The demands on medical practitioners today are overwhelming. The landscape for healthcare delivery is constantly changing, and those changes are reflected in the financial issues that doctors face every day. You must continually educate yourself about new research in your chosen specialty, stay current on the latest technology that is transforming health care, and pay attention to business considerations, including ever-changing state and federal regulations.
Like most doctors, you may have transitioned from medical school and residency to being on your own with little formal preparation for the substantial financial issues you now face. Even the day-to-day concerns that affect most people--paying college tuition bills or student loans, planning for retirement, buying a home, insuring yourself and your business--may be complicated by the challenges and rewards of a medical practice.
In a nutshell, doctors are highly educated, specially trained independent business owners that face steep financial costs at the start of their career, intensified opportunities for value creation from the middle of their careers and onwards, and a raft of specific potential liability and legal concerns.
All of this requires a routine financial check-up.
Unfortunately, substantial demands on your time can make it difficult for you to accurately evaluate your financial plan, or monitor changes that can affect it.
That's especially true given ongoing health care reform efforts that will affect the future of the industry as a whole. Just as patients need periodic checkups, you may need to work with a financial professional to make sure your finances receive the proper care.
In particular, doctors should routinely pay closer attention to the following aspects of their financial well-being:
- Wealth Management & Asset Protection
- Business and Practice Management
- Estate Planning
Wealth Management & Asset Protection
Much like medicine, the field of finance has been the subject of much scientific research and data, and should be approached with the same level of discipline and thoughtfulness. Making the most of your earning years requires a plan for addressing many pertinent issues and careful consideration of your personal situation and goals.
Your years of advanced training and perhaps the additional costs of launching and building a practice may have put you behind your peers outside the health-care field by a decade or more in starting to save and invest for retirement. You may have found yourself struggling with debt from years of college, internship, and residency; later, there's the ongoing juggling act between making mortgage payments, caring for your parents, paying for weddings and tuition for your children. Because starting to save early is such a powerful ally when it comes to building a nest egg, you may face a real challenge in assuring your own retirement. A solid retirement plan is a must.
Getting a late start on saving for retirement can create other problems. For example, you might be tempted to try to make up for lost time by making investment choices that carry an inappropriate level or type of risk for you. And once your earnings improve, you may be tempted to overspend on luxuries you were denied during the lean years. One of the benefits of a long-range financial plan is that it can help you protect your assets and your future from inappropriate choices.
Lastly, and perhaps just as importantly, once the lean years are behind you, your success means you probably need to pay more attention to tax implications and investment strategies that help you keep more of what you earn. Finding and determining which strategies are best and most effective in managing your tax burden is in itself a daunting task that requires the guidance of several financial and tax experts.
Insurance Considerations: It's all about getting the right preventive care
The nature of your profession requires that you pay special attention to making sure you are protected both personally and professionally from the financial consequences of legal action, a medical emergency of your own, and business difficulties. Having a well-defined protection plan can give you confidence that you can practice your chosen profession without putting your family or future in jeopardy.
Physicians are caught financially between rising premiums for malpractice insurance and fixed reimbursements from managed-care programs and medicare, and you may find yourself evaluating a variety of approaches to providing that protection. Remember that in addition to potential malpractice claims, you also face the same potential liabilities as other business owners. You might consider an umbrella policy as well as coverage that protects you against business-related exposures such as fire, theft, employee dishonesty, or business interruption, etc.
Your income depends on your ability to function, especially if you're a solo practitioner, and you may have fixed overhead costs that would need to be covered if your ability to work were impaired. One choice you'll face is how early in your career to purchase disability insurance. Age plays a role in determining premiums, and you may qualify for lower premiums if you are relatively young. When evaluating disability income policies, medical professionals should pay special attention to how the policy defines disability. Look for a liberal definition such as "own occupation," which can help ensure that you're covered in case you can't practice in your chosen specialty.
To protect your business if you become disabled, consider business overhead expense insurance that will cover routine expenses such as payroll, utilities, and equipment rental.
Your family often relies on your income for their existence and sustainability, should tragedy strike, having the proper life insurance is key. Which plan makes most sense for you also depends on several personal and individual factors that are unique to your situation. Finding the proper insurance professional to help you evaluate all of your options is key.
Practice & Business Management
Is a group practice more advantageous than operating solo, taking in a junior colleague, or working for a managed-care network? If you have an independent practice, should you own or rent your office space? What are the pros and cons of taking over an existing practice compared to starting one from scratch? If you're part of a group practice, is the practice structured financially to accommodate the needs of all partners? Does running a "concierge" or retainer practice appeal to you? If you're considering expansion, how should you finance it?
My clients are constantly asking themselves these questions and the answers are rarely simple and should be done in the context of an overall financial plan that takes into account both your personal and professional goals.
Estate planning is the process of planning how to best shelter your assets and ensuring their succession to your loved one. Proper estate planning can both minimize taxes and further your personal and philanthropic goals. Doctors are especially vulnerable because of the level of complexity of their financial holdings, structures and assets. Proper advice, coordination with legal experts is of utmost importance.
In medicine, by monitoring and managing treatment components from the beginning to the end of a patient's care, and by knowing how to properly sequence the appropriate components of care, the physician can greatly and positively affect the patient's outcome.
The same and exact successes can be achieved financially through proper financial planning, working with the relevant experts and objectively defining your goals and continually monitoring your progress while constantly making the adequate adjustments.
Gerber Kawasaki Wealth Management
2716 Ocean Park Blvd #2020
Santa Monica, CA 90405
Securities offered through LPL Financial, member FINRA/SIPC. Investment advisory services and fixed insurance offered through Gerber Kawasaki, Inc., a registered investment advisor and separate entity from LPL Financial.
This material contains forward looking statements and projections. There are no guarantees that these results will be achieved. Investing involves risk including potential loss of principal.