Your voice. Our vision.
The MD Financial Forum, held in Kitchener, Ontario on November 30, 2009, was an opportunity for MD Physician Services to engage with members and provide insight into the organization and current market conditions.
The forum presentations were followed by a Question & Answer session to address the questions and concerns that were top of mind from our members.
At the forum, presentations were given by:
- Dr. David B. Bach, Director of CMA Holdings Inc. (2009)
- Brian F. Peters, President and CEO of MD Physician Services Inc.
- William R. Horton, Jr., Chief Investment Officer at MD
Watch video highlights
Questions and Answers
What has MD really done to respond to the crisis and adapt to the economy?
Brian Peters: MD has weathered the recent economic crisis very well. We were already in the process of making changes to improve our effectiveness at delivering value to CMA Members as a result of a strategic review we undertook in 2007. The end objective is to simplify our relationships with physicians in every aspect where we do business. At the end of 2008, MD Financial's business results reflected market conditions, but were stronger than many competitors in the financial services sector. We ended the year with a positive cash flow unlike many other financial services providers, who were in net redemption at that time. We did take action on several fronts earlier in the year to ensure we could remain sustainable in what looked like very uncertain times. This included reducing the number of initiatives and programs we were delivering to reduce expenses. We were able to streamline activities and reduce expenses through creative synergies across the organization. We have simplified the organization - we now have fewer companies through which to offer our products and services. This results in cost savings that can and will be reinvested in technology. We unfortunately had to reduce our work force, by approximately 5% to maintain that critical balance to provide you with the service you need in a cost effective manner. Furthermore, with no debt and minimal exposure to ABCPs, we do not share the risk profile of many other financial institutions; therefore we are able to conserve cash for the long term.
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The way online information was presented previously was more helpful than the current view. (Why was the website portfolio summary changed? I found the previous format with all accounts summarized according to total in each MD Fund and the percentage of the total portfolio more helpful.)
(Brian Peters) We've made some necessary technology changes and will take comments/suggestions under advisement.
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Why did MD Management not respond to or discredit the National Post article if it was not accurate?
(Brian Peters) We took the high road and chose not to battle this out in the media. My experience has shown that the media will selectively choose what they say to reinforce their bias. We did respond with an article on our website entitled "Clearing the air" which stated that the claim made in the article - "that MD Management is now limiting the investments you can hold - was categorically untrue". We decided to rely on the personal relationships our advisors have with our clients to get this message out. We would do this more quickly next time.
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MD Funds should be priced (low MERs) lower than the industry because you don't have to spend as much on advertising as other fund companies - MD can rely on word of mouth to replace advertizing.
(Brian Peters) We are competitively priced and we continually strive to keep our Management Expense Ratios low - monitoring other funds in the industry to ensure we remain competitively priced. We are able to do this because we are not trying to maximize profit. But MD exists in a very competitive industry and MD does need to create awareness among physicians and promote new products and services. Unfortunately, we can't rely on the accuracy of word of mouth - as is evidenced by the rumour that we had somehow changed and were restricting your investment options. As mentioned above this was not the case. We know that you can choose to do business with a variety of financial services firms. We do have to communicate the value of doing business with us so that you will choose to do business with us.
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Is MD in business to make a profit? Recent downsizing, the sale of Saxon, a new technology platform (that was required by your regulators), the use of external consultants, etc. - why has MD changed?
(Brian Peters) We are not profit-maximizing. When we make money, part is put aside as prescribed by our regulators. The recent downsizing was done in accordance with our culture and values. Rightsizing of the organization was based on where we have to be to serve physicians better and keep adequate reserves to cover the costs of technology and market impacts.
With regard to Saxon - we sold our 30% interest in a publicly listed company to another publicly listed company - it was a tremendous deal to get into and out of - and could have created conflicts of interest.
We hire consultants because we're not big enough to do everything on our own. The catalyst for our new technology platform was regulatory, but we used that to get a system that really works for us and our clients. We haven't changed - we do not "have evil intentions that run counter to how we did in the past"; our ownership hasn't changed. We focus on physicians.
We're living in a cynical environment and it's good to be questioning. We don't take our clients' trust and faith in us for granted. You have choices; to be your first choice; we have to set the bar very high. I appreciate your expressing your concerns - it's important to have dialogue with clients and members.
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What is the Global Portfolio Strategy? Why do your competitors call it cookie-cutter? Can I hold other funds/stocks?
MD Financial commits to helping clients achieve their financial goals. In order to deliver on this commitment, we evolved a sophisticated investment framework based on a deliberate set of investment beliefs. MD advisors follow a rich discovery process to help you identify your goals, needs, wants and wishes - and to develop multiple purpose-driven portfolios with the potential for solid performance relative to the ups and downs of the market. We are passionate about acting in the best interests of our clients and are committed to helping them reach their objectives. We call this our Global Portfolio Strategy - or GPS. GPS is a methodology that provides true risk management while optimizing return potential - a sophisticated evolution of our current approach. It leverages the expertise of DB Advisors, one of the world's foremost asset allocation experts - to bring a new perspective on risk - an evolution that makes sense in a changed investment world.
We are recommending our financial advisors introduce clients over time to the correct asset mix defined by this new strategy. Our job is to ensure we continue to offer the best financial solutions to earn your business every day.
You may have heard such things from our competitors as "MD Management is now limiting the investments you can hold". Nothing could be further from the truth. We continue to offer, on behalf of our clients, both MD and non-MD products.
We hope that you have taken or will take the opportunity to discuss the portfolios with your advisor.
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Can you please comment on the financial stability of the organization?
MD is in a very strong financial position. We have no debt and minimal exposure to ABCPs; we do not share the risk profile of many other financial institutions. We have money in the bank. Assets under management were at $24.7 billion, at the end of October, slightly ahead of budget. We continue to review all projects, operating expenses and revenues to ensure our business model is sustainable and as efficient as possible.
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The agenda tonight indicates that you are President and CEO of MD Physician Services - what is that?
We are unifying under one recognizable and relevant brand - MD Physician Services - so that putting physicians first is reflected in our name.
We're simplifying the corporate, legal structure of the CMAH group of companies by reducing the number of separate corporations from 10 companies to 7 companies through amalgamation. MD Management remains as one of the subsidiaries. MD Private Investment Management and MD Practice Solutions have been amalgamated into CMA Holdings from a legal perspective, permitting us to operate under one brand.
Why? To help us start to simplify your interactions with us and to better align us to our strategy of putting physicians first.
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You often refer to advisors as salaried - but don't they get a bonus for selling MD Funds? What is the compensation structure for MD Management Financial consultants?
MD Advisors are paid no commission. Their salary represents 75%-80% of their earnings, the rest is based on meeting goals derived from the underlying measures of providing sound advice geared to the best interest of the client, such as; "Know Your Client" updates and referrals, corporate targets for assets under administration, net cash flow and new physician clients across all lines of business. There is no financial incentive for advisors to recommend MD Funds, or any other specific product. This compensation model allows advisors to focus on providing advice and solutions that meet the needs of members, rather than resulting in the profit of the firm or their own personal gain. This is a very unique feature of MD Financial - MD advisors are paid to act in their client's best interest - and it's important to understand how different MD is from the industry in this regard.
Comment added by Dr. David Bach
...I trust what the advisors tell us. I know that if I want to do something on my own they'll say, "We suggest you only put a small part of your portfolio here and you should have your main investments following your long-term plan". That's the sort of sound advice I get from MD and that's what I want my friends and colleagues to get. It is not necessarily what you get at other places. I think part of the reason is because the incentives at MD are geared to our own interests as doctors, whereas incentives elsewhere are geared to the commission salary of their advisors or the profit of the firm.
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It was mentioned that advisors are not paid with commissions. How are the CMAH Board members paid? Do they receive a bonus' tied to performance?
(Jeffrey Gandz) Board Members are paid a yearly retainer, and reimbursed for attending meeting. There is no compensation at the Board level which is tied to a product or geared to skewing investment advice to you. It is purely focused on your needs as clients of the organization. Board compensation is benchmarked to other companies of similar size and hasn't grown dramatically over the last 5 years.
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Why was the website portfolio summary changed? I found the previous format with all accounts summarized according to the total in each MD Fund and the percentage of the total portfolio more helpful than the present format.
(Brian Peters) We've made some necessary technology changes and will take client comments and suggestions under advisement. This was not a historically well-used feature for online clients and was not included in the initial deployment of the new system. We have heard from other clients expressing similar concerns and will appropriately prioritize this feature for future upgrades, relative to other priorities.
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Is there any option to reduce the amount of statements and confirmations from MD?
I assume this refers to the availability of online statements and confirmations?
There are regulatory requirements that do require a certain amount of documentation to be sent via mail. We are actively working on options to consolidate information and limit the instances where multiple documents are sent to the same household. We are also working on our capability to deliver statements electronically. We continue to monitor regulatory requirements and look for opportunities to provide our clients with options for how they receive information from MD Physician Services. We are not in a position to promise dates for when these options will be available, but we can confirm that we are actively working on multiple solutions.
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