That's a problem for future Olga

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.

How can behavioural economics help financial advisers do their jobs?

I consult with a lot of businesses that have applied behavioural science to the way they deliver the financial planning process and how they present choices to their clients. So explaining what risk is in very different terms - more about the narrative than the numbers. It's an emotional journey. We're in a client's corner to make sure that we use science, research and our knowledge to keep this narrative or vision for your life. Businesses that use this approach are proving to be much more profitable because clients are very engaged. They tend to give those advisers all their wealth to look after, and stay invested.

The name of this episode (That's a Problem for Future Olga) refers to an episode of The Simpsons, which you use when talking about our future selves. Can you explain?

Ha ha, yes. One thing a good financial adviser should be able to do is to help clients empathise with their future selves, which is something we're very bad at. There's an episode of The Simpsons where Marge is castigating Homer, saying he's going to come to regret his current behaviour. And his answer is, 'Well, that's a problem for future Homer. Man, I don't envy that guy.' And if you think about it, financial planning is very much about saying, 'Look, let's part with resources today for your future betterment. Let's behave in a way today that your future self doesn't come to regret.' That's very difficult to do because we have this thing called 'the end of history' illusion where we look at ourselves and think we're the finished article.

Are there any tricks financial advisers can use to help people empathise with their future selves?

A face app where you age yourself is a really good way that some advisers use. So let's say you're talking to somebody in their mid-forties, and they're talking about potentially not wanting to work as hard when they're 60 or 65. Face app them to 65 and show them the picture on the phone. There's normally the laugh about what they'll look like, but then you say, 'You've woken up. This is you. What does your day look like?' And that visual representation helps them start thinking about their future.