Riscario Insider

HOW TOM HANKS (THE MOST TRUSTED AMERICAN) GOT CHEATED BY HIS INSURANCE ADVISOR

promodcares@gmail.com (Promod Sharma) — Sat, 15 Jun 2013 20:57:00 +0000

Survey says … the most trusted public person in the US is Tom Hanks. That’s according to Readers Digest this month.

Why Tom?

How would the public know if Tom is trustworthy?

It’s not as if they know him personally. Still, they perceive him as trustworthy and that becomes their reality. Tom seems likeable and usually plays a “good guy” in movies.

What Happened?

How did Tom think he got cheated? His insurance advisor (Jerry B Goldman) charged more than list price for coverage for 13 years (1998 to 2011).

This was not obvious the invoices — inflated by up to 600% — were on the advisor’s letterhead. For some unexplained reason payments were made to the advisor instead of directly to the insurers. The advisor remitted the correct premiums and kept the rest.

Tom and his wife Rita Wilson claimed a loss of over $316,000. Other clients were also tricked leading to total alleged losses of $800,000.

Wouldn’t you want copies of your insurance policies? The advisor provided copies of the real policies but blacked out (redacted) the premiums. Why didn’t that raise questions?

The Detective

The discrepancies were uncovered by Tom’s new insurance advisor who was concerned that the premiums looked too high.
Why weren’t the problems discovered earlier?

The accountant — often the most trusted financial advisor — might have recommended an independent review of the coverage and premiums. Or questioned why premiums were not going directly to the insurers. Or asked to see the insurance policies without redaction.

Outcome

The advisor agreed to plead guilty. Unfortunately, the details are behind the law360 paywall.

Lessons

As we know, the untrustworthy take advantage of others. However, being trustworthy doesn’t help you detect the untrustworthy. You might even be easier to fool if you treat others as innocent until proven guilty.

Advisors are actors too. You’re seeing a performance they’ve perfected over the years. That doesn’t mean they are the character they portray. Unless you see them again and again with different clients in different situations, how could you possible know?

Tom Hanks has facial characteristics give the appearance of trustworthiness (click on the photo to read the article for explanations). Looks deceive. I can’t find photos of Tom’s advisor online. Maybe he also had the right look?
Assuming someone is trustworthy because you like them is risky.

Chemistry easily fools people. Divorce is evidence. So much for “till death do us part”.

Don’t follow others because they can be fooled too. It’s easy to fool some of the people some of the time. In that state, they may fool others unintentionally. We still fall for magic tricks even though we know they’re tricks. The advisor also fooled

Andy Summers, guitarist for The Police
Sam Raimi, director of Spider-Man 3

Insurance comes from an insurer not an intermediary like an advisor. Get statements directly from the insurer. Make payments directly to the insurer.

The World’s A Stage

Not all actors are on the stage or screen. You meet some in person and you can’t always tell they’re performing — and for their benefit.

Podcast 224

direct download | Internet Archive page | iTunes

PS Readers Digest removed the three most trusted from the list: your own doctor, your own spiritual advisor and your own child’s current teacher.

SHOULD YOU CHANGE ADVISORS WHEN YOU MOVE?

promodcares@gmail.com (Promod Sharma) — Sat, 08 Jun 2013 13:00:00 +0000

When you move, your advisor will likely want to keep you as a revenue stream. Is this really to your advantage? Long distance relationships face challenges.

Why Stay?

It's easy to stay with your old advisor since you don't need to do much beside provide a change of address. You can then spend your time on bigger decisions. You can get service over the phone or by email. You probably don't see your advisor often anyway. Perhaps your advisor will come to visit his/her clients in your new city on occasion. Maybe you go to the old city on occasion anyway and could meet then.

If your advisor spends money on client appreciation events, how do you attend? That’s probably not a big deal. Maybe service is.

Limited Choices

Suppose your advisor lives hours away and prepares a proposal for you to buy from Company A. If you want changes which make Company W a better choice, what happens if the advisor doesn’t have the proper paperwork? Will you be encouraged to buy from A or have to reschedule?

Oversights

Suppose your advisor-from-afar returns home and then discovers that you missed a signature. What happens now? For 10 years, two advisors forged signatures “for their clients’ convenience to avoid clients having to attend to paperwork” (Toronto Star, Apr 2012). They were fired, paid $300,000 in fines and remain in business. Maybe you’d rather do without that “convenience”. In case you’re curious, WikiHow explains how to forge a signature.

Delays

When you buy life or health insurance, the coverage does not go into effect the day you’re approved. You must wait until you pay the first premium and sign the delivery receipt, which confirms that nothing material has changed (e.g., in your health). When your advisor is out of town, could your delivery be delayed?

Why Switch?

Your new local advisor will give you more attention in the beginning. Partially, that's an attempt to sell you something else. You don't need to agree but you may benefit from getting new options.

If you were observant, you'll have a sense of what bothered you about your old advisor. You can find a new one without those flaws.

I had a distant investment advisor send one of my blog posts to clients under his own name. I knew I had to switch then. You can't trust a plagiarist. We still haven't seen the resurrection of Jonah Lehrer or Chris Spence.

When you "buy local", you get better service and help the local economy thrive. You’ll likely pay the same or less.

Hybrid

Maybe you keep what you've got with the old advisor and get a new advisor for additional purchases. Now you can compare. That can help you switch to one later. In the meantime, won’t both try harder?

You'll get reasons to bundle your business with one advisor. That's clearly better for the advisor but how do you benefit. If you're using a true fee-only financial planner, where you have your financial products doesn't matter.

Advisors talk about "building a fence" around a client. That's done by selling you multiple products. The thinking is that inconvenience of switching makes you more docile.

Escape

When you move away, you’re older and wiser. You have an excellent chance to escape. Just say you'd rather deal with a local advisor. That's plausible and likely beneficial.

Podcast 223

direct download | Internet Archive page | iTunes

PS You'll probably want to find a local plumber and babysitter too.

(MAILBAG) SWITCHING INVESTMENT ADVISORS: BAD TO WORSE?

promodcares@gmail.com (Promod Sharma) — Sat, 01 Jun 2013 20:11:00 +0000

Here’s a recent email conversation with minor editing, names changed and personal information removed. Prudence is helping her parents switch investment advisors.

Prudence: Incidentally, I interviewed a guy from (NEW FIRM) who is fee-only. He was ethical and his investment philosophy matches my own.

This was for my parents as they are not happy with the (CURRENT FIRM) guy. We will test him out (this was his suggestion) with some money to see how he does. The rest will be managed on the discount brokerage side.

Me: I doubt that you'll find anyone at a bank who is true fee-only. The model isn't profitable enough. You probably are dealing with a fee-based advisor who charges a flat percentage of the assets managed (e.g., 1% to 2%). That's essentially an annuity for the seller. Advisors tend to switch to this model as their portfolios grow because it's even more profitable that getting commissions/bonuses on trades. The optics look good — a semblance of transparency. There's now a perverse incentive. The advisors make the most money when they do the least work for the client. Yet clients don't seem to notice or mind that the advisor is spending more time prospecting than serving their needs.

How can you tell if the advisor is ethical, rather than a great salesperson?

Prudence: I put everything on the table at the meeting with the planner and my parents at their home. It was transparent from the beginning.

(NEW ADVISOR) is fee-only planner my parents are dealing with at (NEW FIRM). He was great and I put him through the ringer with questions about fees (1% to 1.5% of assets), due diligence, educating the investor, investment vehicles and how he selects investments to buy. He answered all my questions and disclosed things I did not ask about. We also discussed the methods and models he used to select stocks, ETFs and other non-MER investments. I agree with them.

He suggested we not give him the full lump sum and test him to see if he can deliver based on the risk tolerance of my parents. They are targeting 5% to 7% annual returns.

Do you recommend I take steps to check that (NEW GUY) is in good standing? Any direction would be welcome. My parents currently have a guy at (OLD PLACE) (I was upset they went here), who is pretty lousy.

The (OLD ADVISOR) put $5,000 of my mom's TFSA money into a high risk investment, which violates her risk tolerance and assessment. We are in the process of getting that money back before we sever ties with the planner and his firm due to unethical practices.

(NEW ADVISOR) said financial investment firms often pay the investor their money back if the planner acted against the investor's risk assessment, which seems to be the case. We will be drafting a letter for the Ombudsman and then meet with the planner’s boss or director. Any suggestions would be appreciated.

Me: What you got looks like the standard sales job from a polished advisor.

You are NOT dealing with a fee-only advisor (gets paid an hourly rate and does not do the investing). You are dealing with a fee-based advisor (gets paid based on the size of the portfolio not the actual work). Do you write cheques to this advisor or to the bank? If the cheques are going to the bank, the advisor is getting paid by the bank. The advisor is not working for you unless you — and only you — pay them.

You know what the advisor charges but not what the advisor gets paid. You don't know if there are other incentives behinds the scenes or what performance criteria are demanded. For instance, there can be incentives/quotas to encourage sales of insurance or other products. If you're buying ETFs, paying 1%+ seems pricey. You're paying extra for the overheads and profit margins of the bank.

You might want to ask if the advisor is a fiduciary with a legal responsibility to put your best interests first. The financial sector is fighting against a move from the much weaker suitability standard. Here's an article from this week supporting the industry. Here's one from Rob Carrick supporting the public.

You'll have trouble getting objective independent advice unless you go to a true fee-only financial planner (I thought I sent you some names). You seem to be dealing with an experienced salesman, which is fine unless you think you're getting something different.

Prudence: Based on your comments, there is no rush to make a quick decision. This is a good month to interview other financial planners. I will start with the list you gave me. If you have anyone else to add, please let me know. Much appreciated.

Epilogue

I looked up the potential advisor online. Despite his years of experience, I found no signs of visible expertise. No articles. No interviews. No video. No endorsements or testimonials on LinkedIn. The corporate website allows advisors to show their designations, photos and have some personalization. This advisor hasn’t bothered. How does silence, inattention and invisibility build trust?

Prudence is investing time to help her parents make a wise decision. Not everyone is as patient. Imagine the mistakes that get made every day. Buyer beware.

Podcast 222

direct download | Internet Archive page | iTunes

PS How carefully do you select your advisors?

THE REACTION TO APPLE’S TAX AVOIDANCE

promodcares@gmail.com (Promod Sharma) — Sat, 25 May 2013 18:30:00 +0000

Think different. Imagine your friend earns $1,000,000 and pays $600 in tax. Or earns $10,000,000 and pays $6,000. Well, on $30 billion of net income ($30,000,000,000), Apple paid $21,000,000 in tax. That’s a tax rate of 0.06%.

Exhibit #1a

According to a May 21, 2013 memo on offshore profit shifting (get the PDF)

"Apple Inc established an offshore subsidiary, Apple Operations International, which from 2009 to 2012 reported net income of $30bn, but declined to declare any tax residence, filed no corporate income tax return and paid no corporate income taxes to any national government for five years.“

Apparently, Apple didn’t do anything illegal and has been named the most valuable global brand by Marketing Week.

“We not only comply with the laws, we comply with the spirit of the laws.”
— Tim Cook (May 21, 2013)

Really? Since the 1980s, Apple has been avoiding tax and invented strategies like the “double Irish with a Dutch sandwich” (InfoWorld, May 24, 2013). Apple’s creativity cost Americans $44 billion in tax revenue in the last 4 years (including $9 billion in 2012) (Bloomberg, May 21, 2013).

In 1952, corporations paid 32.1% of all federal taxes. That’s dropped to 8.9% today. Government expenditures have grown in the last 60 years. Who’s making up the shortfall?

The Scope

Tax avoidance isn’t restricted to Apple or the US. Canadian companies are clever too with “nearly $60 billion flowing from Canada to Barbados, which has a statutory tax rate of roughly 2 per cent for foreign firms” (Global News, May 21, 2013).

Muted Response

There hasn’t been much outrage about what Apple is doing. Some senators even congratulated the company.

On minimizing taxes, Senator Rand Paul said, “It would probably be malpractice for them not to do so”. He even said “I frankly think the committee should apologize to Apple.”

Perhaps lobbying is a factor. Apple is relatively small, spending $2 million in 2012 and an estimated $4 million in 2013. Google is the biggest spender — $18 million in 2012. If there’s no effect, why spend the money?

Fair Share

Whether you consider Apple and other tax avoiders heroes or villains, ask yourself this: how do you feel about the taxes you pay?

Podcast 221

(note: poor recording quality due to microphone problems)

direct download | Internet Archive page | iTunes

PS Imagine what’s going on that we don’t even know about.

TIPS FOR FIRST-TIME LIFE INSURANCE BUYERS

promodcares@gmail.com (Promod Sharma) — Sat, 18 May 2013 22:59:00 +0000

Buying life insurance is a sign of maturity. You care enough to protect your family if you are no longer here. Or, if you're single, you avoid burdening others with unpaid financial obligations.

Since life changing events — the purchase of a home or the birth of a child — no longer trigger insurance sales, your actions even more commendable.

Here are mistakes to avoid.

Don't Buy On Price

Insurers create products using the same ingredients: mortality, interest and expenses. If one product looks cheaper, you may not be getting the same quality, features or guarantees. Why would that insurer knowingly choose to earn lower profits?

You can’t buy based on brand name either. Following the building collapse which killed 1,100 people, Benetton, Calvin Klein, H&M, Marks & Spencer and Tommy Hilfiger signed the Accord of Fire and Building Safety in Bangladesh. Companies which refused to participate include Foot Locker, Gap, OshKosh, Macys, Sears, Target, The North Face and Walmart. Maybe this matters to you.

Life insurance is a promise. Will your (legitimate) claim be paid? Probably, but some companies are better at keeping promises. Buying from an insurer ranked high in corporate governance might cost a little more but give you more peace of mind.

Look Beyond Today’s Price

Term 10 insurance looks inexpensive until you look at big increase when you renew. This week, I saw a case where rates increased by 569%. Where will the money to pay for that increase come from? If you're buying primarily to cover a mortgage maybe you want Term 20 if you expect to have paid off your mortgage by then.

Stay fit. You buy insurance with your health. Rates will spike with term insurance. If you're healthy, you can apply for new insurance which will often be much cheaper.

Avoid Buying From A Bank

Banks cut costs to benefit their shareholders (e.g., the RBC-iGate saga). Banks are not known for offering the best value to their customers. They sell unaccountable products like mortgage life insurance. What are they doing to put your best interests first? Why would they change if people still buy?

Avoid Buying From An Association

You might be offered insurance through your alumni or professional association. The rates are rarely guaranteed, healthy lives subsidize the unhealthy, you don’t have any say in selecting the insurer and you have limited flexibility in the products.

Insurance companies pay compensation regardless of whether sales are made through an association, a bank or an advisor. You might want to support your association. Fine. Can you make a donation and get tax savings? When buying insurance, look out for yourself first.

Your needs will change over time. If you eventually need the flexibility and guarantees of personal life insurance, you might as well start now.

Avoid Buying Through Your Employer

You may have some life insurance coverage from your employer (say twice your salary). If that's not enough — it probably is not — you may be able to add more. Avoid this temptation. You have more options, guarantees and flexibility if you buy your own coverage. Buy privately and you also get privacy.

If you lose your job, you likely have a month to convert your group coverage to personal coverage without underwriting. This option may not be explained well. You may not appreciate the value because you're in an emotional state. You might think you'll get another job within days and get coverage there. There may be delays …

You don't want to be shopping for insurance when you’re also looking for work. If you have already built the habit of paying for your insurance, it's much easier than adding a new expense at a traumatic time. Some permanent plans let you skip premiums, which improves your cash flow at just the right time.

Avoid Young Advisors

Advisors have natural markets and tend to sell to people their own age range. New advisors tend to be young. First-time buyers tend to be young too. Two inexperienced parties, do not make a great combination. You won’t save money since products tend to sell at the same price wherever you buy.

Unfortunately, you may not be able to get help from experienced advisor because you are a relatively small client.

Avoid Old Advisors

You might consider the same advisor your parents use. Generation gap. That advisor may be out of touch with your needs. You’re also mismatched. An older advisor has much more experience selling than you do in buying (not just insurance, but in general).

You may feel reluctant to ask questions or feel pressured to accept recommendations you don’t fully understand. Older doesn’t mean wiser, either. You might get proposals better suited to yesteryear.

Don’t Overlook Health Insurance

It's tempting to only buy life insurance. That’s risky. During your working years, you’re more likely to get sick or disabled than die. That's why life coverage costs much less than critical illness insurance or income replacement insurance.

The problem is finding money to pay for all these forms of insurance. You could take money that you're saving for other purposes such as retirement.

Making optimal decisions takes care. Buyer beware.

Podcast 220

direct download | Internet Archive page | iTunes

PS Feel free to comment or ask questions below

HOW HEALTHY ARE YOU REALLY?

promodcares@gmail.com (Promod Sharma) — Sat, 11 May 2013 19:00:00 +0000

“… where all the women are strong,
all the men are good looking, and
all the children are above average."
— Garrison Keillor, Lake Wobegon

We like to think we’re better than than the rest but we can’t all be above average.

You’ll find lots of health statistics from Statistics Canada. In 2011, here are examples of “the 80/20 rule” in action, where the 80% is good:

19.9% smoke
19.0% are heavy drinkers
17.6% have high blood pressure
20.4% of youth age 12-17 are overweight or obese

Other parts aren’t as reassuring. For instance, 52.1% of adults are overweight or obese. Yet when asked in 2011, 61.6% of Canadians perceive themselves as having very good or excellent health (61.9% for males and 61.3% for females). Aren’t they looking in the mirror?

Explain This

Let’s look at a more dramatic comparison: hypertension. Here 13.8% of Canadians report having the condition but 19.6% are under a doctor’s care. I could see more people having a problem than getting treatment but the opposite is taking place here. You’d know if you’re getting medical treatment. Yet there’s a reluctance to report the facts.

(2007 data)	Self-reported (Health Trends, Canada)	Under Doctor’s Care (Canadian Chronic Disease Surveillance System)
Hypertension	13.8%	19.6%

I’m reminded of Monty Python’s Dead Parrot skit. Who’s fooling who?

Reality Check

When you apply for life or health insurance, you undergo underwriting. The premiums you pay are not determined by how healthy you think you are. You might face a surcharge or even get declined coverage. This may be a shock.

An easy way to stay in denial is to not apply. Maybe that’s a reason why life changing events no longer trigger insurance purchases. Besides, we don’t think we’ll have a claim anyway.

What To Do

If your health is rated worse than you expected, you have the opportunity to improve. Sometimes underwriting uncovers problems your doctor wouldn’t catch during your regular medical examinations. Depending on the condition, you may be able to get treatment sooner, while there’s more time and less damage. Hospitals are best avoided.

Medical Misadventures

Medical misadventures occur in hospitals around the world. Examples include

accidental cuts
gauze left in the body during surgery
lack of sterilization
wrong amount or drugs or radiation

The consequences are extended hospital stays, disability or death.

These findings are from a 2009 report by the Conference Board of Canada. Canada ranks 7th out of 15 peer countries. About 158,000 Canadians admitted to an acute care hospital in a year (7%) suffer from a medical misadventure — about 60,000 (38%) are preventable.

As a consequence, about 150 Canadians die each year (compared with 33,000 annual deaths in the US). The graph shows the trends in both countries.

We want to be healthy. We see ourselves as healthy. Let’s takes steps to be healthy.

Podcast 219

direct download | Internet Archive page | iTunes

PS When are you exercising next?

WHAT’S YOUR FINANCIAL ‘PLAN B’?

promodcares@gmail.com (Promod Sharma) — Sat, 04 May 2013 18:00:00 +0000

B is for Backup.

What a beautiful Friday afternoon. I’m in my office trying to work but can’t. The reason isn’t the weather: our Rogers Ultimate Internet is down. I called and found out that 64 addresses are affected. Repairs could take 12+ hours.

Within the Rogers universe, 64 disconnected clients is minuscule. Their anthill. My mountain. The timing is unfortunate.

Plan B

A backup plan is worthwhile.

We have cable Internet from Rogers and mobile Internet from Bell. We lose out on bundling deals but are more likely to have Internet access unless a mega disaster like Superstorm Sandy strikes. There’s a cost but there’s also peace of mind.

Recently, I was running a workshop on building trust (next one on May 28th) and the Internet was out (Bell this time). I turned my smartphone into a mobile hotspot and carried on. That worked reasonably well (though I was mindful of data usage). As a Plan C, I modified the workshop to rely on a workbook. No Internet required.

Financial Plan B

A backup plan is worthwhile for all four steps in wealth management. As you proceed, you can protect your financial security by diversifying. It’s tempting to get multiple services from the same place (though perhaps different people in different departments):

banking: savings account, chequing account, credit card, line of credit
financial planning
investments
insurance

You get convenience but what about objectivity? The more dealings you have in one place, the tougher for you to leave. As Ellen Roseman notes in Fight Back (my post), what you see as loyalty they see as inertia. The rewards go to them (more money), not you (lower prices or upgraded services). You probably won’t pay much more — you might even pay less. However, you’ll get much more since you have a larger team working for you. Since there’s some overlap, you have opportunities to get different opinions.

If you run into problems, you can switch more easily. That gives you leverage, flexibility and a Plan B.

Podcast 218

direct download | Internet Archive page | iTunes

PS Service was intermittent for about six hours, which felt like much longer

LIFE CHANGING EVENTS NO LONGER TRIGGER INSURANCE PURCHASES

promodcares@gmail.com (Promod Sharma) — Sat, 27 Apr 2013 15:08:00 +0000

A life changing event — the birth of a child or a marriage (perhaps not in that order) — is a time to evaluate your insurance coverage. You might need more to take care of your loved ones in case you can’t.

If you’re single and start working, you might get critical illness insurance or income replacement insurance.

That’s not happening.

Life CHANGING Events

Here are typical life changing events:

Starting to work
Getting married or divorced
Birth or adoption of a child
Buying a home
Losing a loved one
Starting a business
Planning for retirement
Retiring
Preserving your estate

Each event is a prod to re-evaluate your insurance, investments and financial plans.

Research Shows

Only 41% said a life changing event prompted them to shop for life insurance (all the statistics are from LIMRA and refer specifically to life insurance). Do the majority — the other 59% — think nothing will happen to them? That’s not a bet you want to lose.

What’s more

60% of new parents don’t shop or buy life insurance within two years
70% of newly married or newly divorced couples don’t shop or buy life insurance within two years

What’s Going Wrong?

People can’t be ignorant about the need for insurance. Maybe they think insurance is too expensive or don’t know where to turn for objective help. The advisors might not be contacting them (60% don’t remember being approached to buy life insurance in the last two years). Some were approached but 35% say the advisors didn’t follow up. How strange. Maybe the advisors thought the cases were too small to bother with?

Maybe the problem with the insurance industry? The financial sector ranks at the bottom in trust the latest Edelman Trust Barometer. That can’t help.

Possible Reasons

Maybe advisors aren't maintaining enough ongoing contact with their network to know of important changes in their lives. Well before I worked for Met Life, agents in New York City collected premiums weekly in person on foot. They were part of the community. They built relationships.
They knew what was happening.

In To Sell Is Human (my review), Dan Pink says that once buyers know they have a problem, the seller loses relevance. That's because buyers can often find solutions on their own. The Internet gives ready access to information. Finding problems becomes more important than solving them. Are advisors good at consistent meaningful contact?

Who Loses?

Life changing events affect our insurance needs. Unless we take time to see if we need to add, update or remove coverage. we may not have the amount of insurance we really need. Too many are not doing an evaluation. How about you?

Podcast 217

direct download | Internet Archive page | iTunes

PS What do you think is going wrong?

AVOID WINDOWS 8

promodcares@gmail.com (Promod Sharma) — Sat, 20 Apr 2013 17:57:00 +0000

Companies make money by enticing us to buy stuff that looks “new and improved” but really isn’t. Windows 8 falls into this category. Windows 7 still works very well. It’s quick. It’s stable. What’s missing?

Microsoft is hardly successful at innovation. Did you buy a Zune MP3 player, Windows tablet, Windows phone or switch to Bing (reached an all-time high of 16.5% market share in January compared with Google’s 67.0%). The world is moving online where Microsoft hasn’t made a penny since 2005. In Q1, Microsoft’s online operations lost $262 million. That’s considered an improvement.

In 2012, five of the top six mobile apps in the US came from Google. Where was Microsoft?

At the same time, Microsoft continues making lots of money because of the prevalence of Windows and Office. Times change and Microsoft tried to catch up with the launch of Windows 8. As usual, they created confusion with the various edition for different devices. Should you get Windows 8 or Windows 8 Pro for your desktop. What is Windows RT and why can’t it run the programs you already have?

In Q1 2013, Windows 8 only reached 3.31% market share, despite promotions like a $15 upgrade offer (now over). Even the horrible Windows Vista has more market share (about 5%).

Forced Upgraded

I recently got a new notebook computer with Windows 8 and started detesting the operating system within hours. I don't mind change as long as change makes life simpler or better.

Windows 8 may be appealing if you have a computer with a touch screen. Many of today's high end computers still rely on a touchpad. Many users still use a mouse. Why force us to use an interface designed for touch? That’s unnecessary and annoying. This new interface called Metro slows work down.

Common features like the button to shut down your computer are now hidden away under settings. Shutting down your computer is an action its not a setting.

Stop

You can switch to desktop mode but the Start button is gone. This is progress?

Full Scream

Applications designed for Windows 8 take up the whole screen. Where are the windows?

There is rarely a reason to run Skype in full screen mode. There are many reasons to run Skype in a window while you're working on other windows. On a small screen like a tablet, having an application fill the whole screen is fine. On a computer designed for productivity, the restriction is silly. I have a full HD screen with a resolution of 1920x1080 pixels. I have no good reason to devote all that space to Skype or Weather or Messaging. What is Microsoft thinking?

Better But …

Overall, Windows 8 feels faster than Windows 7. Maybe this is because of the operating system or the newer hardware. The upgrade does not do anything important that I could not do before. The initial annoyances are gone. I’ve restored the Start button with Start8 ($5 from Stardock), which blends the old and new elegantly.

When companies tell you something is new and improved, be wary. You may not get the benefits promised. The time you spend learning how to use the new could be better spent mastering the old. You'll also save money.

The very same applies with financial products and services. You may not know what you're giving up. Maybe there is more fine print. Maybe prices are higher. Maybe guarantees are worse. Buyer beware.

Podcast 216

direct download | Internet Archive page | iTunes

PS When you get your next computer, Windows may not even matter much since we’re spending more time on our tablets and smartphones.

THE UNWELCOME LESSON FROM THE RBC-iGATE SAGA

promodcares@gmail.com (Promod Sharma) — Sat, 13 Apr 2013 12:52:00 +0000

Companies focus on making profits for their owners. They look for cost savings. They can save money by hiring people in other cities, provinces or countries. Outsourcing is another way. How that’s done may not matter as much as the money saved.

We like saving money too. The plight of the local mom & pop stores isn’t as compelling as the savings at the big box stores.

Outrage

This week, Canadians are outraged by RBC bringing in 45 temporary foreign workers to replace current employees. Okay … but 18 of the 50 largest employers do too. Is that a surprise?

In all, about 33,000 employers participate including: Air Canada, Bank of Canada, Bell, Blackberry, BMO, Bombardier, Canadian Tire, CanJet, CBC, CN Rail, CP Rail, Deloitte, Enbridge, Fairmont Hotels, Girl Guides, Hudson’s Bay, Loblaws, Lululemon, Manulife, Maple Leaf Foods, McDonalds, Porter Airlines, Rogers, Rona, Scotiabank, Shoppers Drug Mart, SNC Lavalin, Sobeys, Suncor, Sun Life, Sears, Shaw, TD Bank, Telus, Thompson Reuters, Tim Hortons, TransCanada and Walmart (see The Globe and Mail and Huffington Post both for Apr 12, 2013)

“Without the employment program, many Tim Hortons restaurants would not be able to operate full time or, in many cases, remain open at all.”
— Tim Horton’s spokesperson

Really? Concerns fade with time. Life goes on much as before.

Dig Deeper

The deeper lesson is that job security is not guaranteed even if you have one of the best jobs or the passion of Guillermo de Toro. How a job disappears isn’t very relevant. Gone is gone. Companies fail too. Bad happens. How do you protect yourself? Why not stay employable and reduce your financial risks?

Employable

Staying employable requires upgrades in your skills. Sorry. I still keep seeing people who aren’t more prepared for the job market than they were five years ago. They don’t bother networking or updating their LinkedIn profiles until they need a job. Too late. You can’t harvest seeds you haven’t planted and nurtured.

Your Risks

We have a habit of being unprepared. After Sandy, 50% to 67% of homeowners found they were underinsured. We need to prepare in advance.

Podcast 215

direct download | Internet Archive page | iTunes

PS We weren’t expecting snow this week but we had some on our patio furniture for two days.

DO YOU HAVE A FINANCIAL DREAM OR A FINANCIAL NIGHTMARE?

promodcares@gmail.com (Promod Sharma) — Sat, 06 Apr 2013 18:00:00 +0000

This photo has an alarming warning: “danger steps are steep and slippery”. Why not build a handrail to prevent injury rather than stop with a warning to deflect liability?

Financial advertising often entices you with dreams of a wonderful life. Here are five key trends since the 2008 global financial crisis, according to Getty Images

Targeting women
Bringing surprise
Wealth is more than money
Small businesses
Regaining trust

None of the trends aim at making people feel bad. The 10 most viewed financial ads on YouTube avoid negativity too (The Financial Brand, Nov 2012).

Didn’t Get The Memo

At a recent networking event, we were subjected to an infomercial from an advisor from a major company you'd recognize. He said our financial futures are less secure than we think. His solution? Buy investments and insurance from him.

Really?

I couldn't help but think about his current and former clients. Weren't they messed up too? Unless this advisor is an unknown financial wizard, didn't he contribute to their plight? At the same time, wasn't he profiting while they suffered? After all, he sold high margin mutual funds instead of low cost ETFs.

He was handing out business cards like candy. They were being received like apples with razor blades. I noticed he had no designations. That's not reassuring. He could serve clients better with some financial education. Do you think he charged less because he knew less? There was no blog or other clues online to show his expertise either.

There are reasons our financial futures may be more nightmarish than dreamy: erosion of investments, uncertain future returns, high investment expenses, inadequate health or life insurance, job uncertainty, longer lifespans and unexpected costs such as health care.

Luckily, this advisor didn’t have more time at the microphone to spread more gloom. I didn't see a line of people heading toward him for their financial salvation. The buyers were beware.

Plans

Flaws in the financial advisor system (Feb 2012, The Globe And Mail)
If you have/had/want money, read Pound Foolish
Do you have a financial advisor or a financial salesperson? (RetireHappy.ca)
Why insurance advisors also sell investments
Where is your advisor’s blog?
image courtesy of Kenn W. Kiser

Podcast 214

direct download | Internet Archive page | iTunes

PS Getting help may be a great idea.

THE BATTLE BETWEEN TEMPTATION AND PERSONAL RESPONSIBILITY

promodcares@gmail.com (Promod Sharma) — Sat, 30 Mar 2013 15:00:00 +0000

It's all your fault. You’re not a baby.

If you're eating too much, that's your fault. No one is shoving food into your mouth. If you're saving too little, that's your fault. No one is telling you how to spend your money. If you're gambling, that's your fault too. No one is dragging you to the casino.

We are adults. We make our own decisions. We accept the consequences. Unfortunately, there are big forces working against us. They don't take responsibility because we are supposed to have the education how to choose wisely.

On the money side, we have financial literacy but does the financial sector make more money when you make better financial decisions (see do your advisors help with your financial literacy and Pound Foolish).

On the food side, we have eating guidelines. On the gambling side, we have warnings.

The Other Hand

Unfortunately, we also face temptation wherever we look. Isn’t that the purpose of marketing, advertising and sales? There are ways to manipulate us and deplete our willpower (see Dan Heath explain the radish experiment). Our decisions suffer.

Food companies earn more when we eat more. Unfortunately obesity rates keep increasing. In the US, 35.7% of adults are already obese and the trends aren’t changing (Reuters, Sep 2012). Food consumption has increased 600 calories a day since 1970 and bagels have doubled in size since 1990 (Reuters, Sep 2012). In Canada, adult obesity is at record highs (Toronto Star, Feb 2013). Maybe food is a factor?

Financial companies earn more money when we buy high margin products like mutual funds. Casinos and governments win when we gamble.

Shareholders demand profits. You expect them to but there are consequences. Since habits start young, even children get targeted. Within three years of a new 1988 campaign, 90% of six year olds knew about Joe Camel (Seattle Times, Dec 1991). Market share among underage smokers grew from under 1% to over 32% (Wikipedia).

Big Food advertises to children and the offerings are not always healthy choices. Taco Bell proposed a fourth meal between dinner and breakfast — and not fruit or veggies (AlterNet, Nov 2012).

Better Decisions

Rather than waiting for the world to change, we need to make ourselves understand how the world works. That helps us make better decisions. Since we are responsible for the outcome, we might as well learn how to decide better. Decisive, the new book from Chip and Dan Heath may help (my blog post).

Lots of research goes into how we make decisions … and gets used against us. It's worthwhile understanding how irrational we are. Dan Ariely is running a free course over the next 6 weeks on Coursera: a beginners guide to irrational behavior. Sign up here.

Podcast 213

direct download | Internet Archive page | iTunes

PS This weekend, the Easter Bunny is making temptation tough to resist.

BUDGET 2013 PUNISHES THE INNOVATION OF “10-8” INSURED LEVERAGING

promodcares@gmail.com (Promod Sharma) — Sat, 23 Mar 2013 23:15:00 +0000

Ernst & Young’s most recent research shows 88% of global survey respondents across a wide number of industries agreed that innovation was the one genuine differentiator and advantage they have over the competition.
— The Globe and Mail (Mar 22, 2013)

It’s Spring. One of the saddest songs is Flowers Are Red. It’s not just because Harry Chapin died early but because innovation gets punished. A child starting school gets forced into conformity. What a loss.

The 2013 federal budget punishes innovation in life insurance by wanting to remove the tax advantages of “10-8” insured leveraging strategies which were first introduced in the 1990s.

The Problem

Besides a tax-free death benefit, life insurance offers other advantages such as tax-sheltered growth (to learn why, see How Pink Floyd’s insights on mortality help you). Unfortunately, investing inside life insurance has consequences.

With term life, you can’t invest. With whole life, you can’t choose the investments (among the perils of whole life insurance). With universal life, you pick the investments but face two major drawbacks: limited choice and high investment expenses like mutual funds (see what are you doing about your high investment expenses?).

If only you could invest in the “real world” with options like ETFs, stock, bonds and real estate.

Leverage

Insured leveraging provides a solution:

Deposit cash into a universal life insurance policy (tax-sheltered growth)
Borrow against the savings (secure collateral that continues to earn tax-sheltered growth)
Invest the proceeds (investment flexibility)

This process allows tax-sheltered growth on the loan collateral, the flexibility of investing in the “real world” and deductions on the loan interest. If your investments earn more than the after-tax cost of the loan, you’re ahead.

There’s a risk. The gap between what you pay on the loan and earn on the collateral fluctuates. With “10-8 leveraging”, the gap is guaranteed at 2%.

Several insurers introduced “10-8” strategies (RBC Life, BMO Life, National Life, Industrial Alliance, Transamerica). Before becoming independent in 2009, I worked for two. The strategies were endorsed by leading accounting firms and sold by top advisors across Canada.

Flagship

Insurance products are essentially commodities (similar designs, similar prices, similar compensation). Strategies (packaged solutions to specific needs) offer a competitive advantage to the insurers. Since there are oodles of advisors, the ones who master new strategies have an edge too. Innovation brings rewards.

“10-8” strategies became the flagship offerings for the life insurance sector — much like the S-Class in automobiles (see Mercedes’ next flagship does the commuting for you in Wired, Dec 2012). Few advisors had the skills to sell “10-8” or suitable clients. Even so, the attraction of “10-8” opened conversations. There was demand for presentations that insurance advisors, accountants and clients could understand. Communication became the battleground for innovation.

CRA

Strategies which help you can hurt tax collections. The Canada Revenue Agency was unhappy about “10-8” strategies. This lead to legal challenges which ended in 2011:

During the court proceedings, the CRA was forced by the court to produce some documents of its own — material revealing that the CRA, apparently in conflict with some of its public statements, believes that 10/8 products probably conform with the formal requirements of the Income Tax Act, if not its spirit. — CRA rebuked for ‘fishing expedition’ (Investment Executive, Dec 2011)

The future of properly-implemented 10-8 strategies looked good, though Jamie Golombek warned, "We have to wait and see whether Finance issues a comment, announces legislation or just stays out of it." (Investment Executive, Dec 2011)

The 2013 Budget

Two days ago, the March 2013 federal budget proposed changes to eliminate the appeal of “10-8” leveraging and leveraged insured annuities. You’ll find the details in Investment Executive.

The Future

Vast resources were committed to “10-8 leveraging” prior to the introduction and ever since. I invested years and did countless presentations to advisors, accountants and clients. I prepared many proposals too.

When innovation gets punished, there’s less innovation in the future. We all lose. We soon see flowers as red and leaves as green. To quote Harry Chapin:

There’s no need to see flowers any other way
Than the way they always have been seen.

Podcast 212

direct download | Internet Archive page | iTunes

PS Do you have a fave Harry Chapin song?

STOP BLAMING YOUR PARENTS

promodcares@gmail.com (Promod Sharma) — Sat, 16 Mar 2013 15:00:00 +0000

It's easy to blame your parents for how you turned out. It's also unfair. Mistakes get made but we can learn from them and change.

We’ll focus on your financial life.

That Was Then

Maybe your folks weren't good at saving or paying off credit card balances. Maybe they bought on impulse. Perhaps the fine print fooled them. Maybe they were too trusting of salespeople who didn’t have their best interests at heart. Perhaps they didn’t budget or have a financial plan. Maybe they believed the myth of financial freedom at age 55.

Now

Yesterday is history. Yesteryear is ancient history. You're living today. You can do better. Extract lessons and let the past go. Make a better future: where there’s willpower, there’s a way.

Maybe

Your parents may not have made the right decisions but they probably had noble intentions. That makes them much like us. We tend to judge others by their visible actions and ourselves by our invisible intentions. That's inconsistent.

Parents also do wonderful things. They raise us and protect us. We see good news in the case of Leslie Bibb and Lamar Odom. In contrast, Buddy Valastro, the Cake Boss got tragic news but learned to do better.

Dwell on the negatives or mistakes and you'll mess up your life.
Earl Nightingale said, “We become what we think about” and Brian Tracy later said, "We become what we think about most of the time."

What are you thinking about? Positivity and optimism are much better fuels than negativity and pessimism.

Is Our Future Written?

We cannot predict what will happen — bad or good.

Counter-examples

There are often convincing arguments for doing the opposite of what we think is "right".
Should parents pay for your university education? If the family pays, the student has less financial stress but may not value the investment or study hard. If the student pays, the financial stress may reduce grades, create resentment towards the parents … or build character.

Successful

The successful people don't have a specific background. They can easily come from broken homes, lack higher education and have no money (in the beginning). Yet they are often optimistic, risk taking, passionate and driven.

Blaming Others

You can't blame your teachers (learn on your own), friends (replace them), a bad economy (some segments thrive at any given time), the government (the people voted for them ... except for the ones who abstained) or disasters like Superstorm Sandy (prepare for next time).

We can blame ourselves, but that’s not productive either. Let’s learn and change.

Podcast 211

direct download | Internet Archive page | iTunes

PS If you’re not already, you might be a parent one day too …

BLACKBERRY’S CONFUSING MESSAGE AT THE 2013 TECH LEADERSHIP CONFERENCE (#TLC13)

promodcares@gmail.com (Promod Sharma) — Sat, 09 Mar 2013 16:30:00 +0000

BlackBerry 10 looks like a huge accomplishment, well beyond expectations. The company may have a future even if sold.

President/CEO Thorsten Heins spoke at the 2013 Tech Leadership Conference. He spoke well, smiled and took audience questions. I listened but couldn't understand what he was saying and kept hearing what he left out.

Choice

Thorsten claimed that mobile providers want a choice besides Apple and Samsung. Maybe, but Windows Phone could be the answer. Choice paralyzes. We manage to live with duopolies like Coke/Pepsi, Windows/Mac, Google/Bing. Isn't the real question what the end users want? As buyers, we have lots of choices already.

Mobile Computing

Do you know what mobile computing is? Apparently, that's what really sets Blackberry 10 apart. The devices are mobile computers. This is apparently a paradigm shift.

Since I'm drafting this blog post by voice into web-based Trello (my review) on my Galaxy Note 2 while walking around the room, am I not engaged in mobile computing? I use my notebook computer and tablet in different places. Isn’t that mobile computing too? Perhaps the paradigm shifted years ago when free WiFi became available in coffee shops.

Multitasking

Multitasking is touted as another advantage of the new Blackberry. I didn't understand this either. I think I already multitask on my phone and tablet. Maybe there are technically superior options, but I don't see what's missing. I'm not compelled to seek another solution.

Besides, research shows that we’re lousy at multitasking (Wikipedia). We waste more time and make more mistakes. Imagine a device that helps us focus. That would be a breakthrough.

Jeans And Tie

Apparently BlackBerry is optimized to run our business and personal lives on the same device. Maybe that’s like playing Solitaire on your company computer or wearing runners with your suit.

It's easy enough to have 2 devices: one from work and one of your own. That also helps with work/life balance.

If you're working for a company, you don't know how long you'll be there. Having your own phone with your own phone number has merits. You then have privacy from corporate snooping and control of your contacts. Nowadays, there are good plans at affordable rates, especially if you use a smaller carrier.

Blackberry seems to think their customers are the intermediaries: the mobile phone providers and corporate IT departments. Apparently, you cannot copy/paste from a personal email to a corporate email. That's good if you don't trust your employees. It's inconvenient if you're doing real work. There are probably simple workarounds such as copy/paste to an online Word document. If you have another phone, you can always take a photo or dictate the text. Pen and paper works too.

The Future

BlackBerry is an important company. I'd like to see them rebound but not enough to switch back from iOS and Android (see the perfect smartphone). There was no compelling reason that I could understand. If you're already a Blackberry user, you may be very happy with the changes. Feel free to share your thoughts below.

Podcast 210

direct download | Internet Archive page | iTunes

PS Are you planning to switch?

FIGHT BACK AGAINST CORPORATE TRICKERY WITH ELLEN ROSEMAN’S INSIDER TIPS

promodcares@gmail.com (Promod Sharma) — Sat, 02 Mar 2013 17:23:00 +0000

Fight Back; 81 Ways to Help You Save Money and Protect Yourself from Corporate Trickery is a tough book to read. It's filled with example after example after example of businesses behaving badly towards their own customers. Unfortunately, this isn’t a work of fiction.

Author Ellen Roseman has an unusually good sense of what goes on in real life. She’s a consumer advocate for readers of The Toronto Star and her On Your Side blog.

Repeat When Necessary

My brain gets overwhelmed when shown 81 ways of doing anything. I start looking for patterns and principles that usually work. Here are five steps to fight corporate bullies:

Read before you sign (and ask questions)
Keep records (including steps you taken with the company)
Follow up
Stay calm (and polite)
Be persistent

The first step is a big problem. Who reads before they sign? The terms and conditions are difficult to read and understand. They might change later. Take-it-or-leave-it. Even worse than fine print is what’s left out. You can’t evaluate what’s missing unless you know what ought to be there. Even a pizza flyer isn’t straightforward. At least you’re not signing a multiyear contract with cancellation penalties.

More Is Less

Fight Back has multiple authors and 81 tips. Both lead to some overlap. Sometimes I felt I was reading what I’d already read. Though, that helps show how widespread basic problems are.

Perhaps Ellen means for us to read the section that matters to us at the time. For instance if your current concern is your high phone bill, you don't need to read tips on fighting your bank just yet. Perhaps you use the book as a reference.

Very Different

Normally, a business wants you to keep you as a customer since that’s more lucrative than finding a replacement. When new customers are enticed with incentives, they are less profitable. Maybe they’ll leave when the normal terms take effect. Your “loyalty” (or inertia) gives you leverage — if you ask.

Life and health insurance is very different (and outside the scope of Ellen’s book). If you cancel your coverage, the insurer makes money. That's because you've been paying premiums and didn't get any back (though you did have peace of mind). New products come with new conditions and higher rates.

With offerings like banking and Internet service, you experience what you're buying regularly. You can detect changes in performance and price. Even if you don’t, others might. That’s an advantage of buying a commodity-like offering. Combined voices are more powerful when singing in harmony. Social media spreads outrage quickly, which helps get results. Look at what we’ve achieved as Internet users through OpenMedia.ca.

With insurance, you get the financial benefits at the time of the claim ... which may never happen. If you cancel your coverage, you may face big penalties (much larger than for mobile phone contracts). If you buy again, count on paying more since you're older. Depending on your health and finances, you might not even qualify.

With insurance, the key is getting your claim paid, should you have one. You increase your odds with the right purchase since changes may not be possible later. Each life/health insurance case is unique and subject to privacy issues. It's difficult to show widespread problems and get mass support. In many ways, you’re on your own.

Imagine

Imagine living in a world of trust where the sellers put our best interests first. Until then, buyer beware. Thanks to Ellen, for fighting on our behalf for years and now giving us tools to fight back on our own.

Podcast 209

direct download | Internet Archive page | iTunes

PS How do you fight back?

IMAGINE YOUR ADVISOR WINNING AN OSCAR

promodcares@gmail.com (Promod Sharma) — Sat, 23 Feb 2013 15:31:00 +0000

... and the winner is ...

The Academy Awards anoint the year's “best” films. Let’s say your advisor is in the running. What category would apply? Let’s explore a few.

Best Actor/Actress

Actors work from scripts that others have written. Advisors do too but may also improvise. Over the years, they hone their skills. You might not realize that a script is being used because you’re seeing a practiced performance for the first (and perhaps only) time.

You may infer the actor is like the character played in real life. That need not be the case. The nominees are rarely ugly but does appearance imply better skill?

Best Director

Advisors are rarely directors. They're more likely actors. Maybe they are directing you towards a sale? Directors have problems staying within budget — in this case yours. Was the $207 million remake of King Kong in 2005 really necessary? Maybe the 1933 original was enough.

Best Screenplay

On the screen, we see the same stories retold with minor changes. With Netflix, you quickly see the lack of originality. With advisors, that's good. A creative advisor could turn out to be a Bernie Madoff (New York), Scott Rothstein (Florida) or Earl Jones (Montreal). Tried and true works well, unless the script is outdated.

Best Special Effects

Advisors make their offerings look great. Sometimes better than reality. Just because you want to believe doesn't mean you should.

Advisors may use magic like the power of compound interest. Results depend on the assumptions used and human behavior. Investment returns are volatile and we are too.

Best Foreign Language

Does your advisor seem to be speaking a foreign language? If you need a translation, maybe you’re ready for an advisor you understand.
If you easily understand your advisor, you might be facing a different problem: simplification. Life isn't black and white. Just because we understand everything being said doesn’t mean that everything we need to understand has been said.

Best Editing

Editing makes a huge difference. Sometimes the entire story changes. Advisors may leave out the details they don’t see as pertinent to their goals. Maybe you want to see the raw footage and decide for your self what matters.

This re-edit changes Mrs. Doubtfire from a comedy into a horror film.

The Judge

Maybe your advisor is the judge selecting the winner for you. This simplifies your life but results may be suboptimal. We can’t even decide on the best coffee.

… and the loser is …

Podcast 208

direct download | Internet Archive page | iTunes

PS Do you really care who wins the Oscar?

IF YOU HAVE/HAD/WANT MONEY, READ ‘POUND FOOLISH’

promodcares@gmail.com (Promod Sharma) — Sat, 16 Feb 2013 19:00:00 +0000

I wasn't expecting much from Pound Foolish: exposing the dark side of the personal finance industry (Amazon link).

I saw a video interview (which I can’t find) and felt author Helaine Olen was sensationalizing to sell more copies. She was picking on easy, obvious targets like Robert Kiyosaki (did he really have a Rich Dad?) and David Bach (the latte factor guy who's bad at math). I didn't disagree with her conclusions or assessments but wasn't expecting much more than a book that seeks fame by attacking the well known with sizzle.

Look Closely

To my surprise, Pound Foolish is well researched and contains valuable insights into the world of personal finance.

Have societal issues contributed to the way we are? After all, previous generations seemed to do well financially — even on one income. Are we really that ignorant? Do we really overspend? Or has the world changed in ways that work against us.

Our financial options have become much more complex. We bear more risks (remember defined benefit pensions and job security?). The changes happened quickly ... faster than many can adapt.

You may have sensed something basic isn’t right. Recall the words of Morpheus in The Matrix:

“You've felt it your entire life, that there's something wrong with the world. You don't know what it is, but it's there, like a splinter in your mind, driving you mad … [The Matrix] is the world that has been pulled over your eyes to blind you from the truth.”

This book helps you see what the problems might be and why we can’t easily solve them.

To use terminology from The Seven Habits of Highly Effective People, I’ve avoided talking about the circle of concern, preferring to focus on what we can do ourselves. our the circle of influence.

Are Financial Literacy Initiatives Genuine?

Seventy percent of profits in the credit card industry come from people who do not pay off their bills in full every month. Why would the financial services sector support something that has the ability to significantly impact their bottom line for the worse unless they either believed it was not a real threat or believed it to be a lesser threat to their profits than government regulation? — Pound Foolish

The author asks whether the financial sector wants us to be financially literate since that would hurt their profits. Picture Sylvester and friends looking after caged Tweety birds like us. Here are related posts:

Your Views

You may not agree with everything Helaine says or appreciate her use of unnecessarily complicated words like “éminence grise” and "solipsistically". There is also unneeded profanity. Continue reading because Helaine paints an overall picture that’s worth seeing.

Lessons And Reminders

In the world of finance, do not assume that people helping you have your best interests at heart or genuine skill. If you're dealing with a friend or family member, you may actually be at a bigger risk than if dealing with a stranger. When you’re confused or think you’re getting solid advice, you’re more vulnerable. That's just life. Hasn't it always been so?

The author is not totally altruistic in writing her book. However she does say things that are worth our attention. I'm curious to see what she does next. Identifying problems is important. So is helping people with the solutions. Even if there aren't any easy ones.

Podcast 207

direct download | Internet Archive page | iTunes

PS I taut I taw a puddy tat

IS YOUR LIFE INSURANCE LIKE A SHOVEL, SNOWBLOWER OR SNOWPLOW?

promodcares@gmail.com (Promod Sharma) — Sat, 09 Feb 2013 14:30:00 +0000

Toronto just experienced the biggest snowstorm since 2008 (Toronto Star). Let’s say a foot of snow fell (30 cm), though drifting made the piles higher.

We can’t accurately predict storms in advance. When the snow falls — and fall it will — how do you clean up the mess?

You have several choices:

shovel: like term life insurance
snowblower: like universal life insurance
snowplow: like whole life insurance

Shovel

A shovel (like term life insurance) is very economical and doesn’t take much space. You get exercise in the crisp, cold air. A shovel is fine as long as the snowfall is light, you’re in good physical condition and you don’t need to get out of the driveway in a hurry.

Otherwise, you may not be adequately prepared. The snow at the end of the driveway isn’t much fun to clear.

Depending on your budget, a shovel may be all you can justify.

Snowblower

A snowblower (like universal life insurance) puts you in charge. The purchase price buys lots of shovels but you get peace of mind. There are ongoing costs for fuel and maintenance.

A well-equipped, well-maintained snowblower has the power and capacity to deliver the results quickly.

SnowPlow

A snow plowing company (like whole life insurance) takes the work away from you … for a price. You normally pre-pay for the season. If you’re a tenant or live in a condo, you likely depend on snow plowing too.

This solution seems ideal. The problem: you’re dependent on an outside party, like Homer Simpson’s Mr. Plow. Everyone wants a clean driveway before they leave for work and before they return home. Despite best efforts, that may not be possible (unless Santa introduces snowplowing).

With whole life insurance, you depend on the insurer to invest wisely and and keep costs low, which translates to premium refunds (called “policy dividends”). You have no voice.

Pearson International Airport has the highest landing fees in the world (atrsworld.org, Jun 2012, PDF). The plowing and deicing is done for the airlines but ...

Just when it was most needed, the de-icing equipment at Pearson malfunctioned Friday. Instead of 30 aircraft being de-iced each hour, only eight could go through the de-icing process, which led to a snowballing effect that progressively worsened. — Toronto Star (Feb 9, 2013)

You don’t always get value for your money.

Too Much?

You can’t tell if you’re w ell-protected against snow until the season ends. Just because you were fine this year doesn’t ensure you’ll be as lucky next year. Insurance can also seem like a waste … until you have a claim. Spending a large sum doesn’t ensure you’re well-protected either.

When To Buy

You’ll save money on shovels and snowblowers after the season --- if anything’s left. With insurance, the products remain in stock and there are no clearance sales. After all, you’re buying a promise that gets printed when you’re ready. Waiting doesn’t save you money. Since you’re getting older, the price keeps going up — if you still qualify for coverage.

When's the best time to buy? Just before the storm … if you can predict accurately and find stock. Since others have the same idea, there may be shortages. The same pattern repeats when there's a blackout. We know we need basics like food, water, batteries and fuel. That doesn’t mean that we have them at hand. You can’t get insurance the moment you decide. The approval process often takes weeks or months. You must prepare in advance.

This Storm

Due to the storm, I used our snowblower for the first time in two seasons. Last year I felt foolish having it. This year too. After all, it's February. Most of winter is over.

I used our snowblower twice yesterday and once today. It started because of ongoing maintenance. It had the power to finish the job without stalling. Most of all, the snowblower provided peace of mind. It’s well worth the cost, though I might not have felt that way the day before or now that the storm has passed. How fickle. How human.

Just as no man is an island, a clean driveway is useless unless the streets are plowed too. As I was finishing on storm day, two city plows cleared our street. The government matters too. The cleanup is costing about $4 million.
Snow melts. If you have time, you can wait. With insurance, waiting doesn’t help you.

Podcast 206

direct download | Internet Archive page | iTunes

PS How to you clear your snow?

THE BEST AND WORST TIMES TO CANCEL YOUR LIFE INSURANCE

promodcares@gmail.com (Promod Sharma) — Fri, 01 Feb 2013 14:00:00 +0000

Peter Drucker once said, “Doing the right thing is more important than doing the thing right.”

There’s also value in doing the right thing the right way at the right time. You can cancel your insurance anytime you want. That power comes with risks.

The Best Time

The best time to cancel insurance is before you buy. This is the phase where an advisor makes proposals. You don't have much obligation, especially if you didn't ask for the work to be done.

If you have no intention of buying, perhaps you’re wasting your time or the advisors? If start the process, you may make an unintended purchase. In a chain, one link leads to the next and eventually to your wallet.

The Slippery Slope

You may not qualify for insurance, which means you can’t buy any of the nifty proposals. That’s true. Since the approval process takes weeks or months, your advisor may encourage you to submit a trial application without delay. The proposals can be prepared and changed while awaiting the decision.

Since there’s no cost or obligation to you, why not get “pre-approved”? In reality, you’re likely submitting a normal insurance application.

Once you’re approved, you’re congratulated and a big step closer to buying. You don't want to lose something once you've already got it, especially after the underwriting process. Maybe you had to undergo a paramedical exam. All that for nothing?

Approved

If you’re approved, you need not take delivery of the insurance contract by paying the first premium and confirming that your health hasn’t changed.

If you cancel now, hundreds or thousands of dollars have been wasted by the insurer for the underwriting. These “returns” increase the cost, which get passed on to other buyers via higher premiums or lower benefits.

If you have no real intention of buying there's not much point going through the underwriting process.

Money-back Guarantee

You can also cancel after taking delivery during the money-back guarantee period (you’re exercising your right of rescission). You typically have 10 days. This gives you time to read the policy contract in detail to make sure that you're getting what you thought.

An insurance contract is a complex legal document that’s not easy to understand. Would you really read it? If you want to look at the contract, can get a specimen in advance. There's no harm in looking at one and asking your advisor to explain the pertinent elements.

The Worst Time

The worst time to cancel is after you've purchased and had the insurance for a while. Why are you cancelling now?

Is the reason affordability? Perhaps you were sold the wrong product in the first place or the wrong amount of the right product. Maybe you can make adjustments.

Maybe you think you no longer need the insurance. Do you feel that way because you don't think you'll have a claim? If you could predict accurately, no insurer would sell to you since the odds would be against them.

Are you canceling because you've been shown something newer and shinier? It's important to do a proper comparison. You may be giving up more than you think. With a new policy, you face new conditions, new underwriting and possibly worse guarantees.

If you cancel, you’re giving up an asset of increasing value: you're more likely to face the claim as you get older. There maybe other things you can do with your policy. Perhaps you look at it as an investment now --- especially if you are able to keep the coverage for life.

Cancelling insurance is easy. Replacing coverage may not even be possible.

Podcast 205

direct download | Internet Archive page | iTunes

PS Make sure your insurance doesn’t get cancelled unintentionally because you missed premium payments.

TEST YOUR LIFE INSURANCE LITERACY

promodcares@gmail.com (Promod Sharma) — Sat, 26 Jan 2013 20:22:00 +0000

Hurry while the link is still active.

There’s a quick 10 question multiple choice test of your life insurance literacy. It’s from LIMRA, which does research for life and health insurers. You don’t need to register or provide any personal information. No agent will call.

Take the test now.

How did you do? The rest of this post consists of “spoilers”.

Findings

The questions are relatively easy but only 30% of the 4,000 respondents passed. That means 70% failed. Less than 1% got all the questions right. (Yes, you may congratulate me whenever you like.)

When test results are dismal, who really failed? The students or the teachers?

The Top Three

You’ll find the correct answers in the graphic to the right (click on it to enlarge).

People generally understand

A life insurer invests the money from buyers to pay claims (68% right | 32% wrong)
Group life insurance ends when you leave your job (59% right | 41% wrong); see two types of insurance you cannot own
Term life insurance is for temporary needs (52% right | 48% wrong); see buy or lease

People generally didn’t know that

Life insurers collect medical information to identify pre-existing conditions when a policy is purchased (18% right | 72% wrong); see the pitfalls of mortgage life insurance, which has post-claims underwriting
If a life insurer goes bankrupt, the policies stay in force and the benefits remain (25% right | 75% wrong); see what happens if my life insurer dies?
The life insurance death benefit is tax-free (31% right | 69% wrong); see the overlooked advantages of universal life

Odd Design

The way a test is designed influences the results.

Normally, the answer choices put True before False. You’ll find that in the Microsoft Office templates and a Google image search. Penn State explains how to construct a True/False test and gives help in spotting flawed designs.

For some reason, LIMRA puts False before True. Who’s ever heard of a False/True test? Also, questions with negatives are more complicated to answer than direct statements.

For instance, here’s the first question (which 69% got wrong):

Beneficiaries do not have to pay taxes on the death benefit from a life insurance policy: False/True

The following may be clearer:

(1) Beneficiaries pay tax on the death benefit from a life insurance policy. True/False
(2) The death benefit from a life insurance policy is tax-free. True/False
(3) The death benefit from a life insurance policy is taxable. True/False

What do you think?

Next Steps

“With life insurance ownership at an all-time low, it is important that the industry not only overcome consumers’ lack of knowledge about life insurance but address the misinformation that is out there confusing them and possibly having a negative impact on their image of the industry."
— Jennifer Douglas, LIMRA Associate Research Director

The public needs help. Where can they turn? This week’s 2013 Edelman Trust Barometer ranks the financial sector as the least trusted in the world for the third year in a row.

Podcast 204

direct download | Internet Archive page | iTunes

PS How would insurance advisors do on this test?

HOW TO AFFORD THE INSURANCE YOU NEED

promodcares@gmail.com (Promod Sharma) — Sat, 19 Jan 2013 19:51:00 +0000

If insurance were free, how much would you get? [I heard that at a seminar.]

You’d probably get as much as the underwriters would approve based on your physical and financial health. Since cost is a factor, you've got to prioritize. You may skip some forms of insurance, or reduce the amount you buy.

How do you find the money to pay the premiums?

Types Of Money

We mentally put money into buckets. This for groceries, that for vacation. Don’t touch the beer money. We end up with conflicting goals such as topping up your RRSP or paying down your mortgage (Globe and Mail, Feb 2012).

We might spend "found" money such as lottery winnings, bonuses and perhaps tax refunds with less care. Easy-come, easy-go.

Yet money is money. Knowing this lets us stretch our savings by using one pot for more than one purpose.

Universal Needs

You probably have life insurance, especially if you have a family. Inexpensive term coverage is widely available.

There are bigger risks.

We can face a critical illness or disability and survive. Since the probabilities of getting stricken are relatively high, the premiums look high compared with term life insurance. The easy solution is to skip getting coverage. You're winning ... until you're not.

Untapped FUNDS

You probably understand that saving for retirement is important. We can’t rely on governments. We might not have guaranteed pension benefits from work.

What if your health impedes your journey to a financially-secure retirement? If you get a critical illness or disability, you risk higher expenses and less income. You might be unable to work again. You could take some of the money earmarked for your retirement to buy insurance for critical illnesses and disability. You're then protected while you're working.

With permanent life insurance, you get lifelong protection and an envelope for tax sheltered growth. Maybe you put some of your savings here for access later.

Get Your Money Back

If you’re convinced you’ll have a claim, the insurer doesn’t want to cover you. If you don’t think you’ll have a claim, buying insurance may look like a waste of money. We can’t tell what will happen.

What if you could get your money back if you didn’t make a claim? You’d lose the investment growth on the money but returns are unpredictable anyway.

Some critical illness and income replacement plans refund your premiums if you cancel your policy at an age like 65 (assuming you haven’t had a claim). You now have another form of retirement savings. The money comes from the insurer's investments and other buyers who didn’t have the patience to wait.

With life insurance, you can’t get a return of premium when you retire but can at death.

You do pay more to get your premiums refunded. Because of the poor investment environment, the option is becoming more expensive or disappearing.

Ideal For you

Unless you have money for everything, you might want to combine pots for related goals like getting to retirement. You won't get money back from your car or home insurance. You can with insurance on your health and life.

The best insurance is what remains at the time of a claim. [I also heard that at a seminar.]

Podcast 203

direct download | Internet Archive page | iTunes

PS Review your situation with an advisor you trust and be wary of schemes that look too good to be true.

CUSTOMERS BEHAVE LIKE PINOCCHIO TOO

promodcares@gmail.com (Promod Sharma) — Sat, 12 Jan 2013 20:33:00 +0000

I'm at Best Buy to pickup wireless speakers I bought online. Another customer is trying to return a camera. She says she paid $290 but has no receipt and doesn't remember when she bought. The store agrees to give her $190, which was the lowest price during the return period. This seems fair. What if she bought on sale and now wants to earn a quick $100? Maybe she bought the camera somewhere else.

There's plenty of discussion about how the financial sector could improve. In 2012, bank fines topped $10 billion (CNN Money) or $20 billion (RT.com).

What about the buyers? The customer isn't always right ... or honest.

Time Wasters

Some people get potential advisors to do work without any intention of buying from them. This includes attending expensive-to-host dinner seminars only for the food. The free recommendations can then be shopped around. It’s then easy for another advisor (including the incumbent) to propose a different product — not necessarily better — with a lower price or more features.

Advisors can avoid time wasters by prescreening clients and advising for a fee instead of for free.

Withholders

Whatever happened to the truth --- the-whole-truth-and-nothing-but-the-truth?

When you go to your doctor for treatment, don't you describe all the symptoms? If not, you risk side effects from the wrong diagnosis. You lose by holding back facts even if you don't think they matter.
Do you give your advisor enough information?

If not, you won't get the best results either. Maybe you're reluctant to disclose because you don't trust your advisor and fear getting sold more. While you may have trouble finding another doctor, advisors are plentiful. You may be further ahead by going through the hassle of finding an advisor who warrants your trust.

Consequences

You may think a pre-existing condition doesn't matter when you're applying for insurance. You aren't the one to decide. Your role is to answer the questions accurately. The consequence might be higher premiums or a denial of coverage. At least you'll know in advance, which gives you the opportunity to shop around.
Two seniors are starting the New Year with $100,000+ medical claims denied under full coverage travel insurance (CBC, Jan 7, 2013). We don’t know the facts.

If you don't understand a question, ask for clarification. Using a qualified independent advisor may be better than dealing buying directly from the insurer (or an advisor who's restricted to selling products from only one company).

Better And Better

I'm back at Best Buy to return the speakers with a receipt. I'm served within minutes. They ask no questions and don't even open the package. They're trusting that the box doesn't contain a brick or missing parts. They’re right.

Maybe better buyers beget better sellers? And vice versa.

Podcast 202

direct download | Internet Archive page | iTunes

PS My favourite Pinocchio was Disney’s 1940 version

YOUR FAVOURITE POSTS OF 2012

promodcares@gmail.com (Promod Sharma) — Sun, 06 Jan 2013 02:06:00 +0000

Welcome to 2013. We’ll start by reviewing what visitors read here on Riscario Insider in 2012.

This blog started in 2006, which is a long time ago in Internet years.

The Top 20 Posts

As usual, there’s repetition in the most popular posts.

Why we switched to Ooma phone service
Quotes related to The Seven Habits of Highly Effective People (down from #1)
Napoleon Hill: The six basic fears from 1937 (unchanged)
How ‘Cake Boss’ Buddy Valastro made bitter batter better at 17
Does Warren Buffett "Buy Term and Invest The Difference"? (down from #2)
The horror of Rogers Ultimate Internet
Why advisors become advisors
Reach your goals with Pick Four from Zig Ziglar and Seth Godin
The risk of financial innovation
Should you switch to an actuarial career? (down from #5)
Secret 7: The best tax sheltering in Canada (down from #4)
What are you doing about your high investment expenses?
The perils of whole life insurance
The problem of “trapped” retained earnings (up from #16)
The Globe and Mail on Canada’s Insurance Loophole (down from #9)
How Lamar Odom’s mom saved his life
Napoleon Hill: Fear #3 (ill health) (down from #12)
The pros and cons of financial leveraging (down from #11)
What happens during a paramedical exam for life insurance? (down from #15)
The foolproof measure of trust

Half these posts were in the top 20 for 2011 (including two of the top three). There are advantages in having a “back catalog”.

Worth A Peek

Here are the 2012 posts by category. We looked primarily at financial literacy, advisors and insurance.

Financial Literacy

Advisors

Insurance

Trust

Goals

Career

Various

The Top 5 Podcasts

You’ll find over 200 podcasts. Here are the top five.

Does billionaire Seymour Schulich help you "Get Smarter"? (unchanged)
The three major obstacles to growth according to Brian Tracy (up from #3)
"The Snowball" rolls into Warren Buffett (down from #2)
Outliers by Malcolm Gladwell: Mastery plus Opportunity trumps Talent (unchanged)
Albert Einstein on education and learning

The Top 3 Countries

You read from around the world

Canada: Toronto, Ottawa, Calgary, Vancouver, Montreal (#2 in 2011)
United States: New York, Los Angeles, Chicago, San Francisco, Houston (#1 in 2011)
United Kingdom: Teddington, London, Bristol, Birmingham, Manchester (#3 in 2011)

Sources of Traffic

Search engines: 52% (down from 69%)
Campaigns: 17% (mainly via subscriptions and Marketing Reflections)
Referring sites: 16% (up from 14%) [main sources: The Globe and Mail, Marketing Actuary, Twitter, LinkedIn]

Keywords

Here are the top keywords typed into search engines to get here.

7 habits of highly effective people quotes (#1 in 2010)
quotes from 7 habits of highly effective people
buy term and invest the difference
seven habits of highly effective people quotes
rogers ultimate internet
buy term invest the difference
innovation
napoleon hill six basic fears
trust
napoleon hill 6 basic fears

Browsers Used

Internet Explorer: 29% (down from 37%)
Chrome: 25% (up from 20%)
Safari: 19% (up from 14%)
Firefox: 19% (down from 25%)
Android browser: 3% (new)

Operating Systems

Windows: 68% (down from 76%)
iOS: 13% (up from 7%)
Macintosh: 12% (unchanged)
Android: 3% (up from 2%)
Linux: 1% (unchanged)

Screen Resolution

1366x768: 14% (up from 12%)
1280x800: 11% (down from 19%)
1024x768: 9% (down from 12%)
1440x900: 7% (down from 8%)
1280x1024: 7% (down from 8%)

Mobile Devices

In 2012, 17% visited with mobile devices (up from 9%). Apple devices rule at 75% (down 1%) with the iPhone and iPad leading. Android is 18% (unchanged) with Blackberry at 6% (up from 5%).
For the first time, mobile visitors stay on this blog longer than computer users.

Podcast 201

direct download | Internet Archive page | iTunes

PS Happy New Year!

WHERE THERE’S WILLPOWER, THERE’S A WAY

promodcares@gmail.com (Promod Sharma) — Sat, 22 Dec 2012 18:46:00 +0000

Success comes from self-control. If you're not getting done what you want to get done, your willpower may be the problem.

Obstacles like freshly-baked chocolate chip cookies have no sympathy.

One of the best uses of self-control is to build habits. Once you establish a habit, you reduce the decisions you need to make. [Getting married does too, but getting told what to do brings stress.]

Routinize The Routine

"You'll see I wear only gray or blue suits. I'm trying to pare down decisions. I don't want to make decisions about what I'm eating or wearing. Because I have too many other decisions to make." — Barack Obama

Think about that. President Obama preserves his willpower by letting others make smaller decisions for him. That lets him focus on more important decisions. (see boring is productive, Harvard Business Review).

Steve Jobs kept inventing and updating products but not his clothing (Gizmodo). He bought 100 black turtlenecks (Gawker), which even removed the step of reordering.
I had more trouble dressing on Casual Fridays. The other days, I'd wear a suit with a white shirt.

"I got sick and tired of having to decide what kind of dessert I was going to have at the restaurant, so I decided it would always be chocolate ice cream, and never worried about it again." — Richard Feynman

Barack became President and Richard won a Nobel Prize. Your mileage may vary.

Little habits help too. I always put my keys in the same place, which eliminates the last moment panic of finding them. Caution: You don't want to become eccentric.

The Radish Experiment

Willpower is also essential for change. Dan Heath explains in this video.

Recent research shows that our willpower is limited and gets exhausted easily. You replenish willpower with glucose. Willpower is like a muscle that you can strengthen without sugary drinks. Building habits is one way.

Learn More

To get better results, get and give these books: (Amazon, non-affiliate links)

The Willpower Instinct: how self-control works, why it matters and what you can do to get more of it by Kelly McGonigal. Practical tips. You're getting a week by week course.
Willpower: Rediscovering the greatest human strength by Roy Baumeister and John Tierney. This book is more theoretical.
Switch: how to change things when change is hard by Chip and Dan Heath. Filled with examples of how to change others too.

This is the final post of 2012 — just in time for your New Years Resolutions.

Best wishes to you and yours during the holidays.
May 2013 be the best year you've seen!

Podcast 200

direct download | Internet Archive page | iTunes

PS Mind those calories!

Riscario Insider

HOW TOM HANKS (THE MOST TRUSTED AMERICAN) GOT CHEATED BY HIS INSURANCE ADVISOR

Why Tom?

What Happened?

The Detective

Outcome

Lessons

The World’s A Stage

Links

Podcast 224

SHOULD YOU CHANGE ADVISORS WHEN YOU MOVE?

Why Stay?

Limited Choices

Oversights

Delays

Why Switch?

Hybrid

Escape

Links

Podcast 223

(MAILBAG) SWITCHING INVESTMENT ADVISORS: BAD TO WORSE?

Epilogue

Links

Podcast 222

THE REACTION TO APPLE’S TAX AVOIDANCE

Exhibit #1a

The Scope

Muted Response

Fair Share

Links

Podcast 221

TIPS FOR FIRST-TIME LIFE INSURANCE BUYERS

Don't Buy On Price

Look Beyond Today’s Price

Avoid Buying From A Bank

Avoid Buying From An Association

Avoid Buying Through Your Employer

Avoid Young Advisors

Avoid Old Advisors

Don’t Overlook Health Insurance

Links

Podcast 220

HOW HEALTHY ARE YOU REALLY?

Explain This

Reality Check

What To Do

Medical Misadventures

Links

Podcast 219

WHAT’S YOUR FINANCIAL ‘PLAN B’?

Plan B

Financial Plan B

Links

Podcast 218

LIFE CHANGING EVENTS NO LONGER TRIGGER INSURANCE PURCHASES

Life CHANGING Events

Research Shows

What’s Going Wrong?

Possible Reasons

Who Loses?

Links

Podcast 217

AVOID WINDOWS 8

Forced Upgraded

Stop

Full Scream

Better But …

Links

Podcast 216

THE UNWELCOME LESSON FROM THE RBC-iGATE SAGA

Outrage

Dig Deeper

Employable

Your Risks

Links

Podcast 215

DO YOU HAVE A FINANCIAL DREAM OR A FINANCIAL NIGHTMARE?

Didn’t Get The Memo

Plans

Podcast 214