November 24, 2012


Any size?Don't get too worried about financial literacy. Improve all forms of literacy. Compare what’s said with what’s implied. Seek to understand the fine print. Look for what’s left out.

With practice, you can.

It's Financial Literacy Month. It's also Pizza Month. Let's combine both and look at your Pizza Literacy. We’ll examine a flyer I received. The name of company doesn’t matter since you’ll find similar approaches taken by others.

Any Size

pay more for lessYou can get any size of pizza for $14.99 (including three toppings, two cans of Coke and one dipping sauce). Tax and delivery is (as expected) extra.

Merriam-Webster says that ANY means EVERY: “used to indicate one selected without restriction; <any child would know that>.”

Here ANY SIZE means Small (10”), Medium (12”) or Large (“14”). Extra-large (16”) costs $15.99 and Party Size (15”x21”) isn’t available. How’s that for playing with words?
If you’re paying $14.99, you get the most value with the Large pizza. If you buy Medium or Small, you overpay. Why would the pizza chain make this inane offer? Perhaps some customers get fooled and get a Small for the price of a Large. What’s left over, you can reheat and eat later.

Say you pick Large. You can’t tell how much you’re saving because the regular price isn’t shown anywhere in the flyer. Our Costco has nice 18” pizza with three toppings for $13.99.

No Toppings For The Price Of One

no toppings for the price of oneHere’s another offer.

This time you have a choice of pepperoni or cheese for $4.99 (walk-in only). Since pizza comes with cheese, they're saying you have a choice of one topping or none. If you get cheese, you're paying more — unless they pile on more cheese.

Trans fat

How much trans fat?Saying "no added trans fat" is not the same as "no trans fat". Maybe there's already trans fat in some of the ingredients. If so, how much? Why can't that trans fat be removed too?

Also, making the pizzas fresh doesn’t mean the ingredients are fresh, organic or free of preservatives.

True Price

area of a circleGrocery stores show the price per unit. Say dollars per pound or per 500g. That helps you compare different packages.

With pizza, there's no unit price. There’s no standard size for a slice. The flyer shows that a Small pizza has 6 slices (13.1 square inches) while a Large has 10 (15.4 square inches). In the offer, the smaller slice costs $2.50, while the larger slice costs $1.50.

Fine print

chili fine printThe offers are subject to expire without notice. Why? If a pizza chain runs out of pizza, they've got big problems. Maybe they're saying that if mistakes that hurt them are discovered, the offer gets pulled.

The coupon implies you can get chili for $1 but the fine print says you’ve got to buy one chili at full retail price first. There’s no mention of how much chili you get or the price.

The coupon is valid from Monday to Sunday. Doesn't that mean everyday? Maybe not. The Beatles sang about Eight Days A Week. Maybe there's an extra day we don't know about.


donatingCompanies like to show they’re doing some good with the money we give them.

This chain has raised over $1 million. That’s great, but over what time frame? Over a month is much more impressive than since inception, which could be years or decades. Saying “proceeds will be donated” implies the money was raised now. Maybe the money was raised in the past but never paid out.

Generosity is better measured based on what you give from what you have — donations as a percentage of pretax earnings. Among US companies that give the most in 2010 (Forbes), Kroger is #1 with 10.9% and Whole Foods is #10 with 3.4%.
There’s no mention of how much gets donated per purchase.

Hungry For More?

The pizza flyer leaves out important information. Wouldn’t you like to know the ingredients, calories, sodium, cholesterol and fat? Maybe those details are (buried) on the website.

The flyer raised other questions but you get the idea. It’s easy to get less than you expect if you don’t pay attention. Imagine what happens with complex financial products like investments and insurance.
“the quality of advice you get from a financial adviser is likely to be tied directly to your financial literacy” — SmartMoney (Apr 2012)
Get more literate.


Podcast 196

direct download | Internet Archive page | iTunes

PS I feel like having pizza

November 17, 2012


What's Plan B for James Bond?Now see James Bond in his most deadly role ever, INSURANCE AGENT: No one gets out alive.

In the 00 section, the mandatory retirement age is 45. What happens then? Sherlock Holmes became a beekeeper. That doesn’t look like the fit for James Bond.

A secret agent knows about life and death. Why not become a life insurance agent? You may think that’s too boring but Ian Fleming said:
“I wanted Bond to be an extremely dull, uninteresting man to whom things happened.” (Wikipedia).
Surely insurance is dull enough. Let’s examine the fit.


James is extremely well-trained and resourceful. He's required to  stay fit and up-to-date. That's how he got his 00 designation and keeps it.

Advisors can get designations but are allowed to sell without them. For life insurance, the test has multiple choice questions. Even then, too many fail. Primerica has a novel solution: make the tests even easier (Wall Street Journal, April 2011). Imagine M asking for less skilled agents.


James gets gadgets from Q and learns how to use them. He also has support from M (unless he's disavowed and getting shouted at).

An advisor gets presentation tools that make what's sold look ever-so-enticing. There are even iPad apps. When there's a live case, there's lots of support available to help with the closing. The only tough part is getting the prospect.

The Real Boss

James is an agent for his employer MI6. Although he's paid by the taxpayers, he doesn't work for them directly. His cheques are signed by M. James is a fiduciary for M.

An insurance advisor is an agent for the insurer. Although you pay, the cheques are signed by the insurer. An advisor isn't a fiduciary.


James has a license to kill. He’s ordered to get results by any means, even if questionable.

click to read: Tom Hanks is a victim of a huge insurance scamAn advisor has a license to sell. Results mean getting the sale. The methods may be questionable. Tom Hanks' agent had a clever approach: charge Tom more than list price, send the insurer the right amount and keep the difference (in addition to the regular compensation).

Secret agents and insurance agents can be double agents.


The world of MI6 is secret. James knows the inner workings but we don't. This is for our benefit.

The financial world — especially life and health insurance --- is opaque. The sellers still know more than the buyers. Try figuring out how a dividend for a  whole life policy got calculated. You'd benefit from transparency.


James does what he's told even if he disagrees. He's not to question why. That’s ideal in selling too.

Given the similarities in work, wouldn't James Bond make a great insurance agent? With his skills, he can also thwart the actuarial mortality tables and hasten death claims — a real boon for beneficiaries.


click for article on Screen CrushAge is no guarantee
of efficiency.
— Q (Skyfall)
In the movies, the actor playing James Bond keeps changing. As the actor ages or loses appeal, he's gone but the character goes on. The replacement is more suited to the times.

In insurance, the actor playing an advisor can keep that role until retirement (and there’s no mandatory age). There's no real judgment of current skill even though mental faculties may deteriorate. Is your advisor still suited to the role.


Podcast 195

direct download | Internet Archive page | iTunes

PS An insurance agent would have a much tougher time becoming James Bond.

November 10, 2012


taxis under waterDon't it always seem to go,
that you don't know what you've got
til it's gone?
— Joni Mitchell,
Big Yellow Taxi

Superstorm Sandy. Blackouts, Ice storms. Hurricanes. Tsunamis. Fire. As disaster looms, we change our priorities. The email can wait. Laundry too. Safety of our families and ourselves becomes the priority.

Do we have food, fuel, heat, water? Do we have flashlights, batteries, a radio and our mobile phones?

We can't stop the devastation but can take steps for our protection. You may find you’re not as ready as you thought. At home, we encountered issues which caused us greater harm than Sandy.


Sandy vs lighthouseSometimes we don't know what to do. In groups, the bystander effect (Wikipedia) leads to inertia.

The northeast blackout of 2003 affected 50 million people (Wikipedia), I was working at National Life in downtown Toronto. We were told to go home. I checked to make sure my floor was clear first. I found staff in one department huddled with a radio, unsure what to do. We figured out ways to get them home. I didn’t know how I’d get home. Luckily, the President was still there and lived in my neighborhood. I got a ride — much better than walking 18 km home in dress shoes.

Scientific American looked back at the mega-blackout five years later and found little changed. Where is the “smart grid”? Blackouts affecting 50,000+ people remained as frequent as before. Another mega-blackout could happen each 25 years.


At the time of turmoil, we know what we’d do differently. Scientists have suggestions for how New York can prepare for the next Sandy (Scientific American, Nov 5, 2012). Perhaps insurers can also help by demanding higher standards and more protection (Wired, Oct 31, 2012). Will much really change once routine life returns?

We’re not good at preparing for serious-but-rare outlier events (“black swans”). What do we overlook, discount or delay at the personal level?


Advance preparation is a form of insurance. Insurance is a form of advance preparation. Coverage is often mandatory for our vehicles and strongly encouraged for our homes.

We aren't required to insure our health or lives. Not everyone has income replacement insurance, critical illness insurance, medical expense reimbursement insurance or life insurance. Affording all types gets costly. We often need to compromise.
There's also the problem of qualifying. When insurance is optional, the insurers get suspicious of motivated buyers. They worry about “anti-selection”: you know more than you tell the insurer, which leads to more claims. A study of denied critical illness claims found that in 40% of the cases clients misrepresented the facts.
You can’t easily buy a generator and fuel the day of a big storm (even if you get to the store). You can't get insurance the moment you want it either. You must apply in advance before anyone can tell there may be a claim.
click to read how to get your claim paidClaim
You may never make a claim. That's ideal because money can never replace a loss. There are three keys to getting your claim paid.


When disaster hits, we find out how well protected we really are.

Insurance contracts have exclusions. Sometimes riders can add what’s missing. Other times, we're stuck and bear the risk ourselves. Deductibles save premiums but also increase our out-of-pocket expenses at a less-than-ideal time. Trade offs.

Following Sandy, 1/2 to 2/3 of homeowners found they were underinsured (San Francisco Chronicle, Nov 3, 2012). That can’t be fixed now. A homeowner policy may not cover flooding without flood insurance. Also, “many insurers have added hurricane and wind deductibles that can run as high as 5 percent of the covered value of the home” (Insurance Journal, Nov 2, 2012).

Life insurance and critical illness insurance don't have deductibles. Disability insurance does. Any of these plans could have exclusions. It’s best to find out in advance. Maybe you can strengthen the protection.

Sometimes disaster strikes without warning. The scale can be large (like 9/11) or confined to our families. We can’t tell but can prepare. If not now, then when?


Podcast 194

direct download | Internet Archive page | iTunes

PS How have you prepared better after the last disaster?

November 3, 2012


The Objective Financial Hour - Jason Heath and Promod SharmaJason Heath, a fee-only financial planner at Objective Financial Partners, interviewed me on the Objective Financial Hour (which does not run a full 60 minutes).

You may know Jason from his articles in the Financial Post (list). A recent column spurred the post, what does your advisor drive? (podcast 190).

Jason Heath

The Objective Financial Hour - Jason HeathJason is an Certified Financial Planner (CFP) who has spent more than 10 years preparing fee-only plans. He doesn’t sell any products, which brings objectivity to his recommendations. That's rare.

You can easily find financial planners who prepare plans for "free" because they get paid from the sale of products. The question is whether the best advice for you is free or for-fee.

What’s Discussed

The Objective Financial Hour - Promod SharmaYou’ll find out about a range of topics related to insurance, investments and financial planning. The program has three segments.

Segment 1

  1. what does an actuary do? (see me an actuary?)
Insurance Reviews
  1. the uniqueness of fee-only insurance reviews
  2. the reasons for getting a review
  3. the three-step process (see Taxevity)
  4. the types of changes that can be made after you’ve bought a policy
  5. how an insurance pharmacy differs from a medical pharmacy
  1. the biggest issue (includes slides)
  2. sources of information and advice
  3. ratings of honesty and ethics
  4. more: who can you trust and what you like/dislike about your trusted financial advisor

Segment 2 (starts at 0:17)

  1. the core of insurance
  2. the importance of the mortality curve (see insights from Pink Floyd)
  3. why life insurance offers tax advantages (see secret 7)
  4. the drawbacks of investing inside life insurance (see the two drawbacks)
  5. the flaw in “buy term and invest the difference” arguments (see what would Warren Buffett do?)
  6. selling the sizzle instead of addressing a need
  7. the RRSP preserver
  8. using life insurance to pay tax liabilities

Segment 3 (starts at 0:33)

Life insurance
  • life insurance as an investment
  • life insurance for estate planning
  • who benefits from buying life insurance for estate purposes
  • more: the top five insured strategies,
Income replacement insurance
Critical illness insurance
Long-term care insurance
The fiduciary question

The Interview

For the first time, I’m using several slides during an on-camera interview. That spares you from watching Jason and me for the full show. Now grab your popcorn and beverage. Here’s the interview.

That’s all.


Podcast 193

direct download | Internet Archive page | iTunes

PS What other questions would you like answered?