Cases like Madoff’s can create significant reversals of consumer confidence detrimental to the entire nation, said Brad Klontz, a Hawaii-based financial psychologist. “These types of scandals, when they break, can spark a crisis in themselves,” Klontz said. Both those betrayed and those who hear of such betrayal might become overly cautious with their investments and others might not invest at all, causing a rippling effect through the financial markets, Klontz said. Victims of financial scandals may also adapt their personal lives to cope with the resulting anxiety in a variety of different ways, said Keith Whitaker, a Boston-based doctor of social thought who works with Calibre financial advisers to apply psychological principles to wealth management
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