Last year, I had the opportunity to listen to Dr. Jason Mitchell from Harvard University while at the AFA Conference on the Gold Coast. For those not in the know, he is the Principal Investigator at the Harvard Cognitive and Affective Neuroscience Lab, and therefore, is much more interesting than I can ever hope to be (no...seriously, this guy has the most job).
I am a firm believer that there is always room for improvement, whether personally or professionally, and two things that Dr. Mitchell spoke about really resonated with me. I would like to share this with you, because it will help us understand how our brains work, and therefore be able to assist ourselves, and our client's to overcome behaviour that may not be in our best interests.
The first concept is that your brain doesn't "see" your future self as an extension of you. It sees the future you as a third person, which is why many of us struggle to feel urgency about preparing for the future, and/or, controlling your instant gratification impulse. There is a disconnect between doing something positive, such as saving for retirement, and the end result, because according to your brain, that end result is happening to someone else. I know that this is probably an "Ah ha!" moment to many financial planners, especially when it comes to the push back with insurance. I know that I have had clients who acknowledge the benefits of personal insurance cover, but in the same breath say "just not for me". When quizzed further, these clients invariably say that it's not for them because they just don't see themselves ever needing it - it happens to other people.
The second interesting thing that Dr Mitchell brought up is that we, as a species, like to have consistent behaviour. We think of our past, and future selves as a third person, but we "like to keep consistent what we think, say and do, and will change to ensure this is so" (Mitchell, 2017). When you start to reflect, you will probably find dozens of examples where you have changed what you were going to say, or do, in order to display behaviour consistent with your audience's expectations. This is a problem when you are trying to break bad habits. An easy example is a spouse who hesitates over a purchase, knowing that things are tight, but might overspend on an item because the other spouse would be "disappointed" if they didn't.
So, how to we go about changing this? The first point is the way the brain is wired. So, in order to work with biology, we must bring our future self to our present self. In my opinion, the ability to do this is what separates a really good Financial Planner from the rest of the pack. Turn your empathy towards yourself, and imagine if your future self was your right now? What would you do, right now, if you had been diagnosed with cancer? What would you do, right now, if you had to retire? What would you do, right now, if that school fee bill turned up in the mail? Bringing the future problem to the present moment will hopefully create the feeling of urgency (and light up the right areas of the brain) so that changes can be made.
Now that we acknowledge that the change needs to be made, we need to have a solution to the problem of overcoming our need for consistent behaviour. The solution seems to be all about incremental change. Rather than trying to make a big change, you make seemingly small, and inconsequential changes. Then you build on that change. For example, rather than buying that coffee on your morning commute, you put the money in a tin. Such a small thing, but if a coffee is $5, then at the end of the week you have $25, by the end of the month, you are on a roll, have saved an extra 20 minutes per day, and have an extra $100 put aside. From that 20 minute time saving, you could possibly make your lunch in the morning. This might save you a further $10 per day. So now, you are saving $300 per month, which is $3,600 a year. All of this from such a little change.
Of course, in order for this to be of any value, you need to actually do it. Dr. Mitchell suggested changing your mindset by using your brain's idiosyncrasies to benefit your future self. You can cut the tie by acknowledging that your "third person" past self is a different person to your present self, and therefore your present self can have different behaviours than this past self stranger.
Wordy, I know, but so very, very interesting. If you ever get a chance to see Dr. Mitchell speak, or come across his work, then jump at it. It really is an experience.
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Mitchell, J. (2017) 'Building consumer trust through higher professional standards' [PowerPoint Presentation]. (Accessed 12 October 2017).