Loonie Doctor Editorial: Last week I suggested that Canadian physicians should consider lightening the fee load in their investment backpacks. A few weeks ago, I helped a colleague of mine switch up her MDF backpack to an ETF portfolio. She had been sitting on a combination of cash and some MD mutual funds in her accounts. She felt that it was obviously sub-optimal, it bothered her, but she was unsure of how exactly to move forward. I teach and help people clinically in my practice all of the time, but helping her take control of her investing felt like the most profound intervention that I did that week.
A few things struck me as we walked through it together:
- She was an excellent business woman. Her billing organization was top-notch. The overhead expenditures for her practice had been nicely optimized also.
- Her family was spending within their means and saving a good chunk (30% gross savings rate) every year. Awesome.
- Her investment returns were very similar to mine, except about 1.5-2%/yr lower. Almost exactly the management costs of her mutual funds. She is in the early years of her practice. So, not a big loss at this point. However, with her strong savings rate and the net investment performance difference – this would cost an extra $750K in current buying power by her mid-50s due to the mutual fund fees.
It’s not just about the money.
I have outlined the basic financial numbers above, but what I really want to share is the personal experience behind them. Enough of my blathering.
I will turn it over to my colleague:
Hello all. I wanted to share my experience with you about…
Well, in my mind (sounds cheesy but wait for it…), taking control over my own financial future.
Now that’s a big statement, and I have no guarantees that it will be successful. However, I’ve made a big change and I’m hoping that sharing my experience might help others in similar situations to do the same.
Let me tell you a little bit about myself.
I am a subspecialty plus fellowship trained doctor. My training, including maternity leaves/fellowship/job search, took some time… A long time in fact.
Somewhere near the beginning of residency I first formally met with MD Financial (MDF). They were available, friendly, and had a good reputation. Best of all, I bought into the idea that they were “free”. To be fair, at that time, with significant student debt, saving for a wedding and a down payment – they were in fact free.
Then, over years of them helping with planning our cash flow and goal setting – I got rid of my student debt, purchased our first home, started very slowly filling our RRSPs… and once we had kids, RESPs. Following that, I incorporated and opened a corporate investment account. Before I knew it, and without paying too much attention, we had built a portfolio of mutual funds with MDF.
To take a step back, my husband and I both come from immigrant families who, while we were growing up, often focused on making ends meet – not RRSPs. Neither of us is particularly spreadsheet or finance savvy. To be totally honest, neither of us even likes “finance”. And so we just kept on keeping on with MDF.
Fast forward to the present: being a few years into practice.
Things changed quickly – significantly more income and a significantly bigger mortgage. Mentors beginning to retire. A child in grade school starting to answer more than “garbage man” when you ask him what he wants to be. And with all of that, I was busier than ever.
At this same time, all the changes for physicians in Ontario with contractual strife were in full swing. Plus, the talk in the surgeons lounge about it. The line on my billing report that says “OHIP discount” – shrinking my billings while my expenses didn’t shrink. Most recently, the quick (and for me unexpected) change in income splitting. That one is huge, as my husband is a stay-at-home-Dad.
And then the kicker…
A talk which showed projections for retirement savings in two scenarios. One for an MD that pays attention and one that doesn’t. [LD: I inserted the charts below from some of my “talk slides”]
I finally decided it was time to take some interest!
So first I watched the videos by Paul Healy on the FB physician independence group about the basics and learned about the “evidence”. Then I gave MDF and another bank a true chance. I booked time off and went to them with my intentions to save and plan for our family’s future.
At those meetings I asked them about index investing and the evidence for it. They did not dispute that, but tried hard to sell their products – more mutual funds, more fund managers to “watch” my investments. I left those meetings with many glossy pages, but no further ahead. If I wanted to make the change I was going to have to do it myself.
I found a mentor – the Loonie Doctor.
[LD: We work together in real life and she approached me following a talk that I had arranged for our staff association. I will say that the real life me has waaayyy less ear-hair than Yoda though.]
We met one afternoon and I couldn’t believe how simple it was. Honestly… I sold all my high fee mutual funds with a few clicks. It felt scary and freeing at the same time. Another quick meeting and I had switched all of our savings into a balanced portfolio of ETFs. Neatly organized in my corporate account and our RRSPs. We started making use of our TFSAs as the powerful investment vehicle that they are meant to be. They had been sitting under-resucitated previously.
Since then – how do I feel?
Yes, a bit nervous, but also more in control. It is amazing how much of a subliminal drain this had been in the background. Having the feeling that your financial plan isn’t optimal, but also not knowing or having the confidence to fix it on your own is uncomfortable. [LD: Especially for someone who makes major life-altering decisions and takes decisive action as part of their career on a daily basis. Major cognitive dissonance! See… I did take psych!]
I will be meeting with the Loonie Doctor again every 6 months to learn how to re-balance it.
A few points to highlight:
1. I am in my very early career. So, like starting my practice with an EMR. I feel like this is the time to pay attention and be on track. [LD: A course correction onto the right path early is way better than unlearning what you have learned later].
2. I have never been one to check my investments frequently or buy/sell based on market rumours. To be honest, I feel too busy with a young family and work to do that. So, index investing works well for me. [LD: These are all good things from a behavioural finance standpoint – told you she had her head screwed on straight]
3. I feel confident in the mentor I have been lucky to find.
4. Perhaps the best part – not one phone call from MDF about the changes! Probably because I’m small potatoes to them, but it made the financial “break up” easy for me. [LD: Worst case scenario would just be some paperwork to change to an MD Direct account at MDF . It will be interesting to see how they handle this. I am in the same boat, have met with my MD advisor since, and so far no problems either].
Loonie Doctor Post-Hoc Analysis:
I loved hearing this perspective and thank my colleague for sharing it. I think that many of my readers will identify with this post.
I hope that it spurs two main groups of readers into action:
- For those who are looking to take control of their investing – I hope this helps shed a light on how easy it is to do and the impact that it can have. Some trepidation is totally normal. Look for a mentor if you know of one.
- For the experienced investors – My desire is that you see how rewarding this can be as a mentor and the impact that it can have on a colleague. Mentoring from the clinical, administrative, and academic standpoints are already deeply ingrained in medical culture. I hope that we can add financial mentorship to that list. Consider helping a colleague starting out, or if you don’t know of one, then sign up as a mentor on the Physician Financial Independence Facebook group (a closed group for Canadian physicians and dentists only). Demand currently outstrips supply.
- Hopefully by financially mentoring, we will not only help our mentees, but also create more mentors.