It has taken more than 20 years, but we have a new book from David Chilton, renowned author, educator, raconteur and all-around advocate of sensible financial decision-making.
With more than two million copies of The Wealthy Barber in circulation in Canada, it is a sure bet that a large number of your clients will buy a copy of the sequel just to see what Chilton has been up to for the past two decades. That may well lead those clients to seek your take on some of the concepts presented, particularly if they vary from the advice you have provided.
My recommendation would be to jump-start the conversation by reading the book yourself and, perhaps, providing it to clients. It would make an interesting gift that could help deepen relationships through open conversation.
Although The Wealthy Barber himself returns, Roy Miller, his alter ego in the original book, does not. Instead of a story line, we get what feels like a personal conversation with Chilton over lunch at his favourite restaurant. From my experience as Chilton’s occasional lunchtime guest, I can attest that while The Wealthy Barber Returns is written with the same wit and insight that the author expresses so amusingly in person, it is a serious and impassioned exposure of the misguided perceptions and financial foibles we demonstrate every day. It is only Chilton’s genuine concern for us all to “do better” that prompted his return to the bookshelf.
The sequel begins with what Chilton calls the “painful truth”: if you want to accumulate wealth for retirement or any other purpose, you have to spend less than you earn. Much of the balance of the book, like its predecessor, stems from this basic premise — and all of us would agree it is the truth. Unfortunately, things (and people) get in the way of our rational thinking. Temptations include the likes of shop owners, car salespeople, real estate agents and purveyors of pleasure, such as restaurants, travel websites and entertainment venues, whom Chilton describes as “non-stop cheerleaders exhorting us to part with our hard-earned dollars.”
Accompanied by our internal programming, which favours consumption and our need to “keep up with the Joneses,” we have come to believe that saving more requires sacrifices that will lessen our enjoyment of life today — when, in fact, people who live within their means tend to be happier and less stressed.
As you might expect in a book about financial missteps, a considerable amount of space is given to the wise (or unwise) use of credit, whether it is the plastic kind, a mortgage or a line of credit. The last option is given a particularly hard time because its abuse is so easily accomplished and prevalent. Readers also are reminded of the value of keeping track of our spending so we can see how really bad most of us are at distinguishing “needs” from “wants” — something that can have tremendous impact on our ability to save. Of course, we are treated, again, to what was probably the most quoted advice from the original Wealthy Barber book: pay yourself first.
@page_break@The second half of the book is devoted to what Chilton labels as “random thoughts on personal finance” and includes familiar topics such as the Rule of 72 (good), reverse mortgages (bad), RESPs (great) and the ubiquitous “Should I put money into my RRSP/TFSA or pay down my mortgage?” question (it all depends). Most of this section, however, is given over to comments on investing.
A summary of some of Chilton’s views:
> Never invest in anything that eats, which is based on Chilton’s amusing personal experience of owning a racehorse.
> Most investors — professional or otherwise — cannot beat the stock market consistently.
> The aggregate return of investors trying to beat the market must match the market’s return.
> It’s a mathematical certainty that investors who buy market-matching index funds will outperform the majority of investors who attempt to outperform market-matching index funds.
> Past, long-term performance of mutual funds has been proven to have absolutely no correlation to future performance.
> Borrowing to invest often works better in a PowerPoint presentation than it does in real life.
> Investors often chase their money away by watching it too closely.
> It takes surprisingly few people to affect stock prices dramatically in the short run.
> By contributing only after-tax savings instead of their pretax equivalent, we shortchange our RRSPs; we then add financial insult to injury by spending our tax refunds.
> TFSAs may not be a better choice than RRSPs for many investors because of the temptations to raid their plans.
> Term insurance is your best move until you’ve taken full advantage of TFSAs and RRSPs and paid off your consumer debts and mortgage.
It is easy to see that the above list contains at least a few statements that some financial advisors will debate hotly or even dismiss as blasphemy. Chilton acknowledges that some people in the industry (many of whom are his friends) won’t agree with his perspective on everything. Nonetheless, his conviction and commitment to helping people make better financial decisions compelled him to speak out after a long hiatus from the
industry. IE