RISCARIO INSIDER

November 24, 2012

FORGET FINANCIAL LITERACY: CHECK YOUR PIZZA LITERACY

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

You 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

Here’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

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

Grocery 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

The 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.

Donations

Companies 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

IMAGINE JAMES BOND SELLING INSURANCE

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.

Training

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.

Support

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.

Results

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 scam

An 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.

Secrecy

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.

Overall

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.

Caveat

Age 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.