THE REACTION TO APPLE’S TAX AVOIDANCE

Think different. Imagine your friend earns $1,000,000 and pays $600 in tax. Or earns $10,000,000 and pays $6,000. Well, on $30 billion of net income ($30,000,000,000), Apple paid $21,000,000 in tax. That’s a tax rate of 0.06%.

Exhibit #1a

According to a May 21, 2013 memo on offshore profit shifting (get the PDF)

"Apple Inc established an offshore subsidiary, Apple Operations International, which from 2009 to 2012 reported net income of $30bn, but declined to declare any tax residence, filed no corporate income tax return and paid no corporate income taxes to any national government for five years.“

Apparently, Apple didn’t do anything illegal and has been named the most valuable global brand by Marketing Week.

“We not only comply with the laws, we comply with the spirit of the laws.”
— Tim Cook (May 21, 2013)

Really? Since the 1980s, Apple has been avoiding tax and invented strategies like the “double Irish with a Dutch sandwich” (InfoWorld, May 24, 2013). Apple’s creativity cost Americans $44 billion in tax revenue in the last 4 years (including $9 billion in 2012) (Bloomberg, May 21, 2013).

In 1952, corporations paid 32.1% of all federal taxes. That’s dropped to 8.9% today. Government expenditures have grown in the last 60 years. Who’s making up the shortfall?

The Scope

Tax avoidance isn’t restricted to Apple or the US. Canadian companies are clever too with “nearly $60 billion flowing from Canada to Barbados, which has a statutory tax rate of roughly 2 per cent for foreign firms” (Global News, May 21, 2013).

Muted Response

There hasn’t been much outrage about what Apple is doing. Some senators even congratulated the company.

On minimizing taxes, Senator Rand Paul said, “It would probably be malpractice for them not to do so”. He even said “I frankly think the committee should apologize to Apple.”

Perhaps lobbying is a factor. Apple is relatively small, spending $2 million in 2012 and an estimated $4 million in 2013. Google is the biggest spender — $18 million in 2012. If there’s no effect, why spend the money?

Fair Share

Whether you consider Apple and other tax avoiders heroes or villains, ask yourself this: how do you feel about the taxes you pay?

Links

• Apple: no tax gimmick left behind (InfoWorld, May 24, 2013)
• Apple on pace to doubling lobbying spending on taxes, other issues (Apple Insider, May 23, 2013)
• The corrosive effect of Apple’s tax avoidance (New York Times, May 23, 2013)
• Is Apple’s tax avoidance rational? (BBC, May 21, 2013)
• How Apple avoids paying $17 million in taxes every day (Business Insider, May 21, 2013)
• Apple’s tax dodges: where’s the public outrage? (The New Yorker, May 21, 2013)
• Tax Men – Apple (Jon Stewart, May 22, 2013)
• US Senate shouldn't appease Apple’s tax avoidance (Toronto Star, May 22, 2013)
• Budget 2013 punishes innovation with life insurance
• The lure of “exclusive” financial strategies
• The risk of financial innovation

Podcast 221

(note: poor recording quality due to microphone problems)

direct download | Internet Archive page | iTunes

PS Imagine what’s going on that we don’t even know about.

HOW HEALTHY ARE YOU REALLY?

“… where all the women are strong,
all the men are good looking, and
all the children are above average."
— Garrison Keillor, Lake Wobegon

We like to think we’re better than than the rest but we can’t all be above average.

You’ll find lots of health statistics from Statistics Canada. In 2011, here are examples of “the 80/20 rule” in action, where the 80% is good:

• 19.9% smoke
• 19.0% are heavy drinkers
• 17.6% have high blood pressure
• 20.4% of youth age 12-17 are overweight or obese

Other parts aren’t as reassuring. For instance, 52.1% of adults are overweight or obese. Yet when asked in 2011, 61.6% of Canadians perceive themselves as having very good or excellent health (61.9% for males and 61.3% for females). Aren’t they looking in the mirror?

Explain This

Let’s look at a more dramatic comparison: hypertension. Here 13.8% of Canadians report having the condition but 19.6% are under a doctor’s care. I could see more people having a problem than getting treatment but the opposite is taking place here. You’d know if you’re getting medical treatment. Yet there’s a reluctance to report the facts.

(2007 data)	Self-reported (Health Trends, Canada)	Under Doctor’s Care (Canadian Chronic Disease Surveillance System)
Hypertension	13.8%	19.6%

I’m reminded of Monty Python’s Dead Parrot skit. Who’s fooling who?

Reality Check

When you apply for life or health insurance, you undergo underwriting. The premiums you pay are not determined by how healthy you think you are. You might face a surcharge or even get declined coverage. This may be a shock.

An easy way to stay in denial is to not apply. Maybe that’s a reason why life changing events no longer trigger insurance purchases. Besides, we don’t think we’ll have a claim anyway.

What To Do

If your health is rated worse than you expected, you have the opportunity to improve. Sometimes underwriting uncovers problems your doctor wouldn’t catch during your regular medical examinations. Depending on the condition, you may be able to get treatment sooner, while there’s more time and less damage. Hospitals are best avoided.

Medical Misadventures

Medical misadventures occur in hospitals around the world. Examples include

• accidental cuts
• gauze left in the body during surgery
• lack of sterilization
• wrong amount or drugs or radiation

The consequences are extended hospital stays, disability or death.

These findings are from a 2009 report by the Conference Board of Canada. Canada ranks 7th out of 15 peer countries. About 158,000 Canadians admitted to an acute care hospital in a year (7%) suffer from a medical misadventure — about 60,000 (38%) are preventable.

As a consequence, about 150 Canadians die each year (compared with 33,000 annual deaths in the US). The graph shows the trends in both countries.

We want to be healthy. We see ourselves as healthy. Let’s takes steps to be healthy.

Links

• Health Trends database (Statistics Canada)
• Mortality due to medical misadventures (Conference Board of Canada)
• How healthy do your clients think they are? (Manulife, May 2013)
• Do financial doctors make as many mistakes as medical doctors?
• What happens during a paramedical exam for life insurance?
• image courtesy of Pavel Losevsky

Podcast 219

direct download | Internet Archive page | iTunes

PS When are you exercising next?

BLACKBERRY’S CONFUSING MESSAGE AT THE 2013 TECH LEADERSHIP CONFERENCE (#TLC13)

BlackBerry 10 looks like a huge accomplishment, well beyond expectations. The company may have a future even if sold.

President/CEO Thorsten Heins spoke at the 2013 Tech Leadership Conference. He spoke well, smiled and took audience questions. I listened but couldn't understand what he was saying and kept hearing what he left out.

Choice

Thorsten claimed that mobile providers want a choice besides Apple and Samsung. Maybe, but Windows Phone could be the answer. Choice paralyzes. We manage to live with duopolies like Coke/Pepsi, Windows/Mac, Google/Bing. Isn't the real question what the end users want? As buyers, we have lots of choices already.

Mobile Computing

Do you know what mobile computing is? Apparently, that's what really sets Blackberry 10 apart. The devices are mobile computers. This is apparently a paradigm shift.

Since I'm drafting this blog post by voice into web-based Trello (my review) on my Galaxy Note 2 while walking around the room, am I not engaged in mobile computing? I use my notebook computer and tablet in different places. Isn’t that mobile computing too? Perhaps the paradigm shifted years ago when free WiFi became available in coffee shops.

Multitasking

Multitasking is touted as another advantage of the new Blackberry. I didn't understand this either. I think I already multitask on my phone and tablet. Maybe there are technically superior options, but I don't see what's missing. I'm not compelled to seek another solution.

Besides, research shows that we’re lousy at multitasking (Wikipedia). We waste more time and make more mistakes. Imagine a device that helps us focus. That would be a breakthrough.

Jeans And Tie

Apparently BlackBerry is optimized to run our business and personal lives on the same device. Maybe that’s like playing Solitaire on your company computer or wearing runners with your suit.

It's easy enough to have 2 devices: one from work and one of your own. That also helps with work/life balance.

If you're working for a company, you don't know how long you'll be there. Having your own phone with your own phone number has merits. You then have privacy from corporate snooping and control of your contacts. Nowadays, there are good plans at affordable rates, especially if you use a smaller carrier.

Blackberry seems to think their customers are the intermediaries: the mobile phone providers and corporate IT departments. Apparently, you cannot copy/paste from a personal email to a corporate email. That's good if you don't trust your employees. It's inconvenient if you're doing real work. There are probably simple workarounds such as copy/paste to an online Word document. If you have another phone, you can always take a photo or dictate the text. Pen and paper works too.

The Future

BlackBerry is an important company. I'd like to see them rebound but not enough to switch back from iOS and Android (see the perfect smartphone). There was no compelling reason that I could understand. If you're already a Blackberry user, you may be very happy with the changes. Feel free to share your thoughts below.

Links

• The perfect smartphone: Bye bye Blackberry
• Customers behave like Pinocchio too
• Why we get bad advice
• How TEDxToronto has changed
• How your brain works against you
• How to spot biased referrals

Podcast 210

direct download | Internet Archive page | iTunes

PS Are you planning to switch?

THE HORROR OF ROGERS “ULTIMATE” INTERNET

How is your Internet access these days? We “upgraded” to Rogers’ priciest Ultimate plan 1.5 months ago and have periodic problems. The speed is inconsistent and access has been intermittent the last three days. I can’t even run SpeedTest.net. The usual steps of unplugging/replugging the equipment hasn’t helped.

Here’s another example of the risk of innovation.

Previous Plan

Our Hi-Speed Extreme Plus plan had downloads of 25 Mbps, maximum 125 GB. In August, we got upgraded to 32 Mbps and 150 GB for a few days. The faster speed made a noticeable difference and seemed "just right". In September, that became our normal plan ... except now everything seemed sluggish.

What happened?

We had a rental wireless modem for $7 per month. The range was lousy compared to our previous wireless N router. As a compromise, we turned the Rogers gear into a wired modem and connected to our own wireless router. We’ve done this for years. It works well but we were paying Rogers for wireless services we were not using and did not need.

Costco To The Rescue

While vacationing in the US in late August, we bought a Motorola Docsis 3 modem, the fastest available. The price was $75 at Costco. After returning home, we tested it for several days. The results were excellent ... until I returned our rental modem to Rogers. Service slowed down. I thought this was due to the back to school crowd or technical problems. We waited patiently for weeks.

Consequences

I called Rogers and found that we'd been put on an ancient plan with 18 Mbps and 95 GB/month. We're still paying the same $70/month but losing 14 Mbps and 55 GB per month! That's crazy. By upgrading, we ended with less. Using convoluted logic, the rep explained we weren’t paying more because of price hadn’t gone up.

This was the consequence of returning the Rogers equipment. We were not told at the time. We could only get the previous service if we were willing to pay an extra $7/month to rent Rogers equipment we clearly didn't need.

Fastest

I asked if I could upgrade to Ultimate which is 50 Mbps and 250 GB per month. This costs $100/month plus $7/month wireless modem rental plus tax. In the past, this plan required digital cable. That's a nonstarter since we don't even have a TV: we use Netflix, mobile devices and a projector.

This time, I was told that I could upgrade and did. We couldn’t get the published plan, though. We’re on a faster backbone that isn’t available everywhere. The rep put us on an unadvertised plan: 75 Mbps and 200 GB/month.  Faster is better but why chop usage by 50 GB? Google is piloting 1000 Mbps and unlimited usage via fiber optics. That’s forward-thinking.

Rogers Ultimate is inconsistent as others have reported. Sometimes great. Other times sluggish. Maybe it’s time to call tech support again.

		Speed Tests 75Mbps? VIEW SLIDE SHOW DOWNLOAD ALL

Links

• What’s up with Rogers’ high speed Internet (Ellen Roseman, moneyville.ca, Oct 21, 2011)
• Very slow Ultimate (Rogers forums)
• Ultimate super slow at Bloor/Avenue (DSLreports.com)
• The right way to view Netflix in Canada
• The folly of the Rogers/Bell attack ads
• The risk of innovation

Podcast 143 (4:53)

direct download | Internet Archive page | iTunes
PS How is your Internet access these days?

CASE STUDY: THE DOCTOR THE INSURANCE ADVISOR MISTREATED

A customer is the most important visitor on our premises, he is not dependent on us. We are dependent on him. He is not an interruption in our work. He is the purpose of it. He is not an outsider in our business. He is part of it. We are not doing him a favour by serving him. He is doing us a favour by giving us an opportunity to do so. 
— Mahatma Gandhi

Is this the era of bad service? A week without phone service. A summer of medical mistreatment in 2008. There's poor after-sales service with life insurance,

Doctors are among the most coveted clients. Even they get mistreated.

Doctor Says

Here's an email from a doctor

Hi Promod,

I'm a physician living and working in Toronto.

I recently met with my insurance adviser to transfer life insurance policies to my professional corporation (PC). He asked me to meet with an actuary to determine a fair market value in order to allow for their sale to the PC. I found your website through the Canadian Institute of Actuaries website.

Would you be able to assist with this assessment and what cost would be involved for your time and opinion?

Regards,

Response

Here is a simple but powerful rule: always give people more than what they expect to get. — Nelson Boswell

I've never, never, never heard of a single time where a client was told to arrange an actuarial valuation of their insurance on their own. I even asked around.

Experienced insurance advisors already know valuation actuaries. Novices can easily find you a pre-screened one with a quick email or phone call to the intermediary through which they sell insurance (called a Managing General Agent (MGA)). This is step 2 in the graphic from the Globe and Mail (click to read).

If your doctor prescribed an MRI, you'd expect them to arrange the details, guide you through the process and follow-up.

Advisors don't need much training to sell insurance. That's why solid support is readily available to them.

Prescription

How you do anything is how you do everything. Your “character” or “nature” just refers to how you handle all the day-to-day things in life, no matter how small. — Derek Sivers: Character predicts your future

How can you trust an advisor who takes a clear shortcut? There may be weaknesses with the insurance currently in place and the proposal to change ownership.

Before going further, this doctor would do well to get his insurance needs evaluated by an advisor he trusts. The Process System is a simple way. There are other models that achieve similar results with more steps.

What's Wrong?

There are no traffic jams along the extra mile. 
— Roger Staubach

Insurers pay salespeople the bulk of their compensation the moment you buy. You've prepaid for after-sales service and are entitled to receive it. The advisor could have helped the doctor in mere minutes.  How long does it take to make a phone call or send an email? Better still, the advisor could have taken care of the details to save the doctor's time.

Why would an advisor provide such lousy service? No immediate compensation. How sad.

Links

• Where are the customer service ratings for advisors?
• Why after-sales service stinks for life insurance
• The Globe and Mail on Canada's insurance loophole: what else is wrong?
• Does your insurance company win when you cancel your coverage?
• Do financial doctors make as many mistakes as medical doctors?
• Christmas in the emergency ward
• Surviving a week without phone service
• When doctors disagree: toe to toe
• Three keys to getting your claim paid
• The Process System for planning simply
• The foolproof measure of trust
• image courtesy of Steve Ford Elliott (Ireland)

Podcast 126 (4:41)

direct download | Internet Archive page | iTunes

PS In a future post, we'll look at the kind of post-sales service you deserve.

HOW TO FIGHT CYNICISM

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

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

WARRANTED

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

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

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

UNWARRANTED

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

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

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

FIGHT BACK

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

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

Links

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

Podcast Episode 100 (3:37)

direct download | Internet Archive page

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

GOT 59 SECONDS FOR YOUR GIFT LIST?

Got a minute? Perfect. You'll have a second left.

Here's a gift idea for you last minute shoppers. It's Richard Wiseman's book 59 Seconds: Think a Little, Change a Lot (Amazon unaffiliate link).

Richard describes effective tips you can apply in less than a minute. This isn't a shallow "1,001 Ways To ..." book with gobs of filler and flaky ideas. In 59 Seconds, you get quality and quantity. The content is consistent with research I've seen elsewhere.

In the sphere of psychology and human behaviour, findings are never 100% conclusive but there are enough points to make you popular at parties.

Surprises

59 Seconds doesn't focus on shattering urban myths, but dispatches several. Popularity isn't proof.

For instance, the self-help industry routinely quotes a 1950s study conducted by a prestigious university (usually Harvard or Yale). The 3% of graduates with written goals soon become more successful than the other 97%. I agree with setting goals but the study never took place.

Content

You'll get tips on

• why positive thinking fails
• how to negotiate better (a pet frog helps)
• the right way to praise children

You may have come across some of the techniques in other books. Here you'll get a concise synopsis. The results are combined with other research too.

The result? An original book that educates and entertains. That's not all. You get actions you can implement in seconds. That fits today's lifestyle. You might even find tips to help with your New Year's resolutions.

Listen Or Read?

I listened to the audiobook. The narrator (Jonathan Cowley) has a pleasant British accent. Listening is fine except you'll have trouble doing the quizzes — especially when driving.

You'll get more benefit from the written book, which is easy for reference.

Bonus: 20 Quirky Science-based Party Tricks

Do you want to add zing to your next party? Here are 20 ideas. They're from Richard but not from 59 Seconds.

10 Experiments

The Lighter Side of Richard Wiseman–Part 1

10 More

The Lighter Side of Richard Wiseman–Part 1

This is the final post of 2010. This time last year, we were in India.

The best to you and yours during the holidays.
May your 2011 be as nice as heaven!

Links

• Richard Wiseman's website (richardwiseman.com)
• Debunking the famous study about writing down goals (Fast Company, December 1996)
• The long search for a quick fix (Wall Street Journal, Jan 2010)
• 10 ways to change your life in 59 seconds (The Telegraph, Jul 2009)
• A brief review of 59 Seconds (The Independent, April 2010)
• Detailed summary (Jim's Book Reviews, Nov 2010)

Podcast 97 (3:27)

direct link | Internet Archive page

PS If you're looking for other gift ideas, how about the gift of networking or simply give your greatest gift? I hope you won't spend Christmas in the emergency ward as we did in 2008.

HOW TO GET FREE HELP FROM A STRANGER

If you're lost in a new city, you might ask a stranger for directions. They'll probably help for free.

Nowadays, you can easily reach strangers worldwide by phone, email or text messages. Ease of access doesn't obligate them to help you. Try other options first.

Try Other Options First

Yes, you're original, but is your question? Probably not. That's great because answers for your query --- or a variation --- are probably online waiting for you. If you can't find an answer with your preferred search engine, try another one. Also, try different search words.
Search for places that those with answers might gather. Consider getting books from the library (depending on your question).

There are many places where your questions are welcome and you can get multiple answers

• a LinkedIn Group (newly revamped). The quality of your question and your profile may affect who answers. Check for similar questions first.
• on Facebook. If your friends don't know, they may know someone who does. Whether they bother to help depends on your relationship with them.
• an online forum. Example: for financial questions, the Canadian Money Forum is excellent.
• in person Meetups: so many, so many different topics

You'll get better answers if you first observe and participate. You're then a welcome guest, not an annoying pest. If you're helped, why not stay to help others? That's a great way to say thanks.

What To Ask

Ask what they would do, rather than what you should do. They don't know you. Opinions vary. Would you act if you didn't get the answer you wanted? We routinely ignore advice from family, friends and doctors.

A critique can be better than an answer. Why not share what you're thinking and explain why? The strangers might raise questions that help you figure out your own answer. That's ultimately what you'll need to do.

Asking A Real Person

If you must ask a stranger, be sure

1. to use their preferred method of contact. If in doubt, use email. Chris Brogan has a nice structured form
2. be patient. People are busy and have their own priorities
3. followup nicely if you don't get a reply. Your question may have gone astray or been forgotten.

The Bizarre Request

Here's this week's most bizarre request for help. I got two long distance voicemails that I couldn't hear properly. That's why my greeting recommends sending email for faster and better service. I then got a phone call and still couldn't hear properly. The caller asked me how to enter a post-graduate program at a university I never attended. Huh? He also wanted advice on whether his study plan was a good idea.

How could I possibly know? I asked the caller to send an email with the details. He agreed but didn't. Case closed?

If you're lost in a new city, you could use GPS Navigation on your smartphone or even a paper map. That way you're self-reliant. Preparation takes more effort but makes you more resourceful.

Links

• Me an actuary? Seven questions from a student
• Faster: How to deal with the rat race
• image courtesy of Diego Medrano (Spain)

Podcast Episode 79 (3:48)

direct download | Internet Archive page

PS Say thanks --- even if you don't like the answers.

HOW @riscario BECAME #12,178 OUT OF 100,000,000 ON TWITTER

What we want to be true doesn't become true because we want it (to be true).

Twittercounter says that @riscario (twitter.com/riscario) has 18,000 followers. That's the Twitter channel that accompanies this blog. Sceptical? Take a look at this screen shot.

Now do you believe? Me neither. The normal audience is several hundred.

An audience of 18,032 followers would make @riscario #12,178 on Twitter according to the screen shot from twittercounter.com. Click on it for a larger version.

There are techniques to get thousands of followers on Twitter. They seem to involve you following thousands of people and them reciprocating. You can get quantity quickly, but quality takes time. The growth of @riscario is organic, and slow. That's fine.

The Real Rank

The correct rank for @riscario is #160,191 based on 290 followers. That may underwhelm you, but there are over 100 million Twitter users. That impressive total is misleading because many accounts are dormant.

If you define a true Twitter user as

• 10+ followers, and
• 10+ friends, and
• 10+ tweets

then only 29% qualify. That's still 2.9 million users and up from 21% in January 2010.
This three-month graph shows the statistics returning to normal.

Notice how the trend looks consistent and predictive … until the drop two days ago.

@what

The Twitter channel @riscario (twitter.com/riscario) supplements this blog and the podcast. You'll find an update on most days. If you're more interested in marketing, there's @mActuary (twitter.com/mActuary), which supplements my Marketing Actuary blog for entrepreneurs. Again, the goal is one meaningful tweet per day.

Some Twitter users have thousands and thousands of tweets, adding many daily. Ranking high on that list would scare me. Time is too precious to fritter.

Links

• 13 questions to evaluate an investment that's "too good to be true"
• More people, and inevitably scammers, are using Twitter (TechCrunch, Jul 2010)

Podcast Episode 77 (3:31)

direct download | Internet Archive page

PS If you use Twitter regularly, you can easily rank high too.

THE FINE PRINT TAKETH AWAY … EXCEPT IN LIFE INSURANCE

We’re sceptical because even the simplest offers have fine print. You're enticed but the many conditions take away the charm.

Not only do you spend money to get the offer, you often spend money to use the reward.

A Common Example

Here’s the fine print in a free movie ticket offer from a pizza chain.

1. the buy-one-to-get-one-free condition
2. limited provinces
3. limited theatre chains
4. no IMAX films
5. no IMAX digitally remastered presentations
6. no VIP room
7. no 3D films
8. no Real D 3D films
9. no non-feature film entertainment
10. no advance tickets
11. no midnight performances
12. no reward points
13. no pass-restricted movies
14. no refunds
15. not redeemable for cash
16. no reselling
17. no extensions
18. no reproductions
19. not combinable with other promotions, coupons, vouchers or special discount offers

If you get through all that, be sure to go to a participating theatre by the April 29 expiry date.

Okay, some conditions won’t affect your life. Yet someone felt the need to spell them out. There’s no warning that the movie might be a waste of your time even for free and that you’ll be subjected to commercials. That doesn't warrant a mention?

The Surprising Exception

We’re so used to fine print that we don’t notice one surprising exception. In Canada, personal life insurance contracts routinely guarantee everything except

1. government actions
2. investment returns
3. the availability of investment options

Fine print: Products differ and practices change. We’re looking at what’s common to help you in discussions with your advisor.

Government Actions

Provincial governments set the premium tax rates. They range from 2% in most provinces to 4% in Newfoundland. These rates are far below normal sales tax and the federal government doesn’t add a surcharge.

Insurance contracts are usually guaranteed to be tax exempt based on the tax rules when your coverage takes effect. Governments can change the rules but they might compromise and allow existing contracts to operate as before.

Investment Returns

Permanent life insurance plans allow tax-sheltered investment growth. With whole life, the insurer makes all the investment decisions and you get the rewards and penalties for their judgement. With universal life, you pick all the investments and take responsibility for the returns.

The insurer can often remove investment choices from a universal life plan. For example, if the S&P 500 disappears so will indexes based on it. That’s fair but the new indexes might have higher management expenses --- they rarely go down.

The Guarantees

Whole life has the fewest guarantees and is more like insurance on your car or home. You foot the bill for higher claims by others, pricey computer programming (remember Y2K?) and lousy investment returns.

In contrast, term life and universal life insurance routinely guarantee whatever the insurer can:

• premium rates per $1,000 of coverage
• administration expenses
• tax exempt status (under the rules in effect when you got your contract)
• no new conditions or restrictions

Something to think about when you’re back from the movies.

Links

• Check your pizza literacy (new)
• What's worse than fine print? (new)
• The best tax sheltering in Canada
• The four steps in wealth management
• The two drawbacks of investing in life insurance
• How advisors fool you (and what you can do)

Podcast Episode 64 (4:43)

direct download | Internet Archive page

PS The movie coupon expires on a Thursday, which means you can’t see the new Friday releases like A Nightmare on Elm Street or Furry Vengeance. Thank goodness.