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Need a shrink? Call your broker

Financial advisors enlist psychologists to help clients deal with their anxieties.

August 10, 2007|Kathy M. Kristof | Times Staff Writer

Is the crazy stock market driving you crazy?

Don't worry. To cope with the turmoil on Wall Street and beyond, financial advisors are forging professional alliances to provide their clients with psychiatric help. An advisor will work to keep a portfolio balanced while a psychologist will do the same with the client -- and, on occasion, the advisor.

"People are realizing that money issues can have some deep and significant psychological implications," said Richard Wagner, a certified financial planner and president of Worth Living in Denver. "Whether you have somebody on staff or you develop your own skill set, you need somebody to call when things get weird."

Marcee Yager became a certified financial planner first. Then she became a certified mediator. Now she has a psychologist who acts as her coach on speed-dial at her office at Financial Visions in La Honda, Calif.

"My clients call me their money therapist," she said.

Decades ago, experts contended in near-unison that financial markets were ultimately efficient and rational -- with stock and bond prices reaching their levels based on nothing more than financial statements and supply and demand. Any time a market didn't react logically, it was considered an anomaly.

The anomalies mounted. Eventually, Hersh Shefrin, a Santa Clara University finance professor, and a handful of other experts began to study whether emotions were getting in the way of economic efficiencies. They concluded that they were -- regularly.

"That's why financial planners are bringing psychologists into their tool kit," said Shefrin, who wrote "Beyond Greed & Fear: Understanding Behavioral Finance and the Psychology of Investing."

"It's the revolution, or at least the increasing prominence, of behavioral finance."

Money therapy can be a selling point too, as Michael Tucci, president of Lexington Wealth Management in Lexington, Mass., learned.

"I was pitching our firm to this wealthy developer a few years ago, and he was practically spitting in my eye on everything I told him our firm offered. I get to the page about having a counselor and I feel like I need to hide this, so I'm skipping over it really quickly. But he stops me and says, 'You know, I am just beeped-up enough to need that.' "

Before the market crash in 2000, planners said, they were perfectly content to sell their services based on portfolio performance alone. After the crash, many realized they needed more.

"A lot of my colleagues thought their asset-allocation strategy was what created value in the relationship. Then the market fell and many of them lost clients, and they realized that the management of money wasn't strong enough glue to keep clients attached to them," said Larry P. Ginsburg, an Oakland-based financial planner who regularly refers his clients to therapists (and is married to one) and uses a psychological approach to planning.

Beyond helping people make sensible stock decisions, therapy can help people feel better about parting with their money, Ginsburg said, especially those raised during the Depression, which made them great savers but rotten spenders. He said one elderly man started giving his children annual gifts after therapy.

"When it appears that a client's psychological makeup is not allowing them to benefit from years of savvy saving and investing, I feel compelled to reach beyond my area of expertise to help," he said. "Money is just a tool to get more out of life."

For Madeline Rabb, who owns a Chicago art advisory business, money therapy was, in a way, life-changing. Her investing confidence was shattered when her husband died two years ago, and she hired Cicily Maton, a financial planner and president of Aequus Wealth Management Resources, to help restore it. New clients meet with Maton and a psychotherapist who is on retainer at Aequus before drawing up a plan.

"It gave me permission to talk about my fears," Rabb said. "It just made sense to me to understand what my motivations and anxieties were and to have two hands working on my plan. It allowed me to look more holistically at my financial life."

The couch doesn't always yield results. People will still invest in companies with no earnings, sorry prospects and stratospheric stock prices.

They'll buy "winners" even when everyone they know tells them the stocks are overvalued, because it's more comfortable to buy winners than losers, Shefrin said, and they won't sell money-losing stocks when they should because selling would mean admitting a mistake. As a group, investors trade too much while looking to "beat the market," Shefrin said. Why? Ego.

"Emotions can really get in the way of investing sensibly."

Tell that to Wall Street.

--

kathy.kristof@latimes.com

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