A collaboration among financial advisors and specialists who engineer total financial management strategies exclusively for physicians.
In this case study, watch our team in action as they review the finances of Dr. and Mrs. Smith, a couple preparing to retire.
The team provides a range of personalized advice in the areas of financial planning, investing, insurance, and estates and trusts, which brings an integrated approach to the Smiths’ situation.
MD Client Profile
Dr. John Smith:
- ORTHOPEDIC SURGEON/HOSPITAL PRACTICE
Mrs. Jane Smith:
- Consolidation of assets as they transition into retirement
- Define strategy for their estates, especially the family cottage
- Ensure family is well taken care of (youngest daughter with disability)
Tilly Asokan, Advisory Team Coordinator, MD Management Limited
Tilly: Good morning everyone. So we’re here today to discuss Bridget’s clients, Dr. John Smith and Mrs. Jane Smith. Dr. Smith is an incorporated orthopedic surgeon with three children.
Bridget Paton, CFP, FMA, Senior Financial Consultant, MD Management Limited
Bridget: Okay great, thanks Tilly. These clients have been with me for the past few years and they’re looking at retiring in the next few years and that’s why I really wanted to assemble our team to discuss their financial scenario at this point and look at how we can help them make it more focused and integrated going forward.
For John, he’d like to stop his clinical practice, just to give him a little bit more time for his other personal interests but he fully anticipates continuing with the consulting and the research work so there’d be income for another five years beyond that, to around age 70.
I helped them incorporate about four years ago when they finished paying off their mortgage. They had a little bit more disposable income for their asset retention but also to help fund their children’s expenses through the corporate dividends.
There is a gap in terms of their retirement income, as you likely noticed from the projection behind me, because they’re running out of assets around life expectancy but they do want to leave an estate. To keep in mind as well, they do have assets of various institutions have just accumulated over the years, some of it inherited, so they have various GICs, mutual funds and securities, that again, they’d like to make more sense of their total investment portfolio.
Jeff Somer, MBA, CFA, Senior Portfolio Manager, MD Private Investment Counsel
Jeff: It’s probably more important now to preserve what they have, provide a guided, disciplined strategy for their currents assets to ensure they do have a good enough nest egg to provide retirement income. Not only the next five years and throughout the duration of the retirement, but also the estate. The legacy, the beneficiaries down the road, ensure that there will be a lasting remaining estate value. So on the private council side, I think there definitely is some value to introduce them to MD Private Investment Council. Right away, the key benefit would be not only the act of management, so in the past they’ve been, as Bridget you mentioned, self-directing their accounts, not only will that alleviate them of that responsibility to worry about the markets day-to-day, but also the lower fee structure. So with mutual funds, a lot of their external holdings are with mutual funds, which do carry higher fees. MD as a firm does have lower fees on our mutual funds but the next level of private council is a lower fee structure, where not only is it tiered, meaning the fee will go down as the assets grow, but it’s also tax-deductible on their non-registered assets.
Bridget: Okay, that sounds good, so we’ll look into that a bit further. Now, Matt, regarding the insurance what are your thoughts on our next steps?
Matthew Younder, Insurance Consultant, MD Insurance Agency Limited
Matt: The first one is looking at sort of the immediate issue, so things like risk management and income replacement. We’ll take a look at the current coverage they have with their provincial association and make sure there is no risk of lapsing or make sure there is no risks of those policies falling apart, and making sure they’re appropriate and affordable throughout the rest of their lives. We would also want to take a look at ownership structure of these policies.
Are they owned currently privately or are they owned inside the corporation?
Bridget: At this point, nothing is owned in the corporation.
Bridget: So they’re all personally owned.
Matt: So we should look at, does it make sense for them to transfer the ownership into the corporation because you can use your after-tax corporate dollars to pay the insurance rather than your after-tax personal dollars and that makes a big difference.
The second thing we’ll do is, I don’t know if Lucy is the beneficiary of certain benefits, we want to make sure that whatever insurance strategy or portfolio we put in place for them doesn’t take away the ability to receive any benefits that she might be receiving already. It’s something we should really sort of, try get our clients to think about now because there could be some solutions in the will, there could be some solutions using insurance or any other type of repositioning of assets that could help.
Clifford S. Lachmansingh, CIM, MTI, TEP, Estate and Trust Advisor, MD Management Limited
Clifford: Yeah that’s right Matt, I mean we totally have to understand what their goals are and objectives and if we want to look at the full picture we want to look at what their current situation is today. So we want to look at their estates, we want to look at their wills, their powers of attorney and their estate plan. We need to understand a little bit more about their cottage, what perhaps their plans are with the cottage, what are their concerns with regards to planning for Lucy and her disability. We want to look at the corporation, so part of the benefit of a corporation for physicians, is the value that it adds while they’re alive. A large value is also to pass it on to the next generation and we come up with a plan as to efficiently pass it on to the next generation.
Finally, I think they can benefit from an estate plan. Saving taxes for them, minimizing costs and developing an integrated strategy that will achieve their goals.
Bridget: We’ve got a good framework now. So Tilly, if you don’t mind, would you be able to contact the clients to get the wills, the powers of attorney, as well as their insurance portfolio. I think there are a couple that we don’t have so perhaps you can ask for them as well and then schedule a meeting for our team again to circle back and do some more planning before we have that next meeting with John and Jane Smith.
Tilly: Sure, absolutely, I’ll take care of that Bridget.
“Your Expert Office At Work”
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Investment counselling services delivered by MD Financial Management Inc., a CMA company.
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