Zen and the Art of Wealth: truths from fiction

Financial peace of mind requires purpose, planning and value for money, author says.

Diana Cawfield 16 June, 2017 | 5:00PM

The dilemma facing Dave, who is in his early 60s and married with three adult children, is a tale of a formerly wealthy entrepreneur who has fallen on hard times. With his family-owned surgical-instrument manufacturing business facing intense competition, he must decide between an offer of $1 million for his shares in the company, or mortgaging the family home to the maximum possible extent and injecting that cash into the business for desperately needed working capital.

Dave, along with his trusted financial advisor, accountant and lifelong friend named Alex, are the two characters in Zen and the Art of Wealth, by financial advisor and author Warren MacKenzie. The book is a fictionalized account of a friend's weekend stay at MacKenzie's farm east of Toronto, where the two men discuss the true meaning of wealth while enjoying home-cooked meals, fine wine, and building a rock wall.

Written in a personable, easy-to-read style, the book is "a labour of love," says MacKenzie, a principal in Toronto with the investment-counselling firm HighView Asset Management Ltd. and a long-time student of the Zen philosophy.

Perhaps the book's most important message is reminding investors that wealth is not an end in itself. "There's no sense in just accumulating wealth," MacKenzie said in an interview. "It's only good if you use it for some purpose. I think I have a very good practical sense of what's important in life and if a person has some assets, how to help them maximize their own happiness."

Drawing on Zen philosophy, MacKenzie believes that a sense of peace and happiness will be achieved by eliminating desires rather than accumulating more and more things. "I go up to our farm," says MacKenzie, "and I don't need very much at all to live up there. If you can live on a small amount of money, you're a lot better off than someone who has $10 million and think they need $1 million a year to live."

Over the course of the weekend, the fictional Dave mulls over his options and changes his attitude toward what he formerly considered dire circumstances. Alex sums up his perspective on the situation. "Okay, let me get this straight," says Alex, turning to Dave. "You have good health, a wonderful and supportive family, you live in a magnificent country, you are highly intelligent, you have solid integrity, good friends…and great business experience. It will be easy for you to get high-paying work as a consultant -- and you still think you have big problems?"

Also impressed upon Dave during his weekend sojourn is the need to make wise financial decisions. "I really can't think of anything more important," says Alex in the book, "than a properly prepared financial plan."

The book cites as an example a retired woman who is one of Alex's clients. Though she is living on a low fixed income, she enjoys financial security because she has a financial plan and knows that the amount coming in is more than what's going out. Her financial plan included the one-time cost of a luxury cruise with her sister.

As depicted in the book, the woman's sister is a widow who has almost $2 million in investments, thanks to her deceased husband's life-insurance policy. But the wealthy widow doesn't have a financial plan and doesn't know how much she will need to maintain her lifestyle over the next 30 years.

Consequently, during the cruise the widow worried and complained constantly about the cost of the trip. "My client had less money," says Alex, "but she had the confidence that she would be okay because she had a sound financial plan that showed she could afford the trip. She enjoyed every minute of it."

MacKenzie cites as a real-life example a financial plan he has created for a woman who is retired and has assets of $2.2 million, including her home which is worth $800,000. She is spending $80,000 a year, and wants to increase this amount in future years in line with inflation to maintain her purchasing power.

The client has a registered retirement income fund (RRIF), Old Age Security and Canada Pension Plan income, but to meet her income needs she also needs to make withdrawals from her non-registered assets.

MacKenzie recommended an investment portfolio with an assumed average rate of return of 4.5%, and a withdrawal plan designed to enable her money to last for her lifetime and give her peace of mind. "If you don't know how much you can safely spend, you worry about every dime," says MacKenzie. "A financial plan is one of the most important things so that you get to enjoy retirement."

Along with its holistic advice on having a healthy attitude to wealth and the need for a financial plan, MacKenzie's book also advises investors to monitor the performance of their investment accounts and be aware of what they're paying for financial advice. At the back of the book is a practical list of 50 things do-it-yourself investors should consider and a list of 21 ways to reduce investment management fees.

Performance reports from brokers, dealers and other advisors should show you how you're doing compared to market benchmarks. "That's dead simple," says MacKenzie, "but you have to ask for it."

Investors also need to ensure that they're getting good value for the money that they pay in investment-management fees and personal advice. Ideally, it's better for an investor seeking advice to find someone that will be hands-on, talk to them, and provide a financial plan, says MacKenzie. But that's not always the case, he adds. "If you're just looking for investments," says MacKenzie, "I would be using a robo-advisor or I would invest in a low-fee balanced mutual fund or exchange-traded funds."

About Author

Diana Cawfield

Diana Cawfield  Diana Cawfield is an award-winning writer who has been a regular Morningstar contributor since 2000. Her numerous publication credits include the Toronto StarAdvisor's Edge and Chatelaine, as well as the Canadian Securities Institute's online educational services.