November 2019: 10 Questions

Journal of Financial Planning: November 2019


Meghaan Lurtz on Financial Therapy, Divorce Rates for Planners, and the Future of Research


WHO: Meghaan Lurtz, Ph.D.

WHAT: 2019 president of the Financial Therapy Association; senior research associate at; professor of practice at Kansas State University; adjunct associate professor at University of Maryland University College

WHAT'S ON HER MIND: "We have so much power as a financial planner to help people achieve their goals, that we need to think of it as sacred and important."

1. You are an experienced business adviser with a background in industrial and organizational psychology who has conducted leadership trainings. In your opinion, are there behavioral traits that all good leaders possess?

I tend to find that the best leaders know themselves. If they know that they’re good at this, but they’re not good at that, then they are motivated to hire the person who is good at that other thing so they can focus on what they do best. Sometimes that’s being a great motivator; sometimes that’s being a great teacher; sometimes that’s being able to see the forest through the trees.

Some of the best leaders I’ve worked with, whether it’s Michael Kitces, Dr. Sarah Asebedo, or Dr. Kristy Archuleta—they are wonderful leaders in the sense that you want to be part of what they’re doing and you’re motivated by them. You believe in their big idea. They know what they’re going to do as a part of this bigger vision, and they know what they want you to do as part of this bigger vision. Everybody’s going in the same direction, and everybody feels good about that.

To be a good leader, you don’t have to be all things to all people. There’s a reason why we say, “the jack of all trades,” because they’re not the king. You can’t be good at everything. So, know yourself, be able to delegate to other people, and then move forward.

2. In addition to your psychology education, you’ve also achieved a doctorate in personal financial planning. What led you to financial planning?

My mom. She was the CIO of Total Rebalance Expert. It’s a financial software company that was sold to Morningstar, but my mom wrote that entire program. And when she was doing that, she said, “You know, why don’t you come help us?”

So I started talking to and working with all these financial advisers. I really liked them; I just thought that they were wonderful people. They cared about their clients, and I thought that was awesome. I wanted to be more involved with this group.

At that time, I was getting my master’s, and I was at a conference, showing off the TRX software. I started talking to Dr. Barry Mulholland, who was working at Texas Tech University. He was asking about my background, and about the software, and he said, “You know, I think you should come and get your Ph.D. at Texas Tech.” Well, I’m married to the military, so I couldn’t really move to Lubbock, so he suggested Kansas State. He connected me personally with Dr. Sonya Lutter. We talked and K-State was the program for me. With their financial planning program and all they had going on with financial therapy, they were my tribe.

3. You previously had your own financial therapy practice. Can you tell us a little about that work and the people you served?

When I had my own practice, I networked with a number of traditional financial planning firms at the time in San Diego, California. I was the person they’d call when they had a client who needed more coaching, or needed to work out the emotional things, to work out some habits, or to just have more one-on-one time, if you will.

When we work with money, things get emotional. When we work with money, things get relational. And it can be difficult to know, when is the emotion taking over and slowing down the pace of financial planning? Or when is the worry about this relationship impeding the planning?

Some financial advisers aren’t comfortable going into some of those more emotional things, and that’s totally fine. In those cases, I could be their support. I wasn’t managing anybody’s portfolio; I was working in collaboration with the financial adviser. With my background in industrial organizational psychology, it’s a lot more coaching than it is therapeutic. I knew how to coach. I knew how to move forward. I spoke to the emotional part, to the relational part, so the financial planners who didn’t want to do those things could focus more on the financial things.

4. You currently serve as president of the Financial Therapy Association. What do you want the financial planners reading this interview to know about the Financial Therapy Association?

We love, appreciate, and understand the work that you do. We want to work with you in research, in practice, and in teaching.

You have stuff to teach us, and we have stuff to teach you. It’s certainly not a one-way street.

What’s published in academia sometimes is not necessarily translatable to what’s happening at practice. Dr. Martin Seay, for example, in his work with the Financial Planning Association, really tries to blend practitioners with academics. If we want financial planning to be a full-blown profession, in my mind, a significant part of getting there is doing research—real research, in real offices, with real financial planners.

It’s important to know what works best. It is important to know what actually helps move someone forward.

Michael [Kitces] refers to financial planning as a sacred duty, and I don’t scoff at that. I believe that exact same thing. It is people’s money, yes, but this is the rest of their life. This is their inheritance to their grandchildren. These are their relationships. These are their emotions. We have so much power as a financial planner to help people achieve their goals, that we need to think of it as sacred and important. And we need to be doing the research needed to raise that bar.

5. What role do you see financial therapy playing in the work of CFP® professionals today and in the future?

CFP Board has put out a client psychology book, and they’ve announced client psychology classes; people care about this.

We get these students out of CFP programs, and technically, they are unbelievable. It is not a question of: can they do time value of money? They’ve got it. But it is difficult sometimes to teach how to talk to someone, how to connect with someone, how to be empathetic.

Right now, the Financial Therapy Association, and the research being done in our journal (The Journal of Financial Therapy), and the certification that’s now available, and the education that’s available through Kansas State University’s financial therapy certificate program—these are fantastic ways for financial advisers to learn about communication skills, to learn about empathy in financial planning, and to learn how to connect and have more meaningful conversations.

Financial therapy also provides a place for that interaction between financial therapists or mental health practitioners and financial planning practitioners. Wonderful programs at Kansas State and the University of Georgia are places where financial planning and financial therapy are coming together, working with real people. The opportunity for practitioners to see that work and to be a part of those programs is really cool.

Financial therapy is a profession where you can be a mental health practitioner with a strong background in personal finance, which could very well come from being a CFP® [professional]. And you’re going to be focusing on those emotional and relational issues that come up for clients.

If you want to be a financial adviser and be better at communicating, maybe even do some of that deeper work in a sense, but that’s not going to be your whole practice, then remaining a financial adviser but certainly being involved in the financial therapy community is huge.

I think there’s been a lot of gray area in terms of: what is financial therapy; what is financial psychology; what is behavioral economics; what is financial planning, and how does all this come together? I think it comes down to the individual and the type of work you want to do. If you want to do more of the emotional stuff, then go out, get your marriage and family therapy license, get your CFP® [certification], and start working as a financial therapist.

If you want to be a financial adviser, get your CFP and go take some financial therapy courses, because they’re going to improve your ability to communicate. They’re going to improve your ability to be empathetic. You’re going to have stronger relationships with your clients.

6. The research survey, “What Financial Advisors Actually Do,” found that clients with more money tend to pay more for a financial plan. What do you think this finding indicates?

I don’t necessarily think it’s bad or evil. I think it is simply a description of where the market is and how people are currently paying for financial planning services. It’s also worth mentioning that there’s a leverage when it comes to financial advice. Helping a client who is making $500,000 save an extra 1 percent of their income is worth $5,000. Whereas helping a client making $50,000 save 1 percent, maybe that’s only worth $500.

This dynamic applies to a lot of things financial planners do. With more money, there can be significantly greater complexity, especially when it comes to taxes.

Think about how we view things in health. You can pay $10 a month to go to Planet Fitness, which you may do if you have the discretionary income to do so. But let’s say that you’ve got $100. You could pay $10 for this membership, and pay $90 to a personal trainer, and to you that may be worth it. If you’ve got the discretionary income to do that, I don’t think there’s anything wrong with that.

It’s not that if you’re bringing more money to the table, we’re going to charge you more. I definitely think it has to do with how people value these services. For example, think about hourly fees for lawyers. Some lawyers charge $700 an hour to talk to you, whereas other lawyers will charge $250 an hour. Based on your needs and your discretionary income, you’re going to pick the one that makes the most sense for you. And again, I don’t think there’s anything wrong with that. I think in many ways, that’s what the market for financial planners is doing right now, too. It just seems shocking when we say that up front. But you know, very wealthy people have very expensive lawyers, and we don’t get mad about that.

7. You’ve also done research recently on the relationship between technology use and the time spent in the planning process. Can you talk about the results and what they may suggest?

We tend to think of software in financial planning as something that can help you be more efficient, with fewer errors; something that makes you faster because you can do more things at once. Maybe it does make [advisers] a little bit faster, but they are not necessarily then doing more financial plans. Instead, they are spending more time—or just as much time—on financial plans, and in turn we think this means they are probably going deeper.

One interesting example of this in the study was around account aggregation software. In theory, if advisers are using account aggregation software, they should be devoting less time to data gathering; they should be spending less time chasing down statements. But in the data, that was not the case.

They weren’t necessarily devoting less time to data gathering even when they had account aggregation software. So what were they doing, we don’t know, but it is worthwhile to point out that we also looked at the personalities of financial advisers in this study, and to no surprise, we found that financial advisers are highly conscientious. And highly conscientious individuals tend to be more inclined to go deeper, to be curious, to be very careful in what they’re doing. They’re going to look at things 15 different ways, and the software is allowing them to do that. They’re not doing more financial plans with this extra time. Instead, they’re really going deeper on the financial plans that they have.

8. You’ve also done research on divorce rates of financial planners. Female planners are divorced at a rate nearly 270 percent higher than male planners. What can explain this?

I think it’s important to point out that we didn’t expect to find that. We noticed it in the data and thought, how can we try to understand this?

I know that the 270 percent sounds really scary. It is certainly dramatic, but it’s also important to know that females reported a current divorce rate of 10 percent, which is roughly 270 percent higher than the rate of males, at 3.79 percent. So another way to think of this is that women were almost three times as likely to be currently divorced than men.

Female planners should not think, I’m going to go into this and wind up divorced. I don’t want that to be the message; I don’t think at all that that is the case. But, we certainly need to look into this statistic more. We need to collect more data and really try to understand what’s going on.

We can look at why males divorce and why females divorce. In this research, the things that popped out for females were a desire for stable pay and also age. In terms of age, it was significant when we compared 60-year-old female financial advisers to female financial advisers between the age of 30 and 39, and the older group was more likely to be divorced.

Back in the ’50s, if you weren’t a working female, you couldn’t necessarily divorce your husband if you had no money. But now, with the financial mobility of females, if a woman in her 60’s, or at any point in her life, is no longer happy with her marriage, and she’s a financial planner, she probably has the financial independence to get a divorce if she wishes to have one. So there’s that.

Stable pay was the other significant factor related to being currently divorced for females. That may be a chicken-or-the-egg thing. Perhaps currently divorced women need to have stable pay. So, were they divorced and they needed a job? Or were they divorced because they had a job? We don’t know, but stable pay was important. And it’s not like males weren’t divorced; they were—they were just divorced at a different rate and for different reasons.

Moreover, in my mind anyway, this paper has learning points for advisers of both genders, including the importance of personality traits and the potential impacts of different career motivations on family life.

9. At the FPA Annual Conference, your co-researcher Derek Tharp presented research that found a 19 percent pay gap between male and female planners. What can the profession learn about gender-based discrimination from this research?

One, the other researchers on this paper are great—especially Derek. Two, personality and preferences matter. When we looked at what was explaining the differences in pay, large portions of that 19 percent gap were explained by preferences for performance and compensation. So, yes there was a pay gap, but the larger part of the pay gap was explained by how people wished to work.

In this paper, we were trying to look at equal pay for equal work. And it does not appear, at least as significantly as it has often been publicized, like there’s a 40 percent or 50 percent gap between men and women; that there is a wide pay gap. When we looked at equal pay for equal work, the gap is much smaller.

Here is a hypothetical and somewhat speculative example of what the data is telling us. If I, a female, prefer stable pay—I want to come to the office 9 to 5; I want to be able to work from home a few days a week—and I’m completely happy at $65,000 a year doing that, then great. There’s no reason to think that a male is paid more than $65,000 for also wanting those things and also being an employee financial adviser.

Comparatively, another adviser may prefer to be commission-based, and in turn, can make more than $65,000 a year from the eat-what-you-kill arrangement—and again, men and women appeared to be doing about the same if they had the same compensation arrangement. But men and women tend to have different preferences as it pertains to their compensation.

I’m not saying that pay discrimination doesn’t exist. It absolutely does. But given the point of this research, and what we were trying to measure, it did not appear that that was necessarily the main driver of the difference. The difference was more so in preferred preference of work style. If we have the same preference for work style, we actually are paid pretty similarly. And I think that’s a really great thing.

10. What do you believe is the future of research in the financial planning profession?

I hope that it is full of “prac-ademics,” meaning: there are academics, there are practitioners; there are also academics and practitioners working together on teams, and we have practitioners who are academics, or academics who are practitioners.

I believe we will see more research built around practitioner questions that have academic rigor applied to them.

Dr. John Grable gave a presentation at the CFP Board research colloquium a few years ago. He put up a list of names of Nobel Prize winners. He asked the room if we knew what type of research they did. Everybody said “no.” He told us they did experimental work. We don’t have that in financial planning, at least not a lot.

We do a lot of research with big datasets, and that’s great—you can get some really important information that way. But primary data is also really important. Experimental data is also really important. We also need more qualitative and mixed-method work.

Longitudinal data is really important. Wouldn’t it be amazing if we could take a financial planning student right now, measure their abilities, then look at them again when they get their CFP? Look at them again in five years, in 10 years. How many job changes did they make? Did the CFP [certification] really help them to get another $25,000? How is it helping them interact with their clients? We don’t have that data and we need it. We should be doing everything we can to get it.

Wouldn’t it be amazing to be able to work with a financial planning firm and track their clients’ progress over 10 years, and really be able to look at behavior? I think that would be incredible. That is where we could strive to go.

For the financial planners reading this, I think it’s important to understand, from the academic side, how important funding is; even a little funding can go a long way. I did a project with a financial planner who put up about $1,000 for gift cards to get students to take our survey. And now that firm knows all about this group of financial planning students, anonymously, and that’s going to help this firm hire better. And once we publish some of the data, other firms will, too.

So if you’re a financial planner and you have a question and/or a little bit of funding, call your local university and tell them. If you don’t get a response, here​ is my email at KSU​ and at​. Email me and I will work with you or help you find another willing-and-ready researcher. Let’s improve the state of our profession together.  

General Financial Planning Principles