How can we help more people understand the importance of financial planning?
I think the first thing to do is stop talking in terms of product. Nobody wants to buy a pension, but everybody wants an income when they don't want to work as hard. The fact is that everybody has a narrative for their lives. Everybody has a vision of what they want their lives to be and how they want them to turn out. And financial planning is a key component to maximising the opportunity of those things actually happening. That's the importance of financial planning. So the risk is not the risk to a number; it's the risk to that narrative. I think when financial planning stops talking in product terms and starts talking about narratives and the importance of good financial planning to maximise the probability of achieving that vision, we're going to engage far more people.
Do you think people make the wrong choices if left to their own devices?
I don't think so - I know so! People suffer massively from present bias, which is really powerful and stops us from making good financial decisions. Parting with resources that we own at the moment for our future betterment is not a natural thing to do. We want to look after what we already own. This is where experiments on loss aversion have been conducted, where we feel losses far more than we appreciate gains. So the pleasure of gaining £100, for example, is not equivalent to the misery of losing £100. The misery of losing £100 can be twice as miserable as gaining £100 can be joyful. It's the longevity of the financial planning process that's important, and we're not very good at it. The system of having annual reviews doesn't help - you're constantly reminding people that their values are going up and down. You'd be better off letting them invest and blindfolding them for ten years.