Here and Now
One of the greatest hindrances to the financial advice industry (excluding consumer apathy and lack of trust) has to be the notion of intertemporal choice.
In basic terms, it’s the trade off between what something is perceived to be worth today versus what it might be worth in the future and is one of the reasons most people don’t plan enough for the future.
Intertemporal choice is a theory first concocted by the academic John Rae in 1834 in his work titled The Sociological Theory of Capital, and was later adapted, first by Eugen von Böhm-Bawerk in 1889 and then, by Irving Fisher in 1930.
A close cousin of intertemporal choice is temporal discounting – a process whereby people tend to reduce the perceived value of a given reward the further away the reward moves from the present moment in time.
For example, if you’re extremely thirsty and a bottle of water is offered to you, the bottle of water is more likely to be of higher perceived value at that point in time than if the offer was to give you a bottle of water the following day. You want the water now and not tomorrow.
This is an extreme example but helps to partly explain how modern day consumerism has become the dominant phenomenon that it is.
What the clever marketers of the world have been able to do is to create a blurring of need versus want in many consumers minds.
We all know that we don’t need a lot of the ‘stuff’ that we buy but have convinced ourselves otherwise.
With intertemporal choice afflicting most of us, there is a real opportunity for the financial advice sector to change the mindset of consumers. Something it has failed to do en masse to date.
It’s about bringing the future forward today – so instead of Back To The Future, more like Future To The Now.
At CoreData we have long discussed the dilemma of intangibility when it comes to financial advice for consumers – at least in the short to medium term.
But this can be overcome through very strong messages allowing people to perceive their situation in the future – a kind of ‘future you’.
The short-term consumption/gratification tendency of modern society is the counter force against embedding such views and realisation among consumers however this is where financial advice marketing needs to up its game.
It is accepted that people are living longer and remaining active and engaged in all manner of ways; the message for the financial advice and investment sectors is that planning for the future will not only be good for consumers, but something they can imagine with some powerful and clever marketing to mentally transport them to see what the future will actually be like.
This doesn’t mean two grey haired well-to-do’s walking hand in hand on a beach – but something more here and now. Think outside the circle.
Of course, the marketing will have to be hard hitting to offset the natural tendency towards intertemporal choice and temporal discounting.
The key challenge therefore for the financial advice market is to ‘encourage’ people to make commitments today that will benefit their ‘future self’ tomorrow – a future self they can relate to.
Easier said than done.
In times of austerity this is difficult as many people can’t afford to put much aside for their future self.
The following likely scenario is how the conscious/sub-conscious mind works.
“My today self has a greater need and therefore future self will have to deal with the ramifications of decisions made by today self when future self becomes today self.”
Most people don’t even consciously imagine their future self in any great detail as our minds (at least in the waking day) tend to perceive the world along a linear trajectory of thought.
Our mental cognition tends to accept ‘blind spots’ to justify today’s decisions if they have the potential to be at the detriment to a person’s future self.
Consider people who engage in potentially harmful activities such as smoking or heavy drinking etc.
Aside from these potentially detrimental decisions from a physical perspective, the financial advice industry needs to drill home the financially detrimental decisions (or non-decisions) people tend to make and create powerful ‘nicorette’ style solutions to help people make the right decisions at the right time.
One Comment on “Here and Now”
Post a comment
barry parker says:
great article!!!