Stricken by over-dependence on banks and lack of proper education
Between Errol Johnson and Albert Thorne, they have accumulated more than 80 years experience in the insurance and investment arena. Both have built highly successful careers and businesses helping a wide-cross section of Montréal benefit from proper planning and investing.
Sadly, they say, our community lags when it comes to capitalizing on the many advantages that insurance policies bring as a long-term investment strategy because of distrust and over dependence on banks.
“It’s especially true that some older members of our community still hold outdated concerns about the industry and those who sell insurance,” says Johnson, a standout salesman for 41 years, starting at Mutual Life in 1973 and staying with the company as it changed name and form until it was acquired by Sun Life Financial. “But it’s important that people know how much the insurance industry is regulated in Canada and the strict guidelines that we as insurance professionals have to work within.”
Thorne, who earned his initial certification in Canada in 1974 after selling insurance in his native Barbados for two years before immigrating here, says that lingering distrust drove a lot of people in the Black community away from making wise decisions when it comes to retirement and estate planning.
“I think it’s safe to say that our community never understood that a proper insurance package should be the basic in every family’s planning portfolio,” he told the CONTACT in a recent sit-down together with Johnson.
The fallout from this misplaced aversion to insurance lead to a rush by many Black families to hand their money over to banks, which in turn sell them investment products that are on many occasions ill-suited to their needs.
Johnson zeroed in on the blind trust that many place with Canada’s registered retirement savings plan, the government-regulated account for holding savings and investment assets that can be converted to a registered retirement fund at the age of 71.
“The problem is, RRSPs are not an appropriate choice for many individuals and families when you consider that it shouldn’t be touched until you reach 65 years of age,” he says.
“With the average income being what it is in our community, most do not have enough savings or adequate insurance coverage in case of emergency. So they have no choice but to dip into their RRSPs, and that usually has negative tax implications.”
Johnson lamented what he describes as “tunnel vision” in our community that leads to unconditional loyalty to institutions that do not necessarily have their best interest at heart and that are not positioned to offer proper advise.
“How many times have Albert and myself, as insurance professionals, come across community members who are skeptical to talk to us about investments, but readily accept offers from bank clerks who are for the most part not properly trained to sell investments.”
Johnson says it’s not only RRSPs and investments, but also mortgages and mortgage insurance covered by banks that we should be wary of.
“I just had this guy who came to me looking for mortgage insurance because he was dropped by the bank when he turned 65 years of age. It’s there in the “fine print” of those agreements but many don’t fully understand it. With proper insurance coverage, that wouldn’t happen.”
“On many occasions, it’s only after they have been burnt that they come to us hoping that we can salvage their policies, but usually it’s too late.”
In his 41 years in insurance, Thorne, now a chartered life underwriter and chartered financial planner, says he has seen more than his share of clients who, over time, have benefited significantly with an insurance portfolio that is manageable even on average salaries.
“With as little $130 a month, a young person can be well on his way to a secure retirement while being covered with the basic insurance policies such as Life, Critical Illness and Disability.”
He adds that many should be also taking advantage of the Return of Premium policy that covers their families and guarantees they receive every dollar that they put in if they outlive the term of the policy.
Thorne and Johnson acknowledge that each policy sold and every client comes with needs that are unique, but are united in their conviction that Black families should have benefited more from strategic investing and proper insurance coverage.
Both still have clients on their books who are extremely well positioned financially because of steps taken 40 years ago to cover themselves, their families and their retirement.
“As a community, we have done ourselves a disservice by not getting the right information or speaking to the right people when it comes to making the right decisions on investment and retirement planning.”
But it not too late they say.
We have to start with the basics: proper coverage, knowing the importance of having a will and a mandate, and find the right person to talk to your financial well being in your golden years.