AN INDUSTRY NOTE

To:       Daniel H. Zwicker, P.Eng.

From:  The Institute

Oct.10, 2013

To:  Daniel H. Zwicker, CFP, CLU, CH.F.C.

First Financial Consulting Group

Toronto, Ontario

Canada

THE INSTITUTE THANKS YOU!

Dear Daniel H. Zwicker, CFP, CLU, CH.F.C.,

You have now been a Chartered Life Underwriter (CLU) designation holder for 30 years. This speaks to your commitment to excellence, and puts you in a very special class of financial professional.

Because of your hard work and dedication through the years – your action as opposed to merely your words – Canadians have been able to build and preserve their wealth . You have every reason to be proud.

I’d like you to accept both a certificate and a commemorative pin as tokens of The lnstitute’s appreciation of your longtime commitment to high standards . Note that certificates will be issued on a go-forward basis at the 25, 30, 40, 50, 60 and 65-year milestones a long with commemorative pins at the 25 – and 50 – year milestones .

Your name now appears on our website 
www .iafe.ca . 

You will also be recognized in the November 2013 issue of FORUM magazine. 

On behalf of The Institute, thank you for your longstanding commitment to the CLU designation.

Sincerely,


Jim Virtue, CA, CFP, CLU
Chair, The Institute for Advanced Financial Education

THE COLLAPSE OF THE CANADIAN SOCIAL (EMPLOYMENT/RETIREMENT) CONTRACT

When I graduated from University in 1960 employment opportunities were in abundant supply.

A lifetime of productive employment and retirement were achievable.

50 years later neither are within sight.

There are at least 3 root factors at work.

*Capital investment is focused on Shareholder value that excludes

intellectual capital as a key value component.

*Education standards are set with a low bar.

*Neither entrepreneurial innovation or educational excellence are widely held values by our culture.

Our business and education leaders have lost the past 20 years in fulfilling their respective economic and social responsibilities to the current generation.
 
Ask the recent graduates why they can't find productive employment.


Daniel H. Zwicker
B.Sc. (Hons.) P.Eng. CFP CLU CH.F.C. CFSB
Toronto


Financial Practitioner Designations

CFP - Certified Financial Planner

The Certified Financial Planner designation is an internationally recognized standard for financial planning. It is granted by the Financial Planners Standards Council (FPSC). An advisor with a CFP may help you with personal financial planning and offer advice on investment products and strategies.

 CLU - Chartered Life Underwriter

For more than 80 years, the CLU designation has been widely recognized as a mark of excellence in the industry. The Chartered Life Underwriter is a professional financial advisor specializing in developing effective solutions for individuals, business owners and professionals in the areas of income replacement, risk management, estate planning, and wealth transfer.

http://beyondrisk.wordpress.com/2013/12/02/684/

CH.F.C - Chartered Financial Consultant

A Chartered Financial Consultant is a financial advisor with advanced knowledge in wealth accumulation and retirement planning. An advisor with a CH.F.C. is an expert in retirement planning and capital accumulation strategies.


ONLINE REFERENCES:

http://www.advocis.ca/ (Advocis),

http://www.iafe.ca/ (The Institute for Advanced Financial Education)

http://www.cfp-ca.org/ (Financial Planners Standards Council)

http://www.ifbc.ca/ (Independent Financial Brokers of Canada) http://www.peo.on.ca/ (Professional Engineers Ontario)

BLOGS:

FFCG BLOG:  http://dan-zwicker.blogspot.ca/

CFP BLOG:     http://dzwicker.blogspot.ca/

BEYOND RISK BLOG:   http://beyondrisk.blogspot.ca/

CONTACT DETAILS: 
 

http://dzwicker.blogspot.ca/2011/10/contact.html

first financial consulting group

 4261 Highway Seven Suite 238 Markham , Ontario L3R 9W6

Capital Risk Management

Sustainable Lifetime Income

Strategic Wealth Management

Specialists in Advanced Life Insurance Applications and Estate Planning Solutions

'Raising  The Bar' 

THE CRUMBLING AMERICAN DREAM

Diane Ravitch's blog

Robert Putnam on the Crumbling American Dream

By dianerav

August 6, 2013

This is one of the most powerful articles I have read in a long time.
Robert Putnam describes life in his home town of Port Clinton, Ohio, population 6,059, as he was growing up in the 50s.

Port Clinton was “ a passable embodiment of the American dream, a place that offered decent opportunity for the children of bankers and factory workers alike.”

But today, “wealthy kids park BMW convertibles in the Port Clinton High School lot next to decrepit “junkers” in which homeless classmates live. The American dream has morphed into a split-screen American nightmare. And the story of this small town, and the divergent destinies of its children, turns out to be sadly representative of America.

“Growing up, almost all my classmates lived with two parents in homes their parents owned and in neighborhoods where everyone knew everyone else’s first name. Some dads worked in the local auto-part factories or gypsum mines, while others, like my dad, were small businessmen. In that era of strong unions and full employment, few families experienced joblessness or serious economic insecurity. Very few P.C.H.S. students came from wealthy backgrounds, and those few made every effort to hide that fact.”

Putnam and his generation grew up in a healthy society, where opportunity was widely available and many did well in life. Nearly three-quarters got more education than their parents and succeeded economically as well.

But then manufacturing collapsed; jobs were outsourced. The social fabric of the community wore thin
.
“The social impact of those economic hammer blows was initially cushioned by the family and community bonds that had been so strong in my youth. But as successive graduating P.C.H.S. classes entered an ever worsening local economy, the social fabric of the 1950s and 1960s was gradually shredded. Juvenile-delinquency rates began to skyrocket in the 1980s and were triple the national average by 2010. Not surprisingly, given falling wages and loosening norms, single-parent households in Ottawa County doubled from 10 percent in 1970 to 20 percent in 2010, while the divorce rate more than quadrupled. In Port Clinton itself, the epicenter of the local economic collapse in the 1980s, the rate of births out of wedlock quadrupled between 1978 and 1990, topping out at about 40 percent, nearly twice the race-adjusted national average (itself rising rapidly).

“Unlike working-class kids in the class of 1959, many of their counterparts in Port Clinton today are, despite toil and talent, locked into troubled, even hopeless lives.”

What is happening to our country?

Why are the bankers and the major corporations blaming teachers and public schools for problems they not only created but benefit from?

Why do they think that adoption of the Common Core standards or the privatization of public schools will heal the deep economic and social problems caused by the outsourcing of our manufacturing base and deep income inequality?

How many shell games will Americans fall for?

MGAs SEE OPPORTUNITIES IN NEW BUSINESS ENVIRONMENT

While a period of change has its challenges, it also offers a great deal of opportunity for MGAs who are well positioned in the market, says Jim Virtue, president and CEO of PPI Solutions.
There is no question that the industry is going through a lot of change, he says. “But what I think is going to happen is that who you are is going to determine whether it is a positive change or a negative change. From our point of view, I think most of the changes that are happening, if not all of the changes, are actually going to be quite positive for us. We see an awful lot of opportunities.”

The organizations that can prosper in this environment will be those that have scale and are able to comply with the new regulations that are coming down the pipe, he adds. The MGAs that will succeed must also be large enough to meet the volumes of business that will be required to keep their contracts with insurers. “I think a lot of these changes will allow the better organizations to flourish actually,” says Mr. Virtue.

Large MGAs that have sufficient business volume to maintain all their contracts will be in the advantageous position of picking up the business lost by their smaller competitors, he adds. “That’s a good example of how size and scale and the volume of business makes a difference.”

He also sees an advantage for advisors in the changes in the MGA market. “In order to survive and thrive in these changes, it’s going to be more incumbent on MGAs to deliver better services to the advisors.” These better services include technology, marketing, education, compliance, etc. He mentions his own firm’s PPI Solutions Toolkit – a marketing and compliance resource – as an example of an enhanced service that could only be offered by an MGA with scale and resources.

In terms of the recent wave of product changes, Mr. Virtue also sees opportunity there. In part as a response to these changes, his firm has launched its own suite of products. “We’re working with several insurance companies to develop new insurance products. We’ve launched a couple of those (LifePhases and Signature Life). We have actuarial staff that work with the insurance companies that assist them in developing insurance products.”

He expects that PPI Solutions will introduce additional products, some before the end of the year. Such a product development program is only possible with a great deal of scale, he adds.

Mr. Virtue notes that his firm has just finished its best first quarter ever. “We are very, very bullish on our ability to continue to grow through these changes. With problems come opportunities and really for us it is nothing but an opportunity.”

 

The Insurance & Investment Journal

May 2013

LIFE INSURANCE INDUSTRY CLAIMS - Jim Bullock

I have 40+ years experience as a life insurance agent. I have never had a problem getting a life claim paid. I have had a few clients die within 3 years of issue, and in each case the insurer warned me they would take a close look at the claim – but they were paid within two months.

From my experience with my own book of experience, I might conclude there are no issues with claim payments.

However, I am frequently retained by lawyers attempting to get claims paid for their clients. I have worked on about 50 such files and can see a clear pattern.

Life companies expect clients to live a fairly long time. If someone dies within 10 years of issue, the claim gets some scrutiny. If they die within 5 years some companies just flat out don’t want to pay and will grasp at straws to get off the claim.
The claims examiners use three techniques to avoid the claim:
They look for inaccuracies or incompleteness in the application and claim fraud.

They look for inaccuracies or incompleteness in the application and deny the claim because the application required that answers had to be “complete and accurate”. The phrase “…to the best of my knowledge” was not included.

They look for any change in insurability between the time the policy was issued and the time it was delivered. A material change in insurability would mean the policy never became a binding contract. No two year limit on this issue.

I have no idea of how many claims do not get paid. The annual reports to the Superintendent of Insurance do not include this information. However, I think it must be fairly common because I have seen claims as small as $25,000 denied for details as small as undisclosed hemorrhoids two years previously.

Agents should pay close attention to this issue for two reasons. First, they are trying to help and advise their clients. I suggest this should include suggesting companies that pay claims and avoiding those that don’t. That service alone would justify their commission. Secondly, when a claim is not paid the agent is usually included in the resulting lawsuit.

Fraud

If an applicant fails to disclose that he was treated for cancer last year or that he is a sky diver I agree the non-disclosure is probably fraudulent in the normal sense of the word. However, in all the alleged fraud situations I have worked on (I have lost count of how many there have been) only one case involved what might have been a deliberate withholding of information that might have been material.

The problem is that there is a second definition of fraud, as written by David Norwood in an insurance text book. He defines fraud as including “…the statement must be …. made with such reckless disregard for the truth”.

Unfortunately many applications include answers that are grossly incomplete or inaccurate. The agents get blamed for this because they did not adequately brief the client on the need for full and accurate disclosure and because they blithely record answers, without investigation, that are obviously inaccurate.

I have such a case on my desk at the moment. The preamble question on the medical history asks “have you been treated for, tested for, or ever had any known indication of…” followed by all the usual medical issues and body parts.

The question includes “tested for”. Parsing all the questions, we get “Have you ever been tested for disorder of the eyes, ears, high blood pressure, heart murmur, high cholesterol, blood, protein or sugar in the urine, any disorder of the cervix or prostate, elevated blood sugar, or cancer?” The applicant answered “no” to all these questions. The agent recorded and submitted the answers, without comment.

The 40 year old life insured died seven years later and the claim was denied for fraud. The insurance company believes that the application was “made with such reckless disregard for the truth” that it was fraudulent.

I have seen many similar applications and denials. I have no doubt that the applicant was answering the questions with a focus on “Have you ever been treated for or diagnosed with…?” and completely overlooked the “tested for?” part of the question. I can understand the applicant making the mistake, but the agent, in my opinion, is supposed to be administering an application form and is quite capable of making the appropriate follow up question to each “yes” and “no” question. E.g. “Yes, I was diagnosed and tread for a stomach ulcer.” Agent question: “When was that? How bad was it? How was it treated? Who was the doctor” Did you make a full recovery? Is there any affect on you now? Modified diet? Taking drugs?”

For over half the medical questions on the form, the agent should not accept a “no” answer without a follow up. A “no” answer would mean that this 40 year old Canadian has never seen a doctor other than her current family doctor and never been admitted to hospital. She has a child. Can the agent believe the child was not delivered in a hospital and there was no other doctor involved? Can he believe she has never had a urine test? Never had a blood test? No doctor has ever listened to her heart or used that little flashlight thingy to look in her eyes and ears?

I have seen fraud allegations where only one such non-disclosure was made. A woman did not disclose she had hemorrhoids during her pregnancy, two years previous. My wife tells me that about 50% of pregnant women develop hemorrhoids.

In another case a fellow disclosed his family genetic health history as best he could, but did not mention that his brother had had a heart attack. This was because his estranged brother lived in South Africa and they had not spoken in 20 years. The argument was that he could not disclose what he did not know. The insurance company argued that the application required that answers had to be “complete and accurate”. A heart attack of a younger brother was certainly material information, and since it was not disclosed, they claimed the application was invalid.

Why would an agent use applications that required information to be 100% “accurate and complete”? In my opinion, that standard is impossible, and represents a “Get Out of Jail (off claim) Free” card to the insurer. The word “ever” on an application means since the day you were born. What applicant knows all that information? What’s worse, the claims are denied when the doctors’ notes show information that was not shared with the applicant. I have seen claims denied because the doctor’s notes showed high blood pressure one medical. The doctor did not say anything and subsequent visits were normal readings. The applicant claimed he had never had any known indication of high blood pressure but the claim was denied because this answer was not 100% “accurate and complete”.

There was a time when applications with missing information or implausible answers were returned by underwriters to the agents. Not any more. Many companies now issue the policy knowing that if the insured person dies they can contest the claim.

Companies will tell you they deny very few claims. They may be right. Not paying a claim and denying a claim are not synonymous. Almost all the unpaid claim situations I see involve voiding the contract for fraud. If there is no contract, there cannot be a claim, and if there is no claim, there cannot be a claim denial.
The Americans saw this problem over a hundred years ago and put a stop to it. After two years, claims must be paid. As a result, applications are thoroughly underwritten before a policy is issued. An American company would not accept an application with “no” answers that are improbable.

The course required to obtain a life insurance license is about to be replaced. I am waiting to see if there is a requirement for prospective agents to learn how to administer an application form. Probably not. And the insurance companies do not provide agents with any training on what they are expecting on forms, either.

by Jim Bullock
From For Advisors only



---

WHAT YOUR MUTUAL FUND FEE COSTS IN LOST CAPITAL OVER 30 YEARS

THIS IS A MUST READ FOR EVERY ADVISOR

 

Malcolm Hamilton, an actuary and pension consultant with William M. Mercer Ltd., in the Introduction to Jonathan Chevreau's The Wealthy Boomer, provides this handy "rule of 40":

 

Take 40. Divide by your mutual fund's MER. And presto, you've got the number of years it takes management expenses to consume one-third of your investment.

Warning: Now if you think that's painful then you may not want to read further.

 

The "rule of 40" is just an approximation¹

Assume a mutual fund's MER is 2%. In the first year you pay 2% of your fund as an MER, leaving 98%, i.e.
 

1 - MER = 1 - 0.02 = 0.98

In the second year you pay 2% of the remaining 98%, leaving 96.04%, i.e.

In the third year you pay 2% of the remaining 96.04%%, leaving 94.12%.

 

But that's not all!

Now if you think this sounds bad, stop reading any further. It gets worse. Much worse. Those nasty little MERs don't include the cost of brokerage fees, bid/ask spreads and other expenses that are charged directly to the fund. Those extras can easily add another 1% or even more to the annual erosion of your fund. Actively-managed funds incur higher costs due to their usually higher levels of trading. And small cap funds lose even more each time they trade a stock due to the wider bid/ask spreads.

 

And remember, like MERs these extra fees pile up regardless of how you fund performs.

 

But wait there's more!

So far the analysis applies only to tax-sheltered accounts like RRSPs. In a taxable account you'll also have to share your returns with the taxman.

For example, in a taxable account at 50% marginal tax rate, assuming an average annual return of 10%, inflation at 3% and an MER of 2.5%, after 25 years you get to keep 36.89% of your money, the fund company 44.62% and the taxman 18.47%.

by Tyrone C. Phipps
04 23 2013

YOUNG & SELF EMPLOYED - NO JOBS AVAILABLE FOR A CANADIAN GRADUATE WITH A B.ENG. AND AN MBA

When I graduated from university  in 1960 there were numerous employment opportuinities at the equivalent of $250,000/year in today's dollars.

Employment today at $7.25/hr ($14,000+/year) is a travesty of incompetent economic management.

Dan Zwicker
Toronto.

 

Krystina Sulatycki likens the job fair she attended just be­fore graduating from Ryer­ son University's .MBA program two years ago to a rat race as she found herself surrounded by about 100 other applicants. They were all apply­ing for one position.

"That's kind of what it was like then," :Ms. Sulatycki, 28, recalls. "[The job market] was definitely challenging, and especially since I was at a career pivot point, Ididn't have a lot of previ­ous experience and that's what employ­ers were looking for."

Ms. Sulatycki's experience reflects much of the hopelessness many  Can­adian youth face in today's labour mar­ket.   Job prospects for young Canadians continue to diminish, with  larch's un­employment rate for people between the ages of l5 and 24 at 14.2% - nearly double the national average of 7.2%.

What's more, a recent TD Economics report released this year said that the loss of tens of thousands of youth jobs during the recession will cost Canad­ians $23.1-billion in lost wages for the next 18 years.

Yet some twenty somethings  are much more optimistic about the future than what the headlines portray - and they are demonstrating that by veering into the entrepreneurial fast lane.

Toronto-based Ms. Sulatycki, for one, said that not having a job worked in her favour. Being unemployed allowed her more time and freedom to focus on starting up Stylehawk, a social shop­ping app, soon after graduation.

"Had I found work, I probably would have started this on the side and it might have grown slower, or taken a different route," Ms. Sulatycki said.

No mortgage, no children, the ability to be mobile

 

Stylehawk, which launched on the Canadian App Store last December, now features 19 retailers including The Bay. Sephora and Roots.The app is designed to act like a mall

direc­tory, where users can enter stores, browse items, and identify whether they 'have: 'share: or 'buy' it.

 

For Ms. Sulatycki, who also holds an undergraduate materials engin­eering degree from University of Al­berta, Stylehawk and entrepreneur­ ship has allowed her to pursue her dream  early in her career.

 

"Stylehawk evolved from my de­sire to be able to walk into a store, and then hear, 'Hi Krystina, your changeroom is ready for you. We took the liberty of picking up a few things: and then I'll just go and try them on, Ms Sulatycki said

 

"That's what I'd like shopping to be like. I'm trying to give retailers an opportunity to personalize a custom­er's shopping experience."

 

That kind of entrepreneurial spirit is becoming more popular among young Canadians, according to Jane Wu, co-founder and chief happiness officer of Toronto-based Penyo Pal, which makes interactive app games to teach children Mandarin, English or French.
 

The  22-year-old, for example, said her decision to become an entrepre­ neur had little to do with today's job market difficulties, and everything to do with the "popularizing concept of being at the prime of your life, when you're super, super able to tol­erate risk."

 

In  other words: No mortgage, nochildren  and the ability to be mobile. Ms. Wu was selected for the Next 36 program, a "startup boot camp" for promising Canadian undergradu ­ ates, where, she helped create Penyo Pal with $50,000 seed money and a team of three other students in the program.

 

"The entrepreneurial community in Toronto and Canada has been im­ proving. Just five years ago, it wasn't common for high school or univer­ sity students to want to jump into a startup," Ms.Wu said.

 

"Now, I find I'm having this con­versation multiple times with other friends -even those who have jobs in big corporations."

 

Likewise, 22-year-old Phil Jacob­ son turned down a few job offers in brand management at big-name cor­ porations when he graduated from Wilfrid Laurier University's under­ graduate business administration program last year. He opted to focus his full-time attention on PumpUp, a personalized workout app he co­ founded with University of Waterloo student Garrett Gottlieb in  201L

 

"The way things worked out for me, it was just a matter of finding a right fit," Mr. Jacobson said. "But I could definitely see I        wasn't able to  get a job, I'd think about doing some­thing on my own or pursue working for a smaller startup."

 

At the same time, for many twenty something entrepreneurs, youth can also be a hindrance. With little or no professional experience behind them, they have to hustle to prove themselves.

 

"We lack a track record. Beyond Penyo Pal, no one knows what we can do," Ms. Wu said, adding that it is especially difficult when trying to raise funding.

 

Despite the challenges, Ms . Sulatycki said it would be hard to swap her entrepreneurial passion to work fo r someone else. "Maybe in the right environment, if it involved what I'm passionate about -strategic en­vironment, Iwould be open to  it,"she said. "But I'm also very happy working for myself now.

 

 

 

By April Fong

Financial Post

April 8, 2013