A work of this magnitude could not happen without the commitment and dedication of an esteemed group of contributors. Each of these 23 researchers and scholar-practitioners brought a different perspective to the same subject, the human client. They are all leaders in their respective fields and I was fortunate to have the privilege to collaborate with each of them over the course of 2017 to write this book. There is something truly fascinating about diverse lenses examining the same topic—challenging assumptions and providing innovative ideas, all with a common purpose in mind. I am grateful to each of them for their trust and commitment to this new idea.

Thank you to Sheck Cho and all of my friends at John Wiley & Sons for their continued partnership throughout this yearlong endeavor. Wiley continues to be a great partner to the CFP Board Center for Financial Planning and I hope this book is representative of that impactful partnership.

I would like to thank the board of directors at CFP Board for their unwavering commitment to this project. Thank you as well to members of the Executive Leadership Team at CFP Board for their support of this work.

Thank you to Kevin Keller, CEO of CFP Board, and Marilyn Mohrman-Gillis, Executive Director of the CFP Board Center for Financial Planning for their commitment to the Academic Home for the Center for Financial Planning. This work started in 2011 with a vision—a platform where members of academe from multiple disciplines as well as practitioners from across financial planning could present, publish, consume, and discuss research that impacts our academic discipline—our profession—in new and profound ways. It is truly satisfying to see that vision come to fruition.

Thank you to all of those individuals and organizations who support the CFP Board Center for Financial Planning, particularly TD Ameritrade Institutional for their support as Lead Founding Sponsor and Northwestern Mutual as Founding Sponsor. We are grateful to all of the firms, CFP^® professionals, and friends from across business models and professions who have joined us on this journey to build the Academic Home for the profession of personal financial planning.

In the end, I take responsibility for this work—a work that I hope will help serve as a catalyst for expanding the financial planning body of knowledge to include the biases, behaviors, and perceptions of the individuals who entrust this profession with their life’s work: the client. The objective of this book is not to be the last word in client psychology, but the first word. I hope that the text found within these pages will fuel both new lines of inquiry and innovative approaches to financial planning practice, making our profession more impactful, relevant, and most important, client-centered.

Charles R. Chaffin, EdD
Editor

Financial planning is, at face value, a quantitative endeavor. There is a host of numbers that exist within a financial plan, representing a client’s savings, debt, investments, retirement, insurance, and other numeric values associated with his or her financial well-being. In the proposed changes to the CFP^® Board Standards of Professional Conduct, the CFP Board defines financial planning as “. . . a collaborative process that helps maximize a Client’s potential for meeting life goals through Financial Advice that integrates relevant elements of the Client’s personal and financial circumstances” (Proposed CFP Board Standards of Professional Conduct, 2017). Inherent within that definition are both the steps of the financial planning process as well as the content areas, essentially the necessary competencies of a CFP® professional, to provide competent and ethical financial planning.

The role of the financial planner is challenging and with it comes a high level of responsibility. Beyond the numbers, clients entrust not only their goals and dreams to their CFP® professional, but also the accumulation of their life’s work. Years, and in some cases decades, of long hours in the office and careful investing culminate into a specific set of numbers on a spreadsheet. Clients bring into the financial-planning process their vision for the future as well as their vision for those closest to them. Conversely, clients also bring concerns regarding the current and future well-being of their loved ones. The financial planner is sometimes the first to hear the good news and is also the first phone call or text message when bad news arises, both of which require frank conversation, careful planning, action, and sometimes, thoughtful inaction. Therefore, financial planning is, at its core, a human endeavor.

So what about these clients? How do we help them discover (and then communicate) their hopes and dreams? What about the goals for their spouses, partners, or families? How do the interactions with those around them affect their decisions and financial well-being? How do relationships and communication with their advisors impact the financial-planning process? What do we know about individual behaviors such as spending, debt, planning, and saving relative to a variety of client profiles and contexts? How does stress impact the dialogue between the client and planner . . . what can the planner do to mitigate this stress? How do the cognitive load and attention resources of the client during the development and presentation of a financial plan impact the client’s relationship with the planner? How does technology impact a client’s willingness to communicate more freely with their financial planner? What about the sociological issues that are inherently part of the relationship between client and planner? Beyond these questions, there are hundreds more that financial planners encounter each and every day, many of which have a direct impact on planner efficacy and client success.

Behavioral finance helps answer some of these questions. It brings elements of cognitive and behavioral psychology to both economics and finance to examine why investors make irrational financial decisions. These irrational decisions in many cases stem from heuristics, or mental shortcuts, that involve only one aspect of a complex program or phenomenon, leading to errors in judgment, or biases. In behavioral finance, the focus is on the individual and not the market. Essentially, and at the risk of oversimplifying, the tidiness of modern portfolio theory becomes rather messy with the arrival of the human and all of his thoughts and actions. Behavioral finance helps explain some of that messiness with an underlying premise that the individuals making the decisions are complex and not always well-informed. All of these ideas are relevant to financial planning. Practitioners need to know about concepts such as choice architecture, anchoring, and availability bias, all of which have an impact in the daily life of serving clients and are helpful in explaining some of these irrational decisions.

But are these decisions actually irrational? From the outside looking in, it may appear so, but it is also possible that these decisions can be explained by a host of other factors. Many psychologists, including preeminent scholars such as Skinner and Freud, saw many of the actions of the individual based predominantly on environmental factors and those within the psyche of the individual. Skinner saw the environment as solely determining the actions of the individual. Essentially, the individual does not make any decisions on her or his own—the environment does it for them. Freud saw the unconscious—the automated and visceral elements of the self and thought processes—as a key determinant of behavior and decision-making. Although Freud and Skinner saw many elements of psychology quite differently (and there are many aspects of their work that have been both confirmed and refuted in recent years), their work identifies multiple factors that impact human behavior and decision-making. Therefore, what is an irrational decision to one may be the best decision, given the circumstance, to another. So perhaps irrational is in the eye of the beholder.

The body of literature from behavioral finance is critical to our current and future work in serving clients (as well as important parts of this book), but perhaps we should think more broadly. We need to further investigate stress, cognition, interpersonal relationships, communication, identity, and other basic elements, all within the framework of financial planning. We need to invite researchers from fields such as clinical and cognitive psychology, sociology, education, and others to better understand the rationale behind client perceptions, behaviors, and decision-making and then specifically outline the implications of this work (the “So what?”) in an effort to help practitioners and CFP® professionals do their work better.

In medicine, evidence-based practice is where medical professionals use relevant data to make healthcare decisions for individual patients. Clinical practice, patient values, and the best available research and data are all integrated to formulate a healthcare plan. Perhaps most importantly, individual characteristics and preferences—so essentially what works best for each patient physically, psychologically, emotionally, and spiritually—are primary drivers in determining treatment. It is not, therefore, merely a matter of one-size-fits-all nor a sole focus on the action of the physician, but rather, a personalized approach to medicine based upon the patient’s health status, research, and desired outcomes: a patient-centered approach.

Similarly, in education, the classroom approach for decades was teacher-centric, where the actions and knowledge of the teacher were considered the primary drivers in determining the success of an educational offering or program of study. If the instructor performed his or her actions well, then the assumption was that the students must be successful. But then, a few decades ago, educational psychologists identified key attributes associated with cognition and learner development to help better understand the student learner. These advances placed the focus of teaching pedagogy (essentially, the practice of teaching) on what works for the learner, not the teacher. We now almost universally define success in education as not what the teacher knows or does, but rather, by whether the student learned a concept or not: a student-centered approach.

Perhaps we are at a similar juncture in financial planning, where the profession has begun to realize that the knowledge and actions of the planner are critical, but useless if the client is unsuccessful. No financial planner says, “My client failed to reach her lifetime goals, but not to worry, I myself was competent throughout the financial planning process.” We as a profession can follow medicine and education and develop deeper insights into our practice and focus more closely on the individual. Ultimately, taking this evidence-based approach to financial planning, specifically the characteristics of the client, would yield new findings that could help prepare future generations with the competencies and skills that directly relate to the human element of this profession. The basic fundamentals of investments, taxation, insurance, estate planning, communication, and so on would still and likely always be vital, but these content areas and competencies can be developed and refined solely with the client in mind: a client-centered approach.

Against that backdrop, I present Client Psychology. This book brings together the expected research areas such as financial planning, behavioral finance, communication, and financial therapy. Just as importantly, client psychology invites new fields (or those new to financial planning) such as sociology, cognitive psychology, education, social work, and others. This interdisciplinary approach, bringing diverse fields, methodologies, and researchers together to focus on the financial planning client, can lead to new knowledge that has a significant impact on our profession. As we all know, all of this new knowledge has limited relevance if we cannot answer the “So what?” question. We hope to do so here.

There is an added dimension to this work given the influence of technology in financial planning. As the use and access of artificial intelligence and technology expand, there are a multitude of opportunities and threats to the profession as it strives to be relevant to the population it serves (and perhaps is hoping to serve). The profession has the opportunity to be creative in delivering competent and ethical financial planning through a combination of in-person and electronic delivery, all based upon client needs and preferences. In order to fully serve each client and maximize market potential, the profession needs to have a full awareness of the tendencies and perceptions of the user. In addition, at the tap of a smartphone or tablet, clients now have access to increasing amounts of data, whether their own accounts or financial advice from others, potentially altering the complexion of (and potentially the need for) the client-planner relationship. Taking an evidence-based approach to financial planning, we can use much of the body of literature found within client psychology and then utilize or build technology that fits the needs of our current and future clients. As we all know, learning as much as possible about clients will make our profession more relevant to clients.

Client Psychology is not the final and definitive word in financial planning. Rather, it is a commencement to an approach that brings together many fields of study that can have some impact on the financial planning client, always with their best interests in mind. Our attempt is to provide a new theoretical underpinning through a body of literature from across the academy. Each chapter represents a formal introduction of these new concept areas to a broad audience of practitioners and scholars. As you read each chapter, my hope is that you will be drawn to the argument as to why each of these diverse topics is important to our field. Some chapters draw explicit connections to financial planning and others ask the reader to infer where specific concepts fit into daily practice. I hope that scholars from within and beyond financial planning will be challenged to think about new lines of inquiry within this framework that help us as a profession become more client-centered. To summarize this book and at the risk of giving away the plot, it is a new theoretical framework with contributions from a variety of academic disciplines to enable financial planning to become more client-centered.

So let us begin. I hope that you find Client Psychology both challenging and illuminating, but perhaps more importantly, I hope that you finish the book with more questions than when you started. We all still have so much to learn.

Charles R. Chaffin, EdD
Editor

REFERENCES

1. Code of Ethics and Standards of Conduct. (2017). Retrieved from https://www.cfp.net/docs/default-source/for-cfp-pros—professional-standards-enforcement/2017-proposed-standards/final-standards-for-public-comment.pdf?sfvrsn=2.

Charles R. Chaffin, EdD, is Director of Academic Initiatives, CFP Board Center for Financial Planning, leading academic initiatives such as the Academic Research Colloquium; executive editor of the academic journal Financial Planning Review; editor of the CFP Board book series; and the program lead for the Columbia University–CFP Board Teaching Program. For seven years prior to that appointment, Chaffin provided guidance and oversight to the over 300 CFP Board Registered Programs across the United States. He holds a graduate degree from the University of Michigan and a doctorate from the University of Illinois.

Kristy Archuleta, PhD, is an associate professor and program director of the personal financial planning program at Kansas State University and a licensed marriage and family therapist. She has been quoted in media outlets such as the New York Times, Glamour, Parade, and NPR Marketplace. She is the editor of the Journal of Financial Therapy and has coedited two books related to assessment and financial therapy.

Sarah Asebedo, PhD, CFP^®, is an assistant professor at Texas Tech University. With extensive financial planning experience, her goal is to connect research and financial planning practice. She is spearheading research focused on personality, positive psychology, and financial behavior, and how mediation and principled negotiation techniques can be employed to resolve money arguments. Asebedo’s work has been recognized with the 2016 Montgomery-Warschauer Award (FPA/JFP), 2014 and 2017 Best Applied Research Award (FPA/JFP), 2017 Top 40 Under 40 Award (Investment News), 2017 AARP Public Policy Institute Financial Services and the Older Consumer Award (ACCI), and 2017 Robert O. Hermann Outstanding Dissertation Award (ACCI). Asebedo currently serves as President of the Financial Therapy Association. She earned her PhD from Kansas State University.

Sonya Britt-Lutter, PhD, CFP^®, is an associate professor of personal financial planning at Kansas State University. She holds degrees from Kansas State University and Texas Tech University. Her research has been featured in news outlets such as the New York Times, the Wall Street Journal, Kiplinger’s, and Yahoo! Finance. Dr. Britt-Lutter recently wrote a love and money curriculum and a forthcoming book for couples.

Swarn Chatterjee, PhD, is an associate professor of financial planning at the University of Georgia. He has published more than 40 peer-reviewed papers and teaches classes in wealth management and behavioral economics. His research interests include studying performance evaluation across different stages of the financial planning process and identification of factors that improve financial decision-making among millennials and the elderly.

Jonathan Fox, PhD, is the Ruth Whipp Sherwin Professor of Human Development and Family Studies at Iowa State University, where he teaches courses in financial counseling and planning. His research in financial socialization appears in journals such as the Journal of Financial Therapy and the Journal of Consumer Affairs. He received his PhD in Consumer Economics from the University of Maryland.

Joseph Goetz, PhD, is an associate professor of financial planning at the University of Georgia. He is an award-winning professor, practitioner, and researcher in the area of financial planning and wealth management. His primary professional objectives are to assist individuals and families in reaching their financial life goals, and to support the development of future financial planners who will participate in the positive transformation of the financial planning profession.

John Grable, PhD, CFP^®, holds an Athletic Association Endowed Professorship at the University of Georgia. Dr. Grable served as the founding editor for the Journal of Personal Finance and the founding coeditor of the Journal of Financial Therapy. His research interests include financial risk-tolerance assessment, evidence-based financial planning, and behavioral financial planning. He is Director of the Financial Planning Performance Laboratory at the University of Georgia and a coeditor of Financial Planning Review.

Stuart J. Heckman, PhD, CFP^®, is an assistant professor of personal financial planning at Kansas State University. He earned his BS in Personal Financial Planning from Kansas State University and his MS and PhD in Family Resource Management from The Ohio State University. His research focuses on professional financial planning and on risky financial decisions among young adults.

Edward Horwitz, PhD, CFP^®, ChFC, CLU, FBS^®, is the Mutual of Omaha Endowed Executive Director in Risk Management at Creighton University’s Heider College of Business and an associate professor of practice in behavioral finance. He also serves as Director for Creighton’s Financial Planning and Financial Psychology programs. Prior to academia, his career in the insurance industry spanned over 25 years.

Zhuo Jin is scheduled to complete her master’s degree in 2018, in Organizational Management from George Washington University and earned her bachelor’s degree in Psychology in 2014 from the University of Nebraska, Lincoln. Zhuo’s primary research interests are in consumer and donating behaviors, technology, social media–inspired creativity and lifestyle branding, and social media celebrity. She plans to pursue a doctoral degree in either Marketing or Human Computer Interaction in the fall of 2018.

Bradley T. Klontz, PsyD, CFP^®, is an associate professor of practice in financial psychology at Creighton University Heider College of Business and a managing principal at Your Mental Wealth Advisors™. Dr. Klontz is coeditor/author of five books on the psychology of money, including Financial Therapy (Springer, 2015), Mind Over Money (Broadway Business, 2009), and Facilitating Financial Health (NUCO, 2016).

Jodi Letkiewicz, PhD, is an assistant professor at York University in Toronto, Ontario. She teaches, researches, and publishes in the areas of consumer finance, financial planning, and financial well-being. She received an MS and PhD in Family Resource Management at The Ohio State University.

Michael J. Liersch, PhD, is a behavioral scientist and financial planning executive. He holds a PhD in Cognitive Psychology from University of California, San Diego and an AB from Harvard in Economics. He has spent time in both academia and business. As an academic, Dr. Liersch was a postdoctoral fellow at University of California, San Diego Rady School of Business and a visiting professor at New York University Stern School of Business. In business, he held positions as head of behavioral finance in the Americas at Barclays Wealth, head of behavioral finance and goals-based consulting at Merrill Lynch, and most recently, head of financial planning at JPMorgan Chase.

HanNa Lim, PhD, is an assistant professor of personal financial planning at Kansas State University. Her research focuses on households’ financial decision-making and college students’ financial wellness. She earned her BA and MA in Consumer Science from Seoul National University, and her PhD in Family Resource Management from The Ohio State University.

Meghaan R. Lurtz is a financial psychology specialist at Kaleido Creative Studio, an assistant adjunct professor of finance at the University of Maryland University College, and a PhD student at Kansas State University. She graduated from the University of Kansas with a bachelor’s degree in Philosophy, Psychology, and Spanish. Her master’s degree was in Industrial Organizational Psychology.

Jason McCarley, PhD, is a professor in the School of Psychological Sciences at Oregon State University. He holds a BA in Psychology from Purdue University and a PhD in Experimental Psychology from the University of Louisville, and has held positions at the Naval Postgraduate School, the University of Illinois, and Flinders University of South Australia. He conducts research in engineering psychology, with interest in models of attention, decision-making, and human–automation interaction. His work has appeared in outlets including Human Factors and Journal of Experimental Psychology: Applied, and he is coauthor of the book Applied Attention Theory (Wickens & McCarley, 2008).

Nils Olsen, PhD, is an assistant professor of organizational sciences at George Washington University and conducts research within the following domains: (a) individual decision-making (e.g., medical, financial, legal); (b) strategic decision-making (e.g., Olympic Games); and (c) procedural justice (e.g., physician-patient, lawyer-client); and has publications appearing in the Journal of Personality and Social Psychology, Academic Emergency Medicine, and Handbook of the London 2012 Olympic and Paralympic Games. Before joining the faculty at GWU, Professor Olsen worked as a researcher at the Developmental Psychology Laboratory of the National Institute of Mental Health and worked collaboratively with the American Bar Foundation. Professor Olsen holds a BS in Psychology from the University of Wisconsin, an MA from the University of Iowa, and PhD from the University of North Carolina at Chapel Hill.

Vanessa Gail Perry, MBA, PhD, is professor of marketing, strategic management and public policy at the George Washington University School of Business.  Her research is focused on consumers in financial and housing markets, public policy, and marketplace discrimination, and has been widely published in scholarly and industry-oriented outlets. Professor Perry has served as senior advisor to the secretary of the U.S. Department of Housing and Urban Development, as an expert appointee at the U.S. Consumer Financial Protection Bureau, and as a consultant to numerous public and private sector clients. Before joining the faculty at GWU, Professor Perry was a senior economist at Freddie Mac. Professor Perry holds a BA in Philosophy from American University, an MBA from Washington University in St. Louis, and a PhD from the University of North Carolina at Chapel Hill.

Quinetta Roberson, PhD, is the Fred J. Springer Endowed Chair in Business Leadership in the School of Business at Villanova University. Prior to her current position, she was an associate professor of human resource studies at Cornell University. Professor Roberson has over 15 years of experience teaching courses and workshops globally on leadership, talent management, and diversity. She has published over 20 scholarly journal articles and book chapters and edited Handbook of Diversity in the Workplace, published by Oxford Press in 2013. Her research interests center on developing organizational capability and enhancing effectiveness through the strategic management of people, particularly diverse work teams. Dr. Roberson’s research and work with organizations is informed by her background in finance, having worked as a financial analyst and small business development consultant prior to obtaining her PhD in Organizational Behavior from the University of Maryland. She also holds a BS in Finance and Accounting from the University of Delaware and an MBA in Finance and Strategic Planning from the University of Pittsburgh.

Deanna L. Sharpe, PhD, CFP^®, CRPC^®, CRPS^®, is an associate professor in the Personal Financial Planning department at the University of Missouri.  Her teaching and research focus on factors affecting later-life economic well-being.  She has provided leadership for the American Council on Consumer Interests, the Association of Financial Counseling and Planning Education, and the Certified Financial Planner Board of Standards Education Task Force.

Abigail Sussman, PhD, is an associate professor of marketing at the University of Chicago Booth School of Business. Sussman’s prior experience includes work at Goldman Sachs in its equity research division. She earned a bachelor’s degree from Brown University in Cognitive Science and Economics, and a joint PhD from the psychology department and the Woodrow Wilson School of Public and International Affairs at Princeton University.

Faith Zabek is a PhD candidate in School Psychology at Georgia State University. She is currently completing her doctoral internship at the APA-accredited Hawaii Psychology Internship Consortium, where she has contributed to research investigating the impact of experiential financial therapy on savings behaviors.

C. Yiwei Zhang, PhD, is a postdoctoral fellow at the University of Chicago Booth School of Business. Prior to joining the University of Chicago, Zhang worked as an economist in the Office of Research at the Consumer Financial Protection Bureau. She earned bachelor’s degrees in Economics and in Mathematics from the Massachusetts Institute of Technology and earned her PhD from the University of Pennsylvania, Wharton School’s program in Applied Economics.