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The value of financial advice

An elderly man sitting on a bench in the park

Industry studies that attempt to quantify the value of financial advice have found that working with a financial advisor has real benefits. These include helping investors accumulate more savings over the long haul than investors without a financial advisor1 and helping them 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, discussions in each of these areas should specifically consider the uniqueness of a career in medicine.

MD Financial Management’s 50+ years3 of experience working exclusively with physicians and their families gives us an in-depth understanding of the challenges they face and opportunities available. We understand your family’s unique needs, at every stage of your career.

Breaking down the value of financial planning

More confidence in retirement plans

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

Improved ability to save

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

Source: FP Canada – 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 savings habits, appropriate portfolio risk, life insurance, emergency savings and less chance of having revolving credit debt.4 All of these factors reduce an individual’s overall stress. Nearly 30% of those who work with a financial planner say their finances don’t cause them any stress, compared to only 17% who do not.5

The following are more specific examples of how 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. An MD Advisor can help you develop a debt repayment strategy that works best for you, and minimize interest costs while ensuring you don’t repay forgivable or interest-free debt.

We can also help you develop a budget for your individual and corporate accounts, including remuneration strategies that will minimize tax at the household level, now and in retirement. Your MD Advisor will review your income and expenses with you, assess your net worth, and analyze your financial goals and desired lifestyle. Together, you can establish a cash flow strategy for today while building wealth for tomorrow.

Investment management

An MD Advisor can help you determine your tolerance and willingness to accept risk and then recommend assets to build a diversified investment portfolio to help you reach your goals. Based on your unique needs, we can then help you determine the best location for your assets (registered plans, corporate accounts, non-registered accounts).

To ensure your portfolio remains on track to meet your financial goals as market conditions change, we regularly review and rebalance your portfolio and even make shorter-term tactical adjustments to avoid risks or take advantage of market opportunities. By providing steady, fact-based advice and guidance when markets are volatile, your MD Advisor can help you avoid common behavioural investing pitfalls.

Retirement planning

Most physicians are required to save for their own retirement and have a shorter-than-average timeframe to do so. An MD Advisor can help you determine when, where and with whom you would like to retire, and what that will cost. We can then develop a plan to get you there. This includes making use of all available account types and government programs, and knowing the limits of each.

Your MD Advisor will plan at the household level to ensure you reach the retirement you desire in the most tax-efficient manner. Planning doesn’t stop when you’re retired — in retirement, we will continue to ensure you are on track to continue to enjoy the retirement you planned, and will continue to make adjustments as government programs and limits change, or as global pandemics occur.

Tax planning — tax-efficient strategies

An MD Advisor can help you determine the most tax-effective strategies for your situation. This includes asset location, when and to which accounts to contribute and if there are any tax-savings strategies at the household level such as income splitting. Additionally, we can help you determine whether, when, and where to incorporate so you don’t pay more in tax than you need to during practice, retirement and at death.

Risk management

As a physician, you are one of your — and your family’s — most valuable assets. Risk management is about financially protecting yourself and your family in the case of death, disability or critical illness. Through the effective use of insurance, you can ensure that your financial obligations can still be met, and your family’s standard of living can be maintained, if something unfortunate were to happen. An MD Advisor can help you identify 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 they are achieved. This could include naming beneficiaries on eligible accounts, obtaining the appropriate amount of life insurance, establishing trusts and ensuring your wills and related documents reflect your estate planning goals. MD has estate and trust specialists that can discuss the appropriate strategies for you and your family, help to put them in place and carry them out for you when the time comes, by acting as your trustee and or executor.**

Your career and finances are different from most. So, the advice and guidance you get to help you establish and meet your goals 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.

3 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