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Entry into the Echelons of Affluence


Aspiring physicians might take comfort in the knowledge that there are now 12 million people in the world with investable assets of $1 million or more. But you might not join those ranks if you don't vet your financial advisor.

Honestly, after you have been around awhile, having been exposed to the financial news media, you think that you have seen or heard everything. But new developments continue to abound. So for fine-tuning, profit, amazement and fun, let’s see some of what’s new.

—Topping everything we think we know, it has recently been calculated that the 85 richest people on Earth now control more money than the bottom 3.5 billion. The 300 richest people made half a trillion (yes, with a T) last year alone. Of some comfort to aspiring docs is that 12 million people in the world now have investable assets of $1 million or more, totaling almost $50 trillion. So there is still hope for most of us to gain entry into the lower echelons of affluence.

—If you turn to your financial advisor to help you move up the lengthening ladder of net worth, it won’t cheer you to know that a survey by the Financial Planning Association recently found that almost half of them do not yet have a retirement plan for themselves. And 75% have no succession planning for their firms. Also, if you ask what industry your advisor came from, you may be surprised to learn that sales (21%!), accounting, education and law are in play, aside from just the pure, expected financial careers.

—In the last 5 years, Americans have left an estimated $44 billion unspent on gift cards from retailers. This big, under-the-radar bonus for retailers explains why they push gift card sales so much. In the interest of transparency, I am one of the guilty. I have 4 cards, received either as gifts, or in lieu of returns without a receipt, that I haven’t yet used.

—The traditional, historical ratio between the cost of one ounce of gold and one ounce of silver is 62:1. Keep that in mind if you want to gamble in that very volatile market. A tilt too far in either direction could be a buy or sell signal, depending upon which metal you hold, or want to. In case you are wondering, not one of the 85 folks mentioned above got there by speculating in precious metals.

—For you day traders, you courageous souls, Money magazine reports that over half of all trades are now made by computers in .0007 seconds, down from the horse-and-buggy 10 seconds 8 years ago. The average Joe has no chance whatsoever to get a jump on these high-powered algorithms: so invest in tax-deferred ETFs and go back to sleep.

—The airlines are now routinely reporting profits after years of losses. How did they do it? Largely from the $18 billion that they made from “unbundling” the luggage from your ticket. Incidentally, the $25 per bag that they charge is for the $2 in jet fuel that the bag’s weight costs the airlines. The other reason that they are making money is that they are canceling flights right and left to make sure that each one flying is crammed full. No more lying across 3 or 4 empty seats in economy.

And this situation is largely of the consumer’s doing. When people are offered a slightly higher charge for a less full flight, with luggage included, they almost always pick the lowest fare listed instead, even with all the asterisks for the add-ons. Our psychological quirks can be very expensive for us.

—Lastly, a study from Johns Hopkins recently revealed that when docs actually know how much tests cost, they ordered 9% fewer or sought cheaper alternatives. In the small study over 6 months, more than $400,000 was saved with no measurable effect upon patient welfare. If this project was applied to the rest of the country, we would be talking real savings and more rational patient care. Medical training directors and deans please take note.

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Victor J. Dzau, MD, gives expert advice
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