The Wealth Code 2.0: How the Rich Stay Rich in Good Times and Bad

289 Pages·2013·1.77 MB·English

by  Jason Vanclef(auth.)

The Wealth Code 2.0
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The Wealth Code 2.0
HOW THE RICH STAY RICH IN
GOOD TIMES AND BAD
Jason Vanclef
John Wiley & Sons, Inc.
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Cover image: Key, © Sarah Lee / iStockphoto, gold background,
© Gyro Photography/amanaimagesRF / Getty Images.
Cover design: Leiva-Sposato.
Copyright © 2013 by Jason Vanclef. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
The first edition of The Wealth Code was published by Createspace in 2009.
Published simultaneously in Canada.
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ISBN 978-1-118-48336-7 (Hardcover); ISBN 978-1-118-48390-9 (ebk);
ISBN 978-1-118-48387-9 (ebk); ISBN 978-1-118-48381-7 (ebk)
Printed in the United States of America
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For Tami, Grant, and Cole. You inspire me every
minute of the day to be a better man.
Jason/Dad
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Contents
Preface xi
Acknowledgments xiii
Introduction xvii
Chapter 1 Freeing Your Estate from Conventional
Thinking 1
An Unconventional Approach 2
In Summary 3
Chapter 2 The Best Portfolios Are Mixtures of Many
Different Asset Classes 5
The Real Meaning of Portfolio Diversifi cation 6
In Summary 9
Chapter 3 The Key to Protecting and Building Wealth
in Good Times and Bad 11
General Practitioner versus Specialist 11
In Summary 15
Chapter 4 The Process of Wealth 17
Wealth Bucket 101 19
Buy Assets to Pay For Liabilities! 21
Fortune 400 Secret 23
Brokerisms 25
In Summary 27
vii
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viii Contents
Chapter 5 Leaks in the Bucket 29
Not Following Common Sense 30
Limited Investment Diversifi cation 31
Infl ation 35
Investment Fees 42
Income, Income, Income 49
Taxes 51
Poor Estate Planning 55
Poor Asset Protection 57
Liquidity 59
Summary: Leaks in the Bucket 61
Chapter 6 True Asset Class Diversification 63
The General Asset Classes 63
20,000 Foot Viewpoint on Money 72
Liquidity Leak Reexamined 87
Chapter 7 Foundations for Your Financial Table 91
Matching Beliefs to Your Asset Choices 91
Time and Real Assets 93
Direct Participation Programs 94
Accreditation of Investors 96
Commissions and Fees 99
Prioritization and Placement of
Portfolio Investments 101
In Summary 103
Chapter 8 Building a Strong Financial Table 105
Step One: Know Yourself 106
Step Two: Liquidity Time Lines 108
Step Three: Income Needs 113
Step Four: Growth Needs 120
Step Five: Benefi ciary Needs 125
Putting Together a Financial Plan 127
In Summary 142
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Contents ix
Chapter 9 Life Insurance, Annuities, and How They
Relate to Your Wealth Code 143
General Need for Life Insurance—Family
Liabilities 144
Federal Estate Taxes 146
Annuities 149
Index Universal Life and Index Fixed
Annuities 150
MVA versus Non-MVA Annuities and
Why You Need to Know This 152
In Summary 153
Conclusion: Time to Take Action! 155
Appendix A: Case Studies 159
Appendix B: Different Investment Asset Classes 185
Appendix C: Discounted Roth Conversions 243
Appendix D: 1031 Real Estate Exchanges 265
About the Author 275
Index 277
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Preface
A
frog placed in a pot of boiling water will jump out and save
itself. If that same frog is placed in the pot with cold water and heat
is slowly applied, it will boil itself to death.
Running a wealth management fi rm in Los Angeles, California,
I meet hundreds of people each year and discuss their fi nances.
Nothing cuts more to the core than people and their money. With
each passing year, as I see hard working people who have had their
retirement goals shattered time and time again by the stock mar-
kets. I question, “Is the stock market just a big pot of water with the
heat slowly being turned on?”
If this book was written in a year like 1999 or 2006, most people
would disregard it. “The stock markets are great,” they would say.
“It has made us a lot of money.” In spite of the terrible correction
between 2000 and 2002, the sense that all was right was the prevail-
ing belief. By 2006 most people were nowhere near the account
value they had before the market crash, yet their faith in the mar-
ket was unshakable. The heat was being applied to the pot of water,
but most people stayed the course.
The timing of the fi rst edition of The Wealth Code , mid 2009 and
after the horrendous loss of wealth suffered with the stock mar-
ket crash between 2007 and 2009, was no accident. I felt people
needed to be shaken up before they could be open to a different
viewpoint on building and protecting their nest eggs.
My goal was to educate investors on how using fi nancial build-
ing blocks other than just stocks and bonds could provide the
potential for more consistent returns and cash fl ow for their retire-
ments. These other building blocks include investments such as
Oil/Gas, Equipment Leases, Collateralized Notes, Real Estate, and
many more. Financial ideas common to the super wealthy but gen-
erally not thought of as being accessible to the regular investor in a
401(k) plan or in their personal savings.
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xii Preface
“Representing ideas of wealth, not Wall Street,” has been a com-
mon saying to my clients for years now.
The objective of this second edition is to further expand the
ideas, applying lessons learned in the last three years since the fi rst
edition was published, and more importantly to give people a new
perspective and more control over their fi nances. After experienc-
ing 12 years in the current bear market which began in 2000, most
people are beginning to realize that maybe the water pot is not the
best place for their money, and the revolt against staying the course
has begun.
Jason Vanclef
December 2012
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Acknowledgments
A
few people are directly responsible for making this book a
reality. First, Nancy and Herve Vanclef, mom and dad, who had
a huge impact on editing this book and smoothing out the rough
edges. Your contributions and ideas sorted out my 2 a.m. feverish
writings and made them coherent. You were the perfect sounding
board to bounce ideas off. To my brother Cristian who from afar
has always demonstrated to me that genius is often found in over-
looked places. R.D. Hutchinson, Sr., my grandfather, who was the
inspiration for my entire career as a fi nancial advisor.
I also want to recognize Mark Trewitt for his contributions on
the topic of discounted Roth IRA conversions. As a fi nancial adviser
you represent the epitome of excellence and I ’m proud to work
with you in our quest to improve people’ s retirements and lives.
Lastly, I want to thank all my clients who have constantly
inspired me to grow and adapt in this ever-changing economic
landscape. This book is dedicated to you.
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