Author: A.T.

My Harvard Business School yearbook opened with a quote from John Kenneth Galbraith. "It’s a good school," he said, in his wry way. "We should be grateful to it for training people who will shoulder the dull, tedious administrative jobs in organizations."

This goes back 25 years, but my recollection is that the teaching at the Business School was a lot more animated and accessible than the teaching at Harvard College. The College was academic. Few academics have the outgoing personalities of, say, a Galbraith (and few Galbraiths spent a lot of time teaching undergraduates). At the B-school, by contrast, the professors were, for the most part, more fun.

Business: dull? Tedious? I don’t think so.

Better than half the respondents to our class survey responded "yes" when asked, "Do you consider yourself an entrepreneur?" Tedious administrative jobs, indeed.

What strikes me in contemplating our 25th reunion isn’t so much our two years in those United Nations-like horseshoe classrooms (instead of signs in front of us that read NIGERIA, CUBA, FINLAND, we had signs that read PERELLA, HOBBS, SCHWARZMAN), but how much has changed in the interim. We have gone from the days of pocket calculators and inflation so severe, at 4%, that President Nixon (that laissez-faire Republican) imposed wage and price controls, to a world where each of our kids has more computing power on his or her desk, and each of us on his or her lap, than all of Harvard had in its entirety (or certainly all of Harvard Business School) . . . a world that seems to have found a better way than price controls to tame inflation (free trade, competition, innovation, dour central bankers).

In these 25 years HBS has gone from being an acronym only a little more palatable around the world than CIA, to symbolizing much that the younger generation and people everywhere aspire to.

Not to say my classmates and I have had a whole lot to do with ending the Cold War or the near universal acceptance of market economics. Or that dear old Professor George Lodge, in our day more or less the liberal "conscience" of the B-School, succeeded in making us all ethical, compassionate capitalists. One of my most likable sectionmates made the front page of The Wall Street Journal for massive insider trading even before our fifth reunion. Another — a centi-millionaire by now, I would guess — was featured in that same newspaper with a quote so unsentimental, in connection with a takeover years ago, that it was runner-up only to the "greed is good" quote Gordon Gekko wound up using in Wall Street. But most of us, from what I can tell, fall comfortably in between: modest to significant successes, honest, doing our bit for the economy and our communities, paying our taxes (grumbling, if we’re Republicans, and amazed, if we’re Democrats, that the top federal bracket is only 39.6% – it was 70% in 1972).

We have gained some weight, lost some hair, and seen the world take giant leaps forward and a few steps back. Many of us would never be remotely where we are today had we not lucked into the HBS imprimatur and network of connections (not to say we would have been circus performers or busboys, but still). Most of us are really glad we chose business school rather than law school. (We surely need good lawyers just as we need good politicians — but talk about maligned professions!) And almost all of us, I imagine, regard the next 25 years with a sense of wonder.

Recently I mentioned going to my 25th Harvard Business School reunion. While you were left wondering why the reunion would be held in the fall — isn’t June reunion month? — I was left wondering how a young guy like me could possibly be this old. I must have graduated when I was 12.

It also occurred to me that a couple of comments might be in order.

The first is: what is this fund-raising stuff? My classmates and I were asked to pony up ten million dollars. OK, I sent something — I do believe in "participation." But if there’s any school in the country that should be self-sufficient, it’s Harvard Business School. It’s the college or the divinity school or the ed school or the science labs that need alumni money. If I were running the B-School (and you can be sure I will never be asked), I would jack up the tuition from whatever astronomical sum it now is ($25,000 a year?) to the full unsubsidized cost plus a profit ($50,000?) and then offer the 95% of students who couldn’t afford it a couple of financing plans.

They could borrow as much as they wanted on terms more or less identical to a 15- or 30-year mortgage (with a small life-insurance fee tacked on to pay off the debts of those struck by lightning out on the golf course). Or they could agree to pay, say, 5% of their income for life (or until they had paid a sum equal to double all they had borrowed, plus accumulated interest at the prime rate).

This is obviously rough — it would be fun working out the details — but the ballparks are right. Say you borrowed $75,000. That works out to about $7,000 a year for 30 years on an 8% loan. Starting pay for graduates of top B-schools tends to range between $50,000 and $100,000, so 5%-of-pay for most would quickly rise to cover the cost — and over a lifetime, most students would wind up paying their debts in full, with interest, while many others would pay up to double their debt with interest. The extra money from those would cover any shortfall from those who chose less lucrative careers.

That’s my plan. Understandably, the B-school alumni magazine chose not to include it with the other thoughts it solicited for our 25th — which, if you are really a glutton for this kind of musing, you are invited to come back to this space to read tomorrow’s comment.

(OK, OK — for it to work, I guess the country’s other excellent business schools would have to do more or less the same thing, lest Harvard lose all its best applicants to lower-priced rivals. So maybe Harvard should just begin to ease into this gradually, raising tuition a little and offering financing options, leading the way for the other schools to follow suit.)

You know the episode where Kramer has this terrible cough but, not trusting human doctors, he finds a dog with a similar cough and off they both go to the vet? Well, here is the converse of that story, and it’s not from Seinfeld. It’s from The Very Rich, by Joseph Thorndike, Jr., via Dave Davis:

John Wendel worked as a porter for John Jacob Astor and took to heart his employer’s advice to invest his savings in land. With unwavering trust in this ancestral wisdom, the family held on to their real estate until in the twentieth century it was valued at one hundred million dollars. The last of their line were two spinster sisters, Miss Ella and Miss Rebecca, who for fifty years seldom ventured outside their brownstone, huddled amid the stores and office buildings at the corner of 39th Street and Fifth Avenue.

According to Lucius Beebe, they resisted offers of five million dollars and up because their succession of dogs, each named Tobey, liked the garden to run in. Once when they could not reach a veterinary, the current Tobey was taken to Flower Memorial Hospital, where a kindly doctor treated him. The Misses Wendel did not forget, and in 1931, when Miss Ella died, leaving the family estate to charities, sixteen million dollars of it went to Flower Hospital.

Be nice. What goes around comes around.

“I saw your advice in PARADE recently about tempering the impulse to purchase non-necessities. A habit I developed in college was, when I felt the urge to buy some item that caught my eye, to wait two weeks. If I wanted it then, I told myself, I would buy it. Usually, I didn’t even remember it after two weeks. Even though my financial situation is much changed from those days, I still maintain this habit and consider it really useful.” — Vince DeHart

This is so simple and so smart and so important, I have only one thing to add: it does not apply to books.

Yesterday I described my run-in with a credit card company that chewed me out for approaching them with a poor attitude . . . and then refused to waive a $20 late fee. Something tells me this might not have played out the same way with Paul Fischer, of Virginia.

Writes he:

I recently had a run-in with one of my 401(k) companies and I’d like to pass that lesson along to your readers.

I had been one-third owner in a small business, and after a year and a half we were able to start up a small 401(k). We agreed to a penalty for early withdrawal, thinking it would give our employees greater reason to stay with the company over the long haul.

I rolled an older 401(k) into the plan, thinking nothing about the penalty, as I was an owner. I never imagined that two and a half years later I would have sold out to my partners and moved on. Now, four years after its inception, my partners are closing down the plan, and I am being forced to move my accounts. I called the 401(k) company, and they insisted that they had a contract and would be taking about $4,600 of my money, regardless of whether I kept the money invested with them.

They said the early withdrawal penalty applied even though I wasn’t quitting the plan, the plan was quitting me. I got really angry about this, and sat down for a good think. I came up with some points to threaten them on, and apparently one if not all struck home. I would like to share these with your readers since they may someday be in a similar situation, and should learn that there is always an alternative and that persistence will get you what you want.

In order to do this, you must know what you want. I have been happy with the fund performance, and would gladly roll my money over to an IRA with the same investment company as long as they abolished the early withdrawal penalty. This became my goal.

The first thing I did was ask for the boss of the person in charge of my plan. Usually the front line people are not allowed to make deals or exceptions to policy (read corporate dogma). This got me on the phone with someone who would feel the heat really bad if I went above his head, which I threatened to do. Never be afraid to take things all the way to the top.

Next, I computed, conservatively, what my account would be worth when I reached 67 (36 years from now). Since I have been earning about 16% annually on these funds I decided a long term average of 12% over my lifetime would be a conservative return. Using the Rule of 72, I calculated my current account will be worth about 64 times what it is now by the time I retire. Although the account is relatively small now, it would be worth well over $2,000,000 by the time I started withdrawing from it! This, I felt, gave me some leverage.

I thought about some proper threats to motivate them to see my point of view. And I came up with some good ones, if I do say so myself.

1) File a complaint with the SEC. Since the plan was quitting me, and they were penalizing me as if I were quitting the plan, I considered this legalized theft. I figured I could easily cost them 10 times my penalty in legal bills if I asked the SEC to investigate legalized theft. Again, this will not apply to everyone, as my situation was special, but it seemed to me a good way to achieve my goal.

2) Never do business with them again. Although my accounts are small now, they will be worth several million when I retire. Whichever companies I do business with will make lots of money in the long run. If they want to keep me for that long run they can make a lifetime friendly customer who will tout their respectability or they can make a mortal enemy.

3) Tell a friend. Either way, I plan to tell lots of people whether or not they are a good company to deal with. If all my friends are in about the same financial place as me, and I get 5 to switch away from their company, they lose the management of over 10 million dollars by the time we retire. If they submit to my demands, they could gain just as much.

4) Go public. I also threatened to post my story all over the Internet if things didn’t go my way. There is nothing they can legally do to me if I print the truth, so I planned to blast them week after week, month after month, and let people know how heartless and pedantic they were.

Fortunately, they backed off their stance, probably because it was a special case. Possibly because I outlined several things I would actively pursue that would cost them a minimum of $46,000 and the management of an eventual 2 million dollars. At most, I could have cost them several accounts totaling tens of millions of dollars.

Let your readers know they can stand up to these financial institutions and get their way. Also, I’ve never seen you cover the rule of 72, so you might want to expound on that.

Even if I had any serious reservations about Paul’s approach, and I have only minor ones (like: a contract is a contract, though I haven’t read this one), I’d be afraid to voice them. This guy’s tough! But he was right to pursue the case, because it ended up win-win. He got to keep his $4,600; they got to keep a customer.

For those of us who are already hellions when it comes to this stuff, Paul’s tale just confirms our aggressiveness. To those of us who are meek, it suggests a way of inheriting a little more of the earth while we’re still here to enjoy it.

[The Rule of 72 is an easy way to dazzle your innumerate friends. It tells you how fast money will double, roughly, at any given interest rate. Just divide 72 by the rate. Three into 72 is 24, meaning that money growing at 3% doubles every 24 years. Six into 72 is 12, meaning that money growing at 6% doubles every 12 years. Eight into 72 is 9, meaning that money — well, you get the idea.]

Let me preface this by saying it’s trivial and could doubtless have happened elsewhere, not just with GM. But now that we know there’s such a thing as Road Rage, which leads people to kill other people over nothing, should we not all admit to having suffered, from time to time, Credit Card Billing Rage, where we want to hurtle down through the phone line and rip the customer service rep’s heart out?

No? You mean I’m alone in these fantasies? Oops. How very embarrassing. Well, fortunately, it’s moot, because I’ve yet to figure out how to hurtle down the phone line. And because I’m aware it’s not the customer service rep who makes policy, so the Rage quickly passes.

It’s actually been a while since I felt any of this, because my credit card life is really simple: The bills come; I pay them in full via CheckFree.

But this morning I got my GM Gold card statement. I had signed up for one of these cards thinking I might someday buy a new GM vehicle, despite my preference for used ones, and that accumulating up to $1,000 a year in 5% “rebates” on everything I charged could be pretty good. No annual fee. Already awash in frequent flier miles. What’s to lose.

The previous month’s bill had been $55.93. (When I tell you to live beneath your means, I’m not kidding.) For whatever reason, it had taken me 29 days from the end of the billing cycle instead of 25 to get them the money.

Because I’m a good customer, I guess, the computer printed a notice asking me to be more careful in the future, but waiving the finance charge. (“In the future, you will incur purchase periodic finance charges if we do not receive your payment within 25 days after the close of the billing cycle.”) Fair enough. And thanks. It’s not that the interest on $55.93 at 18.9% would amount to a lot — 88 cents. But then you get all bollixed up, because when you pay the $55.93 in full, expecting to be free of interest charges in the future, you find the next month you were 88 cents short, and so are accruing interest on the $22,000 Home Entertainment Center you just purchased, and — well, you’ve been there, right? It’s a nightmare.

So it was nice of the computer to waive the 88 cents.

What did catch my eye, however, was the $20 late charge. “Please note,” the computer printed on my bill: “A late fee was assessed because your payment this month was received more than 25 days after the close of the billing cycle. In the future, please allow time for your payment to reach us within 25 days after the close of your billing cycle. Thank you for using the GM card.”

I tried to calculate the interest rate $20 represents on 4 days of a $55 debt, but my calculator exploded.

Now, I can see a $50 fee when you change a non-refundable airline ticket. There are a lot of reasons for it (one: a human has to spend some time trying to find you a seat on a different flight) and they clearly warn you about it in advance. Happy to pay it.

I can see a $25 ticket for overstaying one’s allotted time at a parking meter or a $150 fine for speeding (though to be effective on the rich without being draconian on the poor, I’d rather see speeding fines somehow geared not just to the degree of recklessness but also to the ability to pay).

But this? This is a little scuzzy. I turned over the bill and hunted through the light gray fine print that summarizes the terms of the card. No mention of $20 late fees. Gee, I thought. How fortunate I am that they didn’t levy a secret $50 or $500 late fee.

I called the 800-number, branched through the branching, listened to the music, gave out my card number, mom’s maiden name, all that — not because it was a good use of time, but because really: $20 on a $55.93 debt? — and I got Sean.

You’ll just have to trust me when I tell you I was reasonably well-behaved. I wasn’t nice. I’m not saying I was nice. But I wasn’t awful either. (And I know, because sometimes in these situations I have been awful, and I always hate myself for it afterward — so I try to keep from getting that way.)

“Help me understand why there would be a $20 charge for being a few days late on a $55 balance,” I said, after briefly explaining the situation. “That would seem to work out to, like, a bazillion percent interest. And help me get the charge reversed.”

Yes, I should have said, “please” and I should have been meek. But surely these folks have encountered worse than what I had just dished out.

“Are you asking me or telling me?” was Sean’s response.

“Huh?” I said.

I had just assumed he would run through the “soothe the customer and gain goodwill for GM by canceling the late fee” script and I’d be on my way.

“Are you asking me or telling me?” he repeated.

“‘Help me’ is what I said. Is that asking or telling? I guess it’s however you received it.”

Again, I was neither nice (nice would have been, “Gee, did that come off wrong? I’m sorry. I just need your help.”) nor awful. I was just nonplused. Not only was I being charged $20 for being “bad,” I wasn’t asking for help nicely enough — bad again. We can’t get on to the substance of my customer service inquiry until I improve my attitude. I’ve obviously got a lot to learn about how to be a good GM customer.

“Look,” I said. “I think we’ve gotten off on the wrong foot. Is there someone else I could talk with about this and just start fresh?”

Sean seemed to find that acceptable and put me back on with the music. After a couple of minutes — a long time to be stewing over being dressed down by the customer service rep, especially when you don’t know it will be only a two-minute wait, you’re just in limbo, and what a waste of time this is for $20 (not to sound grand about it, but you do know I have a vast fortune) — Mr. Morrow came on the line.

Mr. Morrow, handled it much better, as most customer service supervisors do. He let me vent a little, then explained that they used to waive the late fee when people called, but all the card companies were tightening up on this (oh, yeah? in some sort of collusion outlawed by anti-trust?) and, while he sympathized, if I checked the terms of my agreement I’d see this $20 was part of the deal.

“Well, you know,” I said, “I looked at the fine print on the back of my statement and I didn’t see anything about a $20 late fee.”

Mr. Morrow was surprised by this. I read him each of the section headings, offering to read the full text. He said, well, it may not be in the lengthy fine print summary but it is in the original fine print agreement. He offered to send a copy.

I was all set to cancel my card, but realized I would probably lose the considerable credit I had built up toward a new GM car, should I ever buy one. (Does not apply to Saturn, reads some other fine print.) (Can no longer rack up as much in credits as before, reads a later amendment.) So, after Mr. Morrow assured me there was no annual fee and that I need not ever use it again to keep it in force, I pledged to pay the $20 promptly but never to use the card again. I realized he didn’t set the policy, I explained, but suggested that he might want to volunteer in the next department meeting that this is pretty dumb. It’s a low-road way to make $20, and, in my case at least, will cost GM a lot more than $20 in goodwill.

Yet one more reason to buy a used car.

Thank you for letting me vent. Does turning the $20 into the subject of this comment make it a deductible business expense?

(Nah.)

PS – Don’t let this trivial episode cause you to sell your GM stock. A lot of people smarter about these things than me seem to feel GM stock is in the early stages of a gradual upswing. Having bought a little myself, I hope they’re right.

Recently, I answered a question from Pieter Lessing about stop-loss orders. If you don’t know what they are, or are interested in revivifying comic book characters, check it out. Today, for those of you just joining us (this is actually my 420th “comment” on the Ceres — now Ameritrade — web site), let me reprise the rest of Lessing on losses. He writes:

Could you comment on STOP LOSS ORDERS AS PART OF AN OVERALL INVESTMENT STRATEGY? I have stop loss orders on most of my equity positions (approximately 20% below the current trading price) for the following reasons:

a) To lock in a profit, once I have one. I finally decided that buying a stock at $18, see it zoom to $40, then down to $7 in less than a year is dumb, not to mention painful. To have sold at $32 ($40 minus 20%) would have been just fine. It would have worked in this case, because the climb up to $40 never had dips as big as 20% along the way.

b) Protect against catastrophe. I travel internationally, and am out of touch w/ quotes & brokers for weeks at a time. If the big one hits while I don’t have access to my account, I have a theoretical limit to my loss. (I realize that I may lose more than 20% if the dive is REAL fast, but since I’ve made quite a bit more than that in most of my positions, I’m willing to accept that.) If the Dow zips down to 2,000 in an hour, I figure we have bigger problems to face anyway. However, if it takes a few days to get down to 2,000, I would be in an all cash situation, buying like crazy!

c) Set the limit of loss when buying a new highly speculative stock. (Sure, it may triple after first going down 20%, but it can also keep on going down.) Preservation of capital.

PS: Just like any other investment strategy (or Vegas gambling system), the above does have its weaker points (tax implications, commissions, etc.)

PPS: I prefer the above to selling calls (or buying puts) — lower maintenance.

Pieter goes on to say that he’s not dogmatic about that 20% number. He may set his stops looser, allowing for even more of a dip, if he thinks the stock is very volatile and/or if he has a really big profit in it.

So what do I think? I think, mainly, that for Pieter this is a good strategy. It gives him peace of mind. Indeed, for anyone lucky enough to have gotten into this market in the last few years and doubled or tripled his or her money, it’s something to consider. The benefits, as Pieter has listed them, are clear. (But for the record, the Dow can’t drop to 2000 in a day, for two reasons. First, as I’m sure Pieter knows, there are “circuit breakers” that kick in at various stages to keep the market from falling off a cliff. Second, at least two Dow components, Coke and GE, only go up.)

But the negatives of this strategy keep me personally from using stops very often.

If you’re speculating in stocks because they may go up, this is a strategy to consider. If you’re buying them to get a stake — perhaps at what you consider a bargain price — in a company you want to own, whose profits you want to share, and in whose growth you want to participate, then this is not such a good strategy. It means that you will frequently find yourself selling stocks you thought were worth owning at one price for no reason other than they are now 20% cheaper (if you set your stop at a 20% loss).

When a sale is triggered, you have that 20-plus percent loss (plus, because it’s not unlikely that, as the stock is dropping, your sell order will fetch a still lower price). You incur a brokerage commission (happily, this has become all but trivial). You eat the “spread” between bid and asked prices (not so trivial on some stocks). And, if it’s a stock in which you have a profit in a taxable account, you give up a chunk to Uncle Sam.

Granted, if you’re holding a stock at $150 a share for which you paid $28, it’s not too terrible a prospect. You may think of this as play money to begin with. (You know how magnanimous you get at Monopoly when you have hotels every place and there’s no way you won’t win? How when your cash is piling up and you land on someone else’s pathetic little property, with $23 rent, you flip them a hundred and tell them to keep the change? That’s what’s going on here.)

And then there’s the conundrum of just how tight to set your stops. The tighter you set them, the less you’ll lose on any given position — but the more you may lose in the long run, as you are whipsawed out of stocks that are basically headed up, but dip occasionally by enough to trigger the stop.

A final conundrum is whether to place a straight “stop” or a “stop limit” order. With a stop, when your stock trades at $25 (or wherever you set your stop), your broker will automatically enter a market order to sell your shares. In a thinly-traded stock dropping fast (in part because you are not the only guy who’s been setting stops), that could mean getting your order filled not at $25 or $24-3/4 but $16. Literally. It can happen.

To protect against this, you can enter a “stop limit” order — to sell if the stock trades at $25, but only if you can get at least $24, say.

That way, you know for sure the worst price you’ll get is $24, which is a big plus . . . except that it also may defeat the whole purpose of the stop in the first place. Because if this is the next Bre-X and you want out at any price, there you will likely sit with the stock at $2, wishing you had set no limit and gotten “just” $16.

There’s no free lunch.

On balance, and though it will vary tremendously from investor to investor, stops probably cost stock-market investors more than they save them. But that is simply the price you pay for peace of mind.

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Where stops do make lots of sense is in commodities speculation, where you can actually lose more than your entire stake, and where your reason for buying coffee futures wasn’t that you actually wanted to own a few tons of coffee, just that you thought the price might go up. Commodities speculation is an idiotic enterprise for lay investors like you or me, but downright suicidal without stops. (And I am so sick of all the innuendo and misinformation about Hillary Clinton’s commodities adventure, I’d like to stop your snickering right now. The full story is laid out in great detail in Jim Stewart’s Blood Sport, and it turns out that — other than handling the public relations aspects of the episode very badly — she did nothing wrong. I’ll bet not one American in 100 knows that.)

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Notes to newcomers:

• Unlike this one, most of the “comments” you’ll find here are relatively short. (One was a single word.)

• Many are on ridiculous topics like the nutritional value of ostrich meat or the top 10 ways to know you’re dating a consultant or the top 10 reasons not to buy mutual funds (even though I’m a strong believer in low-expense no-load mutual funds) or — especially — the top ten reasons to buy my new book.

• I really do read and greatly appreciate your feedback, both pro and con. (Be sure to let me know if you would rather I not use your name if I quote you here.)

• The archives don’t get go back more than a week because, while one or two may have the shelf life of a fruitcake, most are — at best — a croissant to accompany your morning coffee.

Writes a gay Republican prominent in the Eisenhower White House and ever since:

“I went to see In and Out [the current Kevin Kline hit]. Ahead of me in the line were a couple and three kids. I heard the father order the tickets: ‘Two adults for The Game, three children for In and Out.’ We have come a distance!”

I’ll be brief. I know this stuff offends a few of you and doubtless bores others. But it’s worth comment how America is confronting this until-very-recently taboo and scary subject . . . considering the issues on their merits . . . and in relatively short order accepting yet another minority into the national fabric.

I don’t know if you saw Ellen on the Tonight Show with Jay Leno a week or two ago, but it doesn’t get much more mainstream than that. It was very funny. In and Out is very funny. It’s all part of what I believe they call “the human comedy.” As long as people are law-abiding, productive citizens, let’s just laugh at our differences and profit from our diversity.

This is the attitude that seems to have won over many Democrats and more than a few Republicans. (The libertarians of course were never in doubt.)

When Charles and I went up to Boston last week for my 25th business school reunion, it went as I’ve found these things always do — the wives all over Charles when they find out he designs a prominent clothing line many of them wear; the husbands trying to figure out whether there’s money to be made putting together a deal to launch his own label.

Not to say Harvard Business School is typical. But our class survey showed us to be something like 70% Republican, 21% Democrat, 9% Independent — so it’s not exactly Harvard College we’re talking about here, or Berkeley, or Key West. Newt may not accept his sister for who she is, but many of his fellow Republicans and most Democrats now do.

Anyway, see In and Out. It’s a riot.

Monday: A new web address: www.ameritrade.com

If you take out a life insurance policy, the cash it produces when you die becomes part of your taxable estate. If everything you own — house, insurance proceeds, pension assets and so on — total less than $600,000 (gradually rising to $1 million over the next few years), no estate tax will be due. But beyond that, the tax is heavy.

If you’re leaving everything in excess of $600,000 to your spouse (or to charity), no estate tax will be due, either. But when your spouse dies, estate tax may well be due.

So if you’re trying to leave some money to your kids, here’s what you can do: set up an irrevocable trust and have it apply for the life insurance (or transfer ownership of an existing policy into it, at least three years before you die). When you die, the life insurance proceeds go to fund the trust, and no estate tax is due. You might set up the trust to pay your spouse an income while she’s alive and then be distributed to your kids.

Speak with a trust and estates attorney for the details, and to be sure what I’m saying applies to you. But for people who have appreciable assets, this issue of “who should own the life insurance” is a basic estate-planning question to consider.

Comes this smart tip from the Percy Hoek insurance agency (if you happen to live out on Long Island, New York, or perhaps even a bit further afield, you could do worse than to talk to these folks — one of the nicest, most knowledgeable, hardest-working independent agents I’ve ever run across — 516-589-4100):

“More insurance companies are offering or suggesting you report claims directly to them, not to the agent. It’s easy, but can be costly too.” The problem is: even if your claim proves not to be covered or not to exceed the deductible, your call to the insurer will be “logged.” They didn’t pay out a dime, yet they consider it a smudge on your record. Rack up a few such smudges, and you could see your rate rise or your renewal declined. Whereas if you had called your agent, you would have had these “non-claims” filtered out. A good agent can also provide some help and guidance in making and following through with a claim.

This is not to deny the benefits of dealing with a “direct writer” — insurers like GEICO (which happens to insure my car) that sell direct by phone rather than through agents. You’ll generally get a lower price shopping around and going with a direct writer. But there can be benefits to personal service and guidance as well. If you have more time than money, I’d shop around for a cheap direct writer. If you’re a little further along financially, you may want to establish a relationship with a good independent agent — yet occasionally do reality checks by shopping around on your own. With the Internet, this is likely to get ever easier.

Also, consider that with life insurance, unlike homeowners and auto insurance, you’re not likely to make a lot of claims. So there it’s particularly sensible, if your needs are simple and direct — you’ve got young kids, you need all the coverage you can afford — to shop around yourself for the cheapest term insurance you can find.

Tomorrow: Who Owns Your Life Insurance Policy?