Nature vs nurture at Discovery Financial Planning Summit
Today marked the annual Discovery Financial Planning Summit, which saw myself and a thousand-odd other industry professionals descend on Sandton Convention Centre for the latest in thought leadership.
I was just one of a whopping two thousand advisors at the summit, which proved to be something of a departure for Discovery CEO, Adrian Gore, who is usually known for his high-level, upbeat optimism onstage. Today, he was something of a financial Darwin pulling the punches instead.
"As human beings we are miscoded for financial planning - we're not good at it. We evolved from hunter-gatherers and survived by two principles: seeking negative signals, and seeking instant gratification. And that's not good for financial planning because we are in a world of abundance. You aren't concerned about being eaten by a wild animal, but more about systems like government breaking down. Success in the world today, I think particularly in financial planning, is about delaying your urges, and we are not coded for it."
However, he did add that this could be changed in his view. "The entire Discovery business is built on trying to change behaviour for the better. Being positive, too, is a sophisticated emotion that doesn't come easy. But it is possible to learn. People will seek the wrong signals and delay future palnning for instant gratification, but because of this financial advice is essnetial. I do believe that the financial solutions are there and changing people's minds is certainly possible."
Gore, as first speaker of the summit, advocated the importance of a balanced outlook at the Discovery Financial Planning Summit today, saying South Africa is on an upward trajectory, contrary to popular opinion.
"The facts clearly show that the JSE is today 10 times bigger than it was in 1996, poverty has been more than halved and amazingly, the economy has gone up nearly six times in size," he told a packed auditorium.
Bringing the South African outlook back to financial planning, Gore said people are miscoded in that they are inherently trained to look for negative signals. “Society is coded for instant gratification, which means that the future is discounted,” he said. He explained that this is due to hyperbolic discounting (instant gratification) or the tendency to choose a smaller reward immediately over a larger, delayed reward.
“While we are living in complicated times, the human bias towards hyperbolic discounting makes financial planning complicated and the mismatch could be fatal in the absence of excellent financial advice,” he concluded.