Dr. Carolyn McClanahan, founder and director of financial planning at Life Planning Partners Inc. in Jacksonville, Fla., didn’t quit her day job when she initially launched her fee-only firm more than a decade ago. She was still practicing medicine part time in the urgent care section of an emergency room.
Today, she manages a little more than $100 million in assets for 78 client families (many of them multi-generational) while teaching other advisors to integrate health-care planning into their businesses. She plans to keep her firm small—her goal is about 100 client families—so she has time to stay closely connected with them, remain active in education and develop better processes for the advisor community.
Her advisory business differs dramatically from the mainstream of the profession. McClanahan, who specialized in family medicine and emergency medicine, accompanies clients with very serious health issues to medical appointments. But aside from asking clients what they do to take care of their health, she doesn’t typically don her medical hat until they have a major health issue, she says.
“We ask about health because that helps us do better planning,” she says. “You plan very differently for someone who has an unhealthy lifestyle or who already has significant health problems as opposed to someone who is very healthy and takes good care of themself.”
Life Planning Partners also helps assuage some of the biggest fears of its seriously ill clients: “Do I have the money to treat this illness?” “Is it going to decimate my family?” “Who will take care of things, including my finances?”
“I was a math nerd in high school,” says McClanahan, 51, who briefly considered becoming an actuary. Her role as an athletic trainer in high school and college eventually motivated her to pursue a career in medicine.
She began thinking about finances after earning her M.D. degree from the University of Mississippi. She opened an IRA as a low-paid medical resident, then helped her husband invest money he inherited from his parents who had died. “That was in the mid-’90s and we thought we were brilliant and we did fairly well,” she says. “Of course, everyone was brilliant back then.”
By 2000, the couple, then in their mid-30s, realized they needed more financial guidance. “We had this nice pot of money and were getting nervous and not really knowing what we were doing,” she says. They also wanted to know if they could afford for her husband to give up engineering to become a track coach. Finding a planner proved difficult. “Back then, especially in Jacksonville, everyone was pretty much a salesperson,” she says. “It was all about investments.”
So McClanahan started taking courses in financial planning and, she says, “I just fell in love with it.” She earned a certificate in financial planning, passed the CFP exam and worked a couple of years for an advisor while practicing medicine part time.
The firm where she cut her teeth was fee-only on the brokerage side but sold insurance products. “I realized they were good people, nice people,” she says, “but I can tell you, if you’re going to sell something and you’re going to make money on it, it takes away your objectivity.” She opened her own practice in 2004 because she wanted to be truly fee-only.
The first year, she worked out of her home and grew her practice solely by word of mouth. Friends and ER colleagues became clients because they wanted to work with someone they knew. “In medicine, trust is a big thing,” she says.
McClanahan joined NAPFA and met other advisors who were also very interested in being fiduciaries and providing comprehensive planning. Soon she started attracting clients who found her through NAPFA. “I was one of the first NAPFA members in a city of a million, and to me that was amazing,” she says.
By 2005, McClanahan opened a real office and quit practicing medicine for money. She still volunteers twice a month in the medical clinic of a homeless shelter. As time passed, she also started giving presentations, initially to her advisor study group and later at conferences, about issues at the intersection of health and finance.
Her first talk addressed how to help clients clean up their medical records to get better rates for life, disability and long-term care insurance. After the Affordable Care Act was passed, she spent two hours a night for three months reading its 2,400-page version and then put together a presentation that proved very popular.
McClanahan, who’d taught medical students and residents, was glad to teach again and to give back to the advisor community that aided her so much when she started out. “I picked a lot of brains and I realized after a few years that I knew stuff from medicine that could help advisors become better advisors,” she says. “I come from two different backgrounds, and there’s a lot of overlap in how we operate.”
Speaking invitations started pouring in; she estimates she has given more than 200 presentations to advisors. Other topics she covers include end-of-life planning and the integration of health status into financial plans.
She is also a contributing writer with Forbes. “They let me lay off this year because my house was eaten by termites,” says McClanahan, who has finally moved back home and has invited clients to attend her upcoming “termite recovery party.” Life Planning Partners also holds an annual paper-shredding party for clients and invites them to join the firm in community events it sponsors, including a 5K race that benefits economically challenged citizens in its county.
Creating A Vision
McClanahan is high energy, but even she realized that keeping up with her clients and her education endeavors was too much to handle solo. So she and her business coach, Tracy Beckes, came up with a long-term plan to expand her practice into what McClanahan refers to as an ensemble firm. “I couldn’t do what I do without the team,” she says. Her four-person shop includes a senior planner, a chief investment officer and an office manager.
Beckes, founder of Tracy Beckes and Associates, a Washington state-based coaching firm for financial advisors, also helped McClanahan improve her communication skills and develop client engagement standards that specify what Life Planning Partners does, what it delivers and what it expects from clients. “In the ER, I used to bark orders and I had to learn not to bark,” says McClanahan.
Life Planning Partners’ newer clients typically have $1 million to $10 million in assets. Clients are charged a flat annual retainer based on the complexity of the work, taking into account the number of family members, whether the firm does business planning for the client and whether the client has significant health issues that require heavy planning. The minimum retainer is $10,000 a year. If McClanahan doesn’t think prospects require that much work, she’ll refer them to other planners.
She does the tax planning, estate planning and emergency planning for clients. Carrie Jones, a senior planner with the firm since early 2014 and a 25-year veteran of the financial industry, handles projection planning and insurance planning. “I call it deep-dive financial planning,” Jones says of the firm’s approach. “It’s not just health care, and it’s not just people dying!”
Jones speaks frequently with clients about retirement planning and annually reviews their insurance coverage (property and casualty, disability, personal liability, life and long-term care). “We serve as a second set of eyes looking over their shoulder,” she says.
Life Planning Partners isn’t licensed to sell insurance, but it makes sure clients’ premiums and coverage seem reasonable. When it spots red flags, it turns them over to the client’s insurance agent. The firm also helps clients shop new coverage.
On the health-care side, Jones walks clients through the insurance options offered in their workplaces. She also helps them decide whether to opt for full coverage or a health savings account. Considerations include how much they spend on drugs and doctors each month and whether they should seek second and third medical opinions on their health issues, she says.
Jones also checks to see if clients qualify for premium subsidies under the Affordable Care Act. Because these subsidies are based on income rather than assets, people who are retired or on sabbatical may be likely to qualify, she says.
Tim Utecht, a former analyst and portfolio manager, has been the chief investment officer at Life Planning Partners since 2009. He was disillusioned with the industry’s focus on asset accumulation and product sales and considering going out on his own when he stumbled upon McClanahan’s ad for the position. He relocated to Florida from his native Wisconsin to take it.
Utecht walks clients through the firm’s investment process, develops their investment policy statements (which he reviews at least annually) and makes sure clients are able to meet their cash-flow needs. “Planning for us is always an ongoing process,” he says. “It doesn’t accumulate dust over five to seven years.”
He gives clients manageable pieces of investment education during their office visits, through quarterly newsletters and through the letters that accompany their quarterly performance reports. The team also contacts clients when there are significant moves in the market.
Life Planning Partners isn’t the right fit for everyone. Clients must agree with its client engagement standards and investment policy. A doctor with $10 million in assets refused to let the firm see all his accounts, which it requires for tax-efficiency purposes, and he also wanted to dictate his investments. “He couldn’t believe we’d turn him down as a client,” says Utecht—but they did.
A growing focus for Life Planning Partners, and the chief concern voiced by advisors McClanahan speaks with, is dementia and cognitive decline in clients. The firm is creating long-term-care plans that spell out at what point a client will stop driving, move to assisted living or enact other arrangements. The plans will be reviewed annually with clients and used as a touchstone when clients start to decline, she says.
McClanahan has also arranged for Life Planning Partners to serve as a test bed for new software that aims to catch early cognitive decline in the financial decision-making process.
Lessons Learned
McClanahan has been increasingly emphasizing to clients the importance of planning for a comfortable today and not just an uncertain tomorrow. She knows too well from working in emergency rooms that many people die or have bad things happen to them when they least expect it. She has also seen this among her clients.
One client, Susan (a pseudonym she used to protect her privacy in talking with Financial Advisor), and her husband had finished their planning with McClanahan—including their wills and health-care directives—a week before the husband, a nonsmoker in his early 50s, was given a diagnosis of lung cancer. McClanahan went into triage mode, helping him sort out his health coverage and the care he received in two states. “It was a really big support for him,” says Susan. “He was also grateful that she took us as clients so she’d be there for me.”
When he died, “I lost my anchor,” says Susan, now 53. “I’d been a housewife for 27 years—all my married life.” McClanahan came to her home every other week, she says, and helped her understand the bills, create a budget, sell properties and figure out how to pay for college for her youngest child. She also helped Susan with some details associated with shuttering her husband’s business. “Her goal is to help me keep simplifying things,” says Susan.
McClanahan connected her with an attorney, an accountant, a grief counselor and other clients, whom Susan befriended. “She’s a friend, a doctor, a financial planner and an advisor—she wears so many hats,” says Susan. “She hires people who are just as knowledgeable and compassionate.” Susan, who is now enrolled in college and working toward her own goals, says that McClanahan has also extended her services to Susan’s children, who are young adults.
McClanahan also impresses Brandon Ratzlaff, a wealth manager with Dallas-headquartered Carter Financial Management, which manages $800 million in assets for 457 clients. McClanahan spoke to the firm’s clients during its investment conference on Obamacare. Ratzlaff subsequently arranged for her to speak to his local chapter of the Financial Planning Association.
“She is an incredible planner,” he says. “She has a different skill set, and I respect that and I aspire to develop that.”
Thanks to McClanahan’s guidance, Carter Financial Management is now holding health-care conversations more regularly with its clients. Initially, “It really felt like none of my business,” says Ratzlaff, 36, “but that was less about the clients and more about me and my own mental roadblocks.” He finds face-to-face conversations to be much more effective than traditional work sheets and fact-finder questionnaires.
McClanahan has also been a good resource for Columbia, S.C.-based Abacus Planning Group, a fee-only wealth management firm that manages $832 million in assets for 192 clients. “She has a unique perspective and brings a lot of knowledge to the table that the rest of us don’t have,” says Molly Thomas, a registered paraplanner and the insurance strategist at Abacus. “She helps marry the two worlds,” adds Thomas, referring to the medical and financial sides of health care.
Abacus is now better able to help clients understand their medical records and what insurance companies look for in them. During open-enrollment periods, the firm reviews prescription drug cost options with clients, adds Thomas.
She finds McClanahan’s recent presentations on planning for health-care costs in retirement particularly useful. “How are we even supposed to start talking about that,” asks Thomas, “when someone who retires at 60 may live to 100?”
McClanahan has encouraged Abacus to ask clients open-ended questions about their health, including whether there is anything they’d like their planning team to know. These conversations help minimize surprises when doing financial planning—“Not that there’s a crystal ball,” says Thomas—and helps Abacus know how to have health-related conversations with clients’ children.
Abacus team members also do a lot of role-playing with one another to practice the best way to weave health care into conversations with clients, says Thomas.
McClanahan is thrilled that other advisors are stepping up their emphasis on health-care planning. “Our BHAG, or our big hairy audacious goal,” she says, “is to be a financial planning firm that other firms want to emulate.”