December 25, 2008

Christmas in the Emergency Ward

It's Christmas Eve. We're visiting friends in Mississauga. It's about 10:30pm. Our son Jeevan is having dessert --- chocolate cake and apple pie. After a bite, his mouth feels itchy. Thirty minutes later, hives appear on his chest. He's short of breath and shivering. A severe allergic reaction. He takes Benadryl.  

11:30pm An hour later, Jeevan is shivering and still short of breath. We go to Credit Valley Hospital, 900m away, calmly guided by GPS. I drop him and my wife, Sharmila, at the entrance of the Emergency wing. Unlike the movies, the mood is subdued. No ambulances with flashing lights and blaring sirens. No one outside. No excitement at all.

The Emergency ward has less staff due to the Christmas holidays. After 15 minutes, Jeevan is being examined at Emergency Reception. Questions about symptoms. Measurement of his heart rate, blood pressure, weight. This takes 10 minutes. We forgot his OHIP card for proof of eligibility for government health insurance but this is not a hurdle. 

Registration is next. The process takes a few minutes. The paperwork goes back to Emergency Reception. After a few minutes, Jeevan is taken to a hospital bed and gets examined. Sharmila accompanies him. It's 12:05am. Merry Christmas?

I stay in the waiting area, writing this post as I wonder what's happening. I avoid touching anything for fear of catching a serious contagious disease. Three other families wait too. Everyone is calm. The scene is much like a doctor's waiting room. Another family enters around 12:25am. There are 10 of us, which fills most of the seats. There's another room full of patients. I'm not sure how many. Maybe they've already been examined and are waiting for further treatment. There's a feeling of calm. A feeling of waiting. 

12:30am Four staff working. A pair each at the Reception and Registration desks. This is full capacity but I don't see more patients.

12:40am Two paramedics drop by to chat and go to the staff room. The staff are pleasant and calm throughout. The experience feels unreal, like a dream in slow motion. 

12:50am Sharmila comes out. Good news! Jeevan is recovering! He received adrenaline and Benadryl. He is in a private room. Number 18.  I can go in too. I see he's on two or three drips (one to treat side effects). It feels like a movie with all the machinery beeping in languages that only R2D2 would understand.

1:40am The IV drip machine starts beeping because the fluids are finished. No one is around to respond. The emergency wing bustles with activity due to more patients and more urgent cases. That's fair but the beeping is annoying.

2:00am A new IV drip. One litre of a saline solution. Previously 0.5L administered. This is going to take a while. In my drowsy stupor, I realize I'm hungry. I follow a winding path to Tim Hortons for water, hot chocolate and a cream cheese bagel.

3:00am Trying to doze. We can probably go home in another hour if Jeevan's condition remains stable.

4:00am Waiting for the doctor

4:45am Waiting for the doctor

5:10am Waiting for the doctor

5:40am The Doctor! He was with more urgent cases. All's well. He writes a prescription for an epipen. Jeevan is to take Benadryl, as required. 

5:55am All the tubes and sensors are removed. I pay for parking ($14 --- nothing's free even on Christmas) Jeevan and Sharmila wait at the entrance of the Emergency wing, where we arrived seven hours earlier. Light snow flurries fall. Roads are nearly empty. How unusual.

6:20am We arrive at a Shoppers Drug Mart near home. We're thankful that it's always open, even on Christmas. Filling the prescription takes 20 minutes but feels like hours after the night's ordeal. I notice eight other customers making purchases. One leaves his Dodge Ram truck on while he shops. A woman forgets her purse in her Acura RDX and does outside to get it. 

6:50am Home again after 14 eventful hours. Blinking clocks show we had a power failure in our absence. Exhausted, we tumble into bed.

Update at 7pm
Jeevan has recovered. Life is back to normal as if nothing happened. 

Hospital service varies depending on when you arrive and how serious your condition is relative to other patients. We were fortunate to receive excellent, fast service. For free. 

We weren't able to leave milk and cookies for Santa on Christmas Eve, but he remembered us. An object, no matter how valuable, is replaceable. A life is not. We got the best gift ever. 

Our deep thanks to the caring, efficient staff at Credit Valley Hospital. They were separated from their own families on Christmas so ours could be together.

December 20, 2008

Hero To Zero: Why Satisfaction is Relative

There is no greater challenge than to have someone relying upon you; no greater satisfaction than to vindicate his expectation.
Kingman Brewster

How quick from hero to zero.

On Friday, Toronto faced the first major snowstorm of the season. Schools and offices were open. Public transportation kept the city running. Streets were plowed well enough that no cars got stuck near us. I had three meetings but they were rescheduled. So I worked from home.

I've been waiting for a parcel from the US and thought delivery would be delayed to Monday, the next business day. I checked the courier's website and saw they were committed to making the delivery even if this meant at night. Impressive!

Around 2:30 pm, Canada Post delivered mail. A few minutes later, Purolator delivered two parcels. Both were several hours late, but this was understandable. I was sure the other courier would arrive too. I checked the delivery status that evening:
  • 3:17 pm: Emergency Conditions Beyond Our Control
  • 5:19 pm: In-Transit Scan
?!? Would they come on Saturday? No.
How about Sunday? No ... but another package arrived.

Delivery has been rescheduled for Monday. Here's the funny part. On Friday morning, I would have been happy with a Monday delivery. Now I'm disappointed because of the
  • two deliveries on Friday
  • one delivery on Sunday
Satisfaction is relative. Right now, snow is falling heavily. Let's see what happens tomorrow.

This is my last post of 2008. Thank you, dear readers, for your precious attention.

All the best to you and yours during the holidays.
May your 2009 be really fine!


December 14, 2008

Solve Problems Like A Magician: Four Steps from Dai Vernon via David Ben

Magic has universal appeal. I don’t believe in magic in the way that I describe in my books, but I’d love it to be real.
--- J.K. Rowling

How can you make seemingly impossible problems disappear? By solving them. Like a magician.

At a recent conference, David Ben performed some magic --- mainly with cards. He even revealed how he did some of the tricks (what he called "effects"). More importantly, he shared a simple, classic process you can use to solve your problems.

The Four Steps
Dai Vernon, an influential Canadian magician (1894 - 1992), identified four steps for solving problems
  1. define the objective
  2. generate solutions
  3. evaluate the solutions
  4. implement the solution
These "obvious" steps are useful for many purposes. And somewhat dull. Until seen from the perspective of a magician. Let's assume that you are looking at a financial product or service with the help of an advisor.

Define The Objective
In magic, you start by defining the effect you want to create. Your objective may change during this process because you may not know what you really want. You may start with a vague goal and then refine it by digging deeper.

For example, maybe you want to be "wealthy". Drilling down, that may mean "financial independence". That may mean retiring at a specific age. That may mean a specific financial goal. That may lead to plans to reach the target dollar amount.

Generate Solutions
You might call this "brainstorming". Quantity counts. You want lots of ideas. Suspend your negative thinking and open your mind to new ideas. Our preconceived ideas affect the outcomes.
David asked this question: How would you put 36 cubes of sugar into three cups of coffee so there's an odd amount of sugar in each cup?
Think about this. Share your answer in a Comment. I'll post the answer on Monday morning.

Evaluate The Solutions
As a former tax lawyer, David reminded us that pigs get fat but hogs get slaughtered. This means that ideas that technically follow the law must still pass the "smell test". Charitable giving provides a great example. If you get a tax receipt several times larger than your donation, be on your guard.

What is too-good-to-be-true? Sometimes you can't tell. Your advisor helps by screening out flaky ideas. Generally, the simplest solutions work best. Easier to understand. Easier to explain.
The simpler the solution, the more that it will mean.
--- The Strawbs, Lemon Pie
Your experience is your greatest advantage. The same applies for your advisor. Experience isn't always valued, though (see Your Car Mechanic: Paying For Effort or Results?). That's too bad.

Implement The Solution
Detail makes for perfection, but perfection is no detail.
--- Leonardo da Vinci
Like talk, ideas are cheap because supply surpasses demand. Proper implementation is key. Simple ideas are often difficult to implement properly. You wouldn't generally know (or care) what takes place in the background.

David defined magic as the summation of hundreds of apparently inconsequential details. You can probably say the same for craft. This is certainly true for sales, especially for intangibles like financial products or services.

Different Perspectives
You will sweat. David Ben pointed out that you can perspire in front of your audience or in private. Naturally, the best place is while you're practicing in private.

How interesting to get perspectives from a tax lawyer turned magician. The magic behind the magic is a process we can also choose to use.


December 7, 2008


Everyone needs something to aim for. You can call it a challenge, or you can call it a goal. It is what makes us human. It was challenges that took us from being cavemen to reaching for the stars. --- Richard Branson

Richard Branson has intrigued me for years. Not for his knack for getting publicity but because he makes the world better. He cares. He enters established markets (e.g., music, airlines, mobile phones) and makes them more competitive. And more fun.

We look for opportunities where we can offer something better, fresher, and more valuable, and we seize them. We often move into areas where the customer has traditionally received a poor deal, and where the competition is complacent. --- Richard Branson

No Show
I expected to see Branson live at the 2007 Real Estate and Wealth Expo (see lessons learned), alongside Tony Robbins and Donald Trump. We were duped (probably by the organizers). Branson appeared on screen from his island home in a presentation that looked prerecorded. Even so, he commanded our attention.

When Old Is New

If I have not read a book before, it is, for all intents and purposes, new to me whether it was printed yesterday or three hundred years ago. --- William Hazlitt
Autobiographies let us learn from people we'll (likely) never meet. Losing My Virginity is hardly new. It was published in 1999 and runs chronologically. I listened to the audiobook, which Branson narrates. You can get a newer print edition if you prefer reading.

Frankly, I didn't know much about Branson since I live a low noise life. I assumed he went smoothly from success to success, starting with Virgin Music. Hardly. He faced many obstacles and could have easily lost his businesses many times since the 1960s. When facing a hurdle, he usually made risky moves and won.

I was especially surprised to learn
  • the role of the unknown Mike Oldfield
  • private businesses have outside masters too
Mike Oldfield
The success of Mike Oldfield's debut Tubular Bells --- the first record released by Virgin --- kept the company going for years. Oldfield recorded at The Manor when the studio was not rented out to other musicians. Virgin rented most of the 20+ instruments used. Branson writes:
I set about finding all these instruments: the acoustic guitar cost £35, the Spanish guitar £25, the Fender amplifier was £45, the mandolin £15, and the triangle was a bargain at £1. The tubular bells cost £20. £20 for tubular bells??

I said, "They'd better be worth it."
They were. The record set records. The profits were reinvested, primarily in finding and supporting new recording artists.

Outside Masters

Fortunately we're not a public company - we're a private group of companies, and I can do what I want. --- Richard Branson
Public companies tend to focus on short term goals, which can hurt the long term prospects. Virgin went from private to public to raise capital. Then from public to private to act fast (no need for board approval) and experiment more (e.g., starting the Virgin Atlantic airline).

Becoming private again still meant scrutiny. This time from banks. To grow, Virgin invested heavily and used borrowed money. This gave the banks influence over what Virgin could do and how long they could continue. Cash flow becomes very, very, very important.

There are numerous examples of challenges with the banks. Virgin was not well understood by lenders or stock markets.

Confucius on Wisdom
By three methods we may learn wisdom: First, by reflection, which is noblest; Second, by imitation, which is easiest; and third by experience, which is the bitterest. --- Confucius
While others may imitate, Richard Branson learned by experience and reflection. In his autobiography, he candidly shares what he went through. This leaves us richer --- though not quite billionaires.


November 30, 2008

Fearing The Wrong Risks (With Examples)

Things that'll knock you down you don't even see coming --- Bruce Springsteen

Last week, I was looking at webcams. The warranties run two years (Logitech) or three years (Microsoft). That's good. I expect gadgets to have a warranty of at least a year. The cashier still suggested I buy an extended warranty. The cost isn't much, but I've got a bigger issue: protecting data.

I make daily automated backups on external hard drives but these copies are at home too. Years of valuable information could disappear by fire or theft. In contrast, a defective webcam would be a minor, inexpensive inconvenience.

According to the Harvard Business Review, we worry about the wrong risks by
  1. focusing on the recent and near term
  2. spending too much protecting against the wrong risks
Smoking reduces lifespans by about 5 years. Flying reduces lifespans by a day. Yet smokers worry about flying and continue smoking (in the few remaining designated areas). We worry about minuscule levels of pesticides on veggies but ignore the carcinogens from grilling burgers over charcoal.

We're irrational. According to David Myers, four fears influence our misguided intuition:
  1. we fear what our ancestors feared
  2. we fear what we can't control
  3. we fear what's immediate
  4. we fear what's most readily available in our memories
Inherited Fears
All of us are born with a set of instinctive fears --- of falling, of the dark, of lobsters, of falling on lobsters in the dark, or speaking before a Rotary Club, and of the words "Some Assembly Required." ---- Dave Barry
We no longer live in the wild, but we fear spiders, lizards and snakes. Combined, those creatures kill one American a month.

Out Of Control
If everything seems under control, you're just not going fast enough.
--- Mario Andretti
We fear food preservatives which we can't do much about. So we pay extra for organic products. However, we gladly ski and drive faster than conditions warrant (especially with all-wheel-drive).

The Immediate
Fear is an emotion indispensable for survival --- Hannah Arendt
We ignore the long term effects of a poor diet or lack of exercise because nothing bad happens now. This is the buy now/pay later mindset. We worry about flying especially at takeoff and landing. Here are other examples
  • strokes take twice as many lives as accidents
  • diabetes takes four times as many lives as homicides
The Memorable
What sticks in our mind and colors our judgment is our own vivid experience.
--- David Myers, Intuition
I recall reading that drowning causes more deaths than fire. Yet fires make the TV news and probably cause more fear.

Thanks to Jaws, we are afraid of shark attacks. In the last century, less than 70 deaths have been reported worldwide.

Lack of fear can be idiotic. Alligators look inert when sunning themselves on land. While on a bus tour bus of the wilds of Florida, we saw a family on the side of the road snapping photos of an alligator mere metres away. Our driver stopped and honked until the foolish foursome got back into their car. Who knows what they did after we left.


November 23, 2008

New Seth Godin - Tribes - Hear It For Free

One's mind, once stretched by a new idea, never regains its original dimensions.

The mind, once expanded to the dimension of larger ideas, never returns to its original size.
--- Oliver Wendell Holmes

I discovered Seth Godin through my friend Peter McGarvey over at Sparkplug a couple of years ago. I've since listened to most of his audiobooks and acted on numerous ideas since we share a similar perspective.

Seth keeps doing new things. You can listen to him read his entire new book free from Audible but you'll need to setup an account, install the Audible player and put up with copy protection. Since I listen to books on MP3 CDs in my car, that's a problem. Nonetheless, I went through the hoops and started listening. I later found you can get unprotected MP3 or AAC versions too. So I finished listening in my car.

Seth Do?
What does Seth do? He helps you think in fresh ways. And become remarkable (worth talking about). Best of all, he teaches us to farm, rather than rely on him for fresh produce.

How can Seth give away an entire book for free? Because we pay him with attention and by spreading his message. Book sales probably increase too.

Low Expectations
Someone's knocking at the door.
Somebody's ringing the bell.
Do me a favor, open the door and let 'em in.
--- Paul McCartney, Let 'Em In
I benefited from the insights and encouragement in Seth's previous book, The Dip, which explains when to quit and when to keep going (see my thoughts).

This time I didn't expect much because of what happened during the summer. Seth launched a closed website with a weird spelling: At present, the tribe (or "triiibe", as they call themselves) has voted to keep everyone else out, except by invitation. I didn't join because I prefer open environments. Even if everyone can join, everyone won't. Those that do may not participate. You can still end up with a small group this way.

Had Seth exhausted his ideas and become conventional?

Out of Ideas?
Tribes, has the subtitle "We Need You To Lead Us". Don't worry. This is not a conventional book about leadership, management and employees. We can all be leaders if we choose. Tribes has many good ideas --- new, revisited and remixed.

A tribe interconnects a leader, a group and an idea. Here are examples: coworkers, soldiers, The Sopranos, Grateful Dead fans, the United Way, a church, readers of this blog, ...

Do You Connect With Seth?
Seth isn't for everyone and does not want to be (see the woodpecker quote). If you've never listened to him before (even if you've read his books), get the free unabridged audio of Tribes. He does not sound like a professional book reader and the book starts off slow. Stick with it for 30 minutes and you'll see whether his ideas touch you. I'm betting you'll like his.

Feel free to share your thoughts.


November 15, 2008

What Happened on Take Our Kids To Work Day?

Take Our Kids To Work Day is an an opportunity for grade nine students to see what their parents do. This year, my son Jeevan accompanied me in anticipation of what he called a "businessman's lunch". I planned a (slightly better than) typical day. 

I wanted Jeevan to see elite life insurance advisors with revenue of at least $1 million. Since there are many in downtown Toronto, I tried to arrange a presentation for in a prestigious office tower like Brookfield Place, First Canadian Place or Scotia Plaza. The timing didn't work out.

9:00am Left Home (Etobicoke)
We were both nicely dressed with shiny shoes. I normally arrange meetings after most of the morning traffic has passed. This saves travel time.

9:45am Meeting An Advisor (Markham)
We arrived on time to meet an advisor who asked for help with "10-8" Leveraging, which uses life insurance to magnify the benefits of financial leveraging while shrinking the risks. We were then meeting his client.

The advisor arrive late for no good reason --- around 10am. This is very rare. During our meeting, he kept jumping between topics. He also kept answering his phone, which is rude. That's not how you treat an invited guest. I avoid advisors who behave like that. I focus on advisors who apply the four habits of highly referrable people

My son got a gift which he better not use: a wine bottle opener.

11:40am Meeting A Client (Markham)
Although scheduled for 11 am, the client arrived 40 minutes late He brought his accountant. As discussions began, the client kept checking messages on his Blackberry. However, he became more engaged within a few minutes. Both he and the accountant asked thoughtful questions. They had seen proposals for 10-8 leveraging before. 

Although questions remained, we left around 12:10pm to keep on schedule. In the car, Jeevan said that he followed most of the discussions. He asked what "YRT" meant. It's short for Yearly Renewable Term, a type of insurance scale in which rates increase every year to mirror mortality rates. To minimize the costs, the death benefit decreases each year to the minimum that Canada Revenue Agency requires for tax-exempt status. Who would want this? Wealthy clients who want to maximize tax-sheltered growth by minimizing insurance charges. Typical deposits are $100,000 to $500,000 a year for three to five years. 

1:00pm Lunch With An Advisor (Oakville)
Where can you get root beer in bottles?

Most leading insurance advisors are in their late 50s or older. They prefer wine over root beer. I wanted Jeevan to see there are successful younger advisors too. So we had lunch with an advisor under age 30 who is part of a very successful team (mainly selling "10-8" leveraging). We all had root beer in bottles. 

3:30pm Harry Rosen (Mississauga)
We made a pit stop between appointments. Two of my Italian suits needed unusual repairs: one has a broken zipper (which I didn't notice until I was in Sudbury just before a group presentation) and the other has lining that came apart at the seams in a sleeve. This proves that things go wrong regardless of price. While there, I bought an overcoat from the broken zipper company, the triumph of hope over experience. Do we ever learn?

4:00pm IFB Summit (Toronto Airport)
To end the day, we went to Independent Financial Brokers Summit to see the final speaker: Heath Slawner on the Power of Persuasion. This was based on the eye-opening work of Dr. Robert Cialdini, who I've seen twice. We all need reminding. I wrote about the six universal principles of infuence earlier. 

6:00pm Heading Home
Even though everyone was leaving the parking lot at once, we were on time for Take Our Kids Home For Dinner.

November 9, 2008


Many financial bloggers write about investing. Despite regular contact with investment advisors at different firms and access to other experts like fund managers, I keep my thoughts to myself. 

Months ago, a reporter for a major newspaper asked how I invested. I explained but my approach lacked pizazz. You can judge for yourself from the notes I prepared for the interview.

Actuaries measure and manage risk. I focus on financial risks. Here are the four "obvious" ones:
  1. living too long (longevity)
  2. dying too soon (mortality)
  3. getting sick (morbidity)
  4. getting disabled (disability)
A fifth risk often gets overlooked: overpaying taxes through ignorance or inertia (taxevity). Few realize how effective life insurance can be when properly structured.

Mainly mutual funds bought years ago. I use two investment advisors in London Ontario. I've never met them. I'd like to consolidate with one advisor in town but have not found the right person. Rather than investing more, we've focused on paying off our mortgage to increase cashflow for investing. On my own, I invest through universal life insurance, which allows tax-free growth like RRSPs (but without the restrictions on maximum deposits or forced withdrawals).

Start of Career
In 1984, I graduated from the actuarial science program at The University of Western Ontario. I worked at several major life insurance companies, starting with Metropolitan Life in Ottawa. I specialized in the design, manufacture and marketing of life & health insurance products. In mid-2005, I switched to a nontraditional actuarial role: helping advisors reduce the financial risks of their key clients. I donate time to help the general public by writing this blog. There is very little similar content online.

Start of Investing
My parents gave me a solid grounding in the importance of saving. As a child in the 1970s, I started putting money into a savings account and then GICs. My 14 year old son is following this pattern too. He likes compounding: your interest earns interest.

Thanks to scholarships, summer jobs and support from my parents, I graduated from university debt-free in 1984. I started working and making maximum RRSP contributions. I found an investment advisor by walking into an investment firm (a reverse cold call) and began investing nonregistered savings in mutual funds. As a novice, I didn't realize that loads were negotiable. I got charged a hefty 9% up front. I didn't know that investment advisors got hidden perks like cruises. I thought my advisor had the training and obligation to put my interests first. When I smartened up, I switched to my family's investment advisor in London, ON. This new fellow advised me to buy "can't lose" shares, options and warrants. And lost. By the late 1980s, I decided to stick with mutual funds.

Investment Strategies
Unclear. Over the years, I have known many experts: investors, investment advisors, fund managers, etc. I see many different approaches to investing. Each has merits but they conflict. No one knows what's going to happen. For example, we knew that gas prices could only go up (diminishing supply, insatiable worldwide demand) but now gas has dropped below 90 cents a litre again. 

Emotion leads to bad decisions.  We're reluctant to sell and buy at the "right" times. Yet we get excited about investments and agitated by blips in the returns. Many want to "get rich quick". At the 2007 Real Estate and Wealth Expo in Toronto, audience members were enticed to buy foolproof investing secrets for $995 or more. It is better to learn investment basics, sow seeds, nurture them and wait for the harvest.

Portfolio Returns
Unknown. I generally buy/hold but will make changes on the rare occasions where my investment advisor makes recommendations (one does, the other doesn't).

Stages Of Life
I've had a lifelong fear of outliving my savings during retirement. How horrible to have nothing left because we are living longer. What if an illness strikes or we need expensive long term care? A lifetime of savings can quickly disappear. How horrible. This fear of poverty --- the most basic of the six fears Napoleon Hill identified --- provides a strong incentive to save, spend prudently and increase earnings. 

Best Decision
Real estate. We changed our principal residence three times during down markets. We are close to paying off our mortgage. This would give a great sense of accomplishment ... unless we move again.

Worst Decision
Trusting my first investment advisor to put my interests first. I deserved unbiased advice but got high fees and poor returns. My advisor got nice commissions and hidden incentives like cruises. Where's the sport in taking advantage of someone who know less?

Investment Hero
Probably Warren Buffett. He invests for the long term, skips fads, shares his insights and understands insurance. I favour passive over active, low MERs over high, indexes over mutual funds. 

Who can I really trust for investment principles? I have decided that's going to me and I am learning. I'm reading financial blogsand classic books like The Richest Man in Babylon. The general advice is 
  • pay yourself first: live on less than you earn
  • invest
  • never spend the invested money
  • harness the power of compound interest
My extension is to invest inside universal life where growth is tax-sheltered (like RRSPs) and savings are accessible tax-free using bank loans. We will take advantage of the Tax-Free Savings Account too. None of this is exciting but neither is a financial rollercoaster.


November 2, 2008

The Four Steps In Wealth Management

The way to wealth depends in just two words, industry and frugality. – Benjamin Franklin

There are four steps in wealth management
  1. Create wealth
  2. Grow wealth
  3. Preserve wealth
  4. Transfer wealth
Simple to say but hard to do. Reducing taxes and reducing risk helps in each step.

Create Wealth
Ability is a poor man's wealth. — John Wooden
To create wealth, you develop, apply and improve your unique skills by getting through what Seth Godin calls the dip. Easier to say but certainly doable. And well-worth doing.

What if your opportunity to create wealth gets stolen by
  • premature death
  • disability
  • a critical illness like a heart attack, cancer or stroke
Insurance maximizes your potential wealth in several ways.

Life insurance immunizes your heirs from your premature death by providing cash to repay debt such as a mortgage, cover living expenses for your family. Your business partners can use insurance on you to buy your shares so your heirs get cash and the partners get ownership of the company.

Disability insurance replaces income lost through disability. Some universal life (UL) insurance policies have a disability benefit which can pay out the cash value of your policy tax-free. You can also use the savings in permanent insurance as collateral for tax-free loans.

You can offset the financial losses from a severe illness with a critical illness insurance (see The Basics). This can take the form of a separate policy or an add-on your universal life.

Grow Wealth

The way to become rich is to put all your eggs in one basket and then watch that basket. – Andrew Carnegie
You invest your wealth to multiply your wealth. Compound returns do wonders, especially when tax-sheltered, yet most investors have
  • nonregistered investments with taxable growth
  • registered investments with temporary tax deferral until accessed
To improve results, you can reallocate a portion of your nonregistered investments into universal life. Why? For permanent or temporary tax deferral. Investment growth is tax sheltered as with an RRSP or the Tax-Free Savings Account (TFSA). But you're not limited by government-mandated maximum contributions, which are inadequate for the wealthy.

Preserve Wealth
It requires a great deal of boldness and a great deal of caution to make a great fortune, and when you have it, it requires ten times as much skill to keep it. – Ralph Waldo Emerson
To preserve your wealth, you want protection from taxes and creditors. With universal life insurance, your investment growth is tax-sheltered until withdrawn. You get permanent deferral if the growth is paid out as part of the tax-free death benefit.

You can get protection against your creditors by proper structuring (see the companion Riscario wiki).

Transfer Wealth
Never forget: the secret of creating riches for oneself is to create them for others. – Sir John Templeton
You can't take your wealth with you when you die. When you transfer your legacy, why not bypass taxes, creditors and public scrutiny. Your life insurance death benefit goes directly to your beneficiaries without passing through your estate or Will. This means
  • escape from the probate fees on your estate
  • protection from the claims of creditors, if properly structured
  • privacy, since your Will becomes a public document
The tax-free insurance proceeds can be used to offset the taxes and costs at death without burdening survivors or requiring the sale of assets like a family cottage. This leaves more of your wealth intact.

Wealth is not in making money, but in making the man while he is making the money. – John Wicker
There's more to wealth than financial rewards, but the financial rewards are nice too. All the best with your voyage.


October 25, 2008

Annoying Pest Or Welcome Guest? The Do Not Call List

Cold prospecting is like coal mining. It’s dirty, filthy, ugly, smelly, sweaty work best left to people who earn minimum wage with brawn, not maximum wage with brain. --- Dan Kennedy, Magnetic Marketing

There's lots of talk about the new National Do Not Call List (DNC) in Canada. As a consumer, you're probably happy. What about advisors trying to make a living? Some are concerned. Others aren't. 

Annoying Pest

You don't want to ignore a phone call at night because it could be important. We'd get calls from fax machines calling our fax machine. We didn't have one. So they'd call back again and again thinking our machine ran out of paper.  

Office fax machines still spew garbage faxes. You pay for the paper and ink. How annoying. There was no easy way to opt out until now. On a random day, I saw 27 wasted pages.

Email spam is annoying but it's easier to filter out --- 33 messages correctly tagged today. 

Telemarketing is the second worst pest. Calls at inconvenient times. Products and services you don't want or need.

Those days are now gone (with some exceptions).

The Most Annoying Remains

There's no relief for the most annoying pest: door-to-door solicitors. Two cute kids rang our doorbell and asked us to buy popcorn to support a cause we never hear about. I took the catalog. How can you refuse? The prices were $45-$55 on the open page. Yikes! Saying no then became easy.

Welcome Guest

You can easily joing the National Do Not Call registry. Online, you enter your phone number and confirm you're a human by typing an onscreen code. Here's the surprise. You don't even need to prove the phone number is yours. If you're not getting enough telemarketing, maybe someone opted you out. An act of random kindness. 

Unintended Side Effects

Before you choose your wish
You better think first.
With every wish there comes a curse.
--- Bruce Springsteen,
With Every Wish

Old techniques like cold calling may be dead. Advisors are generally told that they cannot call on behalf of a company and if they do, they'll pay the entire fine of $16,500 per incident. Ouch! 

Suppose you're my advisor and I give you a referral. If you phone, you're telemarketing and you don't have permission. I'd have to call on your behalf or you could send them a letter. 

Businesses seek ways to encourage you to contact them. We're already smothered by advertising but expect more. From those willing to spend. 


October 19, 2008

Losing Your Livelihood: Insuring Against The Risk

But there's things that'll knock you down you don't even see coming. And send you crawling like a baby back home. --- Bruce Springsteen - When You're Alone

Insurance reduces risk and provides peace of mind. We insure our lives, our cars, our homes. What about insuring our livelihood/income/job? Companies disappear and you could be in the wrong spot. What can you do? You can make yourself more employable by improving yourself. This doesn't guarantee success but certainly improves the probabilities.

In the Harvard Business Review, Janet Banks and Diane Coutu write about How To Protect Your Job In A Recession (September 2008). They have three recommendations
  1. Act like a survivor
  2. Give your leaders hope
  3. Be a team player
Act Like A Survivor
Over the years, I had staff seeking promotions or raises because they wanted more money. Or thought they did great work. Or thought they were indispensable. Those aren't good reasons. To earn more, do more than you're paid for. This applies whether times are good or bad.

Since we see better than we think, impressions can mean more than facts. If we act like winners, we get seen as winners and can become winners. Acting like a survivor helps you survive and become a survivor. Overcoming impressions takes time, during which we can improve our skills.

The Best Tactic
Survivors look forward to the future. The best way is by focusing on your customers, anticipating their needs and then satisfying them. Your customers can be inside or outside your organization. By proving your worth, you build your future at your company --- or another.
When we are no longer able to change a situation, we are challenged to change ourselves. --- Viktor Frankl
How versatile are you? If you've built and maintained portable skills, you're valuable wherever you go. You might even find the courage or opportunity to do something fresh and more rewarding. For years, I developed/launched/marketed life and health insurance products. After "harmonization" into our much larger parent company in 2005, my role became redundant. Although I had no experience outside the "ivory tower", I eagerly switched to working with advisors and clients in the field. This new role is much more satisfying because I'm helping people directly and quickly. 

Give Your Leaders Hope
"The better your relationship with your manager, the less likely you are to be cut, all things being equal. Your ability to empathize can demonstrate a maturity that is invaluable to the company, not least because it models good behavior for others." --- Harvard Business Review, Sept 2008
How true. Leaders are people too. Chopping staff is not easy. As a head office actuary, I had to cut five from my team of ten during integration with the parent. Fortunately, their strong skills helped them land new positions.

Be A Team Player
"While everyone prefers working with a personable superstar to an incompetent jerk, when people need help getting a job done, they'll choose a congenial colleague over one who is more capable but less lovable." --- Sousa Lobo, Harvard Business Review
Likable trumps capable? That's tough to accept. But true. I learned this at The University of Western Ontario in 1984. Of the seventeen graduates in actuarial science, only four of us got job offers. What a shock since grads usually got multiple job offers. Three of us were the top students and got the best offers. The fourth was average but the most likable, which grads with higher grades found "unfair". 

I just checked the actuarial directory and don't see #4 listed. He probably failed the exams that lead to an actuarial designation and quit. Being capable also matters.


October 13, 2008

The Friendly Way: Remember The Milk And Everything Else

[Sep 12, 2009 update: see why Toodledo does more than Remember The Milk]

I can't forget but I don't remember what,
Leonard Cohen

I don't remember, I don't recall.
I got no memory of anything at all.
Peter Gabriel

Life gets complicated and sometimes you forget basics like getting milk. You need a system.

How To Remember Everything
In How To Never Forget Anything Again (4-Hour Workweek blog), you'll find the four essential habits for following a system
  1. Make a note immediately
  2. Use your lists and tools consistently
  3. Make usage quick and painless
  4. Archive and search instead of filing
That post lists various tools, including my favourite task manager.

The Ideal Task Manager
The ideal system for To Do lists must be
  1. inviting (i.e., easy to use)
  2. searchable
  3. accessible anywhere (online/offline, with/without a computer)
  4. automatically backed up for security
  5. sending reminders by email or text messages
  6. creating printable lists
  7. inexpensive
I've used different tools over the years. Paper is certainly available offline but where's your backup and how to you search for items? Microsoft Outlook looks ideal but has limited features and feels cumbersome. Google provides a virtual office with email, a calendar, and shared documents. But no task manager !?!

What can we use?

Remember The Milk (RTM)
Through Lifehacker, I discovered a nifty Australian website called Remember The Milk. With that name and the drawing of a cow, you know you're going to have a nice experience. You're right. Even the font feels friendly.

Other task managers feel daunting and judgemental. When you fall behind, you feel like you're being scolded. As the unfinished tasks pile up, it's easy to get overwhelmed and give up. Not with RTM. The cow is so inviting and nonjudgemental that you feel like coming back and getting on track.

Getting Things Done
There are many other sites that explain how to use Remember The Milk. I wanted to follow the Getting Things Done (GTD) methodology. That means transferring all current and future tasks from my head into a trusted system. RTM "supports the five GTD workflow phases (Collect, Process, Organize, Review, and Do) in a seamless, automatic way" and this article from an expert user explains how.

Key Benefits
You can access Remember The Milk in many ways. I use the website, iGoogle, Google Calendar, Blackberry and offline with Google Gears. When I think of a new task --- even if years away --- I send an email to my RTM Inbox for later categorization. I send tasks to family members and we even haved several folders of shared tasks.

Each morning, I get an email showing the day's tasks. I sometimes printout the tasks for the upcoming week. Beautiful.

The Price Is Right
We actually didn't even have a business model until a year ago, when we figured out that working full-time, unpaid on RTM and spending all our money on hosting infrastructure for a growing service wasn't, like, the most sustainable idea ever. Whoops. --- Emily Boyd, co-founder
You know how the Internet has wacky business models? Well, Remember The Milk offers lots for free and doesn't even have ads. What good is remembering the milk without money to buy any? I upgraded to a Pro account for $25/year for thanks giving.


October 4, 2008

Keeping Promises: Do You Care About Corporate Governance Scores?

Broken promises don't upset me. I just think, why did they believe me?
 Jack Handy

We looked at the top life insurers by revenue, ranked by The Financial Post 500. Financial measures don't tell the whole story. This time we turn to the Globe & Mail which looks at Corporate Governance.

Corporate What?

A prince never lacks legitimate reasons to break his promise  Niccolo Machiavelli
A promise only matters if it's kept. Financial products and services are simply promises. How can you pick the companies most likely to keep their promises to you? You can look at how they are run. The Globe & Mail considers
  1. the composition of the board of directors
  2. shareholding and compensation
  3. shareholder rights
  4. disclosure
The "A" Dozen
A promise made is a debt unpaid  Robert Service
In financial services, only 12 companies score 80% or more in Corporate Governance
  1. Manulife (1st overall)
  2. TD (3rd)
  3. BMO (5th)
  4. RBC (5th)
  5. Sun Life (8th)
  6. TSX Group (13th)
  7. Scotiabank (18th)
  8. CIBC (18th)
  9. Industrial Alliance Group (21st)
  10. Home Capital Group (23rd)
  11. National Bank (30th)
  12. Brookfied Asset Management (45th)
Highest doesn't mean best (recall GM vs BMW) but higher means better. Here's the full list, and a summary in table at the right (click to enlarge). 

Here's the shock. Some big names don't even make the top 100!?!  Maybe Canadians don't care  or are unaware  of the immense swings.


September 28, 2008

The Top Life Insurers: Is Bigger Better Or Best?

I love to freak out salespeople. They ask me if they can help me, and I say, "Have you got anything I'd like?" Then they ask me what size I need, and I say, "Extra medium." --- Stephen Wright

Can you imagine 20,000 employees in a head office? That's what we had at Metropolitan Life in New York City the late 1980s --- then the second largest life insurer in North America. Later at National Life, we had less than 400 employees across Canada.

Does biggest mean best? Does bigger mean better?

When Bigger Meant Best
If size did matter, the dinosaurs would still be alive.
--- Wendelin Wiedeking
Years ago, size mattered. The largest organizations were seen as prestigious, desirable, and the places with the best job security. That was then. Now big means compromise. Big means boring. Wal-Mart dwarfs every company in the Fortune Global 500 for the second year. Now size becomes a hurdle because speed matters more than the brakes of legacy. GM dwarfs BMW, yet nimble BMW ranks as Fortune's most admired car company.  

The Exception: Financial Services
For financial services, scale can benefit you because of the hefty outlays for a sound and thriving operations. Here are the main advantages of size for life insurance
  • greater financial strength (to meet promises, grow and weather economic typhoons)
  • lower unit costs (major investments in costly technology spread over more volume)
  • more security mechanisms (privacy, record keeping, redundancy, disaster recovery)
Because regulations and tax rules vary by country, ownership by a super-sized foreign parent doesn't mean much. The Canadian operations are typically subsidiaries that can easily be discarded with minimal impact on the parent. As protection, regulators require that insurers (both foreign and domestic) keep enough assets in Canada to meet the promises made to you.

The Top Five Insurers
The Financial Post 500 ranks the top insurers in Canada each year. Here are the results for 2007, published in June 2008. Here are the top five by revenue
  1. Manulife
  2. Great-West Life
  3. Sun Life
  4. Industrial Alliance
  5. Desjardins
Here is the top 20 (click to enlarge).

You may be surprised at how small some of the big names are. While biggest doesn't mean best for you, bigger often means better. And more peace of mind.

September 21, 2008

The Dangers Of Visiting OSFI's Website

While writing Oblivion: What Happens If My Life Insurance Company Dies?, I found a potentially harmful website from an unlikely source: OSFI. The Office of the Superintendent of Financial Institutions (OSFI), regulates banks and most life insurance companies in Canada. You'd expect their website to be very safe. Maybe it is. 

The Risks
The new Google Chrome web browser spots problems that other browsers miss and explains their concerns:
Of the 1092 pages we tested on the site over the past 90 days, 304 page(s) resulted in malicious software being downloaded and installed without user consent. The last time Google visited this site was on 09/21/2008, and the last time suspicious content was found on this site was on 09/21/2008. 

Malicious software includes 934 scripting exploit(s). Successful infection resulted in an average of 2 new processes on the target machine.
--- Google 
Here is the screenshot.

Protecting Yourself
You can protect yourself by taking precautions
  • up-to-date antivirus software with Internet security
  • up-to-date web browsers other than Internet Explorer (e.g., FireFox, Chrome, Opera)
  • visiting safe sites
Perhaps there are no risks on the OSFI website. Google may be over-reacting, as when this blog was temporarily blocked as spam

Oblivion: What Happens If My Life Insurance Company Dies?

At bottom, any insurance policy is simply a promise, and as everyone knows, promises vary enormously in their quality. — Warren Buffett, Berkshire Hathaway 2004 Annual Report

Warren Buffett reminds us that an insurance contract is merely a promise on a piece of paper. What happens if your insurer sinks in a financial storm?  Who will honour the promises made to you?

 In Canada, several mechanisms protect you
  • regulators
  • bigger insurers
  • consumer protection
Insurance companies are regulated federally or provincially. OSFI (Office of the Superintendent of Financial Institutions), the federal regulator also monitors the banks. The regulators are concerned with solvency and establish minimum requirements . In practice, insurers set aside more than than the mandated minimums. Naturally, tying up more capital lowers the returns for the owners. This is a reason why large foreign life insurers left Canada for higher returns in other countries. You may remember names like Aetna, ING (NN Financial), Metropolitan Life, and Prudential Insurance.

Bigger Insurers
In financial services biggest doesn't mean best, but bigger often means better: solvency requirements and operating costs become less onerous with size. I worked at the following companies which vanished: Crown Life (into Canada Life), Metropolitan Life (into Mutual Life into Clarica into Sun Life), National Life (into Industrial Alliance).

The insurers backing your insurance contracts may have changed. You probably did not suffer. To protect you, life insurance contracts are generally accountable, which prevents new owners from making changes that the original insurer could not make.

Consumer Protection
If an insurer becomes insolvent, you are protected by Assuris (formerly called CompCorp). This is similar to CDIC (Canadian Deposit Insurance Corporation) for your bank accounts.  Regulators require life insurance companies belong to Assuris (here's a full list of members) and Assuris can increase assessments on the solvent companies. 

Assuris covers a wide range of products
  • Life Insurance
  • Critical Illness
  • Health Expense
  • Disability Income
  • Long Term Care
  • Annuities
  • Segregated Funds
  • Group Insurance
Coverage levels vary. For life insurance, your death benefit is protected up the larger of
  • $200,000
  • 85% of the death benefit
So the most you can lose is 15%. Even that loss is unlikely since your policies will likely be transferred to a solvent company which will honour the original commitments. If you're concerned, you can buy coverage for multiple companies but this quickly becomes impractical: a $1 million death benefit would five $200,000 policies from five separate insurers. What if you need $5 million?

If All Else Fails

CDIC is a corporation of the federal goverment but Assuris is only a nonprofit organization. That means "Assuris may not have the capacity to deal with an external event causing an industry-wide failure." (see Assuris Funding). That may alarm you but would the federal and provincial governments watch from the sidelines if an entire industrial collapsed?

There's no way to guarantee that a promise will be kept. There are mechanisms in place to greatly increase the likelihood. And give you peace of mind.