Planners often feel like therapists. When should they refer clients to one?

As more financial advisors embrace behavioral and psychological methods for understanding clients' relationships with money, experts say ethical professional boundaries are also important.

A licensed therapist, psychologist or another qualified professional outside of the wealth management industry can better assist a client in need of mental health services than a planner — even if that advisor makes a point of studying all of the latest behavioral research or attains the certified financial therapist designation, three experts told Financial Planning. 

Advisors who may play a critical role in spotting signs of financially related domestic abuse or fraud targeting older adults can help their clients by knowing when they've done all they can and referring those clients to a therapist or psychiatrist, they said.

Drawing that border is "a little more murky" than the specific and comprehensive compliance rules that govern most of an advisor's conduct, according to Jacquette Timmons, a financial behaviorist and former money manager who holds training sessions for wealth management firms and aids advisory companies in examining the mental side of clients' personal finances. 

"If you're not a trained therapist, you could end up doing more damage than providing the help that the client actually needs," she said. "If you are also seeing a therapist, it can help you better with being able to discern when you as a professional are crossing over a line."

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Working with a therapist enabled financial planner, educator and coach Saundra Davis of Sage Financial Solutions to learn that she "didn't believe that security was possible, because of something that I went through as a young person" and led her toward a pattern in which "when I would get money, I would spend it," Davis said. Planners can guide clients part of the way toward identifying the problem or altering the behavior, but they must leave "the wound itself" to therapists or psychiatrists or else they "put me at risk," she noted.

"How it shows up now is I have things in place to help me make good financial decisions, and then I do my work about insecurity with someone who is equipped to help me with whatever comes up," Davis said. Advisors "can certainly help me recognize where this limiting belief is coming from and the impact that it has. It is not likely that they would be equipped to help me do the historical work necessary to heal that."

As the certification chair of the Financial Therapy Association — a professional development group that is the certifying organization for the certified financial therapist designation — Davis is spearheading efforts aimed at "setting a standard that consumers can trust" in finding the balance between advisors practicing financial therapy and the job of therapists, she said. 

"Ethics and scope of work are a very important part of the FTA video series, which is part of the CFT-I exam training, and the ethics section of the exam holds a strong weighting. As an association, we realize the importance of those holding the designation operating within their appropriate professional boundaries for the protection of the consumer," Ashley Agnew, the director of relationship development for Needham, Massachusetts-based Centerpoint Advisors and current president of the association, said in an email. 

"The FTA provides a handbook to CFT-I professionals that help to define an appropriate scope of service for a financial therapy engagement," she continued. "Many professionals also work with a supervisor who is trained on how to assess client fit and how to responsibly, and respectfully, refer out when it is in the best interest of the client."

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With any referrals, advisors should ensure the therapist or psychiatrists have earned the relevant licenses or consider tapping a financial coach or behaviorist to determine whether "the issue may be much more pathological than is even able to be addressed by the coach or the behaviorist in an ethical way, because they may not be trained to do that," Timmons said. Some advisors may carry false impressions about what the sessions with the outside professional could mean to their relationship with their clients and vice versa, she said.

"If you have the question of, 'Oh, am I overstepping a boundary?' then you probably are, because I don't think that nudge, that inkling surfaces without there being a reason for it," Timmons said. "Make sure that the client understands that in referring out you'll obviously still work with them, but also understand that there's a confidentiality boundary."

Advisors ought to "build a relationship with a therapist or a financial therapist so that you have a warm handoff" and forget the mistaken belief that, "sometimes financial planners think, 'Oh if I send them to a financial therapist, I will lose them as a client," Davis said.

With the welcome development that "now, as a society, we're finally figuring out" how emotions, psychology, trauma, beliefs and inherited burdens "are often more impactful than the dollars and cents," the proper professional boundaries establish "what you must know to be able to, with integrity, practice financial therapy," according to Davis. In other words, the guardrails can give advisors more ways to serve their clients.

"There's absolutely no aspect of our lives that money doesn't touch," she said. "We can't be so eager and so hungry to be in the media or so hungry to get every client that we step outside of our capacity to the possible detriment of the clients that we serve and the profession that we claim to uphold."

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Furthermore, an understanding of "how the client's money story has been created up to the point of their seeking your help" informs the creation of their financial plan, Agnew said.

"Financial planners should know that setting clear expectations with clients at the beginning of a financial therapy engagement is absolutely necessary to establishing ethical boundaries," she said. "Financial planners should also know that obtaining training in financial therapy skills can greatly enhance the client relationship, even if the planner does not provide full financial therapy as a service offering."