Do you need a Living Will? Do you have a Health Power of Attorney? Or maybe you’ve wondered what the difference is between the two.

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I recently received an email that really touched me. It was from an editor of a newsletter for financial planners that I subscribe to. This man had tragically lost his wife a short time earlier, and this email informed his subscribers of the reason for his wife’s sudden death. She had committed suicide.

Let me quote a few portions of his email: “The reason I’m sharing so much personal information is that I firmly believe we are too close-mouthed as a society. . . . The fact that no one talks about these things is one reason why we don’t have better systems, as a society, to help people through these events.”

I have to admire this man’s transparency and courage. While I’ve never met him, my respect for him has grown exponentially as a result of his willingness to be open about such painful and personal information.

Over the years, as I’ve been on my own paths of personal growth, I have come to appreciate the incredible amount of healing and empowerment that results when we share our painful secrets in appropriate ways.

But what, you may ask, does this kind of personal sharing have to do with financial planning? Actually, a great deal.

Money touches everything we do and is an integral part of all the decisions we make in our lives. Financial planners and other financial advisors are involved in many of the most intimate and life-changing events of clients’ lives, including career decisions, lifestyle choices, marriages, divorces, births, serious illnesses, and deaths. If you want to get the best advice and service from those advisors, it is essential for them to know what is important to you and what is happening in your life.

I have also learned the value of sharing openly from the planner’s side of the desk. When I facilitate workshops on healing money issues, talking about some of my own past money mistakes and beliefs is a powerful way to help participants become comfortable sharing about their own. In addition, it helps give them the confidence that they, too, can change what they believe and how they act around money.

Even in less emotional interactions, however, appropriate disclosure of personal information helps build trust. As an example, a client recently asked me, “Rick, how much has your portfolio gone down lately?”

I told her, “The same amount as yours.”

This may not seem to be a reassuring statement to hear from your financial planner. Yet this client appreciated knowing I was managing her money in the same way as I was managing my own. It helped her accept that downward cycles such as the current recession are normal and temporary. Telling her, no matter how politely, that information about my portfolio was none of her business would have undermined her trust in both my ability and my integrity.

Obviously, there are appropriate times and places for sharing personal information. You might not choose to vent to your CPA about the intimate and painful details of a divorce, though you would certainly need to share the details relating to your financial and tax circumstances. Deeper sharing might be more appropriate with a financial planner.

In most cases, a client/planner relationship lasts a long time. Some of my clients have been with me for 25 years. We have seen each other through times of joy, pain, and tragedy. The relationships we have built through sharing those significant times are among the most rewarding aspects of my work.

We all have our stories, and there is a great deal of power and healing in sharing those stories.

In just a few weeks I will begin instructing a 16-week course on “The Psychology of Money: Understanding Your Clients From the Inside Out.” I will be using Facilitating Financial Health as the main text book. I’ll take participants on a journey of learning how to identify and change thoughts, beliefs, and behaviors around money, both in ourselves and in others. 

The class is offered through Golden Gate University and is a graduate level course. They offer open enrollment, so anyone who is interested in the topic can participate. The tuition is $2,130 and counts for 3 credit hours. 

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An August 1, 2008 story by Laura Meckler in The Wall Street Journal included the following quote that got my blood boiling. She said:  “Beginning in 2017, the government will start paying out more in Social Security benefits than it collects in taxes and will have to start drawing on the trust fund, money stored in government bonds, to pay promised benefits. By 2041 actuaries predict the trust fund would run out of money and the government would be unable to pay full benefits.”

This, like many other news items about Social Security, is both factually accurate and terribly misleading. Referring to a “trust fund” leads readers to think there is a pool of money, like a savings account, that will actually run out in the near future. In reality, there is no pool of money to run out, only a pile of IOU’s where both the borrower and the lender are the United States government. Continue Reading »

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I recently wrote a column about “longevity insurance.” This topic raised the question of how financial planners estimate our clients’ life spans. Obviously, if we planners are going to tell you whether you’ll have enough money in retirement to last the rest of your life, we need to estimate when your time on earth will be over.

It would be ideal to have a crystal ball that would tell us whether you’re likely to be checking out at 65 or still going dancing when you’re 102. Instead, we’ve had to rely on industry averages, actuarial tables, and government statistics concerning life expectancy. Continue Reading »

Rarely a month goes by that I don’t talk with a reporter representing a national publication or wire service about various financial planning topics. In about half of those interviews, the reporters ask if they could talk with a client. Most of the requests revolve around talking about the benefits and experiences involved in various areas of financial planning. This is pretty normal, as people like to read stories about real people, so reporters are always looking to talk to someone who has actually experienced what a professional, like me, is theorizing about.

For example, in a recent interview with the Associated Press I was interviewed on our investment philosophy as it pertains to asset class diversification. At the conclusion of the interview, the reporter asked if he could talk with a client about how their investment life was before having a diversified portfolio and how it is today. I declined his request, which is typical. First, I am pledged to protect a client’s privacy. Second, I don’t have time to call 70 clients and poll who would be interested in responding. Continue Reading »

The July 28 online issue of Investment News included yet another indication that integrated financial planning is becoming more mainstream. An article, “Freud Meets Finance,” included Rick’s comment, “There’s a growing awareness of a void in the financial services and mental-health professions around the issue of money.” He was cited as a founder of the Planner-Therapist Alliance and the co-author of Conscious Finance.

The article, by Charles Paikert, focused on financial planning and wealth management firms which are hiring psychologists to work with wealthy clients and also advise their financial advisors. To read the complete article, click here.

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Because I encourage clients to invest for the long term, I tend to be an optimist when it comes to the economy. Economic cycles are normal, and the one thing we can be sure of is that markets will go up and markets will go down. If a portfolio is properly diversified, however, with five or more asset classes, it will withstand economic fluctuations with little damage.

One of my first goals with new clients is to make sure their portfolios have that diversification. With the recent decline in the stock market, it’s not unusual for them to have investments in individual stocks which have decreased significantly in value since they were purchased. I usually recommend selling those stocks. I believe it is rarely a good idea for individual investors to own stocks directly, and in most cases they will be better off to sell and reinvest the proceeds in equity mutual funds. Continue Reading »

I just recently ran across a new blog, The Attorney’s Therapist, by Debra Taylor-McGee, that had a post regarding money psychology. Don’t Regress Under Financial Stress.  Of course, I am honored with her recommendation of The Financial Wisdom of Ebenezer Scrooge as a reference!

You may want to read an interesting post today in a WSJ blog, The Wealth Report, by Robert Frank. In the post, Frank reports that a survey of 400 wealthier Americans finds them satisfied with their investments in hedge funds, which account for about 9% of their average portfolio. The average return to July 24th, according to Hedge Fund Research, on the hedge fund asset class is a loss of 3.2%. 

The good news is that you don’t need to have a multi-million dollar portfolio to add this asset class to your portfolio. Even a portfolio of $100,000 can add a 10% position in hedge funds (we call this asset class “market neutral” to avoid the stigma and misrepresentation of the term “hedge fund”) by adding mutual funds that engage in merger and convertible arbitrage, long/short strategies, and even a fund of funds.

Our most popular portfolios have maintained a 10% market neutral allocation for over 10 years. Interestingly, our mutual funds in this asset class are performing similarly with the average loss of 3.2% found by Hedge Fund Research.