The best way for physicians to manage their finances is to put their A team - their financial dream team, if you will - on the field. And the operative word being "team."
Athletes are often heard prior to an important event saying that they need to bring their A game if they want to come out victorious. They know that anything less will not get the job done.
It’s no different with physicians and their finances. The best way for physicians to come out victorious is to put their A team — their financial dream team, if you will — on the field. And the operative word here, according to Bryce Noel, CLU, MBA, ChFC, MSFS, the chief executive officer of Black Diamond Strategies, is “team.”
“The areas of competence needed for a physician’s financial dream team are planning, design, and management,” Noel says. “Rarely does one skill set fit all.”
Where do you start?
Using a football analogy, Noel likens the physician to a head coach, and every head coach has an offensive coordinator who knows what the head coach wants to accomplish. He says the same is true for physicians.
“We operate functionally in a ‘more is better’ kind of environment, you know, more money, more this, whatever,” Noel explains. “But not everybody defines those terms the same way. So, one person really needs to get inside the doctor’s head and know what he or she wants to accomplish.”
Tom Ferkovic, R.Ph., MS, a managing director with SS&G Healthcare Services, an independent accounting and business consulting firm, says that key person can be either a very highly skilled manager in the practice, or an outside professional. Either way, though, they need to understand the nuances of a medical practice, and they need to know how to track key indicators.
“Doctors need to have a quarterback who watches the key indicators — not just collections, but charges — someone who can keep score of historic stuff,” Ferkovic says. “It’s very similar to blood pressure and all the vital signs on a medical chart. And when something goes out of whack, that person can say, ‘Hey, we have a problem here.’ The doctor doesn’t have time to do that.”
Forming the team
Ferkovic says it’s important for physicians to set goals — both business planning, and life planning. For example, how many more years do you plan to work? Is your long-range plan to move to British Columbia and raise horses? Once you know what those plans are, you can bring in the members of your financial team to help you achieve those goals.
"If you only want to work 10 more years, you’ll need an advisor who can help make certain you’re putting away what you’ll need to accomplish that goal,” Ferkovic says. “You’ll need an accountant who will make sure you’re not overpaying taxes. All those really good individual parts will help form a kick-butt team.”
Noel says that just as primary care physicians send patients to specialists to handle specific medical issues, it’s important to work with specialists as members of your financial team. For example, a general practitioner in a local law business should not necessarily do the drafting of wills and trusts.
“If you’ve got a large amount of money and the retirement accounts are accumulation accounts and you’re having somebody manage them, those people should be specialized in managing money,” Noel says. “They probably aren’t planners; they probably aren’t case designers; they probably are not people who specialize in whether or not that money is pre-tax or post-tax money, but boy do they know how to manage it.”
Ferkovic agrees. “It’s different to do estate planning for a business owner of a manufacturing company that has offices in 16 states, and spends most of their time flying around managing professionals, versus a doctor working in a complex economy, in a highly regulated industry.”
Interview, and negotiate
When it comes to payment arrangements, Ferkovic admits they are all over the map. But he stresses the importance of negotiation.
“Nothing should be open-ended,” he says. “Let it be known that you’re talking to other people.”
Noel explains that physicians should beware because, unfortunately, “you can get a license in a weekend” in his industry if you just put some work into it. That’s not who doctors want to work with.
“Those people generally go the street with the package solutions offered by suppliers — insurance companies, banks, whatever,” he says. “They’re not bad, but they’re not state-of-the-art, for the most part. They reduce things to a one-size-fits-all approach.”
Ferkovic says it gets back to the importance of working with professionals who know the ins and outs of a medical practice.
“Lawyers may be great business lawyers, but they don’t have a clue on the nuances of health care,” he says. “There are enough professionals out there. Go get the ones dealing in health care.”