Special Financial Challenges Facing Physicians

While medical liability insurance is designed to protect personal and business assets from malpractice claims, there are limits to your coverage, and many policies explicitly exclude coverage for suits arising from activities that are not directly related to the patient-physician relationship. Jury awards in liability cases often are unpredictable and may exceed your coverage limits. Unfortunately, if your liability coverage is exceeded, your personal assets can be put at risk if they are not sufficiently protected. Even when physicians try to shield their assets by putting them in the name of a child or spouse—or by hiding accounts—professional investigators are skilled at discovering sensitive financial information that can be used at trial.

You’ve worked hard for what you own, and you want to keep it safe. While no asset-protection strategy can be right for everyone, there are many tools at your disposal to help protect you and your family from costly litigation. Some of the ways we can help you protect your assets include the following: umbrella insurance policies to expand your liability coverage, trusts and other ownership strategies, advanced risk-management techniques, and investment diversification.*

Asset protection and protecting yourself from liability are two very big pieces of the wealth-creation puzzle for physicians. The better you can protect your assets from creditors, litigators, and malpractice claims, the more assets you will have to build a prosperous future for you and for your family.

As wealthy investors, many physicians fall under the legal definition of “accredited investors.” The U.S. Securities and Exchange Commission (SEC) considers these sophisticated investors to have adequate investing experience and wealth such that they will not need to liquidate their investments for cash needs and can withstand a total loss of their investment principals. According to the SEC, an individual accredited investor is one with $1 million in personal net worth (excluding the primary residence) or income exceeding $200,000 (or $300,000 jointly).(11)

*Diversification cannot guarantee a profit or protect against loss in a declining market.

While meeting the requirements for accredited investors can increase the range of available investment opportunities, it also means that physicians can find themselves the targets of questionable investment schemes and unqualified financial advice. Being classified as an accredited investor may mean that many of the typical investor protections no longer apply. Beware of any investment that offers guaranteed returns or promises to beat benchmark returns with a “secret” or “proven” investing formula.

The reality is that physicians don’t have to hit home runs to build wealth and live the lifestyles they have worked and sacrificed so much for. As with many things in life, slow and steady may often win the race. Making savvy financial choices and sensible wealth-management decisions is more prudent for your long-term financial health than dodgy investment schemes based on “proven financial formulas.”

In our experience, financial strategy can help create clarity, and a regularly reviewed budget can help keep you on the path toward your financial goals. A written budget and financial strategy can help you articulate your family’s goals, manage your income and cash flow, and monitor your progress toward financial goals.

You cannot underestimate the effects a disabling illness or injury can have on your income and wealth. In some cases, Worker’s Comp, Social Security disability income, and savings are not enough to cover the gap in income, making adequate disability insurance an important part of a financial plan.

During the bull-market years of the dot-com era, it was easy for stockholders to have confidence in their investing abilities when a few lucky stock picks quadrupled overnight. However, many of those same investors were burned in the bear market that followed because they didn’t have the experience or skills to manage their wealth in a declining market.

Long-term investing entails having the skill to achieve returns in bull markets and the discipline to keep what you earn when markets decline. This is when it pays to have a professional financial manager. One of the greatest benefits of professional financial management comes when markets are declining. We educate our clients on the opportunities that market turbulence sends our way and keep them focused on their long-term goals, not on short-term gyrations. As professional financial representatives, it’s our job to stay on top of ever-shifting economic, financial, and legal issues so our clients don’t have to.

Navigating the turbulent investing world of today requires wise management skills, and commitment to a long-term, active investing strategy. For physicians, investing is just one part of their overall financial strategies. Getting good financial guidance may spare you the angst of errors or missed opportunities and may save you money in the long term.

It’s common for physicians to consult with financial representatives, accountants, insurance agents, tax-planning professionals, attorneys, and practice-management specialists. It’s critical to integrate your financial team into your overall goals so that each professional on your team is aware of what the others are doing. If each professional isn’t communicating well with each other or is unaware of your total financial picture, you may get fragmented, inefficient advice that may negate certain strategies and hamper your wealth-creation efforts.

To be most effective, your advisors must be integrated, communicate well with each other, and work toward common, clearly defined objectives. We work with a network of experienced professionals with a wide range of skills and qualifications.

Particularly in times of economic uncertainty and changing regulations, we believe it is important to seek the guidance of a financial professional. We want to emphasize that no approach is right for every physician and that successful financial outcomes need personalized guidance based on a clear understanding of you, your practice, your goals, your values, and many other aspects of your personal circumstances.

We hope you have found this report useful and informative. Physicians who recognize and avoid these common mistakes give themselves the potential to grow their wealth and work toward financial security for the future.

We also want to offer ourselves as a resource to you and your family. We are happy to answer questions about your current financial situation and future goals. If you have any questions about the information presented in this report, or if you’d like to discuss your specific needs, please contact us. We would be delighted to speak with you.

Sincerely,

ANDRE L. HAMPTON