Who are you… really?

Yesterday is history, tomorrow is a mystery, but today is a gift. That is why it is called the “present”.  Kung Fu Panda

There are many things we know about the brain and how it works.

One area of brain functioning that has been researched to the nth degree, is how we recall memories… and the evidence reveals a simple truth. Our memory recall isn’t really that good.

One of the known truths about memory recall, is that it is rather inconsistent, and we can often be found changing certain facts and adding false details to our memories – and all without knowing we’re doing it. This in turn causes us issues, since we rely on our memories to relive past experiences and to share stories with our friends, family, and colleagues.

And boy, do we tell stories. From the minute we wake, to the time we go to bed, our day is full of storytelling. Both you telling others your stories and others telling you theirs. And since the story-telling audience may be different each time, it’s not unusual for us to adapt our stories for the audience receiving them. We may make a story more serious, more fun, shorter, longer. We may elaborate one point and downplay another.

This process, of tailoring your story to an audience, is known as the audience-tuning effect, and has been shown to have an interesting side-effect. Change the story we tell, and not only will your audiences interpret your story differently (obviously), you may also end up updating the memory itself. Tell a version of a story enough times and it becomes THE version that you tell and THE version that gets recalled each time.

But there is another facet of memory recall that is not only interesting but has an impact on financial planning. Let me explain.

A key part of the Financial Planning discussion is asking people about their future plans, their dreams, their aspirations. They may say they want to retire early so they can go on long beach walks, read more, or see their grand-children more.

Most of the projections we make about what we would like our future to be, rely on recalling memories of things we have experienced. How something felt, sounded, or tasted. In essence, we can’t picture our futures without recalling our past. We rely on ‘benchmarks’ to make sense of it all.

Functional fMRI scans have allowed researchers to explore this concept and have revealed that our brain uses the same functions to forecast as it does to remember, so the two functions are biologically linked and interact with each other when we need them to work.

No matter how long you spend with a customer talking about their future plans, or how vivid the picture is you paint in an attempt to make their future plans feel real and achievable, they will always be subject to past experiences creeping in, and, depending on how they have been telling their stories, this may very well impact how they see their futures panning out.

To top this all off, let’s not forget that we also have a bucket load of behavioural biases to contend with; biases like present bias or projection bias. These biases will make an appearance based on the stories we tell ourselves and have an impact on the actions we take and when we take them.

Not taking behaviour into account, nor questioning these stories to truly understanding and appreciate the journey people have been on, may lead us to miss a crucial piece of the financial planning puzzle. This is what we at Be-IQ mean when we use the phrase ‘Know Your Customer’. We aren’t talking about the current, traditional method of assessing KYC, but a more engaging, deeper, and more meaningful process.

So, when it comes to planning and talking about the customer’s future, we need to be mindful of the stories they tell, and how much these are working their way into the customer’s vision of the future. We need to be aware of their behavioural biases that pop up and get in the way of slower, more deliberative thinking… the kind of thinking we need to adopt when it comes to important decision making.

But let’s remember that we are all human. We all have stories we tell, experiences we recall, whether that’s in a professional setting or when we are sharing a joyous evening with friends and family. But we’d be wise to pause and consider for a moment how many of your life stories, your past experiences are making their way into the way you see the world, and perhaps, more importantly, the advice you give. It’s not just about Knowing Your Customer, it’s also about Knowing Thyself.