Piecing Together the Right Financial Support System

Ed Rabinowitz

Physician's Money Digest, August 2007, Volume 14, Issue 8

“Many ideas grow better when transplanted into another mind than in the one where they sprung up.” —Oliver Wendell Holmes

71%—Percentage of adults aged 43 to 61 who said they wished they'd started saving earlier. (Money Magazine, 2007)

The diagnosis and treatment of a particular disease or ailment often requires a team of doctors working together. The same team approach can be applied to financial health. The demands on a physician's time leave little room for comprehensive financial planning; therefore, the physician- investor can and should work with a financial team to maximize their efforts to achieve their goals and secure financial wealth.

Why Assemble a Team?

Almost every successful plan, financial or otherwise, has some built-in checks and balances, Dustin LaPorte, CFP®, a published financial author, explains. And in the case of finances, LaPorte says, almost every action affects multiple disciplines. For example, your investment advisor might recommend the sale of a stock. However, with that sale there could be severe tax consequences. "With a financial team, you can see mistakes that you might have missed due to emotional attachment or lack of knowledge," LaPorte notes.

Matthew Tuttle, CFP®, MBA, and president of Tuttle Wealth Management (www.MatthewTuttle.com), recalled working with a physician in his 60s who had not saved much money for retirement, had numerous assorted insurance policies with no rhyme or reason that he was paying too much for, and was drowning in paperwork from his practice. He thought he could sell his practice for a good amount of money and retire on that, but found out that the offers were much less than he expected. He had a person who sold him insurance and an accountant who didn’t know much about medical practices who just took his information and put it on the return.

In his case, Tuttle explains, a diversified financial team of experts would have been able to coordinate all of his insurances; sift through the paperwork of his medical practice; address the unique accounting issues involved in his business; increase the value of the practice, thereby improving its chances of an attractive sale; and organize his finances with an investment strategy designed to reach a favorable retirement goal.

There are other equally important reasons for having a financial team in place. Christiane Delessert, president and founder of Boston-based Delessert Financial, says that a personal financial team can be an enormous help when there is a change in life situation. For example, when a physician approaches retirement, there are many complex investment and tax issues to address.

In the case of a new marriage, there are many issues that need to be addressed by the team, such as how to title assets, prenuptial agreements, changes in tax and insurance needs, and adjusting the estate plan to include the new spouse.

When a physician passes away and leaves a surviving spouse, it is critical to have a financial team in place to take care of the financial issues, so the surviving spouse can deal with the emotional issues.

A well-constructed financial team can easily have four or five key members, but it will also have very valuable secondary members. Bard Malovany, CFP®, of Sagemark Consulting, admits that he may be biased, but points out that a true financial planner is important in that they often coordinate the various professionals.

"Generally, you would want an investment specialist, an insurance specialist, a tax specialist, and an estate planning specialist," Malovany suggests. "Oftentimes, one person can serve in multiple roles. When we work with clients, we help manage their investments and procure life, disability, and longterm care insurance, and we help design estate plans, but we bring in estate attorneys to draft the documents and provide additional design ideas. We have accountants work on the tax issues, and we'll have a property and casualty insurance agent provide appropriate insurance."

LaPorte agrees, and recommends that a certified financial planner™ (CFP®) practitioner should be the leader of the financial team. "Your certified financial planner [practitioner] is the general contractor for your financial plan," LaPorte says. "That person's role should be to look over the whole plan and coordinate subcontractors—attorney, CPA, insurance advisor—to help you build a solid financial future."

Your Personality Test

Just as there are different members of a financial team, Tuttle suggests that there are three types of physician: the do-it-yourselfer, the collaborator, and the delegator. Understanding the three types, and which category you fit into, can go a long way toward maximizing the efficiency and results that a financial team can achieve. The do-it-yourselfers want to do everything themselves because they either enjoy it or they don’t want to give up control. Unfortunately, this is not unlike the patient trying to do the doctor’s job, and it rarely works out well.

Collaborators want to collaborate with a financial professional. They usually end up with a team of product salespeople and the physician ends up being the team leader. Those who delegate realize that they don't have time to do it themselves or to collaborate; they have more important things to do like work in their practice or spend time with their family.

"It is not hard to convince a delegator to hire a financial team since they understand the value of having this time spent on things that are more important than money," Tuttle says.

Making the Right Choice

Determining the type of support system you need as a physician-investor is only the first step. The next step involves picking your corresponding advisors. So, how do you know that you're choosing the right professionals to suit your needs? And if you're already working with financial professionals, how can you confirm that they are helping you achieve your goals?

Malovany suggests it's a matter of comfort and trusting your gut feelings.

"And if your gut doesn't feel right, don't be afraid to switch," Malovany suggests. "Ultimately, you should pay someone because they provide clear value to you. If they're not providing value, don't keep using them simply out of sense of loyalty. If someone can do a better job for the same price, there’s no reason not to switch."

Delessert suggests starting the process by getting referrals from other physicians. Once you have two or three referrals, interview each professional to see which one you feel most comfortable with. As each new member of the team comes into the fold, ask the other members of the team to provide honest feedback about the new member's qualifications.

It's also important for the team to be respectful of the professional's role on the team.

"If the CPA continually challenges or belittles the financial planner's investment strategy, then it would be better if one of them left," Delessert suggests. "If the estate planning attorney and the life insurance advisor are not on the same page, one of them should leave the team. Differing opinions can be healthy as they can lead to creative strategies. However, at some point each member of the physician's team needs to recognize the expertise of each other in their own particular area."

Lastly, there really is no set number of professionals that should be part of a financial team. Start with determining your team leader, such as a financial planner or accountant, Tuttle suggests. They will generally have a good feel for how many members there should be

The Bottom Line

  • Decide how involved in your financial planning you want to be.
  • Assign a team leader to coordinate with other financial professionals and to ensure your needs are being met.
  • Make sure that your team members can work well with each other.
  • Let the professionals do their job.