Your Future Self Hates You and Why Advisors Should Care

[00:00:13] Tom West: When we were prepping a little bit, everybody, for our topic today, I realized something that was a little bit distressing, and that is future Tom is probably significantly disappointed in present Tom right now.

The title of our podcast is Your Future Self Hates You and Why Advisors Should Care. The, the nexus of these ideas that we're going to be going through is a concept called forward temporal discounting. And Suzanne, if you could just take a minute to unpack that nerd bundle of words, forward temporal discounting.

What is it? And why is it going to be really important for advisors to understand this idea of future self kind of not being really excited about the choices of present self? Can you set the table for us, please?

[00:01:05] Suzanne Schmitt: Yeah, I'll do my best and you're speaking my language. So I think the easiest way to think about what temporal discounting is, is the notion that we tend to put a greater priority on that which we can have right in the moment right now. Even when that is compared against getting more, a bigger reward in the future. And for those of us that did Psych 101, I think the best example to give you is the old marshmallow experiment from Stanford.

[00:01:28] Tom West: Oh, the kids, right.

[00:01:29] Suzanne Schmitt: Exactly. Right. So the premise was, and this was done in the seventies and not a lot has changed in this regard anyway. The, the kids in the experiment could either have a marshmallow right now or not eat that marshmallow and wait a little bit and get more marshmallows down the road. And what's interesting about that, is that's probably one of the first instances where this concept of temporal discounting, meaning a lot of kids wanted to have that marshmallow right now.

But what is also interesting and I think really important for advisors to understand is that's fantastically common. And the kids that did not resist the single marshmallow were actually more apt in later life to have lower salaries, to have more negative health outcomes, and to generally not be as happy with their lives.

And so the notion of that internal ability we all have but don't always exercise to regulate ourselves is important because there are direct financial consequences, both near term and further term. And that might be why future Tom is not so happy with present day Tom.

[00:02:25] Tom West: Yeah, that seems to be a recurring theme.

There's also an interesting concept that when we're talking about temporal, the idea of our understanding of where we are in time and our lifespan and whatnot, that there's also a lot of research that's coming out where we tend to think of ourselves right now as at a younger age than we actually are. And audience when we were prepping a little bit for this I teased like I I'm 54 as of the time of this recording and in my head I'm, really sure i'm like 41 or 42. This presents an interesting push and pull because if we're discounting our future self, it's it's somebody that I don't recognize or somebody that I don't empathize with, but hypothetically me as a 54 year old really thinks I'm 41. This has some pretty significant impacts on our decision making and if financial advisors are trying to give counsel that could improve somebody's life outcomes with the choices that they've got right now, not only do we have to compete with a reduced or a discounted version of our future selves, we also might have to understand that our clients might be thinking and acting younger than they actually are.

Tell me a little bit about your first thoughts on that, Suzanne.

[00:03:39] Suzanne Schmitt: Yeah, I think it's a really interesting parallel and the frequency with which people see themselves as younger is actually on the rise. So there've been a lot of articles and even popular media that say about 40 percent of the population sees themselves as significantly younger than they are.

The American Psychological Institute has also found that, I'll just say the older your birth year, meaning the younger you are, the later you perceive being old as. So as an example boomers think being old starts at 74 as compared to silent generation that saw being old as late 60s, early 70s.

So with all the increases in better nutrition and better medical care, better treatments, et cetera, it seems like the net impact, which you think is really good, right? Is we feel younger than we actually are. The downside is that decision making impact can really mean we're shortening the horizon we have to save.

We might be making choices that aren't great for future self's health. And it can actually lead to greater dissatisfaction when your perceived age kind of catches up with your chronological age. So all that to me is super interesting and not stuff that is generally thought about through the lens of financial planning.

[00:04:46] Tom West: Yeah, that's right. Well, I'm, I'm hearing in my head, my wife reminding me that I'm getting more immature as I get older. So at least my life experience is sort of tracking. But a little bit more seriously, you know, it looks like as younger adults are coming into adulthood. There's, there's so much uh, information out there that hitting a lot of the milestones of what we would consider adulting.

You know, the idea of, full time job moving out of mom and dad's house. Purchasing a house, marriage all those things. I know that colloquial or conventional wisdom says, kids are coming into perceptions of being a mature adult sometimes five to ten years later than maybe the gen xers. Which is you know loosely speaking where you and I fall in. So it seems to be across the whole age span that this idea of temporal discounting in the future or thinking that we're younger than we actually are acting younger than we actually are. I think financial advisors maybe need to take a little bit more precise of a view and maybe think about tools that they can use in communicating their advice their counsel that can sort of anticipate and maybe combat some of these biases that we have.

[00:05:56] Suzanne Schmitt: Yeah, absolutely. And I think the point that folks are achieving those major milestones later is really important, particularly because for most people outside of their retirement plan, their home is their primary source of asset, if you would. And a lot of people, not only is that happening later, it's not happening at all.

So, you know, one of the things that I think is really interesting that the medical profession has picked up on, is this notion of actually giving you a visual of what your older self is going to look like. And anyone out there who's been to a dermatologist lately may have actually seen them show you what your skin's real age is.

A lot of cosmetic providers have been doing that successfully because they know that a visual has a really strong impact on the mind. And so one thing that I think is interesting that a lot of advisors haven't necessarily embraced is this notion of giving your clients a visual of what they might look like as being older because the science is there that that motivates people to think differently.

So there's a lot of apps out there that can do that for you. Some of the best ones that are used by insurance companies and financial services companies are things like aging booth and face lab and face apps. So if you haven't tried it, we're big believers here in, in kind of consuming your own medicine.

It is a really interesting thing to see the mindset shift when you actually see yourself and what you might look like 10, 15, 20 years down the line. So it's an interesting, light way, perhaps to start that transition of conversation and thinking.

[00:07:24] Tom West: Well, the least surprising thing when I did age booth or aging booth is future Tom was bald.

That was, that was

But but I do think where we're going is, how can advisors do a better job of having their clients access and get to know the concept of their future selves. And maybe start thinking backwards of, is your future self, are they going to be happy with this sets of decisions? Are they going to be grateful for the sets of choices that you're making right now?

Are they going to be regretting, you know, you may be taking the wrong path? One technique that I use in my practice when I'm trying to get people to access visions of their future selves, is try to introduce their future selves as people. Like Suzanne, if you're my client, let me describe, what I know about Suzanne as a 75 year old, some years down the road. I'll go through all the attributes that I know and respect about Suzanne now.

But what I'm going to be trying to do is I'm going to be trying to introduce to you present Suzanne, that you're going to like future Suzanne, you know, she's somebody that has learned a lot from the years ahead. She's watched things in her career and as her family ages with her that have imparted some pretty significant lessons. And maybe that concept of introducing a future version of yourself, particularly with other family members or people that you care about.

Maybe that's a technique that gets the access of, of your clients thinking a little bit more facile to this concept. Talk a little bit about the idea of future casting, not just you, but family members as well, and why that's important.

[00:09:10] Suzanne Schmitt: Yeah. I love that idea of playing back to the client. I love the idea of even having a client write a letter to themselves or to their kids, if they have them, through the lens of future self, but specifically Tom around future casting.

And I know you do this in your practice. And I do this when I'm out with clients too, is asking your client to, you know, take a blank sheet of paper, put themselves in a circle in the middle. And then create a little spoke for everybody that's in their life, their friends, their family, their pets, all the people that they love and they care about who also care about them and might ultimately depend on them.

And then the next thing I do is I ask that audience member to project out in five year increments up to 20 years from now. What are some of the changes that are going to happen to each of those people, mentally, physically, spiritually, financially. And the nice thing about starting there is most of us have that benevolent tendency, most of us anyway, and we care deeply about the people in our lives.

And as, as we start to think about them, it softens the ground for us to think about, they're not the only ones changing, right? My next step in that exercise is usually to flip the script and say, okay, now, now think about yourself and go out five, 10, 15, 20 years and think through what might be changing for you physically, mentally, spiritually, financially.

And it's a good way to start to change. You know, understandably, a lot of us are very focused on the here and now we're all really busy, but giving them that frame of reference, I think we both feel can be really helpful in shifting the mindset and just giving people a different set of trade offs.

It's like a different rubric for making decisions.

 

[00:10:48] Tom West: What I like about that is, is future casting family members, you know audience. What we're trying to do is we're trying to give you bridges because we know in the research says that we have a very difficult time accessing our future selves.

What are the bridges, the conversations that can get us to have a more. Exacting in helpful vision of our future selves and the idea that we're introducing number one is futurecast family members and use that as a bridge. Another bridge that I use sometimes in my practice is to talk about choices that they were grateful for, or choices that they regret that they might have made in the past. And You know, we'll look back on I should have stayed at this job longer, or I blew it when I had some modest inheritance from my grandparent or something along those lines. And I'll hover on that.

And even if my client doesn't seem to have any big regrets that are coming to mind, maybe I'll ask sort of by proxy. Was there anything that your parents, choices that they made that they regret, or things that they were really grateful for the choices that they made.

And what I asked my clients is, well, based on that particular story, what was the teachable moment? What was the principle that was really important, that came out of that understanding of your past. And then what I'll do is I'll try to use that principle, that teachable moment of asking, well, future Suzanne.

You know, if the idea is always make sure that you've got some dry powder for liquidity in case things come up, something along those lines. You know, what are the kinds of things that future Suzanne would hope that present Suzanne is able to do? And the idea is I use the concept of the lesson that they've learned in the past and apply it forward.

That's another technique that I use in these family financial conversations, to be able to get my client's understanding of present state versus future state a little bit more fluid. And this is gonna be particularly helpful when we start doing a little bit of scenario building. But before I get ahead of myself, any thoughts on any, any of that ground that we covered, Suzanne?

[00:12:57] Suzanne Schmitt: Yeah, I love that idea. And you know, the research also tells us that it's easier to approach difficult topics and emotionally charged topics through the lens of other, you know, we joke about asking for a friend, but we do that because it can be uncomfortable when we say we're actually asking for ourselves.

The other thing that I think is really important, particularly when we, we talk about, you know, Hey, what, what's something that your parents did? It could be like, you said, Tom, a good thing that you took away or not so good thing that shaped you. But really understanding what are the circumstances that make you more likely to act quickly and make a decision that might not be as well measured.

And it sounds fantastically obvious, but the research says that very few of us actually understand the circumstances where we make our best decisions. So taking that moment, especially if it's a decision you made that you are in retrospect, maybe not as happy with as you'd like to be. Thinking about what else was happening in your life and actually writing it down can help to crystallize that set of circumstances so that you're primed the next time that comes up and it will help you take another beat maybe and make that decision a little bit more circumspectly than you might otherwise.

[00:14:09] Tom West: Yeah. I like that a lot. I think that memory is an interesting thing. We know it's never an accurate accounting of the actual past. It's always a version that gets moved around in your head based on all sorts of different psychological issues.

I think that what I want to move to is a lot of financial advisors use scenarios maybe in a financial plan. Things that, if we do this things might turn out more positively. If we do this things might turn out more negatively. Things along those lines. So advisors, when you're using these different scenario plans, don't miss the opportunity of introducing your client to their future selves in this scenario.

Like we don't do past scenarios. We only do future scenarios. So from an advisor mindset. We're already kind of programmed to move back and forth between present state and future state and our aptitude in scenario building shows how our disciplined look and method can drive better outcomes. But don't miss the opportunity when you're future casting different hypothetical scenarios of reminding your client, the future client that they're talking about, who has future children. And when we're teasing a little bit about you know My future self hates me.

Well, I hope my future kids don't hate me, too. Is there anything in particular that like future kid is really happy that I made this decision right now? Because in this particular scenario future Tom might be in a little bit of a pickle. Or future Tom on a hopeful side, might be in a great situation. But it was kind of based on a set of decisions that present Tom is making.

But think about using scenarios as a jumping off point to make sure that you ground your client in understanding that there are a lot of people along for the ride as the years progress.

[00:16:02] Suzanne Schmitt: So I want to pull that thread because I love that relationship between future self and future kid. And, and we know, and we're seeing it play out real time as Xers who are in that sandwich generation,

the notion of future kid, and how is that future kid going to think about us as they have to pick up some of the caregiving responsibilities that we know are so prevalent, especially for folks in the sandwich generation. And I'm curious, Tom, in your practice, have you actually started to experiment with, you know, how that future kid who's now a caregiver for you is feeling about the choices that the clients or the parent has made historically that might frankly be a not great experience for future kid in terms of impact to their lifestyle and their finances and just their, you know, their choices.

[00:16:48] Tom West: Let's work backwards. I know that adult children that have significant exposure to caregiving from their parents make materially different plans for themselves.

So they're already doing the thing where I'm getting my legal stuff together. I'm changing around my savings. I'm considering, different attitudes towards housing as I get older because I saw what just happened to mom or dad. You know, maybe I'm looking at insurance in a different way, so on and so forth.

So we know the lessons are landing. I think that the present state, though, you know, remember that life is constantly intervening. Certainly it is for me. Everybody's got sort of bandwidth issues and things and technology that are constantly competing for my attention. So the years sort of sneak by.

My perception is, the first instinct is, when this bad thing happened to my parents, it was a big surprise and nobody saw it coming. I think that that conventional wisdom is probably a little generous. I think that we know with population health and demographics, most of the time, as we hit different transition points in our lives, most people have these kinds of changes.

Sometimes individual families or individual present selves As we're muddling through our lives, you know, they act like old age snuck up on us overnight and sprang a surprise on us. As compared to actually chipping away in terms of all of the things. I would probably say most adult children on reflection would allow that parents probably should have done something different along the way.

They acknowledge out loud. This is more of a responsibility on me than I think anybody imagined. And that talks a little bit about not just maybe mom and dad's inability to imagine future selves, but there's this discrete concept of inability to, to imagine a lesser version of ourselves, which is kind of discreet.

Like as I'm sitting here right now, in my home office, I would have an almost impossible task of imagining myself with cognitive impairment. Like we know we don't have the ability to do that. That's a discrete issue from not being able to imagine old Tom. So it does muddy a little bit, but I'm glad you asked the question that way.

How do you tap into current life experiences of your clients? What are you grateful for? What are the things that you might regret? Oh, and by the way, remember advisors. Always balance the things that people can be grateful for, the things that people can be happy about or proud about.

A lot of times when you're thinking of, you know, getting older and you're using a lot of scenarios, don't only pigeonhole yourself into worst case scenarios and cautionary tales. Make sure that you've got a good balance of. Here are outcomes where everybody comes together, that things work out as best possible, that we're proud and happy and grateful for the choices we made along the way.

Make sure there's a balance there. But I'm glad you brought that perspective up Suzanne, because I think that it's again when you're using scenario planning, advisors, just consider this as an opportunity to keep making connections between present self and future self. And if you're asking adult kids, maybe you're making some projections about what are the lessons you learned from your parents experience, and how do you apply that right now?

[00:20:20] Suzanne Schmitt: I think that's a really important point. And, you know, you're getting into wants and wishes. And when you know you have a client who prioritizes maintaining agency, and let's face it, who among us doesn't want to maintain agency and independence, it can help you kind of flip the script to say, in essence, what are some of the trade offs you're willing to make now to help preserve or increase the odds that you can maintain agency and independence and the lifestyle you want later.

And there's some interesting research coming out of Harvard that's called even swaps. And the premise is basically to get people to think about, if I want something, what am I willing to give up for it? So one of the easiest examples I can think of is, you know, how many airline miles are you willing to give up to have the window seat or the aisle seat?

And the point of it is to reinforce in a positive way that choices are not always discreet. There's always going to be a consequence. And when you think about something that's really important to you and you frame it in terms of, I can have that thing that's really important to me, or I can give up something that's a little bit less important to me.

It can help flip the script and not make this seem like this is such an arduous process. You know, the second point, Tom, that I know we've talked about and I think is really important is, the more we can reduce choices and reduce decision fatigue, the greater the likelihood that decisions is easier and not as painful.

So reducing the number of decisions, reducing decision fatigue, and then, you know, increasing friction where it's going to be helpful. So, you know, it's New Year's, a lot of people are thinking about their spending. It's a great time if they haven't already to look back. And if there are just categories of spending that might be getting in the way of that trade off.

So said another way, if you know, I have a really bad going out to eat habit right now, and that is impinging upon future selves ability to go out and enjoy eating out or do whatever I want from a cooking perspective at home. Framing in those terms can help make more informed decisions that don't feel as painful in the moment.

[00:22:22] Tom West: Yeah. And I think that what you're really talking about is different kinds of pre commitment strategies, which is the idea of what is the next least action that can drive better outcomes. Like if you do the future self and I don't want my future self to hate me. Maybe we'll just sign up for saving an extra 100 a month to feed that liquidity reserve, for example.

That would be an action that future self would be really happy with present Tom to be able to do. But the idea is I'm only talking about saving an extra $100 here in January. But what you're really doing is you're minimizing the sets of choices and decision fatigue, just because you've made that one piece in terms of an ongoing commitment on stuff.

[00:23:01] Suzanne Schmitt: Exactly. And, you know, baby steps. So taking what can feel like really big decisions, chunking them out, making them more manageable so that this feels like a partnership and not a prescription being given to a client.

[00:23:12] Tom West: Oh, I like that a lot. So let's close on that idea of, advisors, making sure that you're thinking of your relationship with your clients as a partnership, not just with them, but with your future client.

Like, I've got an obligation as an advisor to Suzanne, future Suzanne, my client, not just present Suzanne. I'm planning on being around and, helping drive better outcomes for you now and some times down the road. And sort of closing thoughts. Consider whenever you're doing scenario building, any advisors that are listening, make sure that you have a reflected understanding on present self and future self with your client.

Remember that a lot of people think and act that they're younger than they actually are. The methods to get there, I think that the idea of future casting family members around as sort of a bridge is a good idea. And then the last sort of workable thought that I remember that we came up with is, are there any particular lessons that you've learned, things that you're grateful for, things that you might regret in your own life or somebody else, and how do you apply those principles to your projected future self.

Those conversations I found in my practice have been hugely helpful to drive sort of better and more engaging family financial conversations. Suzanne, with that, any last thoughts from you?

[00:24:36] Suzanne Schmitt: Yeah, that was a great recap and obviously a topic we both feel strongly about. You know, the only other add I would offer to advisors particularly is when clients do that future casting exercise, you are getting permission to meet their family through the eyes of your client and get to know what is important to each of those family members and friends.

And what a different way to approach potentially building relationships with that client's family, increasing your network and coming at it from a very different and meaningful perspective that makes you not just another financial advisor offering the same services, but somebody who's demonstrating you deeply care about your client's future.

And I think we both think that's incredibly powerful and important. Another great, I hate to say it this way, but it's a great networking and prospecting tool.

[00:25:21] Tom West: Yeah. For present and for the future. Well done. Well landed, Suzanne. Listen with that, everybody, we appreciate again, your ongoing sort of attention.

Make sure you click where it's appropriate to subscribe to our podcast. We certainly enjoyed sharing this conversation with you and until next time, it's Suzanne Schmitt and Tom West at the Family Financial Conversation. Bye bye.