Financial advisors looking to serve doctors need to talk to as many of them as possible—even attend their medical conferences—to understand the unique issues they face, says Michael S. Berry, an advisor who deals almost exclusively with physicians.

Doctors in particular are in need of financial advice because they have to run businesses as well as practice medicine, even though they likely did not study business in college, says Berry, founder of the Michael Scott Financial Group LLC in Newtown, Conn. Many doctors are not ready to operate a business or prepare for retirement, and this represents an opportunity for advisors, says Berry, co-author of The Physician’s Money Manual and other publications.

“Advisors ask me all the time how I developed this niche practice,” says Berry. “In reply, I ask them how many medical conferences they have attended as a participant. You have to talk to doctors and learn what their problems are if you want to advise them.”

Doctors face unique financial issues. Not only are they often business owners, but sometimes they own the buildings they work in. Or they might have
also developed sideline businesses as owners of pharmacies, laboratories or billing and medical coding companies, each with its own revenue stream.

Such business ventures can challenge doctors’ financial knowledge, says Berry, especially as they begin to think about retirement. Some may want to sell their practices and the ancillary services. Some doctors might want to leave their businesses but retain some ownership.

Such moves require planning and the assistance of CPAs, attorneys and other experts who know the medical profession.

Doctors must also contend with the high cost of medical malpractice insurance. Instead of paying a third party, some doctors will want to set up a captive insurance company to self-insure against lawsuits, Berry says.

This requires the help of a lawyer, who can also help doctors take advantage of the tax breaks available for captive insurance companies. Asset managers also can help.

“The doctor or doctors’ group may want to get what is known as a private letter ruling from the IRS saying the plans for the captive insurance company meet actuarial standards,” Berry adds. “Many people think they can simply put all of their assets in their spouse’s name and they will be safe, but a good advisor can tell the doctor this is not so.”

Advisors who want to get into this space need to familiarize themselves not only with medical coding and billing practices, but also with the experts in these fields. And they must help doctors choose the right type of corporation and best employee benefit plan.

And all doctors should have a business exit strategy, which, to be done efficiently, requires knowledge of the medical field, Berry warns.

“The financial advisor can help the doctor get his practice to a more profitable state, but he needs to talk to doctors and know their problems,” Berry says. “We can make health care better through wealth care.”
––Karen DeMasters