Book Review

Separating Fact from Fiction

The Ten Truths of Wealth Creation

By Jacquelyn Lynn

Most of us work hard to make enough money so that we have enough to invest to secure our financial future—and yet all too often, we're willing to trust that hard-earned money to someone selling investment products we don't really understand and that may not work. In the opening of The Ten Truths of Wealth Creation: How to achieve your money goals sooner and safer in good times and bad , author John E. Girouard writes, “The financial services industry is in the business of selling hope. [It] continues to peddle the same stale recipes for wealth creation that, when you really take a good hard look at them, were never good ideas to begin with. They rarely produce consistent returns for clients, but they do consistently make money for the industry.”

He says that the investment industry's success depends on investor confusion, and adds, “the investment industry considers the perfect customer to be one who meekly and gratefully hands over his wallet, asks no questions, and goes away, praying for good luck.” Girouard makes a strong case for the need for people to change their mindsets about wealth and money and the role of investment brokers and salespeople in your own wealth-building plan.

The first truth Girouard lists is: “The key to wealth is through ownership and control, not financial products.” Other truths on his list include:

• “The biggest cost to wealth—up to 60 percent—is uncaptured interest income, unnecessary interest expense, and failure to manage taxes.”

• “Some debt is good, if you finance a thing no longer than its useful life.”

• “Financial independence begins with understanding and focusing on your life goals, as opposed to financial goals, and minimizing your future decisions.”

In other words, figure out what you want from life (besides money), then figure out how to fund it. He says, “Financial goals should not drive your life choices. It should be the other way around.”

Girouard endorses real estate as a wealth-building tool and owns investment property himself. He points out, “Real estate will always be a financial vehicle because an investor can own a piece of property using someone else's money. This leveraging is so fundamental to our economy that it is one of the few segments financed in part by the government through interest deductions.”

In criticizing commission-based financial planners, Girouard makes this comparison: “Would you rather have surgery performed by a doctor paid by you, or one who is free but earns a commission from the drug company, the company that made the medical equipment, and the hospital to whose operating room he steers his patients? Which doctor is looking out for you? The same holds true for many financial planners to whom you are a customer who can buy their products, not a person who needs help reaching his or her life goals.” If you want financial advice, you should expect to pay for it—and you do, one way or another.

Girouard delivers comprehensive definitions and explanations of various financial vehicles and how to use them, including stocks, mortgages, and insurance. He objectively lists pros and cons without specific recommendations. He also emphasizes the issue of the cost of lost opportunity, which he explains as “that part of your investment that stops working for you, and the earnings potential that loss represents.”

The Ten Truths of Wealth Creation is an easy, worthwhile read for both new and experienced investors at any life stage. It can be read sequentially or you can jump to topics of particular interest to you. When Girouard mentions a subject that is discussed in more detail in a later chapter, he points that out so you have the choice of getting additional information when you want it. The book is also well-formatted, with plenty of charts, lists, and illustrations. It's available online and in major bookstores.