BUSINESS

Spinning gold from folksy yarns

David Chilton’s profits mount from his investment advice in The Wealthy Barber

BRENDA DALGLISH January 17 1994
BUSINESS

Spinning gold from folksy yarns

David Chilton’s profits mount from his investment advice in The Wealthy Barber

BRENDA DALGLISH January 17 1994

Spinning gold from folksy yarns

BUSINESS

David Chilton’s profits mount from his investment advice in The Wealthy Barber

David Chilton ignored plenty of good advice when he wrote a folksy guide to financial planning called The Wealthy Barber in 1989. Before publishing it himself, the personable ex-stockbroker from Kitchener, Ont., says that he elicited opinions on draft copies of the manuscript from family and friends. Their reviews of the book, which weaves basic financial advice into a simple story line with a cast of fictional characters including a barber who dispenses conventional financial advice to three young people, were mixed.

Chilton says that his sister, who inspired the character of the smart-mouthed sister in the book, wanted an even simpler explanation of the basic financial principles he wrote about. But the toughest critique—and ultimately the worst advice—came from a top Toronto investment manager. Recalls Chilton: “He said to me, ‘Gee, Dave, you’re a nice guy and everything, but this approach is too simple-minded.

People want charts and graphs and numbers.’ ”

So much for professional advice. Since it was published five years ago, The Wealthy Barber— with only a few numbers and not a single chart or graph—has sold 600,000 paperback copies, making it, according to Chilton’s publisher, Stoddart Publishing of Toronto, one of Canada’s all-time best-selling books. “It is a phenomenon,” said Helena Alto, comQ munications manager for Coles,

Canada’s largest bookstore chain, g Although no agency in Canada “ keeps official records of best-sellers, Alto confirms that Stoddart’s sales claims appear accurate. “Usually a book sells a lot of copies for a year or two and then it fades away,” says Alto. “This one just keeps selling and selling.” In fact, The Wealthy Barber has led Coles’ bestseller list for the last three years. In total it has generated sales roughly estimated at $7 million, with something like $1 million of that going to Chilton. Building on that success, Chilton wrote an American version in 1991 and last year he taped a series for public television in the United States that features the unlikely combination of financial advice and

stand-up comedy. And with revenues from the book added to that from speaking engagements and spinoffs like the television show,

The Wealthy Barber has made Chilton, now 32, a wealthy author.

But it has also done much more than that. Regardless of critics who are put off by Chilton’s chatty format, the book is reaching people who do not want to make a career—or even a hobby—out of managing their money. Chilton’s advice is basic and carefully explained. He encourages readers to save 10 per cent of their income, and then

demonstrates how, through the power of compound interest, a modest savings program that is begun early in life can grow into a fortune by retirement. But while the message may be familiar, the manner in which it is delivered is not. Chilton takes the usual personal finance book one step further: as well as using the barber and other wisecracking characters to hold readers’ interest, he repeatedly assures readers that if they follow his advice, they will become wealthy. Then, he describes in loving detail the dream homes, vac-

ations, cars and boats that they could afford.

Even competitors like Gordon Pape, a former journalist in Toronto who, like Chilton, has developed a career as a personal finance writer and speaker, is complimentary about The Wealthy Barber. Said Pape: “What David has done—and it’s a great credit to him—is to open up what was a closed door for many people. He made financial planning accessible to a lot of people, especially young people, who seem to enjoy his book.”

Chilton’s passion for his subject emerged when he was still a teenager. Although his father, a French teacher, was completely uninterested in investments, his grandfather was a stockbroker.

And when Chilton was 15 and already in Grade 12, his grandmother gave him $1,000 to invest. He says that he lost it almost immediately by buying silver at $45 an ounce, nearly its all-time high price. “I made every mistake you can make,” recalls Chilton. “I didn’t diversify, I bought into hoopla, I didn’t research properly. Of course, I just chalked it up to bad luck, not my own stupidity.”

But the experience did prompt him to take a more analytical approach to investing. Chilton says that he began devouring financial planning books. “My future wife thought I was absolutely bizarre,” says Chilton. “I’d read four or five a week.” He says the first books he read were ones that predicted impending financial disasters.

That kind of crisis investment book is perennially popular, he says, because people are afraid of the unknown. “But the problem with those doomsday books,” notes Chilton, “is that the authors have successfully predicted 18 of the last two recessions.”

Chilton started a couple of small financial businesses when he was attending Sir Wilfrid Laurier University in Waterloo, Ont.

He left there in his third year of a four-year economics program, and in 1984 he became a stockbroker. His timing was impeccable: the stock market had entered a long rally that lasted until October, 1987. And when he wrote the exam for the Canadian Securities Course, the basic training requirement for stockbrokers, his years of reading paid off. “It was my hobby,” says Chilton. “By that time I’d read hundreds and hundreds of books on personal finance. I didn’t study. I just went down and wrote the exam.” Of the 6,500 people who took the rigorous investment course that year, Chilton got the highest mark and won an industry award.

Still, Chilton is highly critical of stockbrokers in The Wealthy Barber. In fact, he blunt-

ly advises readers to never buy stocks from a broker, although he does recommend them as sales agents for mutual funds and for financial advice. One character in the book is a former stockbroker who says: “After five years, I got disgusted and quit. My commissions were great but my clients’ investment performance was dismal. It hit me hard when I realized it was all a game.” In another incident that Chilton says actually happened to him, the character describes how, when a

well-respected veteran in his office retired, the younger broker was given some of the older man’s clients. “Of 90 accounts, only seven were up money over the years, and only one was up dramatically.”

Despite such strong criticism, Chilton says that the brokerage industry has become a good customer for the book. “It’s good basic advice,” says Miriam Varadi, a senior retail broker at Nesbitt Thomson Inc. in Toronto. “I have a whole bunch of them here in my office; I’ve been giving them to clients this Christ-

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The road to financial peace of mind according to The Wealthy Barher:

1. Make maximum tax-deductible contributions to a registered retirement savings plan (KEtSP) each year. For your retirement income, select lower-risk investments.

3. Invest 10 per cent of net income to become wealthy. This money should be invested for long-term growth.

3. Buy mutual funds, not individual stocks. They provide professional management and diversification.

4. Make a will.

5. Buy enough life insurance to adequately protect your dependants.

6. Buy adequate disability insurance. A 30year-old has a one-in-four chance of being disabled for a year or more.

7. Real estate is NOT always a good investment. People who do buy homes should not overextend themselves. Make as large a mortgage payment as possible each month, which will dramatically reduce the amount of interest that will have to be paid.

8. Don’t abuse credit cards.

9. Use tax planning instruments such as spousal KRSPS, the capital gains exemption and income splitting to reduce taxes.

10. Learn for yourself. Nobody cares as much about your money as you do.

mas. They like to pass them on to their kids.” Since the stock market crash of 1987, most of the leading brokerage firms have encouraged their retail salesmen to sell mutual funds, rather than individual stocks, so Chilton’s message fits the industiy’s new strategy.

Like the character in his book, Chilton soon became disenchanted with the investment industry. But, as a result of speaking engagements, he discovered that he did like talking to audiences. So he put together a financial management course specifically designed for teachers, and began planning to make a career out of public speaking. He wrote the book merely as a sideline for his speaking plans.

The idea of using a barber to dispense advice to three financial illiterates came to Chilton when he watched an episode of the television show Cheers. In another stroke of luck—or good planning—he published the book himself. The reason: the first publisher that he approached refused to give him the special rights to mass-market the book to companies for distribution to their clients and employees. As The Wealthy Barber gained popularity, Chilton says that it was the special sales market that made him the most money. Now, he estimates that non-bookstore sales account for about 40 per cent of the 600,000 copies of the book that have been sold.

Why has Chilton’s book been so successful? The author concludes that the reason is the format, in which characters act as devil’s advocates for readers. “The characters in the book put forth the objections and ask the questions that the average person wants to,” says Chilton. “All personal finance books say save 10 per cent. We came back and had the characters say, ‘Yeah, but where am I going to get it, budgeting doesn’t work, and what about inflation?’ ” He adds: ‘Those are the objections that people have. The barber answered them one by one.”

And that is what sets The Wealthy Barber apart from other personal finance books. People buy the book, they read it, they recommend it to their friends and some of them even act on the advice in it. “Everywhere I go people tell me that the book has changed their lives,” says Chilton seriously. “It’s kind of amazing.” Indeed, if he is right, 30 years from now Chilton could be best remembered not as a best-selling author, but as the man who inspired thousands to save their way to prosperity.

BRENDA DALGLISH