Evaluating a Sample Physician Financial Plan III

Stress Testing Results a Decade Later

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

[By Hope Rachel Hetico; RN, MHA, CPHQ, CMP™]dave-and-hope4

We are often asked by physicians and colleagues; medical, nursing and graduate students, and/or prospective clients to see an actual “comprehensive” financial plan. This is a reasonable request. And, although most doctors who are regular readers of this Medical Executive-Post have a general idea of what’s included, many have never seen a professionally crafted financial plan. This not only includes the outcomes, but the actual input data and economic assumptions, as well.

The ME-P Difference

And so, in a departure from our pithy and typically brief journalistic style, we thought it novel to present such a plan for hindsight review. But; we present same in a very unusual manner befitting our iconoclastic and skeptical next-generation Health 2.0 philosophy. And, we challenge all financial advisors to do same and compare results with us.

How so?

By using a real life plan constructed a decade ago and letting ME-P reader’s review, evaluate and critique same.

  • Part I is for a married drug-rep, then medical school student [51 pages] with no children.
  • Part II is for the same mid-career practicing physician [28 pages] with 2 children.
  • Part III is for the same experienced practitioner at his professional zenith [56 pages].

Part III: Sample Financial Plan III

Fiduciary Advisors

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As former financial advisors and licensed insurance agents – and a reformed certified financial planner – it is our duty to act as economic fiduciaries for clients. In other words; to put client interests above our own. This culture was incumbent in our participatory online www.CertifiedMedicalPlanner.org educational program in health economics and medical practice management; since inception in 2000.

Assessment

And so, as Edward I. Koch famously asked as Mayor of New York City from 1978-1989: “how am I doing”; we sought to ask and answer same. What did we do right or wrong; and how were our assumptions correct or erroneous?  As Certified Professionals in Healthcare Quality this is the question we continually seek to answer in medicine. And, as health economists, this is the financial advisory equivalent of Evidence Based Medicine [EBM] or Evidence Based Dentistry [EBD] etc. It is a query that all curious FAs should ask.

Note: Be sure to review sample plan I and II, right here:

Link: Sample Financial Plan I

Link: Sample Financial Plan II

Conclusion

And so, your thoughts and comments on this Medical Executive-Post are appreciated. As a financial advisor, accountant, financial planner, etc., we challenge you to lay bare your results as we have done. And, be sure to “rant and rave” – and – “teach and preach” about this post in the style of Socrates, with Candor, Intelligence and Goodwill, to all. Doctors – chime in – too. 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

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ASSUMPTIONS

Sample Mega Plan for a New Physician

Joe Good, a 30-year-old pharmaceutical sales representative, and his pregnant wife Susie Good, a 30-year-old accountant, sought the services of a certified financial planner because of a $150,000 inheritance from Joe’s grandfather. The insecurity about what to do with the funds was complicated by their insecurity over future employment prospects, along with Joe’s frustrated boyhood dream of becoming a physician, along with only a fuzzy concept of their financial future.

After several information-gathering meetings with the CFP, concrete goals and objectives were clarified, and a plan was instituted that would assist in financing Joe’s medical education without sacrificing his entire inheritance and current lifestyle. They desired at least one more child, so insurance and other supportive needs would increase and were considered, as well. Their prioritized concerns included the following:

1. What is the proper investment management and asset allocation of the $150,000?

2. Is there enough to pay for medical school and support their lifestyle?

3. Can they indemnify insurance concerns through this transitional phase of life,  including the survivorship concerns of premature death or disability?

4. Can they afford for Susie to be the primary bread winner through Joe’s medical school,   internship, and residency years?

5. Can they afford another child?

Current income was not high, and current assets were below the unified estate tax-credit. Therefore, income and estate-planning concerns were not significant at that time.

After thoroughly discussing the gathered financial data, and determining their risk profile, the CMP™ made the following suggestions:

1. Reallocate the inheritance based on their risk tolerance, from conservative to long-term growth.

2. Maximize group health, life, and disability insurance benefits.

3. Supplement small quantities of whole life insurance with larger amounts of term insurance.

4. Create simple wills, for now.

Sample Mega Plan for a Mid-Life Physician

A second plan was drawn up 10 years later, when Joe Good was 40 years old and a practicing internist. Susan, age 40, had been working as a consultant for the same company for the past decade. She was allowed to telecommunicate between home and office. Daughter Cee is nine years old, and her brother Douglas is seven years old.

The preceding suggestions had been implemented. The family maintained their modest lifestyle, and their investment portfolio grew to $392,220, despite the withdrawal of $10,000 per year for medical school tuition. The financial planning aspects of the family’s life went unaddressed. Educational funding needs for Cee and Douglas prompted another frank dialogue with their CMP. Their prioritized concerns at this point were as follows:

1. Reallocation of the investment portfolio

2. Educational funding for both children

3. Tax reduction strategies

4. Medical partnership buy-in concerns

5. Maximization of their investment portfolio

6. Review of risk management needs and long-term care insurance

7. Retirement considerations

The following suggestions were made:

1. Grow the $392,220 nest egg indefinitely.

2. Project future educational needs with current investment vehicles.

3. Maximize qualified retirement plans with tax efficient investments.

4. Update wills to include bypass marital trust creation, and complete proper testamentary planning, including guardians for Cee and Douglas.

5. Retain a professional medical practice valuation firm for the practice buy-in.

Sample Mega Plan for a Mature Physician

At age 55, Dr. Joseph B. Good was a board-certified and practicing internist and partner of his group. Susan, age 55, was the office manager for Dr. Good’s practice, allowing her to provide professional accounting services to her husband’s office and thereby maximizing benefits to the couple from the practice. Daughter Cee was 24 years old, and her brother Douglas was 22 years old. The preceding suggestions had been implemented.  They upgraded their home and modest lifestyle within the confines of their current earnings. They did not invade their grandfather’s original inheritance, which grew to $1,834,045. Reallocation was needed. The other financial planning aspects of their lives had gone unaddressed. Retirement and estate planning issues prompted another revisit with their original CMP’s junior partner.

Their prioritized concerns at this point were as follows:

1. Long-term care issues

2. Retirement implementation

3. Estate planning

4. Business continuity concerns

The following suggestions were made:

1. Analyze the cost and benefits of long-term case insurance, funded with current income until retirement.

2. Reallocate portfolio assets and  plan for estate tax reduction, with offspring and charitable planning consideration..

3. Retain a professional practice management firm for practice sale, with proceeds to maintain current lifestyle until age 70.

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[Executive Director]

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Broker Compensation for Debt-Based Securities

Understanding Commission Methods for Selling Investments

By Staff Reporters

steveBrokers earn commissions on debt instruments based on the spread, or markup, between the price at which the broker can secure the bond and the price at which it is sold.

Bond Funds

In the case of bond funds, the fund charges a management fee and/or an expense fee. There may or may not be a load, or commission, paid to a broker.

Assessmentdhimc-book10

For more terminology information, please refer to the Dictionary of Health Economics and Finance.

www.HealthDictionarySeries.com

Conclusion

And so, your thoughts and comments on this Medical Executive-Post are appreciated?

Link: http://feeds.feedburner.com/HealthcareFinancialsthePostForcxos

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

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Healthcare Organizations: www.HealthcareFinancials.com

Health Administration Terms: www.HealthDictionarySeries.com

Physician Advisors: www.CertifiedMedicalPlanner.com

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Developing a Financial – Management – Advisory Practice for Doctors

Deep Knowledge and Personalized Marketing Brings in New Clients

By Dr. David Edward Marcinko; MBA, CMP™

BY Professor Hope Rachel Hetico; RN, MHA, CMP™

[ME-P Publisher and Managing Editordave-and-hope]

In any marketing situation, the more you know about your target audience, the more successful you will be. Accordingly, all of the old rules still hold true, such as “do your homework.” Unfortunately, for some financial advisors and management consultants, homework means researching broad (i.e., vague) demographic information such as zip codes, income, and age. This broadband approach to marketing is insufficient and unlikely to succeed. For example, SWOT analysis is best done in-house, while related medical marketing information can be obtained from the Institute of Medical Business Advisors, Inc.

www.MedicalBusinessAdvisors.com

Focus like a Laser Beam

An absolute of communication is to focus on the person receiving your message. If you don’t know anything about the person, you can’t focus on what is important to him or her, and you end up placing too much emphasis on yourself. Your message then carries less weight and has less impact.

Defining Your Niche

Instead of approaching all people in a certain neighborhood or age group, look for people within professional subcategories—people who use their talents in a specific way. Primary care physicians, dentists, podiatrists and optometrists apply their talents differently than surgeons or pediatricians. And, private management consultants and entrepreneurs use their talents differently than large corporate managers.

Develop a Profile

Let’s look at the medical entrepreneur niche space. Perhaps you regularly work with such entrepreneurs who manufacture or deal in medical gadgets, Durable Medical Equipment [DME], healthcare IT devices, instruments etc., and would like to increase the number of clients you serve in this niche.biz-book

The Process

First, you need to develop a profile that gives you specific information about those who manufacture said medical widgets in your area (i.e., more than just their zip codes), bearing in mind of course, that the profile is a point of departure. The general profile is then divided into several subsets based upon their specialty sales-type, devices, locations, market size, gender, etc. Concentrate on developing niches in which you have existing clients. Next, consider the attitudes, values, and mental processes common to all of your clients within a given niche. Knowing (or at least being able to project) what those qualities are will make your marketing efforts more successful because you already are familiar with who they are, their values, and how they want to receive information.

Client Values

How do you find out what someone’s values are? Just watch the person work. Ask questions. What do you want? Why do you do that? What’s important to you? To what words and phrases do you relate? What words and phrases do you resent? What does your desk look like? How do you prefer to receive information? Do you prefer a structured or a more relaxed environment?

The Value of Profiles

Developing profiles of specific groups within any given niche helps you establish rapport with people who are not yet clients. Many marketers make their initial contact through a letter. That’s dangerous, unless you are able to establish rapport in the letter. If not, you have diminished your reputation and accomplished little.

Mirroring

If you understand the concept of mirroring, you know it is important to mimic the other person’s breathing, vocal tonality and body language. That works amazingly well in meetings or even during telephone conversations.

Beware Letters

However, you can’t mimic in a letter, so you have to mirror the other person’s mentality. You have to match his or her attitudes, values, and mental processes in your marketing. Again, to consider sending a marketing letter – without first developing a profile – may be a foolish gamble.

Assessment

In short, relationship niche marketing can work to increase your practice without diminishing your reputation.

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Enter the Certified Medical Planner™

For those fiduciaries interested in the medical management and the healthcare financial advisory deep-space, for doctors and medical professionals, please visit www.CertifiedMedicalPlanner.com for more information.

Conclusion

And so, your thoughts and comments on this Medical Executive-Post are appreciated? Despite the CFP imbroglio, how do you niche market, or attract physicians or other “high-value” clients, to your advisory practice? Do you possess any special deep-knowledge or “gravitational pull?” 

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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 Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com  or Bio: www.stpub.com/pubs/authors/MARCINKO.htm

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Healthcare Organizations: www.HealthcareFinancials.com

Health Administration Terms: www.HealthDictionarySeries.com

Physician Advisors: www.CertifiedMedicalPlanner.com

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Advisors Fees vs. Brokerage Commissions

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Beware Assets-under-Management [AUMs]

[Dr. David Edward Marcinko MBA, CMP™]

dem-thinking

I don’t think that doctor-colleagues realize how much more a fee-based financial planner – or financial advisor – might take from a physician-client using an assets-under-management [AUM] subscription business model; than a traditional commission-based stock broker? Of course, commissions are what stock-brokers earn; and “broker” is a bad word today. The more politically correct term seems to be “planner” or “advisor” or “vice-president” or ‘wealth manager”; and these folks earn “fees” along with their confusing nom de plumes. But should they?

Example:

Look at 1% of $100,000 which comes to $1,000 per year. If a doctor-client is in it “for the long haul,” we can see why financial advisors want this money for the “long haul.” Twenty years of this model comes out to nearly $20,000 in fees [assuming zero growth]. If a financial advisor was going to stick the doctor in some investment and leave him alone, would it not have been better to take a one-time $5,000 commission, say at 5%? This way the doctor-client keeps the remaining $15,000. If the money actually grows over time – which it should in the long run – the advisor earns even more.

False Arguments

Now, don’t try to accept the false argument that this puts financial advisors “on the same side of the fence”, as the physician-client or that it allows advisors to take better care them. First off, clients should be taken care of, well. But, it also encourages the advisor to “risk-more to earn more”, and/or to goad the doctor-client into putting more money into the subscription-based account, rather than paying off the mortgage, for example. In fact, the recent mortgage crisis and stock market meltdown suggests that this deceptive argument may have been more common than realized. So, why not ask your advisor/broker to explain both ways s/he gets paid; and then decide for yourself – fees versus commissions?

Assessment

Of course, in today’s world of “assets-under-management,” the word “commission” is taboo. No “real financial planner” takes commissions; he or she would rather manage investments for a “fee” that lasts forever.

PS: Financial advisors really don’t mange most of these accounts, anyway. They are aggregated and outsourced to other firms, for a small sub-fee [a bit less than the original 1%]. The advisor then sends a nice quarterly report to the doctor, as if they did all the work!  Now, do you realize why the best name for these folks is “asset gatherers”; they often do little more than market and sell.

Conclusion

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.

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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