(This article is written by our guest blogger, Dave Jetson, MS, LPC-MH, QMHP)  The term “financial therapy” is beginning to create a buzz in the financial and counseling world. How financial therapy is defined depends upon who is asked. For the sake of this article, financial therapy is the process where a certified financial planner (CFP) and psychological professional (counselor) work together in the same session with a client for the purpose of helping the client recognize and work through emotional obstacles that prevent them from following through on healthy financial decisions.

The process for financial therapy starts by having the client present their financial information to the CFP. While the financial information is being reviewed, the counselor monitors the interactions to determine if any emotional stress or resistance occurs. Many times the client is unaware the emotional stress or resistance exists because they have learned early in life to hide, even from themselves, the feelings that create the resistance.  When the emotional stress or resistance is presented, the response can be reflective. It typically tends to be more on the defensive side because, on a subconscious level, the feelings remain hidden. Continue Reading »

“Don’t own stocks if you can’t stand volatility.” That was a central message at a recent investment conference I attended hosted by Dimensional Fund Advisors (DFA). David Booth, CEO and co-founder of DFA, which manages $240 billion, told us, “Volatility is part of the market. The reason you have the chance to earn higher returns in equity markets is because you take higher risk.”

After two market crashes in ten years, one would think even New York cab drivers understand that higher return and higher risk go hand in hand. But, based on calls I’m receiving from the financial reporters doing stories on “What should investors do now?”, the media hasn’t learned that lesson.

Even politicians are searching for ways to legislate volatility out of the markets. Few of them understand that this would be changing the spots on a leopard. If they succeed in removing market volatility, they’ll have a completely different animal. It will be called a certificate of deposit, with low risk and no return.

Booth emphasized, “What will determine your long-term success is what you do when markets are not doing well.” Readers of this column know that, when markets are not doing well, doing nothing is the path to long-term success. Even more important is what you’ve done before markets don’t do well.

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