March 31, 2012


hand it over ... nice and slowIf you want to win the lottery, you've got to buy a ticket. These three entrepreneurs didn’t put the odds in their favour. One is established, another is starting and the third is planning. Let’s look at the impressions and lessons they provided without even knowing.

The Established Entrepreneur

The 50-something entrepreneur was speaking on a panel. She had 25+ years of experience in different ventures. Afterwards, a fellow speaker asked for her business card. She had none left. Why? She didn't bring many.

She didn't even ask for the other speaker's business card. He may have been  a potential client or centre of influence. We never know who knows who. Or who needs what when.

Impressions: this entrepreneur didn't look prepared or interested in getting new business. That's hardly a model to follow.

Lessons: carry extra business cards. If you don't have any left, get business cards from people asking for yours and send them an email afterwards. (I didn’t say these lessons are tough.)

The Newbie Entrepreneur

These days, entrepreneurship looks glitzy and perhaps more stable than working for a megacorp. This 20-something newbie MBA was exploring an international market niche with promise ... and established competitors. What made her different and trustworthy? This wasn't clear.

Age can be a handicap. Young may signal inexperienced. Old may signal outdated. Or the other way around. For instance, you might prefer a young social media whiz but an older advisor.

If you're on the wrong side of a stereotype, you need to find a way to show why you're the one to choose. Otherwise, you might educate but not get business.

This newbie had no business cards ... yet. She's not on LinkedIn. She has no visible digital tapestry. If Google can't find her, how can potential clients? Why would they bother?

Impressions: Properly printed business cards are cheap and still essential. If you're starting out, all you need on them is your name, phone number, email address and where to find you online (e.g., your personal website or LinkedIn profile). No business card = not serious.

Lessons: get your own business cards. Get enough that you feel compelled to hand them out because you have such a stock. I order 1,000 at a time.

The Future Entrepreneur

This 30-something MBA is working at a major bank and wants to make the transition from employee to entrepreneur. However, he had no business ideas. Not a single one.

We exchanged business cards. I offered to connect on LinkedIn but he's afraid to put a profile there. He thinks company policy forbids that. Is that possible? A LinkedIn profile is your personal resume. Would you want to work for a place that controlling?

Impressions: If you can't spot an opportunity, are you really an entrepreneur? If you chose to work in a megacorp rather than a smaller, more innovative company, perhaps you're too risk averse to succeed on your own.

Lessons: Keep your eyes open for a competitive advantage. Ideas are cheap. What can you do that makes you the best in the world? For success, you need to pick a niche that's small enough for you to dominate. If you're removed from the world of entrepreneurship, find a way to get closer to entrepreneurs. Learn from what they do. You may need to change your job and take on risk. Entrepreneurship requires sacrifices.

Room For You?

These entrepreneurs gave us lessons that they themselves haven’t mastered. Be alert and you’ll find lessons abound. As Yogi Berra said, “You can observe a lot just by watching.”


Podcast 162

direct download | Internet Archive page | iTunes

PS What are your thoughts on entrepreneurship?

March 24, 2012


trap?Opinions on whole life insurance get fiery. Advisors who sell it tend to be older. Whole life was probably the first product they sold. They've learned how to position it and deal with objections. They've convinced themselves of the merits. Criticize whole life and you're in for an argument.

Over the years, advisors have said that whole life pays higher compensation than any other life insurance product. Let’s ignore that. Let’s get to the core question: why do you buy insurance? To transfer risk to the insurer.

Whole life transfers risk back to you. Is that what you want?


Tax refunds feel nice but why do you get them? Because you overpaid. Insurance dividends feel nice but why do you get them? Because you overpaid.

With participating whole life insurance, you pay more than the insurer needs. The insurer conservatively projects mortality claims, expenses and investment earnings. If actual mortality claims are lower, you get a dividend. If expenses are lower than projected, you get a dividend. If investment earnings are higher than expected, you get a dividend. That's nice but there's the other side.

Your dividends could be lower than you expect. Here are three examples.
  1. AIDS: in the 1980s, AIDS became a concern for insurers who sold guaranteed products. There was no problem with par whole life since higher mortality claims simply meant lower dividends. If Hollywood is to be believed, there are epidemics and scourges waiting for us. With whole life, you get to share in the cost.
  2. Y2K: upgrading computer systems was pricey. With whole life, higher expenses simply mean lower dividends. Who knows what might lead to higher expenses in the future?
  3. Investments: with whole life, you're stuck with the returns on the investments the insurer selected. Maybe you wouldn't have done better but you would have had choices. If you’re not good at deciding, your advisor is there to help you.
Rather than return your premium overpayments to you, your advisor may encourage you to spend on more insurance. If you'd like to cancel your coverage, you'll be offered "nonforfeiture options", which are other ways spend your money the insurer instead of getting it back.

The Evolution

Whole life is an expensive black box. Clients and their accountants were looking for products which were transparent and cheaper. The solution was universal life, a combination of life insurance and investments. In essence, you're "buying term and investing the difference". You're also getting guarantees. Typically, you know the mortality rates and expense charges. As with whole life, the investment returns are unknown but now you and your advisor get to choose from the choices available. Premium tax rates may not be guaranteed.

With universal life, you win if actual mortality rates or expenses are higher than projected. The insurer wins if mortality rates or expenses are lower. Doesn't this give insurers an incentive to guarantee inflated rates?

They can try, but there's competition with other insurers, whole life and "buy term and invest the difference". Also, mortality has been improving and technology reduces costs. The projected savings can be factored into the guarantees.

In Canada, most insurers have stopped selling whole life insurance. Instead, the market has shifted to term life and universal life.


With tax, you or your accountant can calculate the costs. You're cannot verify or calculate a dividend. You're trusting the insurer, possibly for decades. Do you? The financial sector is the least trusted in the world … again.

Some insurers selling whole life rank low in corporate governance, a measure of keeping promises. I have a fondness for London Life because their coveted London Life Actuarial Scholarship helped pay my way through university. However, 1.8 million policyowners have not fared as well. In a class action, Great-West Life and London Life were ordered to pay $455.7 million for violating the Insurance Company Act and general accounting principles. An appeal court confirmed the decision but reduced the settlement to $220 million.

Companies change their behaviour. This week, RBC and TD announced they are ending free bank accounts for their older clients --- even if they’re been clients for decades. It's easy to change banks accounts. Right now, BMO, CIBC and Scotiabank still have free ones.

With insurance, you can’t easily switch. You undergo new underwriting and may face tax on the cancelation of your old plan. All that assumes you’re still insurable.

Stay Away?

Whole life insurance may may sense in some situations. If guarantees are important to you, ask an advisor you trust for other options before you decide


Podcast 161

direct download | Internet Archive page | iTunes

PS What are your thoughts on whole life?

March 17, 2012


Pyramid of money?
Pyramids look wonderful … as you get to the top. But
  • there’s not much room at the top
  • the journey isn’t easy
  • not everyone likes heights
The masses at the bottom do the work and hold up the structure. Why? Perhaps they’re drawn by the lure of riches. Perhaps they’re forced as in Orwell’s 1984.

If you’re a slave, you may wish to be the master. That won’t end slavery or the plight of the slaves. You might not enjoy the riches unless you ignore the source.

Something For Nothing

A high civilization is a pyramid: it can stand only on a broad base; its primary prerequisite is a strong and soundly consolidated mediocrity.
--- Friedrich Nietzsche
We know of people who are much more financially successful than we are. They seem to enjoy pleasant lives and probably do. Their rewards look outsized. Why can’t we make a fortune … without the risk and hard work?


They say the Pharaohs built the pyramids. Do you think one Pharaoh dropped one bead of sweat? --- Anna Louise Strong (1885-1970)
Did you ever get caught up in a chain letter? You send a dollar to someone higher up, add your name to the letter and send copies to your connections immediately. Eventually your rank in the pyramid grows and you start receiving dollars too. At least that’s the promise. Those who don’t participate get bad, bad luck. The chain has both carrot and stick. Did you earn enough to cover the cost of postage?

Pyramids are based on false expectations of rewards. The risks get downplayed. The work looks trivial. Besides, you’ll get trained. Success seems guaranteed. We look like fools if we don’t participate (and perhaps like fools if we do). All we need is a credit card. We’ll earn the money back in no time.

Even big institutions get fooled. TD Bank has set aside $255 million for the pyramid-like Rothstein scam.

Multilevel Marketing

The current legal version of pyramid structures is often called multilevel marketing (or less descriptively as network marketing or referral marketing).
“MLM companies have been a frequent subject of criticism as well as the target of lawsuits. Criticism has focused on their similarity to illegal pyramid schemes, price fixing of products, high initial start-up costs, emphasis on recruitment of lower-tiered salespeople over actual sales, encouraging if not requiring salespeople to purchase and use the company's products, potential exploitation of personal relationships which are used as new sales and recruiting targets, complex and sometimes exaggerated compensation schemes, and cult-like techniques which some groups use to enhance their members' enthusiasm and devotion.” --- Wikipedia
Does any of that sound familiar?

The real rewards often come from recruiting. That takes real work and is difficult to sustain. Yet we want to believe we have a reserved spot on an express escalator to the top of the pyramid. That makes us vulnerable and later less trusting. And less trusted.


Podcast 160

direct download | Internet Archive page | iTunes

PS You may have better luck with a franchise or lottery tickets.

March 10, 2012


"To get an autograph, get back in line."

I'm practicing that sentence to deal with my soon-to-grow legion of fans.

This week, I was interviewed on camera for the first time. The clip is about the length of a TED Talk. The program is Liquid Lunch with Hugh Reilly and Sandra Kyrzakos on The show runs from noon to 2 PM on weekdays. You can watch live or on YouTube later.

First Time

I haven't been interviewed on camera before. The idea used to scare me. This time last year, I couldn't bear to see myself on camera.

All that changed because of Goodyear Toastmasters. I'm glad I finally joined. That's where I practiced and got the feedback I needed to improve. My confidence grew.

This week, I also did my 10th and final speech in the Competent Communicator manual — exactly 15 months after my first speech.

All Revved Up

I was ready to get interviewed but where?

Hugh and I were panelist at Networking For Entrepreneurs and Freelancers last month. These quarterly events are hosted by fee-only financial consultant Neil Jain at Money Life Skills (website) and Paulina Lysy (LinkedIn profile) of Southern Exposure Renewable Energy.

Our topic was social media. As a blogger and podcaster, I'm a strong believer. Hugh took a contrary view, which lead to an excellent discussion. Afterwards, Hugh invited me on Liquid Lunch. Opportunity welcomes the prepared.

The Interview


I want to get better at video production. I've volunteered to help at Rogers Community TV. There's a one year commitment … and a long waiting list.

If we meet and you'd like an autograph, please be patient. And get back in line.


Podcast 159

direct download | Internet Archive page | iTunes

PS To improve your speaking, read the Goodyear Toastmasters blog where I'm the editor and a contributor

March 3, 2012


house of ponziIn a Ponzi scheme, money from one set of investors gets paid to another set of investors. That’s illegal because participants are getting duped about the source of the money.

Former lawyer Scott Rothstein has been jailed for 50 years for his $1.2 billion scam in Florida. You'll find details on Wikipedia.

Fooling people is easier when you've got credible parties involved. Accountants. Lawyers. Banks.


TD Bank has set aside $255,000,000 to deal with their role in the Rothstein Ponzi scam.  In January, a jury ordered TD to pay $67,000,000 to Coquina Investments. This week. TD agreed to pay the Razorback Group an estimated $170,000,000.

This post isn't about a particular bank but big financial institutions in general. One bank seems like another. There’s no solid reason to think that a different bank would have acted differently.


Imagine if financial institutions became advocates for the victims and set things right quickly. Imagine if they told us what went wrong and the new precautions they are now taking.

That wouldn't be good for business. Or would it?

Warren Buffett admits his mistakes (Forbes). In this video he confesses to a $200 billion blunder.

Imagine if such candor were common.

Employee Fraud

Large institutions have vast resources, sophisticated systems and other safeguards. Their employees still manage to commit fraud — sometimes for years. Here are examples from a quick web search:
Employee fraud may be a much bigger problem than a rare external Ponzi scheme.


There’s a region between advocacy and fraud. What’s legal may not be quite right. Look at the Rogers/Bell attack ads. That’s big business versus big business. What about big business versus you?

When large institutions are selling to you (say investments or insurance), who is safeguarding your interests? If problems arise, what can you do? If there's a big problem that also affects other clients, the media may become interested. If the activities were illegal, the courts can step in.

In real life, what happens if you alone have a dispute with a large institution? Who's looking out for you then?


Podcast 158

direct download | Internet Archive page | iTunes

PS Are you concerned more about Ponzi scams or employee fraud?