Your Financial Lifeline Is Only as Strong as Your Financial Team

Physician's Money DigestDecember 2006
Volume 13
Issue 12

For those of you who are fans of adventure travel,you are probably very familiar with the importanceof teamwork when it comes to risky activities. Rockor ice climbers often work in pairs, and whitewaterrafters often take on the river in groups. One memberof the team might have an understanding of thelandscape, while another may be depended upon fortheir knowledge of the equipment. The purpose ofthis joint effort is preparedness and safety whilereaching a difficult goal.

A physician's personal finance team can face a similarlytreacherous terrain. The market is always in flux, andtheir personal needs might change as the years go by. Ateam of professionals, including accountants, attorneys,and financial advisors, are brought together to provideadvice that is unbiased and uniquely tailored to a doctor'sneeds—thus creating a diverse team ready to conquerthe financial goals placed before them.

Financial Fund of Knowledge

"It is important to have the right person for the rightjob," says Michael Reiman, a certified fund specialistand coauthor of (HeliographicaPress; 2005). "When you assemble a team, eachmember of the team stays on top of their field of expertise.This pays off for the client in a full education programwithout having to learn all the particulars of anyone area." Selecting the right members for your financialteam is not an easy process, but doing so will pay dividendsdown the road.

Pick Your Team Leader

Each member of a financial team is integral. However,most busy physicians lack the time or the inclination todirect the management of the financial team. Accordingto the experts at Enterprise Bank & Trust, physiciansmust take the time to understand the tax ramificationsand costs associated with each financial decision. Aphysician should, therefore, appoint a leader to guidetheir financial team, ensuring that all financial decisionsare made with a complete understanding of the wholefinancial picture. That leader is, in effect, your financialquarterback. In many cases, Reiman explains, the role ofthe quarterback is filled by a financial advisor. But that'snot always the case.

"I have seen active CPAs and attorneys play the roleof the quarterback," Reiman says. "There should alwaysbe a quarterback, but unfortunately, this is rare. In a lotof instances, a client has a CPA, an investment advisor,and an insurance agent all working independently. Thesynchronization between these individuals is a must,because if there is no communication or lack of communicationbetween the team [members], then big mistakescan take place. As a result, the team [members] can beworking against each other and the client instead of forthe client. The quarterback is usually the advisor that theclient trusts most with their financial goals."

Once you have selected a financial quarterback foryour team, it's critical to sit down and discuss your goalsand objectives. Diana Compardo, principal, CPA,CFP®, of the Moneta Group, explains that sitting downand discussing a physician's goals and objectives providesthe much-needed insight to prepare a financialaction plan for that physician and to lay out the strategiesfor accomplishing those goals and objectives.Without knowing the physician's needs and wants first,there is no way to determine and plan for what thosefinancial goals are and how to accomplish them.

Select the Proper Team Members

The make-up of a financial team can vary dependingon the needs of the physician. There can also be keymembers as well as secondary members—specialistswithin an area, such as an insurance agent who specializesin long-term care.

But experts agree that every financial team shouldinclude some key mainstays: a financial advisor, aninsurance agent, an attorney, and a CPA. The secondarymembers are usually real estate agents/attorneys,mortgage brokers, bankers, practice management personnel,and human resources experts.

"The key members should be those involved in theday-to-day contact with the physician," Compardosuggests. "These should be the people who the physicianhas hired and entrusted with their financial goalsand objectives and the people who can provide themwith the financial advice they need to make logical,well-educated decisions. The secondary members arethose who help with the implementation of the financialaction plan and generally would consist of estateplanning attorneys, life and medical insurance experts,and long-term care experts."

Edmond Walters, CEO and founder of eMoneyAdvisor (, suggests that theaccountant or CPA is typically the historian for thephysician and their family, having a detailed record ofthe family's complete financial history. If there's nofinancial advisor, the accountant will take that role. Thefinancial advisor should integrate the financial plan,pulling the team together. The lawyer is typically theproblem solver, putting strategies in place. The investmentadvisor is responsible for formulating the investmentpolicy statement, balancing the degree of riskwith the client's assets. The insurance advisor is responsiblefor maximizing the client's protection needs in theevent of a negative life event.

Matt Wagner, president of Enterprise Bank &Trust's Trust Advisory Group, says that his organization'sin-house team includes accountants, attorneys,tax planners, and financial advisors.

"Their job is to coordinate the implementation ofthe client's financial plan," Wagner explains. "Internaland external specialists are freely brought into clientmeetings when needed and perform work behind thescenes to implement the financial action plan."

Determine Goals and Establish a Plan

Compardo explains that the Moneta Group, actingas the CFO of the physician's family, first completes ananalysis of the physician's financial situation to determinewhere there are weaknesses and the strategiesneeded to turn those weak spots into strengths."For example, if a physician needs estate planning,we would advise them on the estate planningstrategy and also get an estate planning attorney involvedto draft quality documents," she explains. "Wethen would make sure all assets are titled properlyso that we are obtaining the maximum benefit fromthose documents."

Reiman echoes those thoughts, noting that it's criticalto understand the physician's experiences, needs,and wants for short-term and long-term goals. Thisprocess involves specific detailed questions by the advisorand candid responses from the physician. Byunderstanding the physician's wants and needs, theadvisor can help them implement a team of qualifiedadvisors to improve and protect their financial goals.

"An illustration of this is if the physician's mainobjective is for multigeneration wealth, then an estateattorney is a must," Reiman says. "If the physician isconcerned about asset protection, then an asset protectionattorney is needed."

The financial team, however, must have its own setof goals. Reiman believes that the goals of the teamare to have unique knowledge in their field that willadd value to the physician's situation. The financialteam also needs to be able to create a specific gameplan for the physician that is based on their individualgoals. For example, the financial advisor is lookinginto different types of tax strategies, while the CPA islooking at the actual calculations. It is imperative thatthe team is on the same page and working towardachieving the physician's specific goals. It is also criticalthat there is communication between the teammembers to make sure the strategies are working inalignment. With this constant communication, potentialmistakes could be averted.

Another example, Reiman notes, is if the CPA orfinancial advisor recommends a specific retirement planfor the physician and there is no communicationbetween the advisors, deadlines can be missed andincorrect paperwork can be filed with the IRS. A lot ofthe time, the physician is not aware of which advisorsneed to be in the loop.

"Just like in medicine, a team of advisors needsto understand the client's goals and issues," Reiman says. "This is what I look at as the ‘diagnosticstage.'If a doctor did not ask the correctquestions, more than likely, they are not providingthe correct remedy. This is no different when workingwith your advisors. This diagnostic stage is oneof the most critical steps in the planning process.Without assessing the physician's current situationand goals for the future, the recommendationsmight not be in alignment."

Everyone Needs a Team

Physicians of high net worth, or those who arebuilding their net worth, may have a greater needfor a financial team as their situations are generallymore complicated. But asset management, riskmanagement, taxes, and estate planning are areasof financial concern that affect everybody.

"A financial team is essential for any physicianor group of physicians wanting to maximize theirpractice and increase their net worth," explainsJoseph Walker, MD, neurosurgeon and managingpartner of the Reno, Nev-based Sierra NeurosurgeryGroup. "Most physicians are not in a practicelarge enough to have in-house advisors to handleall their financial needs, and no physician hasthe background to do everything effectively withouthelp. Therefore, putting together a financialteam is essential."

Reiman points out that a financial team shouldbe there to assist you not only with your assets, butto help assess your need in other areas such as protectionplanning, tax planning, and asset allocationstrategies. In addition, in a physician's world, litigationis a major concern as assets begin to grow.

"You will want to start protecting your assetsearly," Reiman says. "No matter the size of youraccounts, the assumption is that as a physician, youhave assets. It is too late to start protecting yourassets and income after you get sued. This is calledfraudulent conveyance. They can also sue you forfuture income. Not being aware of your financialsituation and options is never a good idea no matterthe size of your current or future net worth."

And remember that once you assemble a financialteam, it's equally important to meet regularly toreview plans and update goals and objectives. "It isvery important to meet on a consistent basis, whichvaries depending on the physician's situation," Compardo says. "It is important to not only getupdates of changes in the physician's financial situationbut to inform the physician on how they aretracking against their goals and objectives. Also,there are always many changes in the regulatoryenvironment that need to be communicated to thephysician and reviewed in light of the impact thechanges may have on their specific situation.Depending on the complexity of the physician's situation,we generally meet at least 2 to 3 times per yearfor a formal review and more frequently if specificneeds arise."

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