As a life insurance advisor, I frequently run into two things – consumers who’ve read incorrect our outdated information on the internet on life insurance (there’s lots of info that’s based on 20 year old information) and bloggers who do their research on life insurance on the internet without using primary sources for their information. I’ve even read incorrect information on life insurance in the Toronto Star, information that would’ve been clear if the author had simply asked an insurance advisor for comments. This is concerning enough to me that I spoke on the subject at a financial blogger conference last year. In my talk I showed the bloggers information posted on the internet that everyone agreed with – then proved them wrong. The hoped for impact was that they would at a minimum consult with a life insurance advisor before they published information. That’s the type of thing a professional journalist would do, it’s not common in the blogosphere.
The latest blogger to promote themselves as experts on insurance is Dr. Choi at moneygeeks.ca. Unfortunately, he’s pushing the ‘Dr.’ part really hard in an effort to make his snake oil sales seem legit. The reality is, the product he’s pushing seems about as accurate as an 1800’s dose of snake oil to cure what ails you.
I first ran into his site over at retirehappy.ca. Dr. Choi was promoting the idea that we could look at 20 year income streams using straight addition. In other words, just ignore interest and inflation over the next 20 years. When challenged, his response was “I’ll talk about that later”. The actual response was a blog post that branded me as nothing other than a biased life insurance salesperson pushing commissions. While I’d like to disagree with that perspective, what’s really important here is his lack of response to the challenges to his math.
So what’s the big deal about an internet spat like this? There’s two things that aren’t obvious to consumers looking at this. The fact is, anyone who ignores interest and inflation over 20 years and simply adds the numbers up is either ignorant or a shyster. With someone who’s promoting themselves as ‘Dr.’, he’s clearly trying to present himself as an authority, so we lose the ignorant excuse. That leaves a shyster.
So what’s in it for him? Well, as much as he’s willing to paint an entire industry as being driven by commissions (including specific cases such as myself) one could ask how he earns a living. Interestingly enough, it turns out he’s trying to break into the investment advice field himself – he’s trying to earn money doing this. He’s selling memberships to his ‘investment advice’ newsletter as an income stream. Really? This guy sells investment advice? Really – he does. That should make people think “Hmmmmmm”. Here’s an excerpt from his site where he’s flogging his wares:
“We provide model portfolios consisting of individual stocks hand-picked by Dr. Jin Won Choi. The portfolios have been designed to try and outperform the overall market, using value investing principles. ”
Let me suggest that sales commission is sales commission, no matter how much lipstick you put on it, you’re still kissing a pig. Second hand commissions selling investment advice is still commissions.
This is something I’ve seen before; people trying to promote their wares through general criticism of the life insurance industry, presenting themselves as unbiased experts and then sliding in an ‘Oh, but look what I’m selling as an alternative’. Negative sales like this are not good, not for the salesperson, not for the industry.
The lesson consumers can take from this is, if you’re seeing someone promote themselves using criticism, make sure you question the motives and income of these people – and be doubly suspicious if they’re promoting themselves as experts.
The Dr. also gives away a free ebook, with a chapter on life insurance. And as a Dr., one would expect expert level advice. What we get however, is a pablum treatment that looks to be regurgitated off of info he got from the internet – and it’s full of information that’s simply wrong. Here’s a snippet of his summary:
“There are two life insurance categories: term and whole life. Term insurance is pure insurance while whole life insurance is primarily term insurance + mutual fund. Don’t buy whole insurance. Buy term insurance and invest the rest yourself”.
There’s a whole pile of incorrect information in that short paragraph. The two types of insurance are NOT term and whole life they’re term and permanent (whole life is simply one kind of permanent). Term insurance is not pure insurance, and whole life insurance is not primarily term and a mutual fund. In fact, BOTH types have an insurance component and a reserve and in neither case does the reserve act like a mutual fund. This fallacy is a common misconception from people who don’t actually understand how life insurance works – fine for consumers, not so fine for someone promoting themselves as financial Dr’s – these people should actually understand how life insurance works before promoting these fallacies. As for the final statement about investing, that’s extremely revealing – there’s nothing about a standard life insurance policy; term or whole life, that has anything to do with investing. This statement is simply designed to work up consumer frenzy over evil life insurance investments. This is incorrect, or at best outdated. I personally have thousands of clients and not a one uses their policy for investment purposes. Most of my peers in the industry have the same type of client block – insurance has little to nothing to do with investments. So why is the Dr bringing that into the summary?
While I’ve really pulled apart one example, incorrect advise, bias,and outdated information on the internet is at least as common as correct information. Consumers MUST speak to an experience broker (and maybe two or three) to get accurate, on the ground information.
Next, I’m going to look at the incorrect information published in the Globe and Mail.