Are psychologists allowed to counsel friends and family or no because it's a conflict of interest?

In general: it is a good boundary option to try to avoid this. However, when I lived overseas - my next door neighbors on both sides were my patients. I was the only psychiatrist - so we had no choice. I didn't consider it to be ideal but I provided the bests services I could .

Psychologists: cannot counsel friends and family because they cannot be objective in the way that is necessary for psychotherapy. It is similar to the reason doctors do not operate on family members. Their emotional involvement interferes with objectivity and could cloud their judgement.