October 30, 2011


piggy bank can't escape 500x735You have a better probability of finding Sasquatch than a taxpayer eager to pay more tax (unless you're in Warren Buffett's locale). We hunt for effective tax strategies but our savings reduce what the government collects. Win/lose or lose/win.

Canada Revenue Agency (CRA) interprets the tax laws to identify potential under-payers. If you make the list, they’ll let you know. You can appeal their decisions and ultimately the courts decide who is right. CRA has a huge advantage since few are willing or able to go to court.


How does CRA operate? Two insiders shared their insights at a CALU technical session last week:
  • Susan Gulliver worked at CRA for 36 years — her last 23 in Aggressive Tax Planning. She spent 15 years on the GAAR (General Anti-Avoidance Rule) Committee. She's now a Senior Tax Advisor at PricewaterhouseCoopers.
  • Dan Rivet has been at CRA for 17 years. He's on the GAAR Committee. He is the Manager of the GAAR, Inter-Provincial Tax Avoidance and Technical Support Section. How do you fit that on a business card without abbreviations?
I spoke to both briefly. In 2009, I met Donald Bowman, the former Chief Justice of the Tax Court of Canada. I need an autograph book!

Identifying Issues

How does CRA identify the issues which concern them? There are five key ways:
  1. requests for rulings
  2. conducting regular compliance audits and finding practices of widespread concern
  3. attending conferences and seminars
  4. reading published articles
  5. participating internationally; e.g., in the OECD and the Joint International Tax Shelter Information Centre (JITSIC)
These sources are certainly reasonable. Let’s explore further.

Ruling Requests

If you ask for a ruling, you might change your mind and withdraw your request if you sense the decision might be unfavourable. While ignorance can be better than knowing for certain, CRA does not forget. Withdrawn requests go to the GAAR Committee for review. Lesson: If you'd rather not know, don't ask.

Ruling requests could be misused. Apple and Samsung are busy suing each other and already have 21 lawsuits pending around the world. Let’s turn to tax strategies. Suppose your company is a laggard losing sales to competitors or a leader staving off competition. Maybe you could get request a ruling anonymously (e.g., through a lawyer?) and withdraw your request to trigger a GAAR review. That’s nasty but might work, if structured properly.

Public Sources

CRA has been accused of not understanding industry practices, violating the 5th habit of the highly effective: seek first to understand and then to be understood.

Professionals require continuing education credits to maintain their designations (100 hours every two years for actuaries). Why not attend industry conferences and seminars? CRA staff are doing that and reading articles. While this may look like snooping, the purpose is to learn.

The wealthy reveal how their advisors fail them. Click to read.There are also internal courses. Some advanced courses are taught by outside instructors who don't have biases or conflicts of interest. That’s ideal. If you rely on financial advice from commissioned salespeople, be wary (e.g., read the wealthy reveal how their advisors fail them).


We might not like what CRA does but now we have a better understanding of the inner workings. Before using a strategy that looks “too good to be true”, ask yourself how CRA may react (and these 13 questions). Happy tax planning!


Podcast 141 (5:23)

direct download | Internet Archive page | iTunes

PS Has your opinion of CRA changed over the years?

October 22, 2011


advisor and client?Wealthy clients keep getting interviewed about what they want from their advisors and aren't getting. The advisors keep getting reminded but do they change?

Survey Says

The ideal advisor ...
  • discloses fees: 94%
  • understands your life and financial goals: 94%
  • engages in open and honest dialogue: 84%
  • has professional designations: 77%
You probably agree. These findings are from a new informal survey of 40 wealthy investors. The results may also apply to other types of advisors.

The most interesting results are quotes from the participants. We’ll look at the main issues raised


If your advisor is focused on making money today, you won't get much attention unless you're buying now. Your past purchases won’t entitle you to ongoing service or attention. That’s short-sighted but does happen.

Here are quotes from the survey
  • "He doesn't take the time to explain things thoroughly" [expedient; may not know how]
  • "He provides responses that I think are general to his client list" [cheaper than personalized attention; the responses might be prepared by the advisor’s firm, which makes them even more generic]
  • "There's not enough contact." [cheaper to ignore those who aren't buying]
  • "There's lack of communication." [cheaper, may lack communication skills. especially when writing]
  • "I'm just a number [to my advisor]" [and that’s not Number One]
  • "She acts like she has no time for me" [why are you paying her?]
  • "She doesn't get back to me when I have a question" [why are you paying her?]
If you get more service at Starbucks, you’ve got a problem with your advisor. You are paying your advisor directly or through hidden fees. You deserve to get what you’re paying to get.


Advisors can be salesy because they are typically paid based on what they sell
  • "I get too many emails" [This comment may mean too many messages of the wrong type. If your advisor uses social media, you decide what you want to receive and how often.]
  • "There's a conflict of interest between how they are paid versus my best interest (life stage, fit, superiority of product, personalized to my needs, etc)" [why do you tolerate this?]
Be alert for hints of conflict of interest. More revenue for your advisor means less benefits for you. Advisors are not fiduciaries required to put you first.


  • "I'm not able to reach him in difficult times" [why do you tolerate this?]
  • "He may retire before I am finished with his services" [You’re paying but your advisor decides how long to keep you? That’s backwards.]
If your advisor shows no concern for your future well-being are they treating you well today? Like everyone else, advisors do retire, get sick, die and get disabled. A well-run practice will have plans in place for these contingencies.


More quotes
  • "He doesn't learn from mistakes"
  • "He justifies his actions as "unforeseen events""
You’ll easily find advisors who are slow to learn and quick to shift blame for bad news. By staying and paying, you are condoning their actions. Maybe you’re not learning. There may be a gap in your expectations and what your advisor can realistically deliver. That’s a communication problem.


"He does not always speak in layman's terms."
You'd expect communication to be a core skill, especially when Canadians suffer from innumeracy (financial illiteracy). Skills vary. Some advisors seem brilliant ... but are difficult to understand. Some are clear but … have nothing to say. Practice helps both extremes.

Advisors can hone their communication skills from listening to writing to speaking at Toastmasters. That's an ideal environment to get feedback on the clarity of their messages.

Communicating clearly takes more skill. The first step is having a detailed understanding and the next is to simplify. Do you recall The Seven Habits of Highly Effective People by Stephen Covey? That's the second half of 5th habit: seek first to understand then to be understood.


You'd hope that advisors understand you. That's the first half of 5th habit: seek first to understand then to be understood.

If you aren’t confident that your advisor understands you, how can they truly help you. There are oodles of advisors but only one you. They need you more than you need them.

We've discussed advisors before. The simple answer is that the ideal advisor has three elements: chemistry, credentials and generosity. What do you think?


Podcast 140 (6:25)

direct download | Internet Archive page | iTunes

PS Advisors would serve you better if they read the Seven Habits and applied them.

October 16, 2011


Blackberry broken
broke BlackberryHave you given up on Blackberry after this week’s outages?

Even the backup systems failed — hardly what Steve Jobs would call “buttoned up”.  According to eWeek, “RIM couldn't have mismanaged customers' expectations more poorly if it tried.”

My family ditched all RIM products last month due to other failings. Our decisions may help you upgrade too.

The Perfect Smartphone

The perfect smartphone would combine the iPhone’s ease of use with Google’s cloud-powered data management and Blackberry’s keyboard. That’s not available but there are reasonable substitutes.

Why Bye Bye?

As a Canadian, I'm supposed to be a loyal and rabid Blackberry user. I've had three over the years and never liked them.

In 2003, I had an excellent an excellent mobile solution:
I got "upgraded" to a monochrome Blackberry with horrible screen resolution and disappointing phone quality. Two steps back.

The next model had colour but was thick. The scroll wheel broke twice. Still no touch screen. I had problems synchronizing emails with Microsoft Outlook. This never got resolved fully and may not have been RIM’s fault entirely.

Bold 9700

When I left the corporate world in Nov 2009, "Blackberry" still meant "business". I got the just-released, limited-supply Blackberry Bold 9700.

The trackpad was a huge improvement over the scroll wheel but I've had continual problems.
  1. Battery: The battery didn’t last the day if I made phone calls. What good is that?
  2. Calendar: Google powers my mail, calendar and contacts. The sync with the Blackberry got progressively worse. In recent months, entries made on the Bold had to re-input online.
  3. Contacts: Contacts didn't sync well either. I had numerous multiple entries and no simple way to merge them.
The web browsing is painfully slow and the screen is miniscule. And still without the touchscreen I used to have in 2003. RIM introduced new Blackberries in August but they aren't impressive. I'm not willing to risk more misery. These days, smartphones require apps (contrary to outlandish statements from RIM). That's where Apple and Android shine. The LinkedIn app came last to Blackberry last.

iPhone or Android?

Since I'm a big iPad fan — my first-ever Apple product --- I wanted to get an iPhone. The problem is the keyboard. There isn't one. I don't like typing on the screen even with an iPad. I wrote this draft using an external keyboard.

The biggest problem is with the iOS email client. It's not great even with this week’s release of iOS 5.
The final problem is with apps. I'm used to the ones on my iPad. Some are universal, which means I could use them an iPhone too. With Android, I'd need to find new ones. That's time consuming.

The Winner

Motorola Droid 3 / Bell XT860I decided to get the Motorola Droid 3 (called by XT860 by Bell Mobility). It has a physical keyboard with a separate row for numbers — extremely useful.

The phone can be turned into a WiFi hotspot, which means I can (and did) ditch my MiFi device.

The biggest advantage is tight integration with the Google apps I use daily: mail, calendar and contacts. I'm planning to use Google+ more. I especially like the way photos get uploaded instantly (but don't go live until you approve them).

The bonus? Voice quality. I've had numerous voice-only mobile phones over the years. I found that Motorola had the best voice quality.  I’m happy this time too. Even Skype works well, which saves on mobile minutes.


Here's what the rest of my family got and why:
  • Jeevan (son) - Samsung Galaxy S2: the latest, greatest, fastest (21 Mbps), biggest screen (4.3")
  • Sharmila (wife) - iPhone 4: most like her new iPad 2
We are all happy … for the time-being.


Podcast 139 (6:00)

direct download | Internet Archive page | iTunes

PS If you're upgrading your smartphone, what are you picking?

October 8, 2011


Steve Jobs on why we're hereWhen they built you, brother,
they turned dust into gold.
When they built you, brother,
they broke the mold.
— Bruce Springsteen

How fickle we are. How quickly we forget.

We were terrified by 9/11 but now it's 2011. This week, we're shocked by the death of Steve Jobs. Next time, something else will jar us.

Each time, we Think Different for a bit. We're tempted to do something that matters but life gets in the way. Our most vivid memories fade. Routine returns to rule. We become part of the conforming crowd in the ‘1984’ commercial. But only with our consent and inaction.


We love talking but talk alone doesn't improve our lives. Or the lives we care about. We must act. We're surrounded by uncertainty. Each breath could be our last. Let that knowledge empower us. Not immobilize.


They say you can't take it with you,
but I think that they're wrong.
'Cause all I know is I woke up this morning,
and something big was gone.
— Bruce Springsteen
Steve Jobs died at 56. He had pancreatic cancer and stepped down from running Apple just weeks ago. His death still came as a shock around the world.

Steve was relatively young. He could get the best health care in the world but his $6.7 billion couldn't buy him good health. Isn't that a valuable lesson?

As a Buddhist, Steve would have a theoretical understanding of mortality. In 2004, cancer gave him a personal perspective. He saw that his own life was finite. He shared his experiences at Stanford in 2005. His speech is well worth (re-)watching or (re-)reading … after you finish this post.

Buttoned Up?

"My doctor advised me to go home and get my affairs in order, which is doctor's code for prepare to die. It means to try to tell your kids everything you thought you'd have the next 10 years to tell them in just a few months. It means to make sure everything is buttoned up so that it will be as easy as possible for your family. It means to say your goodbyes."
— Steve Jobs (2005)
Is your life "buttoned up" now while you have time to prepare? Steve didn't need health insurance to cover his hefty medical bills or disability insurance to replace his lost income. Steve didn't need life insurance to provide for his family. Few of us can say the same.

Suppose Steve wanted insurance. Too bad. You can only get coverage when you don't need any. You buy insurance with your good health.

Unless your health is improving, waiting until tomorrow is always worse than applying today. Getting approved can take months. If your health changes while you're waiting, you may be required to pay more — if you're even insurable. I'm working on a case right now where no coverage is available at any price.

Steve did more than button up for his family. He also took care of Apple. That’s called succession planning and is easily mangled, especially by small business.


"No one wants to die. Even people who want to go to heaven don't want to die to get there. And yet death is the destination we all share. No one has ever escaped it."
— Steve Jobs (2005)
We keep seeing the importance of planning but seeing isn't doing. We can focus on our circle of influence. Do what you can, while you can.

Yes, there's always tomorrow, but not necessarily for us. That's why what we do today matters so much. The winter chill is on the way. Are you buttoned up?


Podcast 138 (5:06)

direct download | Internet Archive page | iTunes

PS Steve, thanks for making our lives better.

October 1, 2011


Last time, we wondered if your advisor is sleeping on the job. Let’s explore the extreme. What happens to you if your insurance advisor dies?

Not much.

Your policy is a contract with the insurer. They'll keep their obligations as long as you pay your premiums. Default actions take place if you die without a Will. Ditto for your advisor. Your policy may be an "orphan" until another advisor takes over.


If the new advisor paid to buy the block of business, there is an incentive to sell more insurance to current clients. In a way, the new advisor bought a client database and some residual income. The real revenue comes from new sales.

If you don't already know the new advisor, there's not much advantage to using them. The dead advisor's firm might even get rebranded, which removes links to the past you may have valued.

What if the new advisor got the business for free? Again, the real revenue comes from new sales.

Premature Death

Anyone can die unexpectedly. That's the reason for insurance. If your advisor passes away prior to age 60, a successor may not be in place. If the advisor worked for an insurance company ("captive agent") or bank (an employee), the transition is easy. Ditto if that advisor worked as part of a team and you were served by different team members. The challenge is with an advisor who served you solo — even if they were part of a team.

Normal Death

Since advisors help you prepare for the future, you'd expect them to have succession plans in place well before retirement. You might be surprised ...

There are many reasons planning gets ignored. Here are some
  • death seems so far away
  • the current business is not well-organized or well-maintained (hard for anyone to takeover or agree to a high purchase price: outdated systems, lack of modern marketing using social media)
  • the seller feels the business is worth more than buyers are willing to pay
  • the seller feels the business will be worth more next month, quarter, year, … (as with real estate)
  • the seller is unwilling to let go (wants to remain involved, which can create conflicts)
Also, agreements fall apart. There's the whole problem of trust. There needs to be a smooth transition where the seller introduces the buyer to current clients and the buyer becomes the primary contact. This process can easily take years.
The Seller's Fear
The seller faces a fear: the buyer could take some of the best clients without completing the sale. During this phase, revenue is likely increasing since the clients are getting more attention and opportunities to buy. Relationship are also shifting to the buyer.
The Buyer's Fear
The buyer faces a fear too: the seller could change the sale date, terms or price (because the business is likely growing). There's also the problem of liability. What if the seller has lousy files, provided poor service or sold the wrong products? The buyer probably has the liability for what was done before.

When the seller is retiring, the clients could easily be of retirement age too. Maybe they have all the insurance they're ever going to buy. Their children may have their own advisors. The buyer may not get or retain as many clients as anticipated.

Legal agreements are designed to prevent these kinds of games but lawyers are expensive. I have seen situations where the sellers have taken advantage of the buyers — using them as cheap labour to revitalize the business and then not completing the sale.

Relax … At First

You don't need to worry about squabbling between the buyer and seller since your contract is with the insurer. However, your service may suffer during the transition.

Afterwards, count on attempts to sell you new coverage.

It's tough to sell consumer products you wouldn't buy. That's why asking advisors about their own coverage won't tell you much. Since they buy at a discount, they will likely have plenty. Instead, ask your advisor: "What happens to me if you die today?"


Podcast 137 (5:25)

direct download | Internet Archive page | iTunes

PS Be especially wary if you're encouraged to replace old products with new ones.