By J. Haden Werhan, CPA, PFS
Wealth. Management. Take each word by itself, and each is simple enough. But what deeper meaning can we achieve in combining them? While the catch phrase “wealth management” is used to mean any number of things within the wider financial industry, I offer a working definition to help you consider what it can mean to you — as a dentist, a family and community member, and an individual.
WHY WEALTH MANAGEMENT?
Let’s first set the stage by discussing why you may need wealth management to begin with. Whether you’re at start-up, mid-career, or nearing or into retirement, as a dentist, you probably have a whole lot going on within your financial concerns, to say the least.
- Manage your practice and its intricate patient care, business, human resource, financial/accounting and tax considerations
- Determine how to extract appropriate levels of earnings for personal debt pay-off, spending, saving and investing goals
- Plan for and enjoy a retirement on your own terms
- Protect personal and professional assets against unforeseen threats
- Steward family wealth for desired legacy and charitable pursuits
With so much to consider within the scope of your wealth-related interests, it’s not surprising that uncomfortable gaps emerge. To name a few, young dentists face conflicts between paying off college debt while starting their practice and saving for the future. Pass that hurdle, and you face tough choices between growing your practice while enjoying the improved lifestyle you’ve earned, and building your personal portfolio toward retirement or other long-term goals. Throughout, you must manage the risks that you can — in your professional, personal and financial affairs — while minimizing the costs and uncertainties involved.
Thus, even as your wealth accumulates, those gaps leave you worried; wondering whether you’re overlooking some important detail that’s going to sooner or later cause you grief.
Without wealth management, financial goals tend to distract rather than contribute to the quality of your life.
WEALTH MANAGEMENT DEFINED
Wealth management is a life-long process that is far more than the sum of its parts. It’s a “way of life” model for confidently bridging those distracting gaps among your competing financial goals. The result is that you are freed to devote your energy to getting the most out of your practice, your personal life and your wealth. (However you personally define “the most.”)
TO DRILL DOWN A LITTLE FURTHER,
WEALTH MANAGEMENT IS ADVANCED PLANNING WHICH INCLUDES:
- • WEALTH ENHANCEMENT — Using appropriate, low-cost investment vehicles tailored to match your unique willingness, ability and need to tolerate market risk, in pursuit of expected, long-term market returns. Included in our definition of “low-cost,” are efforts to maximize tax efficiency, as among the most significant, and often-overlooked drags on end returns. A wealth manager is expected to be well versed in applying these and related tenets of sound investing.
- WEALTH TRANSFER — Finding and facilitating the most tax-efficient way to pass assets to succeeding generations in a way that meets your wishes.
- WEALTH PROTECTION — Protecting your wealth against potential creditors, litigants, children’s spouses and potential ex-spouses, as well as protecting yourself against catastrophic loss.
- • CHARITABLE GIFTING — Helping you plan for and fulfill your charitable goals in concert with the preceding three interests.
Wealth management also includes relationship management, which is really the heart of where that “gap-bridging” occurs.
- DISCOVERY AND GOALS SETTING — With regular and frequent meetings, your wealth manager should discover and maintain an intimate knowledge of your greatest financial challenges and dreams, as they are today and as they may evolve over time.
- A WRITTEN PLAN — By forming a written plan that you regularly revisit, a wealth manager should keep you focused on your stated goals, help you revise them when appropriate, and help you avoid the many temptations and traps that might otherwise knock you off-course.
- WELL-COORDINATED ACTIVITIES — Relationship management also includes managing your range of professional advisor relationships. By acting as your personal Chief Financial Officer, a wealth manager should ensure that your lawyers, insurance experts, bankers, consultants, practice managers and others are moving as a team, each in his or her specialty, toward your common highest interests.
THE DENTIST-SPECIFIC, WEALTH MANAGER EDGE
Lastly, this may be a bold statement, but we believe that wealth management for dentists demands industry-specific expertise for maximum ability to address the many challenges that are distinct to your profession. Ultimately, how can you, a dentist, most successfully “create” monies needed to close those uncomfortable gaps in your professional and personal pursuits? By working with a wealth manager who deeply understands the intricacies of your dental practice – including your chosen specialty – you can be best-positioned to add that extraordinary levels of efficiency that is likely to be missing from a generalist relationship.
For example, most general CPAs or financial planners might review your tax returns and profit & loss statements as their basis for calculating earnings and forming a plan. A wealth manager and CPA who specializes in dental clients can be expected to extract considerably more information from your personal and professional circumstances, for crafting a more tightly tailored plan. He or she may draw on detailed management financial statements, practice reports showing production (by provider), collections, adjustments (by category), accounts receivable aging, procedure code analysis reports, new patient reports … you get the idea.
In addition, having the ability to benchmark your practice against appropriate industry standard data is an invaluable tool. It offers you the vital context needed to assess not only how you’re doing, but also how you’re doing in comparison.
Think of it this way: Most generalist CPAs and financial planners look at the equivalent of a set of bite-wing radiographs; dental specific CPAs and wealth managers analyze a Cone Beam CT Scan to diagnose problem areas in a practice and make recommendations that are deeper and farther reaching than any simple view could afford.
The details exposed by the thorough analysis might be resolved by basics, such as focusing on overhead, establishing production goals, and more efficiently managing the calendar (days worked). It also could mean referring your practice to a specialist for particular concerns — a consultant skilled in areas such as personnel matters, employee morale, basic business systems, effective communications, treatment planning, fee schedule assessment or department-specific profit management. Each of these highly specialized experts do exist. And each can represent critical, gap-filling relationships if properly integrated within your overall wealth management needs.
Are you beginning to see wealth management as we define it? Combine the broad solutions of personal wealth management (wealth enhancement, wealth transfer, wealth protection and charitable planning) with dental-specific practice- and tax-management expertise. Form a close, collaborative relationship among you, your wealth manager and your collective team of specialists. Continue expanding on the process and the relationship throughout your evolving career. That is my prescription for helping you reach your own life’s goals while delivering the highest quality oral health care that your family of patients expect and deserve.
J. Haden Werhan, CPA/PFS is a partner at Thomas Wirig Doll in Walnut Creek, CA. He and his firm focus on working only with doctors. They provide dentists with wealth management, tax planning, accounting, practice transition consulting and retirement planning. Haden has spent his entire thirty-year career working with dentists, so his deep industry knowledge makes him uniquely qualified to support his clients in these areas.
The most rewarding part of Haden’s job is when he knows he’s made a difference a dentist’s life. “It’s about more than saving them a few bucks on their taxes. It’s about helping them gain a clear picture of what it will take to get where they want to be in life. With good financial reporting and management tools, we help dentists reach a point where they go to work because they want to – not because they have to. This is very satisfying,” says Werhan. Haden regularly lectures and provides seminars on tax and financial planning, practice management and practice transitions at the University of California, San Francisco, the University of the Pacific Arthur A. Dugoni School of Dentistry and various dental societies. When he isn’t busy helping his dental clients with their wealth management needs, Haden can be found flying his plane, scuba diving or swimming. He welcomes your questions about all things related to the business of dentistry. Email him at [email protected] or give him a call at 877-939-2500.