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FNArena Book Review: The Wealth Code 2.0

Book Reviews | Aug 08 2013

By Rudi Filapek-Vandyck, Editor FNArena

It only takes a few paragraphs to realise what the true aim is of US-based financial planner and educator, Jason Vanclef: this author wants to challenge your financial beliefs. Readers better get ready to be shaken and surprised.

Of course, in my world Vanclef immediately receives one big tick of approval, as I firmly believe most people inside the financial services sector would be well-served by doing a little more thinking and more questioning of the general beliefs that are so dominant in this industry. Are equities truly the long term outperformers as Wall Street firms promote them to be? Is this the time to feel safe in government bonds? Are liquid assets by default better than illiquid alternatives?

The answer to all these questions, and many more inside the book, is: of course not! Vanclef noticeably enjoys picking apart the general "truths" that more often than not result in bad investment decisions. Post 2008, many investors are regretting the fact they hadn't been better informed prior to the GFC hitting their retirement plans. The Wealth Code 2.0. How the Rich Stay Rich in Good Times and Bad is an attempt to provide shell-shocked investors and shaken financial planners with a guide as to how it can all be done much safer and better.

Vanclef comes across as a self-motivated, savvy expert on retirement planning and investment portfolios. Understandably, his suggestions and ideas are USA-centric, but the underlying themes are universal and easily transferable to Australia or wherever else across the globe. This is not about selling financial software or investment products, his quest is about challenging general beliefs that are being sold and promoted throughout the industry, without giving it all much thought, really. This leads to many retirees ending up with major disappointment when old age and retirement finally arrive.

Probably the most interesting take-away from this book is Vanclef's Wealth Code under which investment assets are categorised alongside three key elements: High Potential Return, Capital Preservation and Liquidity. In Vanclef's words: investors can at all times have two out of three of these characteristics, but never all three. This then leads to the inevitable conclusion that successful retirement planning is all about spreading one's portfolio across a diversified range of assets. These assets, argues Vanclef, should be characterised according to their key characteristics: is it High Return Potential with Capital Preservation? Or are we talking Liquidity with High Risk Return?

True portfolio diversification alongside these basic principles works, says Vanclef, and he uses numerous happy clients and real life examples in the book as his (obvious) reference points. The meltdown in equities and commodities in 2008 should not by definition have ruined investors' retirement plans, the book argues successfully, and the same applies to the prospect of rising bond yields in developed countries.

Vanclef does not advocate investors should use his book as their new bible, sack their financial planner and do it all by themselves. Education and knowledge are powerful instruments. This book will broaden investors' minds and at the very least assist them with finding better professional support. Planning for retirement becomes a whole lot easier if one knows where to search and what questions to ask.

I agree with the author, a lot of his base insights and recommendations come down to genuine old fashioned common sense, but the mere fact that books like this are still the exception, instead of the widespread norm, indicates how remotely common sense and financial services still operate from each other in today's reality. Highly recommended for investors not afraid to part with the ordinary and make bold changes to their belief-system.

The Wealth Code 2.0. How the Rich Stay Rich in Good Times and Bad by Jason Vanclef. Publisher John Wiley and Sons. 282 pages. According to information provided by the publisher, critics in the US have already labeled it the first true guide for investing in the "New Normal" era. One other description that caught my eye: the indispensable financial survival guide for the 21st century. This is the second edition.

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