Looking at some wealth management myths

Myth #1: Investing is planning

The biggest misconception we face as trusted advisers is the common thought that wealth management is simply or only investing. To the contrary, for most, investing is an outcome of good wealth management - not the reverse (know what I mean small business owner?). In simple terms, to get heat, you first have to put wood in the fireplace. What that means in good wealth management is living beneath your means first. Then developing a habit of saving that grows into a habit of investing. Oh yeah, sprinkle in yearly tax planning, estate planning, and asset protection to boot!

Truth - Certainly one may inherit their wealth and investing those proceeds may come to the forefront. However, statistically, the majority of millionaires are first generation, having built it themselves.

Myth #2: Having a good credit score should be a goal

I can imagine hearing that having a good credit score is not important might shock some. That's because most would assume the opposite of a.) a good credit score is b.) a bad one. Yet we choose option c) aspiring to have NO credit score at all. This is based on the truth and reality that 100 percent of foreclosures and bankruptcies happen to those who borrow money. In our years of assisting clients achieve more than just goals, but the lifestyle and peace of mind they ultimately strive for, owing is usually not a part of that definition. Being debt free, owing no one anything, paying cash for things only when you can afford them is the path to solid wealth management.

Truth - Those who espouse arbitrage on debt (borrow at 3 percent, grow it at 5 percent) have an economical argument that is quickly lost when risk is factored in - after all, what is a night's sleep worth?

Myth #3: Beating a benchmark should be a goal

It never ceases to amaze me that in exploring a client's deepest values, they never list beating a stock market Index as a goal versus, say, funding the education of their children. Yet, I'd be lying if the same client didn't ponder why am I not beating the Nasdaq at some point. As one of my finance professors phrased it, our job is to help clients reach their goals and live the life they want. Beating an index is often times diametrically opposed to those outcomes, and often leads to the big mistake. If you want to outperform - over save, under spend and seek good counsel more often as those steps all surely lead to great wealth management.

Truth - Indexes don't pay taxes, nor transaction fees.

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They never lose a job, get sick, experience cost of living increases, become a widow or have to help out their in-laws in their retirement years.

Myth #4: Educating my kids is enough

We have a problem in our world today with college debt exceeding credit card debt. One might think so many college educated people would figure out that borrowing is not a long term path to success. Here's the crazy thing, according to the seminal work by Thomas Stanley, the Millionaire Next Door, as much as 30 percent of your long term success is based on your children becoming independent, productive adults. Empowering our children with personal responsibility is still a task that includes financial elements, that is for sure. But more is caught than taught in this arena. The greater value in wealth management is supplying the habits, and the accountability in creating healthy productive boundaries that lead a child to independence. It will help them ... and ultimately help you.

Truth - It is an OK phrase to hear your children tell you; "Your money is no longer good to me." Nothing is greater than having your children buy you dinner!

• Philip J. Statz, CFP, is founder, president and adviser of Insight Financial Group. See their story at www.insightlifepath.com