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On this episode of The X-ray Beam, I am very pleased to present Johanna Fox Turner, of Fox & Company Wealth Management.  [Disclosure: We have no financial relationship at this time]

 

Long-time readers of White Coat Investor have undoubtedly come across a lot of great content by Johanna and she is even a moderator on the White Coat Forum.

She has graciously volunteered to be placed under the X-ray Beam and I know you will gleam a lot of actionable ideas from her responses.

So without further ado, let the examination begin….

1) Your expertise is in wealth management and your company specifically has targeted serving physicians and dentists.   Is there a particular reason why these were the two professions you concentrated on?

 

Yes. I have realized for many years that no one else was offering what doctors needed, which is combined CPA/financial planning services that were fiduciary and flat fee.

All of the firms I knew of were either local or regional CPA’s with a doctor focus or financial advisory firms that were fee-only but mostly investment-oriented.

There were no firms offering the tax expertise combined with the financial planning piece on a national level.

Unfortunately, when I approached hospitals and doctors’ offices locally, I could never get past the gatekeeper and I’m sure every doctor reading this understands.

 

I thought we were offering so much that doctors needed, but I was walled off from them.

I had almost given up – and then Jim [The White Coat Investor] put up the forum.

Bingo!

It was the perfect way to connect and demonstrate that we were different.

Today, I don’t market locally at all. 99% of our business is virtual (we just began working with a local dual-doctor couple but even they came to us through the Facebook Moms group).

 

2)  Is there an advantage a physician or dentist would have with a company that is specifically tailored to their profession versus another wealth management company that has a broader range of clients?

I strongly believe so and I must admit that my opinion has changed 180 degrees.

In the past, I believed that, as long as you had the knowledge, attitude, and work ethic, it didn’t matter that you worked with a wide variety of interests.

Boy, was I wrong!

Since honing our businesses to focus on physicians and dentists, I’ve realized that having a deep knowledge of doctors allows us to serve on a higher level.

I’m often asked “What do other doctors do?” in specific situations.

Because we work with so many, I can easily give relatable examples from throughout the country.

For example, a client in NYC who wanted to start a private specialty practice recently asked if we had a similar client.

Not only did we have a client on the west coast who had a similar, successful practice, but I was able to work out a meeting so that they could speak.

It was incredibly helpful to the first client.

I couldn’t have done that in the past.

 

3) There has been a trend, especially within the FIRE community, to keep investment expenses as low as possible to maximize the bottom line.  

Some investors have therefore taken a DIY approach.  

Can you explain some of the benefits a wealth management team can provide to these investors that would justify the additional cost?

Had I realized that “wealth management” would be perceived (justifiably so) as “investment management,” I probably would have not used it for the name of our firm.

Within the advisory community, wealth management implies comprehensive financial services for HNW [High Net Worth] or those on track to be HNW, not simply investment management.

 

But those who haven’t worked with a wealth manager tend to focus on the investment component only.

For someone who hires an advisor for investment management only, the primary benefits are:

1. To handle all of the details of investing including paperwork, trades, rebalancing and compliance
2. Tax strategizing (planned Roth conversions, for example)
3. Behavior management,
   • I believe this is highly underestimated in today’s environment since it has been 10 years since the last bear market.

 

A true wealth management firm, on the other hand, oversees all components of their clients’ finances:

• Creating and sticking to a budget
• Planning for college
• Advising on benefits at work and reviewing contracts
• Setting goals and devising a plan and timeline to reach those goals
• Estate planning and ensuring the plan dictates the clients’ post-mortem wishes
• Caring for aging parents
• Debt management (most student loans for our clients)
• Tax planning
• And  last but not least, making appropriate investment decisions.

 

As for justifying the cost, clients should easily make enough good decisions as a result of the clarity planning affords to more than pay the planner’s fees.

That’s not even counting the time saved for a busy physician or dentist.

 

4) It is unfortunate that despite all the years of education, most physicians are lacking in financial knowledge.  

That lack of knowledge coupled with a high income can often make for some eye-popping financial blunders.  

Can you share some of your client’s biggest financial mistakes and any advice on what could have been done to prevent them?

I’m just going to list the mistakes. A good financial advisor hired early on would take steps to prevent or resolve these issues.

1. Not paying attention to how and where their money is being spent.
   • When you’re suddenly not worried about being overdrawn on your checking account, it is easy to become lax.
2. Prioritizing goals.
   • An example is paying off low-interest loans when you are not maximizing retirement contributions.
3. Keeping your house to rent after you move just because you want passive income.
   • Single family dwellings are not “passive”.
4. Using a CPA or financial advisor who everybody in your practice uses.
   • The herd is not always right but nobody wants to say so.
   • The financial professional often becomes lax because the referrals keep rolling in.
5. Keeping too much cash in the bank.
   • This is a rough substitute for financial planning – you don’t know how much you need so you overshoot.
6. Buying a house too soon.
7. Being close-minded about where you want to practice.
   • If you could retire 10 years earlier by living in a rural area a reasonable distance from nice amenities, would you consider it?
     • Put another way, if you’ll have to work an extra 10 years at a job you don’t like just to live in a HCOL [High Cost Of Living] area, would it be worth it?
   • There is no right or wrong answer, but you should think of the future, not just the now, when making this decision.
8. Not negotiating when you take a job.
   • I’ve just finished reading a great book I saw recommended on the forum: Never Split the Difference.
     • I think every doctor should read this book, even if you are not looking for a new position.
9. Focusing on areas that will make little overall difference in your life and ignoring the big ones.
   • Doctors are busy and most don’t have the time or expertise to do everything to make sure they are optimizing financial decisions.
   • The posts about the best credit cards to use and getting an extra fraction of a percent of interest on a bank account perplex me.
     • Spend that time rebalancing your investment accounts or working on a budget that will help you reach your goals instead!

 

5)  There was a big emphasis that now requires financial planners to have fiduciary duties.  

Can you explain why this regulation requirement benefits investors and how it can be enforced?  

Before this regulation how could investors potentially have been misled by financial planners who were not fiduciaries?

After you posed this question, the DOL fiduciary rule was overturned in court.

Truthfully, though, investors will always be exposed to advisors who are not true fiduciaries.

Just as there is no way to truly  know what is in your doctor’s heart and her level of expertise when she makes recommendations or if your attorney is competent to advise you on your divorce, hiring a professional will always require a certain level of trust.

 

Knowing whether you should continue to work with that professional will depend upon your degree of engagement and assessment.

I believe far too many people stick with a CPA or financial planner simply because of inertia when the little voice inside tells them that something is wrong.

You bear the responsibility in that case.

 

6)  As tuition costs are skyrocketing with no end in sight, there are now newly minted doctors with high six figure student loans. 

In fact one orthodontist became a mini-celebrity throughout the internet with a seven figure student loan debt.  

What advice do you have for these individuals who seemingly have an insurmountable uphill battle?

Although it will be tempting to do so, don’t bury your head in the sand.

 

Get some advice on whether PSLF might be an option.

Otherwise, refinance asap and don’t get a co-signor.

On a personal motivational level, set a realistic goal for paying off your loans and figure out what you have to do (working extra, spending less, buying a smaller house, etc.) to make it happen.

Don’t just throw every extra penny at it until you know what is “extra” (free cash flow) and whether you are cutting into muscle (sacrificing retirement savings for paying off the debt).

Having an actionable plan that you can follow takes some of the pressure of the unknown off, such as feeling like you’ll be chained to the debt for the rest of your life.

The right financial planner can actually help you pay down your loans faster and sleep better at night.

Will it cost you?

Of course.

But what is the net benefit?

If a planner who costs $5k – $10k can get you to the point that you are spending $20k less per year to put toward your loans, then you’ve made a good deal, even if you use him for only 1 year and then DIY.

Don’t just focus on the cost, but consider the benefit.

 

7) Another potentially devastating hit to a physician/high net worth individual’s finances is divorce.  

Do you have advice for readers who are about to get married or are already married to protect his or her interests?

 

Finances can be so tricky to discuss, especially when income is imbalanced.

When the spouse who is earning $500k/yr begins talking about the need to rein in spending with the SAHP [Stay At Home Person], it is only natural for the SAHP to feel threatened.

One suggestion I make to clients who want to get started on their own (without a planner) is to schedule a monthly “business meeting”.

 

This should be a planned time, without the kids, preferably away from home at a neutral location, where each spouse is expected to contribute to the discussion and discuss areas they need to focus on.

Work toward concrete goals, not just “we need to spend less”.

If you’re not married yet, get premarital financial counseling.

This still needs to be approached from the perspective of “what do we need to do?” not “how good are you with money?”

And NEVER get married before you know your beloved’s credit score.

 

Prenuptial agreements are very tricky.

If you want to go this route, I recommend bringing it up as soon as you know that this might be “the one” instead of after you become engaged.

Blame the financial planner:

“Before we get any more serious, my financial planner has made me promise that we will both get prenuptial agreements in order. I just wanted to let you know – she’s kind of crazy about those things!”

When one spouse approaches me for planning and the other spouse is not really engaged, I work to engage both and give the “non-money” spouse projects, such as putting him in charge of the budget for the next quarter to get him engaged, too.

Sometimes the problem is that the other spouse doesn’t feel entitled to make suggestions about finances because she doesn’t make the big bucks.

That is not a good situation – marriage is a partnership and both people contribute.

 

It’s not all about the money – you’re doing life together.

8)  Is there a book (or books) that have been instrumental in your financial well-being and shaped your thoughts on finance in general?

As you can imagine, I’ve read a lot of investment books, but the only one we use day in and day out is Simple Wealth, Inevitable Wealth by Nick Murray.

Except for his recommendation to use an AUM advisor, our investment philosophy follows his principles to a T and we give a copy to each client before we begin discussing investing.

 

9)  You maintain a Blog section on your company website.   What are three posts you are most proud of that can give readers some valuable insight about you and your philosophies?

• My most popular post, and I’m not sure why, is How to Manipulate your AGI to Lower Your Taxes
• Another popular post that I wrote just to help people who are confused about backdoor Roth IRAs is Explaining Backdoor Roth IRAs.

 

But I would have to say the posts I am proudest of and give the most insight into my philosophies are not even on our blog:

1. The two-part post that Physician On Fire asked me to write for his blog: Bonds: What Are They Good For? Part 1 and Part 2
2. On White Coat Investor: Form ADV – Ignore it at Your Peril
3. Also on WCI: How to Find a Great CPA

 

Ok, so I snuck in two extra – chop away! [Pretty sneaky, but I will allow it 🙂]

 

10)  What are the items a physician needs  to have in place and milestones achieved that would make you feel comfortable that she or he is indeed ready to retire?

 

Maybe surprisingly, I’m not a big advocate of having debt paid off at any cost.

While it’s a nice feeling to have a mortgage-free house, paying off a low-interest mortgage early does not always make the most financial sense.

Most of our clients hope to retire between 55 and 60, so these suggestions are aimed at this group.

I believe you should have:

• A plan for health insurance and healthcare coverage.
• Enough in savings to ensure you have enough to live on for the next 50 years and  reach your important goals.
• A good idea of what you’re going to do after  you retire from your first career.

 

I don’t have a hard number for what you need in savings to retire.

It varies from person to person based upon their investment philosophy, the age they retire, and their retirement goals.

11) There is a growing internet movement about FIRE (Financial Independence/Retire Early). 

What are your feelings about FIRE and what are some of the additional risks these particular individuals face that a more traditional-aged retiree would not?  

Any additional advice you give to your clients that want to retire early?

I think FIRE is wonderful, as long as good planning is involved.

 

Too often, I hear doctors toss out a dollar figure for when they will be FI, to which I want to ask, “What does that mean? How do you know if it’s too much? How do you know if it’s enough?”

Most all of our clients are on board for FI, not as many for RE.

I find that prospective clients who come to us are usually overestimating the time it will take to reach FI.

Having a plan in place for getting there is very motivational.

It gives reality to the wish.

I gave some advice for early retirees above.

Healthcare plans are critical, not just because most early retirees will no longer have employer coverage, but because they may live 50 years without a paycheck.

No matter how well you have taken care of yourself, things are usually going to start happening when you reach your 70s (I realize I’m preaching to the choir here).

 

Will you have enough to live life on your terms for many decades or will you have to turn to your children or the government for help?

I think the most important word represented by FIRE is “Independence”.

12)  If you did not go into the wealth management field, what would have been some alternative career choices?

Interesting question!

Definitely not doctor – too squeamish.

Chef or inventor of gadgets or horse breeder.

 

I was also a “professional SAHM [Stay At Home Mom]” when my business and children were young and I loved it.

 

Thank you so much for your time and informative responses as well as your previous contributions to the medical community.   

I wish you and your business much success

 

 

As some of you know, Johanna is the brains behind the series I created, “The Doctor’s Bill: Can You Afford It?” 

Johanna and I have been taking in submissions from our readers and giving our opinion on whether a particular item or experience would derail your financial plan or not.

I encourage you to fill out a submission (you will be kept anonymous) if you have been debating a large purchase.

 

 

 

(please be sure to subscribe to this blog so you never miss another post (and with every subscription an angel gets his or her wings)).