A miracle of ink and paper

When I trained for this business, we were taught to describe life insurance as a miracle of ink and paper. I’ve never forgotten the phrase. It was meant to inspire. Looking back, it reads more like a permission slip — license to use words to sell something, rather than words to explain it. That is the life insurance salesperson’s inheritance: a vocabulary built to move people, not to inform them.

I’ve been reading Advisor.ca closely, and two recent pieces brought the problem into focus.

The first was Jeff Thorsteinson’s “The advisor’s closing triangle.” It’s a well-built framework — ethos, logos, pathos, trust, clarity, emotional relevance. I don’t disagree with any of it. But it left me empty.

The entire piece assumes the recommendation is already sound and asks only how to build the client’s confidence around it. It is a sophisticated treatment of how to close. It says nothing about whether what’s being closed is right.

The second was the coverage of the Financial Services Regulatory Authority of Ontario’s (FSRA) annual conference, where Antoinette Leung, FSRA’s executive vice-president of market conduct observed that too many regulated entities are still waiting for the regulator to hand them a checklist. The regulator’s answer was, in effect, we don’t run your business, so we won’t. Tell us how you’ll achieve good consumer outcomes and show us the evidence.

Jeff Kehoe, executive vice-president, legal and enforcement with FSRA reframed the central question from “Did you follow the rule?” to “Did you achieve the expected outcome?”

Put those two pieces side by side and you can see the whole shape of the problem. The industry is being taught to close more persuasively at exactly the moment the regulator is asking whether the outcome was any good. Persuasion is racing ahead of substance.

Here is what that looks like on the street.

The same week I read these articles, a financial-planning software developer called me about the tax consequences of transferring a corporate-owned life insurance policy into personal hands.

The insurance company said that no tax was payable on the transfer because the adjusted cost basis was lower than the cash surrender value. Based on that, the transfer took place.

The client was surprised to receive a significant tax bill. So, somebody follows up and consults with two certified financial planners. They correctly identify that the policy’s fair market value is a taxable shareholder benefit. They got the answer right, after the transaction was completed. But how would the client and the advisor know, especially after being told by the insurance company there was no tax?

The nuances weren’t documented anywhere the consumer could see them, and the advisor who originally sold the policy almost certainly never knew the question existed. Getting the answer right in one professional’s head is not the same as protecting the consumer. No closing triangle fixes that.

Now, the industry has an answer to this, and it deserves a fair hearing. The information is disclosed.

I was recently reviewing a major insurer’s corporate-strategy presentation with a client and his accountant. Buried on pages 32 through 34 were 17 key considerations — every material risk, faithfully listed. The industry can say, with a straight face, that it disclosed. And on the narrow point, it’s right.

So, I asked the client one question. Have you read them? No, he said. That, I told him, is where we start.

Seventeen considerations dumped 32 pages deep, after a dozen pages of a comparison engineered to show the product winning, is not the same as a consumer understanding the handful of things that actually decide whether this is right for them.

Disclosure is not education. The regulator now agrees: the outcome is what matters, not whether a box was ticked.

Inherited vocabulary

The fix is not more regulation, and it is not better closing skills. The fix is the words themselves. We need to replace the inherited vocabulary — the words tuned to sell — with fair words: published, defensible, plain and available to the advisor who was never taught there was an alternative.

The advisor is not the villain of this story. He is working with the only language anyone ever handed him.

Accounting solved a version of this a century ago. It did not wait for government to write the rules. The profession built its own technical floor — generally accepted accounting principles — and the regulator came to rely on it.

Life insurance has no equivalent. It should. I have spent years developing one. I call it generally accepted life insurance principles (GALIP).

Not principles handed down, but principles generally accepted: foundational, teachable and so widely agreed upon that deviating from one requires documented justification. Most are not controversial. That is the entire point.

A principle becomes generally accepted precisely because reasonable professionals don’t argue about it. To date, some form of GALIP has simply never been written down, agreed upon and shared widely enough to protect consumers at every point in the chain.

To show what I mean rather than just assert it, I’m preparing a companion piece: the five things a consumer should understand before transferring or holding a life insurance policy in their corporation.

Five principles. Each one filtered through three questions I believe belong at the centre of every life insurance decision — Compared to what? What does the contract actually say? Is it in writing?

Each one anchored to a disclosure the manufacturer already makes. I am not contradicting the insurer. I am re-ranking and replacing what the insurer already admits and putting it where the consumer will meet it — at the front, in plain words, with confirmation that it’s been read.

This is the transition I want to make the case for. Not away from sales — toward a kind of selling that can survive scrutiny.

A trusted independent life insurance sales professional is not a contradiction in terms. It is what this business could become if it were willing to publish its words and stand behind them.

I’m thinking specifically about life insurance. But principles-based regulation now reaches every corner of financial advice. What we build here, others can follow.

Let’s start. Publish the GALIP. Challenge the principles. The ones that survive become the floor we all stand on. That is not regulatory burden. It is a profession doing voluntarily, and in writing, what the regulator is now going to ask for anyway.

A miracle of ink and paper, it turns out, is not a bad description of life insurance. It’s just been pointed in the wrong direction. The miracle was never the words that closed the sale. It’s the words that finally tell the truth.