Advisory specialists are serving medical specialists with very special needs.
The first time David K. Sebastian took on a physician as a client was
early in his financial planning career-the result of a casual meeting
with an ear, nose and throat specialist who got burned by the 2000 tech
The relationship was largely routine, with Sebastian sorting out issues created by previous brokerage relationships, including an underfunded variable life insurance policy that assumed a 13% rate of return. "He was really a great guy, a trusting guy, and quite honestly he was listening to everyone and whatever they said was the hot thing to do at the time," Sebastian recalls. "I started working with him, developing a financial plan and pulling all the pieces together."
The relationship clicked. It led to the doctor referring another physician to Sebastian. It was a short time later, while attending a financial planning seminar, when the "light bulb lit up," Sebastian says.
The seminar instructor asked people in the room to raise their hands if they specialized in serving high-net-worth individuals. "There was no way to distinguish between everyone in the room," he recalls.
What Sebastian learned at the seminar was that while most advisors in his chosen profession were in a feeding frenzy over rich clients, few were specializing. That's when Sebastian decided to dedicate himself to serving physicians. "What I took away from that seminar was, why not do this?" he says.
Six years later, Sebastian has succeeded in carving out a niche. He leads a four-member team that comprises the Physicians Wealth Management Group at Summit Financial Resources in Parsippany-Troy Hills, N.J.
The group serves more than 100 clients with assets under management of more than $100 million, he says. Along with traditional investment management and financial planning services, the group provides assistance with estate and business planning, as well as asset protection strategies for guarding against malpractice lawsuit judgments. "Basically, doctors want someone to take care of them just like they take care of their patients," Sebastian says.
A Specialist For The Specialists
Financial advisors putting doctors and dentists at or near the top of
their prospect list isn't new. Health care professionals, along with
lawyers, engineers and corporate executives, have been among the most
sought after clients ever since there have been financial advisors.
But advisors who limit themselves almost exclusively to doctors are indeed a rare breed. When the magazine Medical Economics published a list of the 150 best financial advisors for doctors in 2004, only a handful were advisors that work with doctors as a sole specialty. The overwhelming majority of firms on the list served doctors as part of a general wealth management practice.
That does raise the question: Is it worthwhile for an advisory firm to specialize in serving medical practitioners?
According to advisors involved in the specialty, if the question had been asked ten or 15 years ago, when doctors were essentially self-employed businessmen, the answer could have been "no." Today, however, the landscape has changed drastically. Doctors now are generally employees of managed care networks. The growing threat of malpractice liability has also changed the medical landscape dramatically.
Such an advisory specialty is now both worthwhile and in high demand, according to advisors, because of the complexity of issues that come along with serving a doctor. "At a glance, you might say doctors are a great market because they have typically higher than average incomes," says Robert Holcomb, CEO of Greenbook Financial Services in San Diego. "That can be true. But there are a lot of obstacles that stand between financial services and doctors."
Among these obstacles is the fact that, on average, doctors have been
seeing a steady drop in their annual incomes over the past decade as
managed care companies have lowered their reimbursements. At the same
time, their overhead has increased, with malpractice insurance being
among their major costs.
Because of the malpractice threat, doctors are unique in the sense that they have an acute need for asset protection, tax and wealth transfer planning-more so, possibly, than any other aspect of financial planning.
These recent trends have compounded problems doctors have always had to deal with, such as the fact that because of their lengthy training and student debt loads they typically begin saving for retirement later than most individuals. Also, because they're playing catch-up with their retirement savings, doctors have a reputation for sometimes being too risky with their investments and paying the price in the form of costly mistakes.
It's a complicated scenario, advisors say, and one which not all
general advisory practices are eager to take on. The truth of the
matter, they say, is that doctors are no longer as prized by the
general advisory industry as they are perceived to be. That, however,
has created opportunities for firms willing to take on the medical
One example of a firm that filled the medical practitioner void is Greenbook Financial, which was formed two and a half years ago through the merger of four advisory firms. The firm has grown to one serving more than 2,000 clients-virtually all of them doctors and dentists-with more than $300 million under management through a nationwide network of 65 Greenbook advisors, according to Holcomb.
The firm, Holcomb says, has a mission of being a nationally recognized expert in financial issues for medical practitioners, with an expertise that also encompasses practice management. Toward that goal, the firm's representatives have been keynote speakers for organizations that include the American Academy of Pediatric Surgeons and the American Academy of Endodontists.
Malpractice And Asset Protection
Mark Singer, co-founder of Singer Xenos Wealth Management in Coral Gables, Fla., saw his firm transition into a medical practitioner specialty shortly after starting the company in 1986. At around that time, a large insurance company in Florida decided to drop out of the malpractice coverage business, sparking a crisis situation for doctors in the state.
Singer Xenos responded to the furor by developing asset protection strategies for doctors without malpractice insurance-usually by using a combination of traditional estate planning strategies. The strategies included transferring wealth to protected assets such as annuities and life insurance, spousal transfers and, less frequently, the use of limited partnerships and offshore trusts.