June 27, 2009

The Effect of Banks Selling You Insurance Online

Rules that restrict a consumer's ability to access information about insurance don't make sense, and it's certainly not in the consumer's interest to try to put new roadblocks in place. --- Canadian Bankers Association, June 2009

Isn't it nice to know the bankers are looking out for you?

The Canadian Bank Act prohibits the sales or marketing of insurance in branches. Naturally, independent advisors like this but banks don't. Now banks can sell insurance online because a website is technically not a branch. That's great news for banks because most Canadians already bank online --- 53% in 2008.

Let's look at what banks are likely to do online and the effect on you.

What Would Banks Sell?
Banks can now integrate links to their insurance offerings into their main bank websites. That's gold. This is much like Microsoft making Internet Explorer the default web browser in Windows. You could still install other browsers but most users didn't bother. The arguably superior Netscape Navigator browser eventually got destroyed. In a similar way, the banks will get lots of insurance traffic.

What would you buy online? Probably simpler products that don't require the expertise of an advisor. Perhaps term life insurance. If you have questions, you could probably phone a call centre to get answers.

For tax planning with insurance, you probably want to meet a qualified advisor in person. However, you may want to do some research online. You won't find much. Perhaps the banks will help here.

As we've seen in the past, banks dominate and take over entire sectors. Remember the days of separate trust companies and stock brokerages? Some banks now own insurance companies too. The sun continues to rise.

Who Suffers?
Independent advisors face the biggest challenges. Research routinely shows that families are underinsured. Independent advisors have difficulty reaching them. Insurance sales are labour-intensive, which encourages advisors to focus on larger cases and more expensive types of insurance which pay higher compensation. This is not meant as a criticism, but a reflection of economic reality.

Banks argue that they could help the underinsured if only they could sell insurance in their branches. After all, who doesn't have an account with a bank? Banks have systems and procedures to handle small, low revenue transactions like selling GICs. If you want to invest $1,000, an independent advisor would spend more in time and gas than they could earn. You might prefer to transact online because your time is also valuable. That's where large organizations have a huge advantage.

Big Deal?
Banks already sell insurance through subsidiaries conveniently located near their branches. If you invest with a bank-owned stock brokerage (e.g., BMO Nesbitt Burns, CIBC Wood Gundy, RBC Dominion Securities, ScotiaMcLeod, TD Waterhouse), you may already have been approached. I help insurance specialists at these firms as well as independent advisors every day.

Do You Win?
As a consumer, you probably win as the insurance companies and independent advisors react. You may have concerns about your privacy and how the bank uses information about your health, though. You may feel pressured to buy insurance as an implied condition or getting a mortgage, say. Don't count on lower prices. Banks are better at making money for their shareholders than saving money for their customers. Aren't most businesses like that?

Perhaps insurers will help advisors create meaningful websites to give you online alternatives. Maybe more advisors will --- alone or as part of teams --- build useful websites and send you meaningful emails. Here "meaningful" means genuinely helping you in a non-self-serving way. There's too much fluff that teases but doesn't help: you are asked to contact the advisor without knowing enough to gauge whether you think they can help you.

I'm currently running a four part series to help advisors implement eNewsletter campaigns that genuinely help you and comply with anti-spam laws.
When insurance and banks are mentioned in the same sentence, opinions vary. You can get different perspectives from the links below. Your comments are welcome.

Podcast Episode 25 (5:43)

direct download | Internet Archive page

June 20, 2009

How "Do Not Spam" Laws Help and Hurt You

There are people who would like to get rid of minimum wage. But we have to have it, because if we didn't some people would not get paid money. They would work all week for two loaves of bread and some Spam. --- Chris Rock

We don't want to be paid in Spam (canned, spiced ham) or pained by spam (emails we didn't agree to receive).
Canada is the lone G8 country without anti-spam legislation, and in 2007, was ranked number six in a list of top 10 worst countries for originating spam.
--- Canadian Lawyer
In 2008, Canada ranked #4 on the Spam by Originating Country list, according to Cisco. Spauhaus, a nonprofit that tracks spam, doesn't include Canada in the top 10. The United States "wins" in each survey.

Better To Give Than Receive
Let's not quibble over which country spews the most spam. Let's turn to us, the recipients. We can take precautions by using anti-spam filters and email services that weed that garbage out. Gmail and Kaspersky Internet Security work well for me.

Like the Do Not Call lists which prevent unsolicited phone calls, Do Not Email rules are a great idea. Some argue that honest small businesses can get hurt inadvertently. How?

Let's look at an example. Financial advisors who serve you well are already send you timely, meaningful email. They have your permission and won't be affected by the new rules. In practice, very few independent advisors send out email or newsletters, which creates opportunities for their larger competitors.

If you can't be contacted directly, advisors might to advertise to you or attract you in other ways. Ads in old-world media --- tv, radio, newspaper, flyers, billboards --- aren't targeted and get lost in the clutter. Money gets wasted as the wrong people get interrupted.

Targeted online advertising can work well. Think of Google Adwords. You get unobtrusive ads related to what you're seeking at exactly the right millisecond. Nice. Unless you use adblockers like the free Adblock Plus for FireFox. Then you're on your own Do Not Advertise list.

A Better Way
There's an even better way. Advisors can create quality content. Say you want to know what Warren Buffett thinks about buying term life insurance. Type in "warren buffett term insurance" in Google, Bing or Yahoo. You'll get links to my 2007 post that currently ranks higher than BBC News, Bloomberg, CNBC, Marketwatch.com, Wikipedia and even Berkshire Hathaway (where I pulled Warren's profound quote).

Discovery trumps advertising any day. Discovery is free. Any advisor can make themselves easy to find. Advisors then switch from annoying pest to welcome guest.

Why Aren't More Advisors Online?
Books are the last bastion of the old business model—the only major medium that still hasn't embraced the digital age. Publishers and author advocates have generally refused to put books online for fear the content will be Napsterized. --- Clive Thompson, Wired 17.06
We go online for information, but meaningful objective financial information can be difficult to find and hard to understand (especially for the life insurance strategies the wealthy use).

Advisors are reluctant to put meaningful information online. They're afraid that competitors would steal their best ideas. In contrast, authors and bloggers share their best to get read. Recently, Darren Rowse posted 31 Days To Build A Better Blog day by day for free at Problogger. Then he started selling a nicely formatted, expanded ebook, which some (like me) bought for the convenience.

The mystique that advisors create works against them because you can't gauge the quality of what they offer without getting personally involved --- a big commitment of your time and a loss of privacy.

Not all unsolicited email is bad. You lose when something valuable doesn't get through. Do Not Spam laws will protect your privacy. What's next? How about saving trees with Do Not Junk Mail rules?

June 13, 2009

The Three Major Obstacles to Growth according to Brian Tracy

The more you learn, the more you can learn.
—  Brian Tracy

And the more you can earn.

Brian Tracy spoke live in Toronto at a private fundraiser this week. My son Jeevan wanted to attend and so did I. We talked to Brian briefly afterwards. I thanked him for teaching me about affirmations in the early 1990s in The Phoenix Seminar.

If you've seen Brian live, you know how entertaining he is. A spoonful of humour helps the lessons go down. Brian dishes out spoon after spoon, lesson after lesson.

Brian identified three major obstacles to growth
  1. the comfort zone
  2. learned helplessness
  3. the path of least resistance
Naturally, he shared solutions too.

The Comfort Zone
Did you exchange a walk-on part in the war for a lead role in a cage?
—  Pink Floyd, Wish You Were Here
Getting into our comfort zone is much like sliding into a warm bath. Soooo tempting. So difficult to leave. How much time do we spend on Entertainment vs Education? For many, that's not pleasant to contemplate. I see many people who aren't more capable now than last year, five years ago or 10 years back. So much wasted potential.

How much do we spend on our mobile phones and cable/satellite tv? Probably much more than on educational material. Ignoring the cost, consider the time spent. This can be scary.
Move out of your comfort zone. You can only grow if you are willing to feel awkward and uncomfortable when you try something new. —  Brian Tracy
We can escape the gravitational lure of our comfort zone by having a Big Hairy Audacious Goal (BHAG). This phrase was coined by Jim Collins and Jerry Porras (authors of the classic Built To Last). Here are examples from Wikipedia.

Learned Helplessness
I think I can. I think I can. I think I can. I know I can.
— The Little Engine That Could
If you say "I can't", you're thinking like a victim. You're giving up internally. You're not betting on yourself. In this phase, we tend to surround ourselves by other losers. The joy of shared misery.

There are lots of examples. A baby elephant tethered to a pole tries to break free but can't. An adult elephant can escape but doesn't try.
thanks, for the trouble you took from her eyes
I thought it was there for good so I never tried.
--- Leonard Cohen
Sometimes we need help to escape from our chains. We might even have the key, but didn't know.

The Path of Least Resistance
Water takes the easiest route. Like water, we're lazy too. Unfortunately, what's valuable doesn't come easily.

We can break the habit of laziness through repetition of something worthwhile. Good habits take as much effort to acquire as the bad ones. Brian reminded us that we all work on commission: we're paid in proportion to our results. We want to add more value.

Brian was also promoting iLearningGlobal.tv (iLG) a website offering videos, audio and ebooks on a monthly subscription. There's also an affiliate program if you're looking for ways to make more money. Thankfully, there were no demonstrations or pressure to join. This made us more interested but we left without making a firm decision.

Brian Tracy is well worth seeing live. You'll laugh. You'll learn.


June 7, 2009

"The Snowball" rolls into Warren Buffett

How much do you know about Warren Buffett's life? My family knew primarily of his staggering wealth. We knew little about his older business partner, Charlie Munger, or Astrid, the companion his wife Susie found for him.

In The Snowball: Warren Buffett and the Business of Life, Alice Schroeder paints a captivating, detailed portrait of the man and key people in his life. The audiobook read by Kirsten Potter runs 37 hours and took three months to finish. This extended listening enhanced the experience and made Warren feel like a part of our lives.

Biographies provide valuable insights into interesting lives. Warren authorized this one and participated. Does that mean the whole story is rosy? No. If there were two conflicting views of a happening, he asked that the less flattering version be used. Alice reveals many blemishes in her quest to help us understand him.

Much of Warren's appeal comes from his wealth. As a person, he's unusual. He brought Moody's manuals on his honeymoon. He doesn't eat a balanced diet and doesn't like to try new food. He neglected his family. He doesn't live a lavish life.

He made investment mistakes over the years. For example, he bought shares in waning textile company Berkshire Hathaway and had an agreement to sell them for $11.50. When the deal got changed to $11.375, he bought the company in retaliation and to his detriment.

Born At An Early Age
Warren focused on making money during childhood. At age 6, he started selling chewing gum. He got inspired by a book called A Thousand Ways To Make $1,000. That's $1,000,000. While in high school, he earned more than his teachers by delivering newspapers. He understood that a dollar today multiplies over the years through the magic of compound interest. This made him reluctant to spend. This made him reluctant to donate until his death, since he wanted to leave a larger sum.

Warren recognized the role luck played. He knew his life would have been very different if he were born at another time or in another country. He wanted to help others who were not as lucky at the Ovarian Lottery. He preferred giving advice over money.

Warren improved over the years. He made the world better for small investors. He supported Main St over Wall St. His actions encouraged better corporate governance. He stuck to his principles for decades.

Warren helped make the world better. What more can you ask? He's changed the world of philanthropy. He doesn't want his name on buildings or scholarships the way many others do. He's happy to donate to The Bill and Melinda Gates Foundation with the stipulation that his annual contributions be spent that year.

The Snowball won't make you a billionaire but you will be richer. Highly recommended (especially the unabridged audiobook).

Podcast (13:04)
Bonus: includes interviews with Jeevan and Sharmila, who also listened to the full 37 hour audiobook.