December 21, 2014


imageThere are lots of reasons to read a book about money and there are lots of books about money. Tony Robbins has a new one, Money: Master The Game.

Unfortunately, not many people read books. Even fewer read nonfiction. Only a small sliver read books about money. Be an exception and join them.

Not Perfect

There are various criticisms of the book, such as
  • an outsider: but being outside the traditional financial community gives Tony a different perspective
  • contradicting advice: but that’s common in life. He interviews 50 money experts with varying views.
  • over-simplified: but isn’t that better than over-complicating and confusing? Complexity can be added once the A-B-Cs (or 1-2-3s) are known.
  • conflicts of interest: Tony recommends companies in which he might have financial interests (see dealing with biased financial advice). That doesn’t mean the choices are bad but they but warrant more investigation.
  • too long: yes … I got the audiobook which runs over 21 hours and sped up the playback by 30%
  • US-centric: yes but the general ideas apply everywhere
Tony responded to some criticism in this interview for The Wall Street Journal.

At the other extreme, you’ll find gushing praise.

Tony’s Advantage

Do celebrities give better financial advice? Maybe not but Tony reaches the unreachable — people who get missed by conventional financial education. Even when Tony says things you’ve heard before, you might be more likely to believe them now. For instance, I’ve covered things like
We often know the keys about money (e.g., spend less than you earn, disaster-proof your life, save for the future). That doesn’t mean we do. Tony helps people change. He might get you to change too. He has a knack for making financial education engaging. He explains his terms and uses many examples.


Instead of writing a book, Tony could have created videos and an app. That’s what I thought before getting the book. I don’t see videos, but he has a free app (if you’re willing to give your contact information).

Instead of using a conventional publisher, Tony could have self-published. He could have made the book cheaper. He could have narrated the full audiobook, rather than portions.

Overall, what he did is fine.

Free Meals

Tony is paying for 50 million free meals. Besides donating all his book royalties, he’s made an additional personal financial contribution. That’s rare. Chances are good that you’ll end up on his mailing list, though. That gives him the opportunity to sell you his other stuff with the money you’re saving.


Tony tackles tough topics such as the conflicts of interest rampant in the financial sector. He gives solutions too. Think before you leap.

The stories from successes like Richard Branson are interesting but may not provide much practical guidance (e.g., how Honest Ed turned $212 into $100 million). Look for patterns rather than a guaranteed formula to financial independence.

I wasn’t expecting much from Tony’s book but because he’s popular, I knew that I had an obligation to read it. Overall, I’m impressed and highly recommend Money: Master The Game. There’s lots of practical advice.

Money books get stale. Tony’s book is new, which means now is the best time to read it.


PS Another must-read (or re-read) is Warren Buffett’s biography, The Snowball

December 14, 2014


Michael James wrote a thoughtful post comparing temporary (term) life insurance and permanent life insurance. Like our canine friends above, both are similar, yet different. The best choice depends on different factors. A winner on one scale loses on another. As Michael’s analysis shows, comparisons can be misleading or omit important elements (like inflation).

Typical Plans

A temporary plan like Term 10 is often
  • renewable to extend coverage for another 10 years for a higher-but-guaranteed premium
  • convertible to permanent insurance without underwriting up to a maximum age
Since a permanent plan lasts for life, there’s no need for renewal or conversion options. Here are typical plans.
Temporary Life Plan Permanent Life Plans
Term 10 (renewable, convertible) Term 100
Term 20 (renewable, convertible) Whole Life
Level term to age 65 Universal Life
We won’t be looking at which form of insurance is better. We’ll be looking at how they’re different.

First Principles

Mortality rates underlie all life insurance. The mortality rate is based on the true probability of someone like you (same gender, age, smoking status and health) dying during the year. Your mortality rate  increases annually because you’ll die eventually (based on current medical science and how we define life).

Your retail premium rate is based on your wholesale mortality rate with margins added for expenses and profits. Your premium is the premium rate multiplied by how much insurance you’re buying. There may be additional loads for premium tax and Investment Income Tax (IIT).

One Year At A Time

When you buy insurance, you are getting one year of protection at a time.
Comparing With Property Insurance
With your car and home insurance, the insurer will usually offer you coverage for another year under similar conditions. Your new premium depends on factors such as their claims (actual vs. projected), expenses (actual vs. projected), investment earnings (actual vs. projected), capital requirements and profit targets.

The insurer could refuse to insure you next year or change the contract provisions (e.g., weaken protection for water damage). You could decide to switch companies.
The Additional Guarantees With Life Insurance
Life insurance also protects you a year at a time but usually
  • you have the right to renew your coverage until a maximum age (even if the insurer stops new sales)
  • your premium rate scale is fully guaranteed (e.g., you keep your nonsmoker rates if you start smoking or stop exercising in the future)
  • your insurer can’t modify the contract unless the change is an improvement
You get this extra protection because you may not be able to switch insurers if your health has deteriorated. You might even become uninsurable.

Yearly Renewable Term

The building block of all life insurance is Yearly Renewable Term (YRT), which is sometimes called Annually Renewable Term (ART).

Do you see the problem?

Your probability of dying during the year increases from 0.01% to 1% to 10% to 80% to 100%. This means your YRT rates will increase every year and become increasingly unaffordable as claims becomes more likely. That’s not good for you or your beneficiaries.

There is a solution: prefunding. Suppose you need insurance for 22 years. You could average the premiums and put that amount into a savings account every year and make withdrawals to pay the YRT premiums.

You could have the insurer invest for you instead. With Term 10 life insurance, you pay a level premium for 10 years at a time. The insurer does the averaging and bears the investment risk. At the extreme, Term 100 life insurance has a level premium for life (and is really permanent insurance and often continues beyond age 100 without further premiums).

Whole life insurance uses YRT rates (which might not be guaranteed). Universal life usually offers two guaranteed scales: YRT and LCOI (Level Cost of Insurance).

Start With The Need

Is your need for insurance temporary or permanent? If you’re addressing the risk of dying while you have financial obligations (e.g., children, a mortgage, a spouse or ex-spouse, other family members), life insurance is the ideal way to create or enhance your estate — if you’re insurable. How else can you get a specified tax-free lump sum at death?

For a temporary need, term life insurance is ideal. You get the most protection for the lowest price.

What If You’re Wrong?

A need which initially looks temporary may last longer than you expect. For instance, a child may have a lifelong disability due to an accident. If you guess wrong, term life insurance gets expensive. You can often renew coverage up to a maximum age without underwriting but the premiums shoot up each time.

Compared with renewing, you may be able to save money by buying a new term plan with new underwriting.
Term life insurance often allows you to convert to permanent protection without underwriting up to a maximum age (e.g., 65). You pay the premiums for your age at the time of conversion (your “attained age”).
Example: Suppose you buy Term 10 at age 32. If you convert eight years later, you pay the permanent premium for a 40 year old. This will be more than the permanent insurance premium at 32 and may be more than what a newly underwritten 40 year old would pay for permanent insurance.

Why Permanent Insurance?

You might want permanent life insurance for estate planning. You may not see the need now because you’re not thinking of your legacy. Maybe you will in your 50s or 60s.

The tax-free insurance proceeds can be an inexpensive way to pay taxes at death, leave money for heirs or help a charity. Coverage is available in a cheaper form called Joint Last To Die (JLTD), which insures you and your spouse. The money gets paid when the longest living spouse dies. That’s when the bulk of taxes are due.

Some younger people buy a small amount of permanent insurance for their legacy and a large amount of term insurance for their temporary needs.

An Appreciating Asset

Why does permanent life insurance have a savings component? Further, why do the savings grow on a tax deferred basis? The government doesn’t give valuable advantages without reasons. There are ways you can benefit with planning.

Permanent life insurance grows in value every year because the payout becomes more likely — especially if your health has deteriorated. Your insurance contract could easily have a market value which is much higher than the cash surrender value. An investor may want to buy your contract, pay the future premiums and get the death benefit. That’s called a life settlement. They are legal in the US and several Canadian provinces (but not Ontario).


Permanent life insurance gives you the opportunity for tax-deferred savings. Universal life provides the most guarantees, flexibility and transparency. You could
  • invest more (limited by the Maximum Tax Actuarial Reserve (MTAR))
  • select the investments
  • stop paying premiums (e.g., in 20 years or at age 65), though not always guaranteed
Having more options helps with tax planning, especially for incorporated businesses.


You can offset the cost of your insurance by reducing your coverage as
  • your financial responsibilities drop (e.g., children older, mortgage smaller, spouse’s income)
  • your assets grow (e.g., savings, pension)
Before you do, consider inflation which decreases the value of money. Also, your financial obligations could grow (e.g., new children, divorce, health issues).


Temporary life insurance gets compared with permanent life insurance but both cover different needs and timeframes. Since advisors get paid much more for selling permanent insurance, they may have biases they don’t even realize. Explore different scenarios before deciding and re-evaluate your needs over time.

For general questions, ask below. I'll answer what I can here or on Question an Actuary (QanA). For personalized answers, reserve time to Learn About Life.


PS Remember insurance for disability, critical illnesses and long-term care too.

December 7, 2014


car park
We’re looking for a new vehicle. There are lots of options. Prices usually start under $25,000 and easily reach $40,000 with the features we want (AWD, heated rear seats, navigation, keyless ignition), taxes and other charges.

Each manufacturer makes compromises. You might get better materials but less features. Or many features but a disappointing engine. You’ll find lots of useful information online, including many YouTube videos. There’s less about improving the process for customers.

The buying process still involves visiting dealerships for test drives and talking to the salespeople. Manufacturers can raise the standards. Let’s look at our actual experiences with various brands in Toronto area. The dealerships aren’t identified and your experience would likely vary.


Tell salespeople to leave their videogame consoles at homes, not in their offices. Tell them to phone customers back when promised, not three days later. Remind them that a test drive with a nearly empty gas tank doesn’t inspire confidence.


Tell dealerships to make sure the vehicles run. An engine that shuts down during a test drive does not encourage a return visit. Walking back to a dealership was good for cardio, though.


Make sure the salespeople have a passion for their product and know basics about the marketplace (e.g., the CX5 is not a Honda). Tell them to only give brochures on products which interest the customer. If customers dislike ample use of cheap hard plastic, a glossy brochure won’t change their minds.


Tell salespeople to refrain from asking customers where they were born and the colour of vehicle they want to test drive. Don’t put customers in a vehicle with a manual transmission without asking since they probably want automatic. Let them go on the highway if they want. Tell salespeople that being new to the dealership doesn’t excuse ignorance about what they’re selling.


Tell salespeople to provide printed quotes upon request, rather than telling customers to write information down on the back of a business card. Have brochures that explain the optional 10 year / 200,000 km extended warranty. Ditto for the non-KIA protection plan for undercoating, tires and rims. Putting the prices online would save time and reduce the feeling that the finance manager makes up the numbers.

For test drives, put the customer in a higher trim level if the dealership doesn’t have the right one. This might even be a way to upsell. How is a customer judge a touch screen navigation or sound system from an explanation? Make sure the website works:
KIA Trade-In Calculator doesn't work


Tell the dealership to make customers feel welcome. The place looked dead an hour before closing. No one was at the reception desk. The three salespeople alone in their offices saw us but didn’t offer any help. Maybe the boss was away (unless one of them was the boss).


Tell smaller dealerships to put desirable vehicles in the showroom. Who aspires to a
  • B250 ($43K) with no power seats
  • GLA250 ($47K) with no sunroof
Make sure the test drive vehicles work. The backup camera in our GLK250 showed a blank screen, though the vehicle had been driven 493 km and had been backed into its parking spot.


Tell salespeople to stop whining about how few Foresters and Outbacks they have. Supply chain problems don’t concern customers. The allocation between dealerships isn’t our concern either. Have dealers put accurate inventory information online, rather than this:


When a customer  shows up for a scheduled test drive, don’t tell them another salesperson went home with the demonstrator. Wouldn’t a successful dealership have another vehicle to test drive? Sorry won’t do. Neither will saying that some customers buy without a test drive because we don’t.
Don’t tell customers who want to test drive on the highway to go another Toyota dealership but return to buy. (Yes this really happened).


Make sure the salespeople know how blind spot detection works even if your vehicles lack this safety feature. Asking the customer is unusual. The best answer to why doesn’t the Tiguan offer a diesel engine isn’t to blame government regulations. When the competition offers a power trunk closing, adding that feature to your top trim makes more sense than having salespeople quip there’s less to break with a manual system.

If you’re promoting a $4,000 cash discount off the negotiated price of the outgoing model, discontinue the promotion if there are no vehicles left. We were told the dealership ran out months ago. Better still, have a substitute offer. Otherwise customers may feel they were tricked.


The car shopping process remains poor. Buyers have more information than ever but the dealership experience remains disappointing. The manufacturers could help by mystery shopping and enforcing higher standards.


PS We visited the dealerships and quiet times and only waited a few minutes for a salesperson.

November 30, 2014


chess: the king has fallen
We can’t predict the future but can take steps to put the odds on our side.

Corporate governance is a measure of companies keeping promises. Since life and health insurance is a long term promise that may last decades, isn’t that important?

Unlike car/home insurance, well-designed protection for mortality, morbidity and disability tends to have premiums guaranteed for life. That provides peace of mind since you can’t easily switch insurers: you’re older and your health may have deteriorated. In addition, newer products may fewer options and weaker guarantees. If the government changes the rules governing insurance, old policies may be “grandfathered” (exempt from the changes).

Similarly, financial advice can have lasting implications even when of high quality.

Lucky 13

The Globe and Mail has compared corporate governance for 13 consecutive years. Board Games 2014 includes 247 major companies in a searchable table. Data was prepared by the Clarkson Centre for Business Ethics and Board Effectiveness at the University of Toronto.

Not much changes, as you’ll see by looking at results for 2011 and 2007.

Selected Rankings

Let’s look at the financial sector, which historically ranks low in trust in comparisons like the annual Edelman Trust Barometer. Here are the banks, insurers, mutual fund manufacturers and advice givers. You’ll likely recognize the names.

 Rank Company Score
1 Bank of Montreal (includes BMO Insurance) 98%
2 Sun Life Financial 97%
3 tie Bank of Nova Scotia 96%
3 tie Royal Bank of Canada (includes RBC Insurance) 96%
6 Manulife Financial 95%
8 Intact Financial Corp (belairdirect, Grey Power, Jevco) 94%
13 tie CIBC / National Bank / TD Bank 93%
30 Industrial Alliance Insurance and Financial Services 89%
62 Western Canadian Bank 81%
69 Laurentian Bank 79%
81 CI Financial Group (CI Investments, Assante Wealth Management, Stonegate Private Counsel) 76%
185 Power Financial Corp (Great-West Lifeco, IGM Financial) 58%
197 tie Canaccord Genuity Group / Fairfax Holdings Inc 55%
197 tie IGM Financial Inc (Investors Group, Investment Planning Counsel, Mackenzie Investments)  
205 AGF Management 54%
221 Great-West Lifeco (Canada Life, Great-West Life, London Life) 48%
231 Dundee Corp 46%
237 Power Corp of Canada 44%
Look at the range. Some companies are at the very top with near-perfect scores. Others are closer to #247 (Fortuna Silver Mines, scoring 35%).

Missing Companies

You may be dealing with companies which aren’t rated. That doesn’t mean they’re “bad”. How would they score f they were included? That’s very tough to say. You can’t really tell. You can ask them if they are ranked by credible independent parties in a transparent way. You may get measures of financial strength. Maybe that shows they’re great at making money but doesn’t mean they’re great at keeping promises.

As usual, buyer beware!


PS Is there any downside to buying from a leader or any upside from supporting a laggard?

November 23, 2014


old classroom I’ve got a newfound respect for educators after guiding 30 lively Grade 8 students through the Junior Achievement Economics for Success program with Dana Mitchell for Advocis during Financial Literacy Month. Thanks to teacher Maureen Deeney and Principal Julie Aube at Christ The King Catholic School for the opportunity.

Here is career advice for students to consider.

Look For What’s Missing

Spotting what’s missing is more valuable than seeing what’s there. What’s missing leads to opportunities. Searching hones your detective skills and helps you stay curious. You get better at spotting distractions and identifying the real clues. You’re not looking for Waldo. You’re looking for where Waldo isn’t --- and wondering why.

Observe the challenges other people face and look for solutions.

Do they have trouble with deadlines? Learn to meet them. Do they start studying too late? Start earlier. Do they forget assignments? Find a system that works for you. You’re then building skills which are scarce and hence valuable.

Develop The Habit Of Saving

Saving means putting something aside now to have more later. Money is an example but not the only one. What about
  • saving time: you can do some things more efficiently (which may mean investing time in developing a process) and stop doing some things which don’t need to be done (note: leaving your room untidy may not be an acceptable idea).
  • saving health: we have only one body for life. Exercising, eating well and sleeping enough build resilience and help preserve what may be your most valuable asset.
  • saving attention: with all the demands and distractions around us, we’re tempted to multitask and prioritize. Both are exhausting. Cutting out stimuli simplifies life. Maybe you’re too knowledgeable about happenings in sports and music. Entertainment is important but maybe less would do? (extreme example: years ago, I stopped watching TV, listening to the radio and reading the newspaper.)

Be Generous

We can each help others for free. We can give of ourselves, our time, our attention, our caring. You’re then making the world better in your own unique way. You’re also changing yourself. You’re thinking in terms of abundance (giving) rather than scarcity (hoarding).

You’re helping change the world since some of the people you help will follow your leadership and help others too.

Develop Portable Skills

You’re unlikely to stay in the same role forever. You’ll likely advance in your career and might even change careers. The cause might be opportunity or necessity. Either way, you’re better prepared if you keep developing your skills.

A portable skill stays with you and helps regardless of what you do.

For instance, communication is essential. Are you improving your ability to read, write and speak? Are you mastering new media? For instance, you write differently for school assignments, blogs and tweets.  Other portable skills include managing your time, getting along with others and finding problems to solve. How can you lose by getting better?

Build Your Network

Success requires willing support from the people you know and — more important — the people they know.

You already have a network. How well do you plant seeds, nurture and prune? Consistent generosity gets noticed and can be free (e.g. the gift of information). Most people feel obligated to give back. Reciprocity is the #1 universal principle of influence.

If you’re in Grade 8 now, you’ve lived your entire life with the Internet. Connecting, sharing and staying in touch is easier than ever via social networks. In-person contact still matters, though.

Market Yourself

You can’t expect the world  notice your brilliance without your help. You need to stand out (or at least be good). You need to be remembered. You need to be findable. The Internet makes this easier for those who bother.


The path to the future includes drudgery. Persist. To quote Zig Ziglar:
When you do the things you ought to do,
When you ought to do them,
The day will come,
When you can do the things want to do,
When you want to do them.
Best wishes for a wonderful future.


PS Please leave the world better than you found it.

November 16, 2014


image You won’t find the type of warnings on alcohol or tobacco applied to
The onus is on us to learn, evaluate and decide. Attempts at consumer protection (e.g., banning sugary drinks in school vending machines or capping credit card interest rates at prime+5%) get challenged. How dare we lose our freedom to harm ourselves!

Which Side?

Sellers claim to be on our side, but are they really? We’re encouraged to
  • drink responsibly (but still drink)
  • follow the rules of the road (but buy vehicles which break them in  commercials)
  • eat a healthy breakfast (but include Nutella)
Since shareholders have different interests than buyers — and rightly so — don’t count on voluntary transitions to better guarantees, more transparency and lower prices. Look at MasterCard/Visa credit card transaction fees in Canada, which are among the world’s highest. They’ve increased 25% in the last two years. Now MasterCard/Visa will make voluntary reductions of about 10%, leading to a typical charge of 1.5%. This is considered a victory, but for whom?

Money Madness

The financial sector promotes financial literacy … but profits from our ignorance, inertia and limited choices. That’s not as effective as improving the products. We could be prevented from paying heavily on unpaid credit card balances if interest rates were lower. We could avoid the pitfalls of mortgage life insurance if poor products were not sold.

Until we live in perfect world, beware.
An Example
We were looking for a video tripod strong enough to support a camera, 15mm rod system, teleprompter and an iPad. The advisor at a well-known specialty store recommended tripods costing $750 or more! When I asked for a cheaper option. I was shown a $350 tripod with weak legs and a poor head. Then another $750 tripod.

Because I did my research, I knew that getting photography legs and a video head separately would be better and cheaper. The advisor — an expert — could have suggested this  but maybe she got sales commissions or thought conventionally.

A Strategy

Protect yourself with education. You can often learn the basics online from objective sources. That helps you ask the right questions and spot the wrong answers. You might find better solutions than those presented to you.


PS Mind the fine print!

November 8, 2014


100% extra free
If insurance were free (and there were no catches), how much would you get?

You might
  • top up your current coverage (e.g., more life insurance)
  • protect against risks you’ve neglected (e.g., critical illness insurance)
  • explore types you don’t know much about (e.g., long-term care insurance)
You might be willing to go through the hassle of the buying process. You might encourage your family and friends to follow your path.

Maybe you wouldn’t do anything what’s free (e.g., air) doesn’t seem to be worth much.

Sale Prices

If insurance were on sale, how much would you get? Your answer might depend on the size of the discount. If large enough, you might even buy protection you’ve refused in the past.

What if there were a one day sale? Would you buy then? Insurers avoid discounts because insurance isn’t an impulse purchase. Instead, they tend to have competitive “every-day” pricing. That’s to encourage advisors to consider their products. They may have contests to motivate advisors but you’re unlikely to know.

You don’t gain by waiting to buy. Even if your health and gender don’t change, you’re getting older. Your age affects the price you pay. Also, newer products don’t mean better guarantees.

Reducing The Price

You can’t save money by buying half an iPhone.  You can save on insurance by buying less coverage. Granted, you get less protection but is no coverage better? Since insurance requires ongoing maintenance, you can re-evaluate your situation during a future inspection.

Insurance costs more as you age and even more if your health deteriorates. You reduce the future price by acting today. When the asset being protected is a human life, the premiums can often be guaranteed for life.

The Limits

A billionaire bought a record $201 million of life insurance, which required 19 insurers and an annual premium in the millions of dollars. Why not more? There are limits on how much insurance you can get even if you can pay.

Underwriters determine what you’re worth. Let’s say that’s $5,000,000. You’ll have trouble replacing more than that. If you try to buy $2,000,000 from five companies, don’t count on getting $10,000,000 of protection. That’s because each company will ask about your other insurance you already have and are in the process of getting.

Real Life

Insurance isn’t free. There’s no Boxing Day, Black Friday or Cyber Monday sale either. Insurance may look like a luxury or waste until you need it. Unfortunately, you can’t buy insurance at moment before misfortune strikes --- at any price.


PS It’s currently Financial Literacy Month. Follow #FLM2014 on Twitter.

November 1, 2014


click to visit official websiteNovember is Financial Literacy Month in Canada. Getting attention during the busy period between Halloween, Black Friday, Boxing Day and New Years Day isn’t easy. According to Google Trends, interest in financial literacy has been growing. That’s great news. Kudos to everyone helping create awareness.
"financial literacy" - Google Trends in Canada There’s more to do.

The Challenge: Current Creators

If you already create ongoing financial education, Thanks! Why not try something new:
  • change your format: you likely prefer text, audio, video or photos. Try a different one.
  • go live: e.g., hold a Hangout On Air, speak at an event or have a Twitter chat
  • adjust your frequency: create more content or cut back to make time for something new
  • alter the length: you could make your content longer or shorter
  • experiment with a different platform: are you using the LinkedIn Publishing Platform or Pinterest?
You might reach a new audience and feel more enthused to create more content. 

The Challenge: The Silent Million

According to Statistics Canada, 1,122,300 people worked in finance, insurance, real estate and leasing in 2013. That’s 6.3% of the workforce (1 out of 16 people). How many of them publish their own original content to help the public understand money better? Now’s an ideal time.

If a mere 2.7% published a single article during Financial Literacy Month, we’d have 30,000 new articles --- 1,000 a day. And 100,000 articles only requires 8.9% to volunteer for a worthy cause which their employers likely support.

Others know about money too. For instance, accountants, entrepreneurs, executives, lawyers, professors, retirees and teachers. Include them and 1,000 pieces of fresh content a day looks even more feasible.

If each creator promotes to their connections, imagine how many new people could be reached and helped. 

Case Study

I’ve been looking for ways to engage people who aren’t especially interested in learning more about money.

For last year’s Financial Literacy Month, I organized Money 50/50: Insider Advice For Today’s Topsy-Turvy Times at the University of Toronto (like TEDx plus Q&A).  November got postponed to February and the Ted Rogers School of Management (see recap). Since TEDx Talks become videos, I decided to skip a live event and interview these insiders who might have been speakers:
  1. How much money do you need before getting financial advice? (Joe Barbieri)
  2. Financial independence at 31 (Sean Cooper)
  3. The Capital Gains Exemption isn’t a gimme (Mark Goodfield)
  4. Insights from an advisor to the insurance industry (Ross Morton)
  5. Reaching the unreachable (Jonathan Chevreau)
  6. Investing outside the markets (Vikram Rajgopalan)
  7. Five essentials to being a better investor (David Toyne)
  8. Planning for aging (Gary Hepworth)
  9. Demystifying SR&ED (Julie Bond)
  10. Retirement planning for small business owners and professionals (Clark Steffy)
This month, I’m
  • guiding Grade 8 students through the Economics For Success via Junior Achievement
  • sharing Business Strategies For Taxing Times at the Toronto Regional Board of Trade
  • launching a series of short educational videos called QanA (Question an Actuary)
Thanks to past, current and future creators of money-related content. Thanks also to everyone who invests in learning.


PS Money matters every month

October 25, 2014


Red Cross tent
Life keeps breaking bad. Floods. Plane crashes. Shootings. Bombings. Diseases. Power outages. Forest fires. Computer viruses. Sometimes bad happens to strangers in a distant continent. Sometimes to people we know or places we’ve been. Good happens too, but gets less attention. Who would watch The Walking Alive, The Empire Doesn’t Strike Back or Breaking Good?

Many headline-grabbers fall into what Stephen Covey calls our large Circle of Concern. We can only make a difference in our smaller Circle of Influence which lies within. Do we do what we can?

Looking Back

When we look back, mistakes looks “obvious”. They weren’t at the time. No one can take all precautions all the time. Right Maleficent? Situations also change. A locked barn door doesn’t protect against leaks, tornados or termites.

Our priorities shift. One day we want lower taxes and convenient access. Another day we want more services and strict security.

At a personal level, memories fade. We forget to prepare (or stay prepared) for next time to the extent we intended.

Mismatched Resources

When disaster strikes outside our homes, society at large can help. Billions of dollars can be committed. There’s an outpouring of support, sometimes from other countries.
click to watch the The The Three Little Pigs on YouTube
When disaster strikes within our homes, we can’t count on the same help. We can take precautions

We can also transfer the financial risks in advance. That’s precisely what insurance does. Because there’s a price and underwriting, we can’t buy an unlimited amount. We’re forced to evaluate the risks, which can be difficult on our own. We tend to fear the wrong risks (e.g., sharks or terrorists) instead of higher probability risks (e.g., disability and longevity).

Looking Forward

To paraphrase Jim Rohn’s dad: You can’t fix the roof when it’s raining. And when it’s sunny, you don’t need to.

What will you do with what you know now? It’s easy to become desensitized (and do nothing) and hard to mobilized (and take action steps within your control).


PS Good also happens … sometimes from preparing for bad.

October 20, 2014


The very first blog post was published over 20 years ago. Newspapers, magazines, books, radio and television started even earlier. The personal finance educators tend to use those media. Yet financial literacy remains a serious problem. Maybe the audience has been shifting their attention elsewhere.

What about the trends towards video and mobile devices? Canadians are big users. According to the 2014 Canada Digital Future In Focus report
  • video viewing is up 33% since 2012
  • 74% watch online video
  • viewing time is 1,769 minutes per month – 43% higher than Americans
There’s a huge (and growing) audience on YouTube. How much personal finance information is available there?

As we’ll see from case studies, current approaches to using video for financial education aren’t working well. There are opportunities to experiment and make breakthroughs. If you’re a less established blogger, you might want to focus on video. Ditto if you’re established and looking to evolve.

Case Study: Investor Education Fund (585 views)

(click to enlarge) YouTube views - InvestorEDfund 2014-10-14
You’ll find good videos on the InvestorEDFund channel from the nonprofit Investor Education Fund. Host Rob Carrick conducts short 1-2 minute interviews which are co-branded with The Globe and Mail. The last 15 videos garnered 585 views. The most popular title got 84 views.

Viewership might improve with
  • Better thumbnails: the current images aren’t always enticing; might show the title, guest and host
  • Longer videos: short clips tends to simplify and generalize (e.g., 84 seconds on whether to cancel your home insurance); more time might let guests give better, less rushed answers

Case Study: Financial Post (714 views)

(click to enlarge) YouTube views - Financial Post 2014-10-14You’ll find good videos on the Financial Post channel. I especially like the ones with Melissa Leong. The last 15 videos got 714 views. The most popular had 134 views (an ice bucket challenge).

Viewership might improve with
  • Better thumbnails: generally good but some don’t look enticing or relevant (e.g., “Can I leave my estate to my pet?” could show an animal)
  • Start titles with the important information: move the less important like “Save your #@%* money” or “What the what?!?” to the end (e.g., “What the what?!? My husband drives like a…” is incomplete)

Case Study: Money Minute (undisclosed views)

click to enlarge
Money Minute with Ashleigh Patterson has good content and lots of visuals. The title is odd since the videos tend to be 3-4 minutes long (a satisfying length). The thumbnails are nicely done.

The basic problem is that the videos aren’t on YouTube. That means you won’t find them with the #2 search engine and there’s a learning curve. For instance, I couldn’t figure out how to improve the playback quality or share a video with Buffer or Hootsuite (each video uses the same URL I couldn’t find a way to subscribe either.

Viewership might improve with
  • Hosting on YouTube: likely a nonstarter but who goes to Yahoo for video?
  • Transparency: Yahoo hides the number of views and even the publication dates

Case Study: Taxevity (737 views)

YouTube views - Taxevity 2014-10-14Our new Taxevity Insurance Advisory channel features in-person interviews over tea in my office. The last 15 videos got 737 views with less than 50 subscribers. The most popular title had 124 views. The lengths varied from 13:54 to 64:03 minutes. As much as 1,290 minutes of content was viewed on a single day.

The topics are diverse but all relate to money (especially the often overlooked aspect of investing in yourself). The guests are diverse and some wouldn’t be considered conventional money experts. That helps reach people who avoid financial education. The questions and flow are planned with the guest before recording. The thumbnails are going to be redone to include the interview title. Most of the marketing takes place on LinkedIn, the place you’ll find people with money. Canadians are big users --- #5 in the world.

You'll have your own approach.

Your Turn

If you create personal finance content, why not create three new videos? One isn’t enough because of the learning curve.

All you need is a webcam or smartphone, a free video editor and free natural daylight. You can upgrade later (e.g., our recommended gear on Amazon).

You might want to
  • talk directly to the camera: impromptu or with a script (which you can re-use in a blog post and the YouTube video description)
  • do interviews: in person or over Skype (Singularity 1 on 1 with Nikola Danaylov uses both) or a Hangout (the Because Money podcast with Jackson Middleton, Sandi Martin and Robb Engen)
  • get creative: say with a whiteboard, an animated whiteboard or a PowerPoint voiceover. Use your imagination (e.g., the funny series The Tax Man from Allan Madan).
Video has impact and is easy to share. Your tools include visuals, audio, text, music and movement. You don’t have to use them all. Maybe you’ll find that video is more enjoyable for you and more valuable for the vast audience waiting.


PS Have you got a moment to subscribe to the Taxevity channel?

October 11, 2014


How can you lose by learning to invest better?

Steadyhand Investment Funds sells no-load low-fee mutual funds directly to investors.
They've prepared an easy-to-read report called Five Essential Elements To Being A Better Investor (PDF). The focus is on sound, timeless basics rather than trendy quick-fix tips.

You'll find interpretations at


You can also watch my chat with David Toyne, their Toronto-based Director of Business Development on Tea At Taxevity (interview #20).

An Extension

The steps to becoming a better investor also apply to becoming better insurance buyer. The following list shows the Steadyhand recommendation in bold and my interpretation for health or life insurance in italics.
  1. Be realistic: risk happens even if you’re optimistic and we have a knack for worrying about the wrong risks
  2. Have a long-term plan: prepare for your financial risks during your working years (disability), retirement years (longevity), throughout (morbidity, mortality) and at death (taxes!)
  3. Commit to a routine: if your insurance gets cancelled because you missed premium payments (e.g., cheques bounced during a long vacation), you lose your protection.
  4. Prepare for extremes: that’s precisely what insurance does by transferring unpredictable financial risks from you
  5. Act as the CEO of your portfolio: be proactive to make sure you get the service for which you're paying. Without regular checkups, you risk having the wrong amounts of insurance and perhaps the wrong types of insurance.
The Steadyhand report is well-worth reading. You might even want to invest with them.


PS Invest in yourself too. Keep developing marketable skills.

September 21, 2014


computer breakdown
No matter which computer you buy, or how carefully you take care of it, you can’t prevent technical problems. Over the years, I've had machines from ALR, Compaq, Dell, IBM, Lenovo, NEC, Toshiba.  In addition, I've had high performance computers custom-made and even assembled two mini-towers.

In recent years, I switched to notebooks because they’re portable, quiet and sufficiently powerful.

The most problematic was a pricey customized Lenovo workstation notebook optimized for video editing. During the latest repairs, the technician said malfunctions are most likely with CTO. That means something like Customized To Order. When you get a computer specially made, there's less quality control and delivery takes longer.

Lesson learned: buy computers "off the shelf" with no customization.


In addition, problems arise when updating operating systems. I no longer bother, preferring to using the computer with whatever was pre-installed. Replacing the whole machine is faster and less aggravating.

Saving Money

Price doesn’t ensure reliability and the technology keeps improving, That’s why I've started buying less expensive computers --- closer to $1,000 than $2,000. They last about two years before getting cascaded to secondary uses.

The Biggest Woes

The biggest problems occur with
  • enhanced graphics cards: the standard video card in a notebook computer is weak for video editing (and gaming). I usually opt for an second more powerful graphics card. The computer switches between the two as required.

    A better and cheaper solution is to get a powerful desktop computer for video editing. You can then upgrade components and worry less about overheating. Either way, the big problem is with video drivers (software which communicates with the hardware). Count on more trouble if you're upgrading your operating system, since the new drivers may have bugs.
  • hard drives: you need backups of your data. I use an external hard drive and online backup, both via CrashPlan. For additional safety, I put key files in the cloud with Dropbox, Google Drive or OneDrive. You may think SSD hard drives are better because they have no moving parts and cost much more. I've had two fail …

Extended warranties

I'm not a fan of extended warranties but with computers (especially laptops), they can be useful. Even then, repairs take time and you're stuck while waiting. That's why keeping an older computer as a backup is wise. For instance, I have three year next business day service but on Friday, that means Monday. You might have to spend hours on the phone with the help desk first.

Currently, my Dell isn't working. Windows 8 isn't starting. There are no hardware errors. The problem seems to be with the enhanced video card drivers. The recovery options in Windows 8 didn't work. I was sent DVDs to reinstall Windows but drivers for the hard drive couldn’t be found. I was then sent a USB key with Windows 8 and the drivers. The hard drive isn't being detected. Dell is sending a new hard drive which they want me to install under their guidance. Since it's currently the weekend, the shipment won't take place until Monday, which means delivery won’t be until Tuesday or Wednesday. That's nearly a week without a working computer.

While inconvenient, I've continued working with a two generation old Lenovo Windows tablet.
As with risks based on your health (disability, morbidity, mortality, longevity), you can't tell when problems will arise. You can take steps to reduce the financial harm.


PS You can use other devices like tablets and smartphones while awaiting repairs.

August 25, 2014


was the dog the driver? pickup truck + ditch + winter = accident
When you’re looking for insurance on your home or vehicle, you may be tempted to pick the lowest price or buy from a convenient place. More important is whether your claim will be paid.

When disaster strikes, you find out how good your car or home insurance really is. Many customers were shocked after Hurricane Sandy and the Western Canada floods. They found they didn't have the protection they expected. Some insurers stepped up to make exceptions. That's the type of insurer you want if you ever have a claim.

How Premiums Get Set

Actuaries make guesses ("projections") of future claims based on past data and future trends. If actual claims are higher, profits are lower. That leads to pressure to restore profits. (Factors like expenses and investment returns also affect profits).

Raising rates isn’t easy unless competitors do too. Another solution is to quietly cheapen the ingredients.
Example: Since strawberries are expensive, Starbucks coloured their Strawberry Frappuccinos with natural red dye from cochineal beetles. Consumers found out and weren’t pleased. Starbucks wasn’t prepared to use real strawberries but compromised by switching to dye from tomato extract.
Cutting Back
Insurance gets cheapened by cutting back on the protection --- transferring more risk to you. Coverage which was solid last year might deteriorate this year. For car and home insurance, the terms can often change each year when you renew your protection. You might face
  • more exclusions
  • bigger deductibles
  • smaller benefit limits
The Alberta floods showed that premiums may have been similar but some insurers were denying claims their competitors covered despite similar contract wording. Now insurance policies changing after the $1.7B in flood payouts --- even for customers who weren't affected.

Note: Life insurance, disability insurance, critical illness insurance and long-term care insurance are different. Rates are often guaranteed for life and contract wording can’t be changed.

After Hurricane Sandy, about 23% of claims led to no payment. The two main reasons: exclusions and high deductibles. Did these buyers know they weren’t covered? Who advised them?

Since insurers decide which claims to approve and how much to pay out, they can improve their profits by denying claims and/or reducing payouts. Since each claim is assessed separately, trends are difficult to spot. You may recall Hurricane Sandy victims getting short-changed on their flood insurance benefits by the claims adjusters who the insurers trained and employed.

Taking Precautions

There are three keys to getting claims paid for any type of insurance: select an independent advisor who works through an independent distributor and offers products from insurers which keep promises.

If you buy directly from the insurance company, who’s on your side during a dispute? You might get stuck dealing with a by-the-script call centre representative located far away.

If you buy through an association (or group), don’t count on lower prices, stronger guarantees or more lenient claims adjudication. The  association likely receives big financial incentives since insurers compete to get access to the members. As the association becomes dependent on the revenue where are their loyalties? 

Bank of America had buying power with QBE Insurance but inflated the cost of insurance they forced homeowners to buy. The result is a $228 million settlement. Other banks had similar schemes and also got caught.

Apples or Avocados?

Unless you're very patient (or a lawyer), you may have difficulty comparing one insurance contract with another. How do you know what's left out or what's weak? An independent advisor can help. You can contact more than one.

Generally speaking, prices are similar among companies when you're making a fair comparison. Be wary if you find big price differences. What are you giving up for the apparent savings?

Money Saving Tips

With property insurance, there is a component to protect you from liability claims. If you have both home and car coverage, you're getting liability coverage in both places. You may save money by getting both plans from the same insurer, reducing the liability coverage and buying an umbrella policy for the liability.

Look At Corporate Governance

When disputes occur, you benefit from having an insurer that ranks high in corporate governance (a measure of keeping promises). They’re more likely to treat you well and make exceptions. For example, TD was reversing decisions on Alberta flood claims and lost $170 million. That's better for customers than shareholders.


PS As the summer driving season ends and schools re-open, please pay attention to the most dangerous part of driving.

August 17, 2014


math puzzles
My client’s annual statement for universal life insurance showed a tax-free death benefit of the face amount ($2,000,000) plus the investment returns ($317,079). Do the math and what’s the total? I get $2,317,079. The insurer showed $3,317,079 — an extra million dollars. I contacted them and got a quick response. They’re issuing a letter of apology and a corrected statement.

Luckily, my client didn’t have whole life insurance where the lack of transparency makes mistakes almost impossible to spot.

Big insurers have big resources but even leaders in corporate governance make mistakes. That’s because computers are programmed and the limited testing is generally done internally. The systems are expected to be 100% functional when launched. In contrast, Gmail was in beta for from April 2004 to July 2009.

Time bombs

When I developed products, we focused on launching new offerings. We maximized our resources by delaying work which could be completed later. For launch, we needed
  • marketing tools: an announcement, PowerPoint presentations for the marketing directors to use with advisors, computer-based tools for advisors to prepare proposals for their clients
  • administration support: printing the policy contract (basics like accepting premiums, paying compensation etc were already part of the administration systems and rarely required major modifications)
To speed up times, we minimized printed materials like marketing guides. They looked nice but added costs and created delays. We then had leeway to make “last-minute” changes.

Month-to-month, universal life insurance policies operate much like bank accounts with deposits (premiums, investment returns) and withdrawals (mortality charges, administration charges). The major calculations took place on policy anniversaries. That meant we had almost a year to get ready.

Other capabilities like inforce illustrations (projecting performance after purchase) could be delayed for years. Manual calculations could be done in the interim, if necessary. I once got approval to add two unbudgeted head count. During a hiring freeze. That’s because we could no longer defer some work.

The Human Element

Staff leave. Staff forget. Staff are under pressure to meet deadlines. Miscommunication occurs. Documentation may not be comprehensive enough or clear enough.

Administration systems change. Older products might be on legacy systems. Migrating them to the latest system is much more difficult than upgrading from a version of Windows (see challenges in trying to upgrade to Windows 8 or from 8 to 8.1).

Be Vigilant

Mistakes occur. You might not be sympathetic but you can be vigilant. You don’t need a PhD in mathematics or to be an actuary (though both help). Instead, be a detective. Question what looks odd or what you don’t understand. You’re entitled to ask.


PS Your advisor should be looking for mistakes on your behalf.

August 10, 2014


price tag $1
The price match should have reduced the price by a dollar from $7 to $6. Instead, the cashier reduced the price to a dollar --- a reduction of $6. The customer noticed but didn’t say anything. This wasn’t for her personal benefit but to protect the cashier from getting in trouble for the mistake.

That’s noble, but would the customer in this real-life example have been concerned about the cashier if the price were higher than expected?


We’re great at justifying to get advantages. Have you heard or used arguments like these
  • stores overprice
  • you didn’t make a mistake
  • you had to do extra work to get the price match
  • the store doesn’t lose money overall because unaware customers are paying their higher price (the store didn’t lower their price even when you showed them they were charging more)
  • the store should train their staff properly
  • if the store had the lowest price, there would have been no need for a price match

What’s The Real Price?

You can only compare prices when different retailers sell the same product and publish their prices. They’ll often match prices when you provide proof. Sometimes they’ll reduce their prices temporarily to match a competitor (e.g., when we ended 10 years without a TV).

Mismatching: When You Can’t Compare

When you’re buying financial products, what’s the lowest price? The options might be tailored to you, which makes comparisons difficult. There’s rarely an easy way to check online. Prices might not be negotiable, even if you have proof. While you may not be able to much about the price, you can get better value by selecting a better advisor.

When you can’t compare make good comparisons, you risk getting poor options. For instance, Freakonomics found that real estate agents encouraged clients to buy/sell quickly, rather than wait for a better price … but left their own properties on the market for longer and sold for higher prices (see the video in tips for first-time homebuyers).

Sellers have ways of justifying their actions
  • the higher margin choice isn’t necessarily “bad”
  • selling takes work and maybe you took extra time
  • showing more options might confuse you and stop you from buying (see the jam experiment)
  • you’re better off buying what they have in stock
  • you’re not forced to buy
Both buyers and sellers have ways to justify their actions. Buyer beware. Seller beware too.


PS Imagine a world without price matching (or mismatching)