Financial Planning

Dentists With $3,500,000 Portfolios


Mark McNulty


February 18, 2014

February 18, 2014

I recently wrote an article about dentists with $6,000,000 portfolios. In twenty years of article writing, I have never received more comments from the dental profession in response to an article. The main point of the article was that despite what the general public thinks, most dentists are not wildly rich. In the thirty years McNulty Group has been advising dentists, we have only come across nine dentists who have built portfolios in excess of $6,000,000.

For this article, my team and I reviewed the files of dentists for whom we manage retirement incomes with portfolios in excess of $3,500,000. Our goal was to look for consistencies in the way these dentists manage their finances.

Why is $3,500,000 impressive?In order for our firm to maintain a small client base, dentists must have a minimum of $1,500,000 of savings for us to work with them. More often than not, the dentists we meet do not have this minimum. That means our client base of dentists is likely more financially successful than the general population of dentists. However, only 20 per cent of our client base has ever crossed the $3,500,000 mark in savings.  How did they get to this size of nest egg when a full 80 per cent of the rest of the dental community don’t come close?  Below are some of the consistencies we found with the $3.5 million dentists.

They live outside of TorontoFor the most part (all but four in fact) the dentists we work with who have reached this level live outside of the Greater Toronto Area (GTA). Most are located in Ottawa, the Niagara region, or in small towns. There are likely a couple of reasons for this. While the fee guide is the same across Ontario, the cost of living is much cheaper outside of Toronto for housing, lifestyle costs, etc.

Another factor could also just be the nature of my business. Please be aware that this is far from a formal study. We are only looking at the families I work with, and because most of my new business comes from referrals, it is likely skewing the results. However, it is undeniable that Torontonians are more likely to allocate more of their nest egg to shelter than a dentist in Bracebridge.

PracticeFor most of these dentists, their practice was valued in the $1,000,000 range and this makes up part of the $3.5 million. What surprised me was that almost all of them were in cost-sharing arrangements or true partnerships. I suppose part of their ability to save more than the average dentist could be due to lower overall expenses in the practice.

Spend less than they make –  don’t drive fancy carsWhile this may be obvious, the fact is these dentists do not have extravagant lifestyles. They pay themselves a smaller than average income and had automatic savings set up for all other cash flows.

They have a formal practice and personal retirement plan in placeThis may also be obvious since they are our clients, and all we do is practice and personal retirement planning. What is consistent and perhaps a little different is that these dentists are active partners in the success of their plans. They “buy-in” whole heartedly to the concept of setting targets and monitoring them. Many dentists only want to review their retirement plans once a year, and don’t live their plans.

In ConclusionIf you are a new dentist just starting out and want to reach a higher than average level of savings, follow these simple few steps. Practice outside of the GTA, with another dentist. Work hard, spend less. Design a plan and live your plan. Sounds simple? Less than 20 per cent of dentists can do it.