Editorial: Volume 3, Issue 2

In the mid-year issue of the Journal of Financial Therapy, we highlighted the many accomplishments the Journal has made in just three short years. The submissions to the Journal continue to grow, the quality of submissions is increasing, and the diversity of topics is expanding. For example, in this issue, topics of articles are not only specifically related to financial therapy, but also include: (a) financial literacy and social work, (b) financial coaching, and (c) financial trauma and tactical asset management. Seeing the Journal expand and grow is very exciting

Financial Anxiety, Physiological Arousal, and Planning Intention

Results from this exploratory clinical study indicate that financial anxiety—holding an unhealthy attitude about one’s financial situation—and physiological arousal—the physical precursor to behavior—play important roles in shaping consumer intention to engage in future financial planning activity. Findings suggest that those who are most likely to engage the services of a financial adviser exhibit low levels of financial anxiety and moderate to high levels of physiological arousal. The least likely to seek the help of a financial adviser are those who exhibit high financial anxiety and low physiological arousal. Results support findings documented in the literature that high anxiety levels often lead to a form of self-imposed helplessness. In order to move those experiencing financial anxiety towards financial solutions, financial advisers ought to take steps to simultaneously reduce financial stressors and stimulate arousal as a way to promote behavioral change and help seeking

The Financial Therapy Association: A Brief History

The purpose of this brief review is to provide a historical context for the conceptualization, development, and launch of the Financial Therapy Association (FTA). The FTA membership base consists of practicing financial planners, financial counselors, psychologists, marriage and family therapists, social workers, financial coaches, psychotherapists, and researchers from these and other disciplines. From the outset, the Association’s purpose has encompassed five goals: To promote a vision of financial therapy, which is the study of cognitive, emotional, behavioral, relational, economic, and integrative aspects of financial health.To provide a forum for researchers, practitioners, the media, and policy makers to share research and practice methods and models of financial therapy.To promote methods of training for those involved in financial therapy.To inform policy and practice management standards as these relate to financial therapy.To stimulate and disseminate clinical, experimental, and survey research on financial therapy

Financial Anxiety, Physiological Arousal, and Planning Intention

Results from this exploratory clinical study indicate that financial anxiety—holding an unhealthy attitude about one’s financial situation—and physiological arousal—the physical precursor to behavior—play important roles in shaping consumer intention to engage in future financial planning activity. Findings suggest that those who are most likely to engage the services of a financial adviser exhibit low levels of financial anxiety and moderate to high levels of physiological arousal. The least likely to seek the help of a financial adviser are those who exhibit high financial anxiety and low physiological arousal. Results support findings documented in the literature that high anxiety levels often lead to a form of self-imposed helplessness. In order to move those experiencing financial anxiety towards financial solutions, financial advisers ought to take steps to simultaneously reduce financial stressors and stimulate arousal as a way to promote behavioral change and help seeking

Editorial

Welcome to the first edition of the Journal of Financial Therapy

Risk Tolerance Estimation Bias: The Age Effect

Older individuals are generally assumed to be less risk tolerant compared to others. The purpose of this research was to test how accurately working adults at different ages in the lifespan estimate their risk-taking propensity. Differential predictions, using ANOVA and regression analyses, were assessed. Findings suggest that younger working adults tend to over-estimate their risk tolerance compared to older working adults. Although those in middle-age were shown to under-estimate their risk tolerance compared to the youngest working adults, the results were not significant. A discussion of findings is presented with the proposition that over- and under-estimation of risk tolerance might help explain the types of risk-taking behaviors engaged in by individuals over time

The Impact Of Decision Power On Financial Risk Tolerance And Asset Allocation

This research considers the impact of decision power (Blood & Wolfe, 1960) and demographic variables within a couple’s relationship on risk tolerance and portfolio risk levels. Married couples (N = 175) separately completed a survey consisting of the Blood and Wolfe Decision Power Index, the Survey of Consumer Finances risk tolerance question, demographic information, and selected financial variables. Unlike their husbands, the study found an effect of decision power for wives and portfolio risk level, suggesting that the wife’s decision power affects portfolio risk levels. Decision power was found to be a significant factor in risk tolerance for both the husband and wife. Findings indicate that both portfolio risk levels and risk tolerance is determined by the education of the wife and not the husband. Further, a divergence in risk levels occurred when the husband owned a greater degree of assets than the wife

Life Insurance Consumption as a Function of Wealth Change

This article used a large nationally representative longitudinal dataset to explore the association between changing socioeconomic factors and household consumption of life insurance across time. This study specifically examined the association between changes in wealth and life insurance consumption controlling for household characteristics and psychosocial factors. Empirical results indicate that during the 2004-2008 period, an increase in net worth was positively associated with purchases of additional cash value life insurance at the household level. Women and Black households were also more likely to increase their life insurance consumption during this period. Saving intention was likewise found to be positively associated with an increase in household life insurance consumption. Results suggest that life insurance acts a complement to, rather than substitute for, wealth. Implications of the findings of this study for individual investors, scholars and practitioners have been included