What the "End of History Illusion" Can Teach Us About Financial Planning
One of the unexpected joys of pursuing my Master's degree in Personal Financial Planning has been discovering research that changes the way I think about my work. As I completed another course this week, I was challenged to consider the assumptions financial planners make when building recommendations for clients. Most people immediately think about assumptions like how much return on our savings we’ll get each year, or what the rate of inflation will be, or how long we will all live. Those are big unknowns in projecting future plans. But the more I reflected on my 20 years in business, the more I realized that the biggest assumption we can make has nothing to do with a spreadsheet. It's assuming the person sitting across the table today (you, our client) will be the same person five, ten or twenty years from now.
Psychologists Jordi Quoidbach, Daniel Gilbert, and Timothy Wilson call this the "End of History Illusion." In a 2013 study1 of more than 19,000 people, they found that while we readily recognize how much we've changed over the past decade, we consistently underestimate how much we'll change over the next one. In other words, we tend to believe we've become the person we'll always be. Think about your own life. Ten years ago, would you have predicted exactly where you'd live, what your career/retirement would look like, or what would matter most to you today? Probably not. Life has a way of reshaping our priorities through career opportunities, raising children, caring for aging parents, health challenges, retirement, and experiences that we never saw coming.
That's why this research has such important implications for financial planning. Most financial plans begin with goals. When do you want to retire? Do you want a vacation home? How much would you like to leave your children? How much do you want to save? Those are good questions, but they're not the most important ones, because often times, our goals change. Someone who dreams of retiring at 62 may discover they love their work and want to continue. A couple planning to buy a second home may later decide their greatest joy comes from traveling with their grandchildren. If we build a financial plan around today's goals alone, we risk anchoring it to a version of the client that may not exist in a few years!
The better question is "Why?" Why does retiring at 62 matter? Why is the vacation home important? Why do you want to leave an inheritance? The answers are rarely about the goal itself. They're about freedom of time. Or creating a sense of security. They’re about family and purpose and generosity. They’re about our VALUES. And while our goals often evolve as life unfolds, our core values tend to be much more enduring. So understanding those values helps us avoid making assumptions about what truly matters and allows us to give advice that's aligned with the life our clients actually want to live, not just the goals they happen to have today.
That's also why we place so much importance on review meetings. They're not simply an opportunity to check investment performance or update account balances. They're an opportunity to ask better questions, revisit what matters most, and make sure your financial plan continues to reflect your life as it evolves.
At Haas Financial Group, we've never believed financial planning is about creating the perfect plan and putting it on a shelf. It's about building a relationship that grows with you. We'll continue listening, asking thoughtful questions, and adapting your plan as your life changes. That's why we've intentionally chosen to stay small, personal, and nimble. Because while none of us can predict exactly who we'll become, your financial plan should always support the person you're still becoming.
Reference
Quoidbach, J., Gilbert, D. T., & Wilson, T. D. (2013). The end of history illusion. Science, 339(6115), 96–98.
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Investment Advice offered through Great Valley Advisor Group, a Registered Investment Advisor. Great Valley Advisor Group and Haas Financial Investment Advice offered through Great Valley Advisor Group, a Registered Investment Advisor. Great Valley Advisor Group and Haas Financial Group are separate entities. This is not intended to be used as tax or legal advice. Please consult a tax or legal professional for specific information and advice. are separate entities. This is not intended to be used as tax or legal advice. Please consult a tax or legal professional for specific information and advice.
