Occupations with high income and student debt may be best advised by specialist financial firms.
As a doctor, you know that choosing the right person to give you advice can make all the difference long term. You wouldn’t ask a gastroenterologist to do a hip replacement.
The same can be said for financial advice. There are plenty of qualified multi-disciplinary firms, generalist financial and tax advisory providers who do a great job. But for the most optimised financial advice for doctors, you need to go to a specialist medical financial advisory firm.
Here we explain why.
Why do doctors need financial advice?
We all know how busy doctors are. You’ve spent years going through medical school, specialty training programs and building your career. Now you’re probably busy juggling your patients, running your practice, and maybe a family. There probably hasn’t been much time to focus on your finances.
“Doctors are super busy,” says DPM tax specialist consultant Amelia Jones. “They have loans and other obligations but they’re in an industry that’s recession-proof. They have incomes that are well above the national averages and because of all that, many doctors don’t have the same panic or concern about their finances.”
However, because of that higher income, the Australian financial industry makes assumptions about your financial knowledge.
“ASIC has this term called a sophisticated investor, which assumes that if you have an income of more than $250,000 a year, or you have assets of more than $2 million, you understand the risks of investing more than people who are investing and earning less,” Ms Jones says.
“In reality, that’s not necessarily the case. And so that’s where doctors need good strong relationships with medical financial services teams that can advise them on the areas they’re not as familiar with.”
Why do doctors need medical financial services?
In addition, many doctors have unique financial needs that are different to many other industries. A medical practice is a service-based business, so the way it’s structured and taxed is different from other more product-based businesses.
“I had a client once who was using another accounting practice, and they were about to sell their family home because they had no money,” Ms Jones says. “It became very clear that they were advised to set up a bad structure. They were set up in a way that you would set up a plumbing business, for example.
“It’s a special part of the tax legislation that says if you earn income because of your knowledge, then you have to pay the tax on it. Accountants for doctors need to understand that.
“When a doctor sees a generalist accountant, that person needs to keep up to date on the tax legislation for a whole range of industries, which can take away from the time they spend getting to know you, your individual circumstances and also tax law associated with the medical industry.
“As medical accountants, we are experts with the tax and compliance requirements for doctors, we can concentrate on getting to know each client. We can help predict their futures so we can be more proactive in giving them the right financial advice that aligns with their personal circumstances, at each stage of their lives.”
How can specialist medical finance advice help doctors?
When you visit a medical finance company, your consultant will use the opportunity to get to know you as a person, as well as how you’re going financially.
“All my meetings start with me getting to know them. I like to find out what’s going on and let them explain about their family and their situation. This will then help me understand what other financial considerations they might have,” Ms Jones says.
Obviously, all doctors need to comply with their tax obligations, whether they work in a public or a private practice. However, there are other areas where specialised medical finance companies can assist.
1. Personal and business tax structuring
Medical practices are often run differently to other businesses. In most practices, doctors spend their time seeing patients and less time working on the business.
“They’re often not looking at how much money is going in the bank,” Ms Jones says. “They’re not reconciling the Medicare with the patient billings or that sort of thing. That’s done by the practice manager or a trusted staff member.
“There’s almost a level of separation in their business ownership from their business management. You don’t see that in other businesses like cafes, or tradespeople.”
Specialised medical financial advisory firms can help you set up your software and provide bookkeeping support so your practice runs more smoothly.
2. Personal insurances
As a doctor, your most important asset is your ability to earn, so it’s important to have the right personal insurances. You can talk to a risk or insurance adviser about income protection, life, or disability insurance.
“When we’re talking about work, if a client says to me, ‘I’m now doing twice as much private practice, but I’ve still got the same number of hours at the hospital’, that’s a trigger for me that their insurance needs to be reviewed because their income has gone up, and so has the financial risk they carry,” Ms Jones says.
3. Financial planning
Is your money working hard for you? As a doctor, you may be in the top 1% of earners, but are you investing (or protecting) it in the best way for your future?
With a wealth consultant, you can talk about your assets and liabilities and exactly how much you’re worth today. Then you can decide on the best strategy going forward. This may be about where you should invest your money and how you can best prepare for any costs or goals you might have ahead. They can also talk about how you’re going to fund your retirement and whether a self-managed super fund is right for you.
4. Loans
You might also be surprised to know that getting a home or business loan can be different for doctors and a medical finance firm can help you get access to lending products the rest of the market can’t offer.
“Several of the banks have specialist medical lending divisions, where they only lend to medical professionals,” Ms Jones says. “They see doctors as having this unique income source that is only going to increase. Often, regular lending organisations don’t have those relationships.
“Our lending team has these relationships with the managers at those banks. We’re able to talk to them directly and get those better loan structures, rates and life discounts.”
Robert Giblin is a chartered accountant and registered tax agent with DPM Financial Services.
Disclaimer: This article contains general information only and does not consider your personal objectives, financial situation or needs. You should assess whether the information contained in this communication is appropriate in relation to your own objectives, financial situation or needs.
