August 25, 2012


Lance's new wheelsIncentives affect behavior.

Lance Armstrong wanted to win but doping got in the way. Jonah Lehrer wanted to rule the book/speaking circuit but plagiarism and lies got in the way. Your advisor has goals too but do you know what gets in the way?


Success attracts sponsors
  • Nike for Lance Armstrong, Tiger Woods, Lolo Jones
  • Condé Nast (publisher of Wired and The New Yorker) for Jonah Lehrer
  • Big firms for advisors with sales ability
It’s difficult for the sponsors to admit their mistakes. You could predict Nike’s pledge of ongoing support for Lance who helps by claiming he’s innocent.

Outsized Rewards

Incentives encourage bad behavior — especially when winners get outsized rewards. Being the fastest cyclist in the Tour de France means something. Number two may try harder but why would we pay them with our ever-so-scarce attention? There’s such pressure to win … at all costs.

Lolo Jones had sponsors like Red Bull and Oakley but didn't win a medal in the 2012 Olympics. Practicing 12 years for a 12 second race and losing? That's not compelling. Sponsors may stick by her until the 2016 games or start looking for more promising prospects.

Cheating doesn't seem as serious a crime as getting caught — especially if competitors might be flexible with the rules. Unfortunately, passing a drug test does not prove innocence.

Smaller Rewards

Advisors at large firms are commissioned employees. They have rules to follow. In exchange, they get the support of a big brand. How is their performance measured? Revenue, rather than service. They have pressure to perform. For them, doping mean selling products which generate higher revenue (e.g., mutual funds instead of ETFs, whole life insurance instead of term life). They might not make you aware of less expensive alternatives, especially if they don't sell them.

The Truth

The truth about what Lance did may never be known. The suspicions will remain and taint the innocent.

While the financial sector ranks at the bottom in trust (Edelman Trust Barometer 2012), there are good advisors and good firms. The onus is on them to show they are exceptions. We can't spot the worthy without transparency. This starts with the advisors.

Penn and Teller reveal the magic behind the magic as only insiders can. Advisors can be transparent too. They can reveal the tricks and show that they don't use them. For instance, by
  • showing what they are licensed to sell
  • showing all forms of compensation they receive (including referral incentives)
  • showing the magnitude of the compensation (e.g., a pie chart showing the percentages from different sources)
  • showing what others leave out
Actions like these remove doubts about whether an advisor is on your side. The same goes for celebrities, athletes and politicians. As an insider, what did Lance do spotlight and stamp out doping by other cyclists?

The Saddest Part

As spectators, we reward the best. As consumers, we compromise. We'll pick an advisor without knowing their performance. Yet an advisor has a much bigger impact in our lives. We don't need the best in the world, but what's wrong with rewarding advisors who are among the best in serving their clients where you live?


Podcast 183

direct download | Internet Archive page | iTunes

PS Lance could apologize and tell the truth.

August 18, 2012


"We regret the duplication of material"I'm very disappointed by Jonah Lehrer. He was called the next Malcolm Gladwell (though not by me).

I looked forward to his articles in Wired. I recommended his two latest books: How We Decide (Amazon) and Imagine: How Creativity Works (withdrawn from circulation).

Jonah’s move to sister magazine, The New Yorker, in June was impressive.  His plagiarism wasn’t. He resigned (or got fired) on July 30th for lying.


Jonah is only 31 and had a bright future … until … he was found guilty of self-plagiarism. What's that? Normal plagiarism means passing off someone else's work as your own. That means self-plagiarism is passing off your work as your work.

What's wrong with that?

I'm also guilty of self-plagiarism since my ideas build upon themselves. Creativity is iterative. When I speak, there’s often overlap with content I've used before. Springsteen performs songs over and over but audiences love that.

Professional writing is different. When a publication pays a writer, they expect an original article. That's fair. As an interviewee, you can keep saying the same or similar things. As a paid writer, you can't. Understood.

Even so, there were no sanctions against Jonah. The New Yorker added a disclaimer to the less-than-original articles to say that some content was recycled.


Jonah concocted Bob Dylan quotes for Imagine. That’s bizarre because Bob isn’t core to the book. That’s also risky because Bob has devoted fans. Michael Moynihan investigated. Jonah finally admitted his lies. Hero to zero.


Lavin continues promoting JonahJonah’s gone from The New Yorker. Let’s call that his decision. Imagine has been withdrawn and you can return your copy for a refund. Over 200,000 copies were sold. That’s many readers fooled.

However, the Lavin speaker’s bureau hasn’t made any corrections or withdrawn his page. What Jonah did may not matter to them but his speaking engagements are getting cancelled. For example, he won’t be talking  to students about ethics at Earlham College next week (Forbes, Aug 1, 2012).


misleading websiteStrangest of all, Jonah makes no apologies on his own website.

Jonah still says he’s a writer for The New Yorker. He’s not.

He still says his book is available for sale. It’s not.

You won’t find any apologies on Twitter either. Why not?

Book still shown on Jonah's website


Why wasn’t Jonah caught earlier?

He has written for well-known publications with journalists who know how to investigate. He has lots of content that’s available online for easy review.

Maybe there was scrutiny in his early days and less as he established himself. Bad habits can develop …
No apology on Twitter

The Consequence

We trust less when we see mainstream examples of deception. That’s a huge and unwelcome tax.

What will be uncovered next?

As Warren Buffett says (or is said to have said), “There’s never just one cockroach in the kitchen”.


Podcast 182

direct download | Internet Archive page | iTunes

PS There are lots of kitchens to inspect.

August 11, 2012


Michael Phelps wins again
The Olympics reward top performance in standardized competitions. How would your advisor fare?

The Current Measure

Advisors get ranked primarily on sales. They may get rewarded with bonuses and conferences, where permitted.

For insurance, there’s the Million Dollar Round Table (MDRT) which requires verified 2012 income of:
  1. “gold” (Top of the Table): $924,000 (in US dollars)
  2. “silver” (Court of the Table): $462,000
  3. “bronze” (Million Dollar Round Table): $154,000
Earnings are not the best way to measure advisor performance. That’s like ranking movie quality by box-office receipts for the year. The winners would include Pirates of the Caribbean  2 (2006), Die Hard 3 (1995) and Harry Potter 1 (2001).

Better MeasuresOlympics first place

Where would you like advisors to excel? Yesterday, a Pollara survey identified the top three ways:
  1. Trustworthiness and honesty (89%)
  2. Level of knowledge (88%)
  3. Experience (83%)
Let’s create competitions.

Tests of TRUST

Measuring trust takes more than a stopwatch. Claims won’t do. To judge, we need evidence of past and ongoing actions. The same goes for honesty and ethics.

Last month, in a survey of advisors, “24% say they believe that financial services professionals may need to engage in unethical or illegal conduct in order to be successful”. What’s worse, 26% said “they had observed, or had firsthand knowledge of, wrongdoing in the workplace.”

How can we measure trust? Perhaps via the new prescription for trust, which focuses on chemistry, credentials and congruence.

Tests of Knowledge

In school, our book knowledge was tested regularly. In our online world, knowing details isn’t as important as knowing where to find the answers. A simple web search may be enough. Olympians invest in themselves massively despite diminishing returns.
  • Problem solving: for the scenario provided, what solution does the study material recommend?
  • Compare/contrast: for example, for different forms of advisor compensation
  • Ongoing education: what takes place and where's the proof; show hours of study per year

Tests of Experience

Experience comes from applying book knowledge in actual cases. Advisors who learn from the past can adapt to our changing world. Olympians practice and practice even when they'd rather not.
  • Problem solving: for the scenario provided, what real-world solution would different advisors provide (an amateur can only parrot what the books say)
  • Learning: how have the answers changed from five years ago (e.g., newer, cheaper investment options may be available; the last financial crisis may have had an effect)
  • Communication: explain a complex topic in accurate and understandable language (e.g., the effect of deducting investment expenses daily, the fine print in a contract, what's really guaranteed)
A blog is an easy way for advisors to show experience and generosity between competitions.

Drug TestS

What would disqualify an advisor from competition? Misconduct makes the list. Regulators catch some. Here are three of the recent examples:
Client dissatisfaction could disqualify advisors. For example, how much service gets provided after the commission dollars are spent? Anonymous surveys could be used. The Ontario Securities Commission (OSC) is starting to contact clients directly as part of routine compliance reviews.

The Winner

There’s no charge for watching the Olympics. There’s no charge for screening advisors. The cost comes from picking a loser or sticking with a loser. With some diligence, you win.


Podcast 181

direct download | Internet Archive page | iTunes

PS What would you add?

August 4, 2012


The government can't tax the growth that's compounding inside youWelcome new readers (and hello to regulars).

Maybe you found me from The Globe and Mail article actuary invests in himself, which Larry Macdonald wrote in the Me And My Money feature. Thanks for dropping by.


I was pleasantly surprised to get published. Someone interviewed me in 2008 but my answers were too boring to print (see how an actuary invests).

Larry MacDonald is a former economist who now manages his own portfolio and writes on investment topics. He is the author of several business books, including corporate biographies of Nortel and Bombardier. Larry MacDonald writes Me and My Money, blogs and tweets. He asked a list of standard questions about investing. As I answered, I realized that my biggest investment was in a nonfinancial asset: me.

Dare I give unconventional investment advice?

I did. Larry asked probing questions for clarification and wrote an article that’s much better than my raw answers. I hope you'll see the merit of improving your skills to increase your earning potential and employability.

Why You?

The financial sector is messed up and remains the least trusted in the world (Edelman 2012 Trust Barometer). We keep seeing why

In the two months post-IPO, Facebook has dropped to half the price and now admits to some 83 million fake accounts (Irish Independent). The Libor scandal has cost Barclays $451 million for interest rate manipulations (Bloomberg). HSBC is facing $2 billion in penalties for money laundering ($700 million) and mis-selling financial products ($1.3 billion) (The Guardian). In Canada, mutual funds have high investment expenses.

We have concerns but can’t do much about them. Keep investing but also look at what Stephen Covey calls your circle of influence.

When you invest in yourself, you've got complete control. You can learn for free online. How can you possibly lose when you’re improving your skills and apply them where others can see?
An Example
Opportunity prefers the prepared.

In my case, blogging made a huge difference in finding newer and bigger revenue streams. Actuaries aren’t trained to communicate but I decided to learn. That lead to speaking opportunities (see YouTube), media attention and clients. Getting nominated for a 2011 Business Excellence Award from the Toronto Board of Trade doesn’t hurt either.

All this arose from investing in myself. Your mileage may vary.

My Story

I’ve worked exclusively in the world of life and health insurance. I designed products (10 years) and then helped advisors sell them (5 years). I saw --- maybe you do too --- that advisors vary immensely in
  • their skill to do the work 
  • their will to put your interests first
Who was protecting you? How could you spot a great advisor?

I thought advisors could  demonstrate their skill and commitment to serving you by blogging regularly. To show them how, I started Riscario Insider in Feb 2007 when blogging was relatively novel in the financial sector. Years have passed. Where is your advisor’s blog?
Readers started asking me to review and fix their life and health insurance coverage. That’s the sole focus of Taxevity, launched in 2009.

Selected Posts

You may like the most-read posts of last year. Here are some from this year:
  1. The word advisors imply but dare not say
  2. The lure of “exclusive” financial strategies
  3. How to spot biased referrals
  4. The new prescription for trust
  5. Looking beyond TD Bank and the Rothstein Ponzi scam
  6. The perils of multilevel marketing and whole life insurance
  7. The new list of best/worst jobs
  8. Three powerful protectors against corporate misconduct
  9. Keeping promises when no one’s watching
  10. Why insurance advisors also sell investments
  11. Why advisors become advisors
  12. How to repay a nonfinancial debt
  13. When your advisor is on vacation
  14. How your brain works against you

Other Resources

If you like what's here, you’ll find @riscario on Twitter and the podcast on iTunes. You can also subscribe to the free newsletter.

If you're interested in marketing, check out the Marketing Actuary blog and @mActuary. The current post is bad business lessons from the Olympics.

If you care about trust, follow @trustandyou --- all trust, all the time. You'll find more about me on LinkedIn and at

Finally, if you're looking for an independent review of your life and health protection, join others and visit Taxevity.

Podcast 180

direct download | Internet Archive page | iTunes

PS Investing in yourself is also a risk-free form of leverage.