NOXIOUS CHINESE DRYWALL AND BEYOND

"… toxic Chinese drywall may well become the biggest environmental crisis to hit North American homeowners and builders in decades." — Toronto Star

You may not know much about drywall (I don't) and buy on price. Or maybe your handyman or contractor does that for you. There might be consequences. If you're buying to resell after a renovation, you may not care. After all, if the products are being sold legally, they probably meet mandated standards.

Welcome to Chinese drywall.

Thanks to the US building boom, Chinese drywall started entering the country in 2001. Hurricanes in 2004-2005 contributed to drywall shortages and imports grew. Between 2006 and 2008 alone, enough drywall was imported to build 60,000 houses in 39 states (over 550,000,000 pounds). Hurricanes didn't hit Canada but the bad drywall is here too.

Consequences

The bad drywall emits smelly, noxious gases. The health issues include "fatigue,  difficulty breathing, asthma attacks, sore throats, sinus problems, nosebleeds, runny noses, irritated and itchy eyes and skin, persistent cough, insomnia, loss of appetite, and headaches" (Contingencies magazine). Quite a list.

Non-health issues include copper turning black and powdery. That affects piping, wiring, air conditioners, TVs, video game consoles, fridges and dishwashers. There are other problems too, but you get the idea.

Once the drywall is in place, how can you tell if you got the bad stuff?

Cost Cutting

Companies boost profits by switching to cheaper ingredients and processes. High fructose corn syrup instead of sugar. Veneer instead of hardwood. Plating instead of solid metal. Processed cheese instead of real cheese.
That's okay if you know what you're getting. What if you're not sure or don't understand the long term implications of your decision? Consequences like obesity take years to materialize. We tend to fear the wrong risks (Harvard Business Review).

Closer To Home

Drywall isn't the only way to suffer from shortcuts or lax quality control. We've heard about lead paint in toys (New York Times), melamine in pet food (USA Today) and salmonella in spinach (CBC). I was disturbed by shortcuts at Johnson & Johnson, which used to be reference for putting customers first (Fortune). They recalled 300 million packages in 2010 and another 50 million this month (Reuters).

At least there were big public uproars and quick action. That support is less likely when you're buying intangibles like financial services. Even if you buy a financial product, it's been tailored for you. You probably signed agreements that say you understand what you bought.

If something goes wrong, getting redress takes time and money. Even today, the Chinese drywall makers are still refusing to pay compensation --- and that's when governments are involved.

Links

• Chinese drywall controversy (Wikipedia)
• Chinese drywall makes refusing to compensate US homeowners (Insurance Journal, Jan 2011)
• Tainted Shelter: The dilemma of defective drywall (Contingencies, Jan/Feb 2011)
• Chinese drywall creating crisis (Toronto Star, June 2009)
• Physical products vs. financial products
• Why J&J's headache won't go away (Fortune, Aug 2010)
• The unexpected costs of home ownership
• Fearing the wrong risks (with examples)
• image courtesy of Contingencies (Jan/Feb 2011)

Podcast Episode 102 (4:11)

direct download | Internet Archive page

PS Remember asbestos?

THE GLOBE & MAIL ON CANADA'S INSURANCE LOOPHOLE: WHAT ELSE IS WRONG?

"Once licensed, a life agent is not subject to any mandatory industry oversight, which differs significantly from all other sectors of the financial services sector [such as] property and casualty insurance, securities, mutual funds and real estate."
— Gerald Matier, executive director of the Insurance Council of British Columbia

That quote comes from a detailed investigation into the mysterious world of life insurance by the Globe & Mail. Do read through Canada's insurance loophole for yourself.

Silence Condones

Those in the insurance world rarely take a public stance before an issue arises or even afterwards. Silence is a lousy option. I've asked for help for years. Here are two examples.

• 2007: Refuting myths about universal life insurance
• 2009: Squawking about life insurance

I no longer bother asking but do what I can. Here are my thoughts on matters that aren't widely discussed.

No Education Required

When we bought a Toyota 11 years ago, the manager said that new salespeople must have university degrees. Why? Because consumers were more educated and demanding.

Even today, there are no educational requirements to get a license to sell life insurance. You don't need to graduate from university, college or even high school. Your language and math skills aren't directly tested. In Ontario, you write a multiple choice exam with 140 questions. Get 55 wrong and you still pass.

I've written lots of exams but the Life Licence Qualification Program (LLQP) is the most bizarre and degrading. You're forced to take a course and pass a trial exam before you're allowed to write the provincial exam. I went through this process last year. At the trial exam, one candidate said he'd already failed six times. At the real exam, there were candidates who'd already failed more than once.

Candidate Conduct

Here's the degrading part. There are rules for candidate conduct. Here's an excerpt from the FAQ.

The following will not be tolerated either during the exam sessions or while communicating with any of the administration staff: swearing, raised voices, threats of violence, physical confrontation. 

Candidates are expected to arrive at the exam session dressed "business casual" and cleaned as if they were attending a client's home. 

During the exam, candidates are expected to restrain from making distracting noises and actions that may be considered in poor taste by the general public.

Aren't those rules common sense? Yet there must have been enough issues to warrant writing them. There are even explanations for the rules. For instance, the dress code is in place to "afford a level of professionalism … and to show respect for the other candidates". Guilty until proven innocent.

No Training Provided

Entering a field without experience is fine but there's little training for rookies. Where help is available, the trainer wants to be paid. Whatever happened to mentoring?

The rookie's initial prospects are friends and family. In a sense, the trainer is paying the rookie for access to them during joint sales calls.

Heaped Compensation

Rewards affect behaviour. Insurance advisors receive most of their compensation at the time of sale. This puts the emphasis on selling you new insurance and replacing old coverage instead of servicing what you already have. How is that in your long term interest? Client satisfaction surveys routinely show that you aren't getting the level of post-sales service you expect.

Complicated Products

Insurance combines the worlds of risk, accounting, investing and law. That's very sophisticated and requires a team approach (see The Financial TRAIL). Using a team creates two problems for you

• cost: advisors are reluctant to pay, which restricts the quality of expertise you get
• bias: if your advisor gets free help from a specific insurer, there's an obligation to sell that company's products

Poor Explanations By Insurers

Insurance companies are out to make money for their shareholders. Do you think they spend their marketing dollars on low revenue products? Do you think they disclose all  the drawbacks? Do you think all the advisors selling the products have a sound understanding?

This week, I saw an odd presentation on how to use a retirement income calculator to sell investments. A case study was used. The assumptions weren't clearly stated and seemed biased. As you might expect, the high compensation solution "won".

The presenter had no handouts and even refused to email attendees a copy of the presentation for review. No reason was given. Instead, you could get training on how to use the tool. That nicely deflects the responsibility for usage and results to the advisor.

No Public Hangings

The investment world actively polices, penalizes and publicizes. Here are several examples from this week.

• $1,000,000 fine for poorly documented third-party arrangement (Jan 20, 2011)
• $400,000 fine for firm and two reps (Jan 21, 2011)
• $75,000 fine for mutual fund salesman (Jan 21, 2011)
• $50,000 fine and permanent ban in misappropriation case (Jan 17, 2011)

You need to see the tricks advisors use and boundaries to product conduct. The life insurance world combines low barriers to entry, heaped commissions and complicated products. There's bound to be trouble. Where are the public hangings?

My Mission

I've tried to act as your advocate by giving you insider insights. Here are some posts over the years.

2007

1. How to pick an advisor: chemistry and credentials (my second post ever)
2. Does Warren Buffett "buy term and invest the difference"? (an emotional and ongoing question)
3. The Financial TRAIL to taming your financial risks (picking the right resources)

2008

1. Keeping promises: do you care about corporate governance? (an important but overlooked consideration)
2. The two drawbacks of investing in life insurance (yes there are issues)
3. The top five insured strategies (the classics lack sizzle but still work)
4. The top insurers: is bigger better or best? (the financial meltdown)
5. The pros and cons of financial leveraging (there are two sides)

2009

1. How advisors fool you (and what you can do) (be forewarned)
2. Why you can't buy on price (there are differences)
3. Why financial literacy eludes us (there are reasons)
4. Secret 7: The best tax sheltering in Canada (did you know?)

2010

1. How advisors really prepare term life insurance quotes (you might be surprised)
2. What to do when your term 10 rates are about to spike (a case study)
3. Three keys to getting your insurance claim paid (widely overlooked yet more important than price)
4. Does your advisor have these three elements? (a quick check)
5. The foolproof measure of trust (the best check I've yet found)

I'll continue in 2011. It would be so helpful if others would participate in this process of educating.

Links

• Through Canada's insurance loophole (Globe & Mail, Dec 10, 2010)
  • Response from The Financial Advisors Association of Canada (Advocis, Dec 18, 2010)
  • The ketchup is out of the bottle (Jim Ruta, Dec 21, 2010)
• LLQP FAQ (Durham College)
• What your insurance broker doesn't want you to know (Globe & Mail, Dec 21, 2010)
• Insurance regulator aims to close the wholesaler loophole (Globe & Mail, Feb 13, 2011)
• Why after-sales service stinks for life insurance (new)
• The word advisors imply but dare not use
• image courtesy of Carole Nickerson (Halifax, Nova Scotia)

Podcast Episode 101 (8:19)

direct download | Internet Archive page

PS The next post will be shorter!

HOW TO FIGHT CYNICISM

There are good people in the world. They help for free. Children believe that and so can we. They aren't scammers. There aren't enough of them. Treating people as guilty until proven innocent is an understandable defence mechanism. Yet that mindset has unpleasant side effects.

I encountered cynicism three times this week, once warranted and twice unreasonable. That's because those two times were directed at me. Here's what happened.

WARRANTED

Banks have strict compliance requirements that lead to conformity and blandness. That doesn't stop their commissioned employees from making outlandish statements to get clients. Here's an example.

An investment advisor told a large room that he's unique because he cares about your money. (I bet he cares more about his own. Disparaging his colleagues and competitors didn't elevate him. He provided no proof.) He said he had unique strategies we won't find elsewhere. Example: income splitting. (That's vanilla in countries around the planet. As a minimum, other advisors in his branch and the numerous other branches offer the same things. Compliance demands uniformity over creativity.)

There's more. He forgot to bring a door prize but would personally deliver one to the winner's office. I heard snickering. If he's that forgetful, how can you count on him? If he's trying to dupe us with an outdated sales trick, you can't believe him. Bad intent means no trust. We won't get fooled again. Saved by cynicism.

UNWARRANTED

This week, I had two speaking gigs, both abut marketing. The audiences were advisors (insurance and/or investments). Why was I helping potential competitors? That's a way to show gratitude for the help I've received.

I had nothing for them to buy. No books. No coaching. No marketing support. Attendees wouldn't be put on a mailing list, phoned or contacted in any way. I doubted anyone wanted life insurance from me. Normally, that makes more credible but in each audiences, several attendees kept searching for the catch. They felt there had to be one and kept prodding.

What was in it for me? Apart from helping them, I had the opportunity to practice an  updated presentation. Attendees could only pay with their attention, applause and feedback. The majority did.

FIGHT BACK

Please don't be cynical. Look for the good instead. We find that which we seek. If you start looking for red BMW convertibles, you'll start seeing them even in winter (though the tops will be up).

Believe until you have proof of deceit. By paying attention, you'll spot tricks faster. You'll also find some genuine people. That's worth the effort.

Links

• Two ways to show gratitude
• How advisors fool you (and what you can do)
• How "Do Not Spam" laws help and hurt you
• image courtesy of Annie Andre (California)

Podcast Episode 100 (3:37)

direct download | Internet Archive page

PS Leave your wallet at home or be especially wary when you bring it.

TWO WAYS TO SHOW GRATITUDE

It's the damage that we do
And never know.
It's the words that we don't say
That scare me so.
— Elvis Costello, Accidents Will Happen

This post is about the good we do and never know. And the words we could say to make it show.

Here are two simple ways to show gratitude.

1. Say thanks
2. Help others

Even a lollipop can mean lots. Drew Dudley explains in a short captivating talk at TEDxToronto.

Lollipop Moments

Leading With Lollipops–Drew Dudley | TEDxToronto

Say Thanks

You didn't have to make it like you did
but you did but you did
and I thank you.
— ZZ Top, I Thank You

The people who help you rarely know their impact. How could they? If your inspiration came from a book or recording, you may never have met them. Yet you can easily thank them privately by email or — better still — online where others can see and share their sentiments.

If you're trying to contact a famous celebrity like Warren Buffett, Richard Branson or Peter Gabriel, you may have trouble reaching them. Instead, share their messages and support their causes. Search this blog and you'll see I've mentioned those three numerous times.

Warning

Don't gush. Be sincere. Where possible, make suggestions that may help your mentors.

Don't immediately ask for more help either. Your request may be small but you don't know how many others are in the queue. I get requests from people who feel entitled to my time. That's not how you get help from a stranger.

Remember that attention spans are short and you may be contacting someone who's busier than you are. If your message is lengthy, put a summary at the top.

Help Others

Tony Robbins says that when he's in restaurants these days, someone will offer to pay for his meal. He wonders where those people were when he was hungry and broke. Why not help people when they need you?

Generosity is a more powerful form of gratitude. You can and probably do help others in many ways. Feedback is an excellent gift and here's how to give it.

Don't expect thanks. When it comes to that, intentions dwarf actions. Yet giving makes you a better person. That's the real prize.

Why This Post?

Two reasons from this week. I was awarded the Golden Crab Award by Paul Nazareth. That's an example of Saying Thanks. Seth Godin wrote about the marks we leave behind . This post is an example of Helping Others.

Links

• Soles and How To Give Feedback (Seth Godin)
• The 2010 Golden Grab Awards (Paul Nazareth)
• How to get free help from a stranger
• How to find a mentor for free
• image courtesy of Kate Ausburn (Australia)

Podcast Episode 99 (3:24)

direct download | Internet Archive page

PS Transform Thanksgiving from a holiday to a routine part of your life.

YOUR FAVOURITE POSTS OF 2010

Welcome to 2011. As usual, let's start by reviewing what you read here on Riscario Insider in 2010.

Overall

After nearly four years, blogging feels like a normal part of life. In that sense, 2010 felt "routine". Long time readers may have noticed the blog redesign by thirtyseven interactive, the first since the launch in 2007.

The Top 10 Posts

Here's what you read most.

1. Quotes related to The Seven Habits of Highly Effective People (#2 in 2009)
2. Iron Man didn't save Leslie Bibb but another superhero did
3. Does Warren Buffett "Buy Term and Invest The Difference"? (#3 in 2009)
4. Toodledo does more than Remember The Milk
5. Three keys to getting your insurance claim paid
6. Six basic fears from 70 years ago [Napoleon Hill] (#4 in 2009)
7. Secret 7: The best tax sheltering in Canada (#5 in 2009)
8. The most dangerous part of driving
9. PersonalBrain 5: Data to information to knowledge (#1 in 2009)
10. Dealing with the staggering cost of dementia

Five of these posts were also in the top 10 for 2009 and four (#2, #5, #8 and #10) were selected by Rob Carrick for his Personal Finance Reader in The Globe & Mail.

Work A Peek

These 2010 posts didn't make the most read list but may interest you.

Various

1. Why I finally joined Toastmasters
2. TED to TEDx to TEDxToronto
3. Highlights from Maker Faire Detroit
4. How to visit India
5. You (yes you) are a genius [The Linchpin Session from Seth Godin]

Life Insurance

1. Three reasons life insurance prices are shooting up
2. The fine print taketh away … except in life insurance
3. Case study: What to do when your Term 10 rates are about to spike
4. Lease or buy? How life insurance compares with getting a car
5. How advisors really prepare term life insurance proposals

Financial

1. The foolproof measure of trust
2. 13 questions to evaluate an investment that's "too good to be true"
3. Three ways for hockey players (and you) to save for retirement
4. Do financial doctors make as many mistakes as medical doctors?
5. Donation guidelines from Warren Buffett, Bill Gates and Melinda Gates

The Top 5 Podcasts

If you prefer, you can listen to podcasts. Here are the top five.

1. Does billionaire Seymour Schulich help you "Get Smarter"?
2. "The Snowball" rolls into Warren Buffett (#1 in 2009)
3. PersonalBrain 5: Data to information to wisdom (#2 in 2009)
4. The three major obstacles to growth according to Brian Tracy
5. Outliers by Malcolm Gladwell: Mastery plus Opportunity trumps Talent (#4 in 2009)

The Top 5 Countries

You read from 128 countries (down from 139).

1. Canada: Toronto, Vancouver, Calgary, Ottawa, Edmonton
2. United States: New York City, Los Angeles, Chicago, San Francisco, Houston
3. United Kingdom: London, Manchester, Edinburgh
4. India: Mumbai, Bangalore, Hyderabad
5. Philippines: Manila, Mandaluyong, Ceby

Sources of Traffic

1. Search engines: 53% (up from 48%)
2. Referring sites: 22% (down from 40%) [main sources: Globe & Mail, Canadian Capitalist, Canadian Business]
3. Direct: 20% (up from 14%)

I spent less time time leaving comments on other blogs and this shows in the lower referrals. When you leave conversations, you get forgotten.

Keywords

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

1. 7 habits of highly effective people quotes
2. seymour schulich
3. toodledo vs remember the milk
4. quotes from 7 habits of highly effective people
5. 7 habits quotes
6. warren buffett life insurance
7. quotes from the 7 habits of highly effective people
8. 6 basic fears
9. personalbrain 5 review
10. pros and cons of financial leverage

Notice the variations of "7 habits" and "quotes"? Different paths lead to the same destination.

Browsers Used

1. Internet Explorer: 44% (down from 59%)
2. Firefox: 32% (down from 34%)
3. Chrome: 12% (up from 2%)
4. Safari: 9% (up from 2%)

Operating Systems

• Windows: 83% (down from 85%)
• Macintosh: 11% (down from 12%)
• iOS: 3% (up from 0.2%)
• Linux: 2% (unchanged)

Screen Resolution

• 1280x800: 20% (unchanged)
• 1024x768: 18% (down from 23%; was 35% in 2008)
• 1280x1024: 13% (down from 15%)
• 1680x1050: 9% (unchanged)
• 1440x900: 8% (down from 11%)

Mobile Devices

About 3.5% of you are visiting with your mobile devices.

1. iPhone (54%)
2. iPad (17%) [longest visits]
3. iPod (11%)
4. Blackberry (8%) [shortest visits]
5. Android (6%)

In all, Apple devices account for 82% of mobile visits. I'm glad I don't use Adobe Flash anywhere.

Links

• Your favourite posts of 2009
• Your favourite posts of 2009 for entrepreneurs
• Your favourite posts of 2008
• Your favourite posts of 2008 for entrepreneurs
• image courtesy of Billy Alexander, Charlotte, North Carolina

Podcast Episode 98 (8:33)

direct download | Internet Archive page

PS There won't be as many statistics in the next post.