Advisors who have specialized in small, qualified plans with three or five doctors and ten or 15 employees must be aware of the risk that the firm will be swallowed up by a megagroup. If a hospital or group buys 15 practices with five doctors in each, all of those retirement plans will be replaced by a big one. That means 14 firms lose small plans and one firm gains a huge one. This means consolidation will be a high stakes game for advisory firms serving small medical practices and their retirement plans.
Given the reimbursement cuts by Medicare, Medicaid and private insurers, the situation will be especially unhappy for physicians over 50. Ask doctors that you work with or want to work with if they are interested in exploring ways to get out of the profession now, and then help them figure out alternatives. Doctors can leverage their valuable medical knowledge in many ways. They can open weight-loss clinics, for example, or provide Botox treatment. Or they can consult with companies in the technology, insurance or pharmaceutical industries.
And lastly, working with doctors means you might have to change the way you yourself do business.
If you require a $1 million investment minimum, doctors under age 50 often won't qualify. You could simply turn them away. But if you're trying to build a long-term business of working with doctors, you might also come up with a service level meeting the needs of doctors who don't yet meet your minimum asset requirements. One answer could be a service focused on helping doctors maintain a budget while you also offer model portfolios over the Web or a turnkey asset-management provider's advice. Reserve your higher level of service, such as comprehensive financial plans and quarterly meetings, for those doctors that meet your minimums.
Editor-at-large Andrew Gluck, a veteran financial writer, owns Advisor Products Inc., a marketing technology company serving 1,800 advisory firms.