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The value of financial advice

An elderly man sitting on a bench in the park

Working with a financial advisor has real benefits, according to industry studies that have sought to quantify the value of financial advice. Research has shown that investors with a financial advisor accumulate more savings over the long haul1 and that they realize higher returns.2

A financial advisor provides guidance in six core areas: financial management, investment management, retirement planning, tax planning, risk management and estate planning. For physician families, each of these areas needs a specialized approach, one that considers all the complexities of a career in medicine.

For more than 50 years,3 MD Financial Management has worked exclusively with physicians and their families. This gives us an in-depth understanding of the challenges physician families face and the opportunities available to them. We understand your family’s unique needs, at every stage of your career.

Breaking down the value of financial planning

This graph is presented for illustrative purposes only and serves to demonstrate the value of financial planning.

More confidence in retirement plans

Those who have a comprehensive financial plan and cite retirement as an important goal feel more confident about their plans to retire.

Improved ability to save

Those with a comprehensive financial plans are more likely to report that they have improved their ability to save in the last five years.

Source: Financial Planning Standards Council – The Value of Financial Planning

Research from Morningstar found that “households working with a financial advisor made the best overall financial decisions” — that is, they had good saving habits, appropriate portfolio risk, and less chance of having revolving credit debt; they also had life insurance and emergency savings.4 And these factors reduce a person’s overall stress: nearly 30% of those who work with a financial planner say their finances don’t cause them any stress, compared with only 17% who don’t have an advisor.5

The following are some of the specific ways that an MD Advisor* can help you and your family.

Financial management

Physicians generally incur significant debt during training, and it can take years into practice to repay. Not all debt is created equal, and an MD Advisor can help you develop a smart repayment strategy that will help you minimize your interest costs. They will also make sure you’re aware of loan forgiveness options for medical graduates and COVID-19 interest-relief measures.

Your MD Advisor will review your income and expenses with you, and help you establish a cash flow strategy for today while building wealth for tomorrow. If you’re incorporated, your Advisor will discuss remuneration strategies that will minimize tax for your household, now and in retirement.

Investment management

An MD Advisor can help you determine how much risk you’re willing to accept, and then recommend investments to build a diversified portfolio to help you reach your goals. Based on your unique circumstances, we can then help you determine where best to hold your assets (RRSPs or other registered plans, non-registered accounts, corporate accounts).

To ensure you remain on track to meet your financial goals, we regularly review and rebalance your portfolio as market conditions change. We even make shorter-term tactical adjustments, either to avoid risks or take advantage of market opportunities. By providing fact-based advice and steady guidance when markets are volatile, your MD Advisor can help you avoid making emotional, reactive decisions about your investments.

Retirement planning

Most physicians must save for retirement themselves, and most have a shorter-than-average time frame in which to save. An MD Advisor can help you determine when you want to retire and what your ideal retirement will cost. We can then develop a plan to get you there. This includes making use of all available account types and government programs — from RRSPs and tax-free saving accounts to the Canada Pension Plan and Old Age Security — and knowing the limits of each.

Your MD Advisor will plan for your whole household in order to find tax efficiencies. And planning doesn’t stop when you stop working. Once you retire, your Advisor will continue to ensure things stay on track, making adjustments as government programs and limits change — or as global pandemics occur.

Tax planning

An MD Advisor can help you determine tax-effective strategies for your situation. You’ll get advice on which accounts to hold your investments in; when to make contributions; and whether there are household tax-saving strategies like income splitting you could implement. We can also help you determine whether to incorporate for the tax advantages — now, in retirement and, eventually, for your estate.

Risk management

As a physician, you are one of your family’s most valuable assets. Risk management is about protecting yourself and your loved ones financially in the case of disability, critical illness or death. Through the effective use of insurance, you can ensure that if something were to happen to you, your financial obligations could still be met and your family’s standard of living maintained. An MD Advisor can help you choose and set up the appropriate protection to avoid unnecessary hardship during difficult times.

Estate planning

An MD Advisor can help you define your legacy goals and arrange your affairs to ensure these goals are achieved. This can include things like naming beneficiaries on certain investment accounts, having the appropriate amount of life insurance, setting up trusts and making sure your will and related documents reflect your estate planning goals. MD Private Trust Company has estate and trust specialists who can advise you on the best strategies for you and your family and help put them in place. They can also carry them out for you, when the time comes, by acting as your trustee and/or executor.**

Get the right advice

As a physician, your career and finances are different from most. The advice and guidance you get should be different too. Contact an MD Advisor for more information.

* MD Advisor refers to an MD Management Limited Financial Consultant or Investment Advisor (in Quebec), or an MD Private Investment Counsel Portfolio Manager.

** An “executor” is called a “liquidator” in the province of Quebec and an “estate trustee” in the province of Ontario.

1 Over 15 years, accumulation has been found to be 2.73% to 4.2% higher for investors with a financial advisor. See Claude Montmarquette and Nathalie Viennot-Briot, “The Value of Financial Advice,” Annals of Economics and Finance, 2015, 16-1, 69-94; and Claude Montmarquette, An Econometric Analysis of Value of Advice in Canada, Montreal: Center for Interuniversity Research and Analysis of Organizations (CIRANO), 2012; and Investment Funds Institute of Canada, “Advice Creates Strong Value for Canadians,” Advisor Insights, May 2017, https://www.ific.ca/wp-content/uploads/2017/05/Advisor-Insights-Advice-Creates-Strong-Value-for-Canadians-May-2017.pdf/17165/.

2 Advisor’s Edge, “Advisors add 2.88% in value, study finds,” May 7, 2020, https://www.advisor.ca/my-practice/conversations/advisors-add-2-88-in-value-study-finds.

MD Management Limited was the first of the MD Group of Companies to be founded, in 1969. MD Financial Management Inc. wholly owns MD Management Limited. For a detailed list of the MD Group of Companies, visit md.ca.

4 David Blanchett, “Gamma in Action: Financially sound households get advice from financial planners,” Morningstar, March 5, 2019, https://www.morningstar.com/articles/918226/gamma-in-action.

5 Financial Stress Index: A year-over-year comparison of Canadian’s financial stress, FP Canada, July 2020, https://fpcanada.ca/docs/default-source/news/financial-stress-wp.pdf.