Why Physicians DO NOT Get Rich?


“Physicians have a significantly low propensity to accumulate substantial wealth.”

Thomas Stanley – Author “The Millionaire Next Door”

[New York Times]

How come doctors fail to get rich? Re-read the above!

By Dr. David Edward Marcinko MBA CMP®

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SPONSOR: http://www.CertifiedMedicalPlanner.org

The Institute of Medical Business Advisors Inc identified several reasons based on observations working with medical professional and physician clients over the years.

A late start

By the time doctors finish medical school and residency they’re typically in their middle or late thirties. Many have families to feed, and substantial student loans to pay off. It will be years before they can even start accumulating wealth. Consider that physicians typically enter careers at later ages, often with larger debts from training. Some specialties may not lead a case until 10 years of practice, and many specialties have limited longevity. Peak earning years may also be shorter for health care providers than other professionals. Financial survival skills are paramount for converting the limited earnings time period to personal financial security.

Challenging socio-political environment

It is increasingly challenging to practice medicine. With the Medicare Trust Fund slated to go bust in 2019, the Center for Medicare and Medicare Service (CMS) is increasingly resorting to cutting physician reimbursements and implementing capitation and bundled value based medical payments models. The medical reimbursement effects of the PP-ACA are not yet fully discerned; but appear to continue the decline in compensation. And to illustrate this potential governmental control, in what other industry can participants debate the simple question, “who is the customer?”

Lifestyle expectations

Society expects a doctor to live like a doctor, dress like a doctor, and drive like a doctor. Meeting social expectations can be quite expensive.

Time and energy

A doctor can’t be just a doctor any more. S/he also has to deal with ever increasing regulatory mandates, paperwork requirements by state and federal agencies and capricious insurance companies. It is estimated that for every hour spent on patient care, and additional half-hour is spent on paperwork. To-date, the use of electronic medical records has exacerbated; not ameliorated this problem. The demand on their time is mind-boggling. A typical doctor works a ten- to twelve-hour day. After work and family, they simply don’t have time and energy left to do comprehensive financial planning.

Financially naïve

Doctors are smart. They’re highly trained in their area of expertise. But, that doesn’t translate into understanding about finance or economics. Because they are smart, it’s easy for them to think they can easily master and execute concepts of personal financial planning, as well. Often, they don’t.

Lack of trust and delegation

Many doctors don’t trust financial advisors working for major Wall Street banks. They have the good instinct to realize that their interests are not aligned. Not knowing there are independent advisors out there who observe a strict fiduciary standard, they tend to do everything by themselves.

In fact, Paul Larson CFP®, President-CEO of the firm LARSON Financial Group LLC, noted a disquieting trend among physician client in his firm [personal communication]. Almost 90% of them fail to take care of their own family finances in a comprehensive manner; while only 10% are succeeding.  The strategies in this chapter and book are common to their success.

Too Trusting

Another aspect of naivety, many physicians do not realize that the financial advisory industry lacks the same discipline and regulation that the average physician operates in. A primary care doctor would never even attempt a complicated surgery on a patient, but is trained to refer such patients to a specialist in the field with the proper training and experience. Financial Advisors often come from a sales background and are trained to keep a client in house even if the advisor is lacking in expertise. Also, many physicians are not trained to discern a qualified financial advisor from a sales person dressed up like a financial advisor. It is illegal to call yourself a physician in the United States unless you have the credentials to back it up; yet, anyone in the US can legally call themselves a financial advisor or a financial planner.

Your thoughts are appreciated.

Comprehensive Financial Planning Strategies for Doctors and Advisors : Best Practices from Leading Consultants and Certified Medical Planners™ book cover

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Managing for Endowment Fund Portfolio Alpha

Understanding Non-Systematic Return on Investment


DEM 2013

[By Dr. David Edward Marcinko MBA]

According to Wayne Firebaugh CPA, CFP®, CMP™ alpha measures non-systematic return on investment [ROI], or the return that cannot be attributed to the market.

It shows the difference between a fund’s actual return and its expected performance given the level of systematic (or market) risk (as measured by beta).


For example, a fund with a beta of 1.2 in a market that returns 10% would be expected to earn 12%. If, in fact, the fund earns a return of 14%, it then has an alpha of 2 which would suggest that the manager has added value. Conversely, a return below that expected given the fund’s beta would suggest that the manager diminished value.

In a truly efficient market, no manager should be able to consistently generate positive alpha. In such a market, the endowment manager would likely employ a passive strategy that seeks to replicate index returns. Although there is substantial evidence of efficient domestic markets, there is also evidence to suggest that certain managers do repeat their positive alpha performance.

In fact, a 2002 study by Roger Ibbotson and Amita Patel found that “the phenomenon of persistence does exist in domestic equity funds.” The same study suggested that 65% of mutual funds with the highest style-adjusted alpha repeated with positive alpha performances in the following year.

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More Research

Additional research suggests that active management can add value and achieve positive alpha in concentrated portfolios.

A pre 2008 crash study of actively managed mutual funds found that “on average, higher industry concentration improves the performance of the funds. The most concentrated funds generate, after adjusting for risk … the highest performance. They yield an average abnormal return [alpha] of 2.56% per year before deducting expenses and 1.12% per year after deducting expenses.”


FutureMetrics, a pension plan consulting firm, calculated that in 2006 the median pension fund achieved record alpha of 3.7% compared to a 60/40 benchmark portfolio, the best since the firm began calculating return data in 1988. Over longer periods of time, an endowment manager’s ability to achieve positive alpha for their entire portfolio is more hotly debated.  Dimensional Fund Advisors, a mutual fund firm specializing in a unique form of passive management, compiled FutureMetrics data on 192 pension funds for the period of 1988 through 2005.

Their research showed that over this period of time approximately 75% of the pension funds underperformed the 60/40 benchmark. The end result is that many endowments will use a combination of active and passive management approaches with respect to some portion of the domestic equity segment of their allocation.


One approach is known as the “core and satellite” method in which a “core” investment into a passive index is used to capture the broader market’s performance while concentrated satellite positions are taken in an attempt to “capture” alpha. Since other asset classes such as private equity, foreign equity, and real assets are often viewed to be less efficient, the endowment manager will typically use active management to obtain positive alpha from these segments.


  • Ibbotson, R.G. and Patel, A.K. Do Winners Repeat with Style? Summary of Findings – Ibbotson & Associates, Chicago (February 2002).
  • Kacperczyk, M.T., Sialm, C., and Lu Zheng. On Industry Concentration of Actively Managed Equity Mutual Funds. University of Michigan Business School. (November 2002).
  • 2007 Annual US Corporate Pension Plan Best and Worst Investment Performance Report.  FutureMetrics, April 20, 2007.


Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

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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


Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™8Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

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BUSINESS PLAN CONSTRUCTION: For Health Industry Modernity


By Dr. David Edward Marcinko MBA MEd CMP®

I was asked by business schools and medical colleagues – and their bankers, CPAs and advisors – to speak about this topic several times last year before the pandemic.

Now, with the specter of M-4-A etc; it certainly is a vital concern to all young entrepreneurs, doctors & medical professionals whether live, audio recorded or in podcast form. And so, here is a written transcript of a recent presentation for your review.

Now, with the specter of tele-health, tele-medicine, M-4-A etc; it certainly is a vital concern to all young doctors & medical professionals whether live, audio recorded or in podcast form. And so, here is a written transcript of a recent presentation for your review.


New Product Business Plan Sample [2021 Updated] | OGScapital


READ: https://healthcarefinancials.files.wordpress.com/2017/08/mba-business-plan-capstone-outline.pdf


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The “New” Dental Support Organization Business Model

By Maia Anderson and Staff Reporters


Watch out, private practice ownership. According to HealthcareBrew, Dental Support Organizations (DSOs) are the hot new business model for dentistry.

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DSOs are companies that take on all the business-related tasks necessary to run a dental practice, like IT support, accounting and billing, marketing, and facility maintenance, Lisa Ward, VP of communications at industry trade group the Association of Dental Support Organizations, told Healthcare Brew.

A DSO can own the dental practice it operates, or a private practice can contract with a DSO. Some DSOs are owned by a group of dentists, but private equity firms own many large DSOs, according to the Academy of General Dentistry.

The idea behind a DSO is that the “dentist can focus on patient care and not have to worry so much about the business side,” Ward said.

The DSO business model was created in 1975 but didn’t become popular until the 1990s, as dentists graduated with piles of student debt and found it hard to open their own practice, according to Huron Consulting Group.

Today, 10.3% of dentists are affiliated with a DSO, per investment bank Harris Williams. In 2020, 30% of dental school seniors said they planned to join a DSO-affiliated practice, compared to 12% in 2015, a survey from the American Dental Education Association found.

The rise in popularity of DSOs has brought about the decline of private practice ownership. In 2021, the number of dentists who owned their practices fell to 73%, according to research from the ADA.

Maia at anderson@morningbrew.com.



RELATED: https://medicalexecutivepost.com/2007/11/27/ppmc-redux/

MORE: https://medicalexecutivepost.com/2022/11/30/the-benefits-of-dentistry-unhurried/



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