practitioner. He is an award-winning academic and researcher but also a practicing financial planner and owner of Your Mental Wealth Advisors, a Registered Investment Advisor (RIA) firm, where he works directly with clients in a financial planning capacity. His unique background and perspective have helped make him a leading expert in financial psychology creating educational content that goes beyond just theory and can be directly applied into a real-world financial planning context. DR. CHARLES CHAFFIN’s work encompasses a broad range of fields, from educational and cognitive psychology to financial planning. He has served as the author or lead editor of 6 different books within financial planning and cognitive psychology, helping practitioners become more client-centered and helping individuals and companies address the pushes and pulls on attention in the workplace. He has taught at the undergraduate and graduate level, as well as in a variety of executive education programs. For over a decade, Dr. Chaffin served as Director of Academic Initiatives with CFP Board in Washington, DC, working with a variety of financial planning programs and led research initiatives that directly or indirectly related to financial planning practice. He consults with financial service firms and is a regular keynote speaker at a variety of conferences. PAUL T (TED) KLONTZ, Ph.D., Associate Professor of Practice of Financial Psychology and Behavioral Finance at Creighton University’s Heider College of Business, Founder and CEO of Klontz Consulting Group and Co-Founder and Director of the Financial Psychology Institute®, is based in Nashville, TN. He has a 40+ year career in counseling, consulting and advising that has included authoring, co-authoring and/or contributing to six financial psychology related books: Money Mammoth: Unlocking the Secrets of Financial Psychology to Break from the Herd and Avoid Extinction:,Mind over Money: Overcoming the Money Disorders that Threaten Our Financial Health, Wired for Wealth, Financial Wisdom of Ebenezer Scrooge, Facilitating Financial Health, Financial Therapy: Theory, Research and Practice.
