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Monitoring the “Professional” Advisors

[By Dr. David Edward Marcinko; MBA, CMP™]

An emerging or non-previously wealthy doctor may never have had a reason to develop a team of “professionals” to help manage his or her personal finances and/or affiliated medical practice businesss entity.Many areas of expertise such as tax planning and medical compliance, risk and investment management, or HR, practice succession planning and medical practice valuations may not be within the background, training, and health economic experience of the emerging or newly wealthy individual physician. 

Required Protean Subject-Matter Mix

The first step in developing a single or cadre of advisors is identifying which specific services are needed. For the practicing physician today, this often includes a protean mix of expertise in:

· Banking and credit relationships

· Budgeting and debt reduction

· Employee benefits negotiations

· Practice business planning and practice organizational start-up

· Practice funding and cash flow

· Financial accounting and tax planning

· Managerial accounting and practice cost accounting

· Insurance planning

· Risk Management implementation

· Continuous practice management

· Practice compliance

· Human resource management

· Investment advice and implementation

· Medical practice equity building

· Mature practice health law and policy issues

· Medical practice valuation and appraisal

· Practice sale and succession planning

· Retirement plan administration

· Professional trustee appointments

· Estate planning and documentation; etc.

Advisor Characteristics

Next, the individual physician should write down the criteria that will be used for selecting these advisors. These criteria could include:

·  Fiduciary capacity

·Medical specificity and expertise

· Educational degrees

· “Professional” credentials [many require just a HS diploma or GED]; age and experience

· Size of firm providing the services [agent, representative or owner].

·Compensation arrangements

·Location; increasingly less important; etc. 

A written document should also specify the services to be provided by the advisors that outline not only the specific responsibilities of all parties, but also the amount and source of compensation. (Some advisors receive compensation only from their clients; others are paid only when they sell certain products – try to avoid the latter). 

Avoiding the Hype 

Additional factors for the emerging or newly wealthy doctor to consider are reviewed below. Finding the right match in advisors can be a difficult but not impossible task.

While many advisors may fulfill the doctor’s initial criteria, it also is important to secure the services of those with whom the physician can have a relationship based on (documented-legal) trust and professional interaction. 

Because the emerging or newly wealthy doctor may have little experience in dealing with financial advisors, the doctor needs to be wary of the flashy, aggressive marketing hype that can accompany different types of advisors.

Physicians should look for fiduciary integrity, personality, extreme physician focused subject matter specificity and professionalism when selecting advisors. 

Compensation Schemes

From the beginning of a relationship, it is important to establish a clear understanding of how an advisor is to be compensated. 

Advisors who are paid a fee directly by their clients, based on time worked or the complexity of their services, are more likely to provide objective advice than are agents or representatives – who are paid to sell certain products.

Services delivered should be reviewed on a systematic, regular basis as outlined in the engagement agreement. The time period for review will vary, depending on the services being provided.

For example, in working with a money manager, it may be appropriate to schedule quarterly review sessions to check investment performance, expected changes in asset allocations, the types of investments made, and so on. Many however, feel this may be too often and merely serves as a pretense to conscientious-industry on the part of the advisor.

With an insurance agent, a bi-annual review may be sufficient for checking on policy coverage and premium costs.

Evaluating the Advisors

Ask advisor level of experience in dealing with other physicians in similar settings. And, consider employment setting.

For example, a large firm provides continuity and depth, while a small firm often results in more personalized, individual attention. Most broker-dealers [BDs-wire-houses] use non-fiduciary stock-brokers [aka vice presidents, wealth managers, investment advisors, etc]; while most Registered Investment Advisor (RIA) firms are true fiduciaries.

• Ask about confidentiality as well as transparency.
• Do not sign arbitration agreements; if possible. You do not want to give-up your right to sue as the deck is stacked against the plaintiff by most arbitration panels.
• Check references that are not offered by the advisor. Make sure they are long-term clients.
• What are the advisor’s professional affiliations? For instance, what professional organizations or societies does he or she belong to and what do their codes of ethics require? Nevertheless, remember ethics is not fiduciary capacity which entails a much high legal duty (i.e., to the doctor-not the representing firm); etc.

Conclusion

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Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

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8 Things your Financial Planner Won’t Tell You: http://articles.moneycentral.msn.com/RetirementandWills/CreateaPlan/8ThingsYourFinancialPlannerWontTellYou.aspx

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