Before specializing in financial psychology, Moira Somers, PhD, worked as a clinical neuropsychologist, treating people who had recently been diagnosed with severe illnesses or experienced significant injuries. Somers noticed that marital conflicts related to money were common in this population. “I saw that the financial stress added to the stress people were already experiencing from the illness or injury,” she said.
Eager to learn more about the connection between psychology and money, she began studying literature about family businesses, behavioral economics, and the social determinants of health. She also started talking to financial advisers, many of whom shared that they were frustrated because clients would not follow their recommendations.
Somers realized that most financial advisers had no training in how to effectively communicate with clients, and they were often working with people who had been thrust into complex financial situations after the death of a loved one, a divorce, or an unexpected financial windfall. “Financial advisers are in touch with people during some of the best and worst days of their lives,” she said. “And an individual’s capacity to pay attention and to follow through can be compromised by high-stress events.”
Somers recognized that the advisers’ frustrations were like those experienced by physicians, for whom adherence to medical advice is a long-standing concern. “I wanted to take the psychological findings around behavior change, communication, empathy, and warmth and bring these insights to the financial domain,” she said.
In recent years, Somers and other financial psychologists have seen demand soar for their expertise in applying psychological principles to the field of finance. The market for their services far outstrips the limited number of psychologists who are equipped to help couples, financial advisers, business owners, and others. Their clients are benefiting from guidance they can offer about how to resolve complicated business conflicts, adapt to newly acquired family wealth, develop marital values and goals related to money, and more.
The need for more support related to money issues is clear, with nearly two-thirds of respondents in APA’s 2020 Stress in America survey reporting that money was a significant source of stress in their lives, a statistic that has been replicated for years. “Despite these findings, psychology has hesitated to devote itself to money issues at almost all levels,” said James Grubman, PhD, founder of Family Wealth Consulting in Massachusetts, which helps clients navigate the relational and financial complexities of acquired or inherited wealth. “Our field has an important role to play in addressing these issues.”
The culture of money
Grubman’s interest in managing money began after his father died suddenly and his mother needed help understanding her investment accounts and the trust established by her late husband. He read finance books while he finished his training in clinical and neuropsychology. After graduating, he worked as a psychologist in an integrated primary-care medical setting, where he learned brief solution-focused communication techniques and how to coach physicians in their communication styles—skills he would later use when he started working with clients who needed financial psychology services.
In the late 1990s, as the dot-com era ushered in a new population of people who had become wealthy quickly, Grubman experienced a growing demand for his combined expertise in wealth management and psychology. He began seeing younger entrepreneurs and couples coping with personal adjustment and parenting dilemmas as a result of their newfound wealth. Grubman developed what is now known as the cultural model of wealth, which posits that many people who become wealthy are from working-class or middle-class backgrounds, and they essentially travel from a lower socioeconomic culture to a higher one—a journey that can cause unexpected stress in many areas of life.
“I studied the literature on cross-cultural psychology, and I realized it applied to many wealthy families,” Grubman said. He learned that people often fall into one of three categories: They assimilate completely and leave behind their former culture, they avoid adapting, or they integrate with a blend of these two approaches, which has the best outcomes for adjustment. Grubman saw that many of his clients who had become wealthy were avoiding the socioeconomic culture shift.
“They didn’t want anyone to know they were wealthy, because they believed wealth was toxic and would ruin their children,” said Grubman. “They could have millions of dollars but would not take a decent vacation.” He taught these clients about the benefits of talking about wealth openly with their children and how to prepare the next generation to handle inheritance wisely.
In the past decade, Grubman has noticed a shift among his wealthy clients as psychological awareness has increased: Fewer families seek his services because wealth is tainting their relationships. Now, more people are interested in proactively preparing their heirs for receiving wealth in adulthood. “Parents want to focus on helping their children and grandchildren responsibly manage money and the relationship issues associated with wealth,” he said.
Research financial advisers
Somers began thinking about applying psychological principles to money matters when she realized that financial planners might want to learn the communication tactics that she was teaching medical residents at the University of Manitoba in Canada. The residents were learning how to talk to patients to increase their likelihood of following medical recommendations. She had an opportunity to leverage her expertise in a new way when she was invited to teach a course on communication strategies for financial advisers at the Financial Transitionist Institute in Florida, an organization that offers training to financial advisers on how to work effectively with clients undergoing major life changes. She taught participants how to assess a client’s readiness for services, cocreate agendas with the client, and embrace the benefits of shorter meeting times.
Now, as owner of Money, Mind & Meaning in Manitoba, she works with financial professionals from the United States, Canada, the United Kingdom, India, and other countries to help them communicate with clients who have cognitive impairments, difficult family dynamics, stress from a recent loss, and other struggles.
Her expertise in the neuropsychology of major life transitions has also led to work with organizations such as the National Football League Players Association. During the player lockout in 2011, she talked to financial advisers for the players about the money problems and interpersonal difficulties their clients could soon be facing and how stress could influence their ability to act on financial advice. For Somers, working with organizations that support people during major transitions is highly rewarding. “That is when advisers are most in need of what psychological science has to offer,” she said.
Money and marriage
Financial psychology is also making inroads in the field of couples counseling. Clinical psychologist Mary Gresham, PhD, joined the field after she went through a divorce at the end of graduate school. “I realized I hadn’t been paying attention to my financial life, and I started reading everything I could find about money,” said Gresham, who owns a private practice in Georgia.
She started seeing couples who were arguing about money, and she noticed a trend: One partner was usually making decisions related to assets, while the other was spending money on groceries and other family needs—divided roles that created conflict. To offset that friction, Gresham helps couples learn how to make asset and spending decisions together. Couples also learn how to match decisions to their personal values and how to create a system to regularly review their spending behavior.
During the COVID-19 pandemic, Gresham has seen an uptick in the number of clients who are stressed about money. Recently, one man sought her out because he and his wife were struggling to decide whether he should continue working given the risk of contracting COVID-19 at his workplace. Gresham helped them talk about the financial feasibility of quitting that job and relocating. They decided to stay put, decrease spending, and have him work part-time to reduce his risk of exposure.
Like many of her clients, this couple was grateful to have guidance from a psychologist who was not only knowledgeable about financial issues but also skilled in the art of helping them have a productive conversation about a subject that can be taboo. “People will often tell me they’ve been struggling for years with conflicts about money and they are relieved to find help,” she said. “There are so few therapists who are doing this, and yet there is so much need.”
Working with entrepreneurs
Like most financial psychologists, David Gage, PhD, did not plan on pursuing the specialty, but he could not ignore the niche once he realized there was tremendous need among people who were working as business partners. “Most entrepreneurs who start businesses have a partner, but many of these partnerships fail in the first two or three years,” said Gage, who specializes in business mediation as founder of BMC Associates in Arlington, Virginia. “These failures, often the result of partner conflicts, affect not only the partners but also their families and employees.”
Gage was keenly aware of the psychological challenges involved in business partnerships because his family owned a construction company in Wisconsin. “I grew up hearing adults talk secretively about activities going on in the family business,” Gage said. “Those conversations had a sense of danger and mystery, which made me never want to work in the family business.”
Gage believed that business partners needed something other than traditional therapy to resolve disagreements—a service that addressed the interpersonal, financial, and legal aspects of the relationship. He envisioned two mediators involved in the process: one with a business or legal background and one with a psychology background.
Gage sought out training in mediation to supplement his degree in clinical psychology, and in 1990 he launched BMC Associates with his partner, Tom Mierzwa, a mediator and strategic management consultant with a doctorate in public administration. Since then, Gage’s team has grown to include three psychologists, four attorneys, and three business professionals. A psychologist and business or legal team member typically travel to meet clients—such as owners of technology companies, nursing homes, farms, or medical practices—for meetings that can last several days. During the COVID-19 pandemic, he has conducted these client meetings via Zoom.
Three years ago, one family contacted him because relationships among family members were strained after a widow, who had taken over her deceased husband’s home-building company, secretly gave one of her four children 49% ownership of the business. The other siblings became enraged. One brother left the business in protest, and a sister still working in the business was resentful about the situation.
“We helped the family examine their culture of keeping secrets, how money was used to show love, and how they could change the way they communicated with one another,” he said. Gage helped the brother and sister who were still involved in the business develop a partnership charter that detailed their expectations of one another, responsibilities, authority, division of equity, and compensation structure. The two siblings also completed assessment tests to shed light on their personality styles, values, and different ways of dealing with conflict.
After more than 30 meetings with the entire family, subsets of the family, and financial advisers, the mother and her children were at peace with how the business was being handled and how the estate would be divided between the siblings. For Gage, the types of conflict this family faced are common. “Business partners are like marital partners, except people usually spend more time with their business partners,” he said. “There are millions of family and nonfamily business partners who are very challenged to have good relationships.”
Changing beliefs about money
When a failed investment drained his nest egg as an early career clinical psychologist, Brad Klontz, PsyD, realized that psychologists for the most part were not involved in finance, even though it is an area driven by cognitive processes. Klontz started learning everything he could about finance and leveraged his clinical psychology training to help launch a treatment program for people with disordered money behaviors, such as financial dependence, compulsive overspending, and financial enabling. He believed that more education about wise investing, saving, and spending behaviors must be combined with psychological interventions that address an individual’s relationship with money.
He started helping people identify their “money scripts,” or beliefs about money, such as “money corrupts” or “I will never have enough money”—beliefs that he held growing up in a low-income family. Klontz provided cognitive behavioral therapy, guided visualization, and mindfulness training, which allowed people to identify and change their beliefs about money. In a study, he analyzed the outcomes of 33 participants in the program and found that people who followed the intervention reported significant decreases in anxiety and depression and improvements in financial health (Psychological Servicesopens in new window, Vol. 5, No. 3, 2008).
Klontz now has more than 290,000 followers on social media and teaches several online financial psychology courses in the MBA program at Creighton University in Nebraska that cover the intersection between money and psychology. He also co-owns Your Mental Wealth Advisors, where he partners with financial advisers to help clients examine their financial behaviors and set goals. He is deeply passionate about sharing insights related to the psychology of money with the public, and he hopes more psychologists will join him in that effort. “I get hundreds of questions and comments per day on my social media sites from people, many of whom are from lower-income families,” he said. “They are eager to learn about beliefs and patterns that may be hampering their financial health, and strategies they can use to transform their relationship to money.”
