I have heard some good debate over the past couple of years about the potential oversupply of dentists in Ontario. In addition, there has been some discussion as to how this intensifying competitive environment, coupled with a decreasing supply of patients, may negatively affect the dental profession as a whole. Along that line of thought, have you ever considered how the oversupply of financial advisors may be affecting the advice the public receives? According to a 2012 report by Advocis –The Financial Advisors Association of Canada – Ontario has over 38,000 financial advisors.
When my wife Krystyna and I became engaged, she decided she wanted to have her own financial advisor. At the time, I was already a Certified Financial Planner in my father’s business providing financial advice to dentists. However, and rightfully so, she felt she should get advice from someone other than me so we could be on a level playing field when it came to managing our finances. The only thing I insisted on was that she not buy insurance through this advisor. The reality of the financial advisory world is that young professionals just starting their careers should focus on paying down debt or buying a home. Neither of these strategies pays the financial advisor very well. I had seen some advisors make money by selling this cohort life insurance. In my opinion, Krystyna did not have an insurance need. She was 26 with no dependants.
Krystyna was in advertising at the time and many of her colleagues were using the same financial advisor. She met with this person and started a savings and investment program. When the first statement came from the company the financial advisor had put her with, I asked to see it. To my disappointment and her surprise, the savings were taking place in a universal life insurance policy. Krystyna had expressed to this financial advisor that she wanted no insurance, but she was actually sold permanent life insurance. Coincidentally, this is the highest commission-paying product in the financial industry.I wish this was an isolated incident. However, a good 50 per cent of the dentists I meet with have had negative experiences with financial advisors. Can you imagine if half the patients you meet every day had been taken advantage of by their previous dentist? Fortunately, that doesn’t happen. Ontario dentists do a great job of putting their patients first. Unfortunately, I am regularly discouraged the financial advisory industry does not do the same.
One problem: Low barriers to entryIn Ontario, anyone can call themselves a financial advisor, and even those who hold a professional designation can get into situations beyond their expertise. According to an article in the Globe and Mail by Preet Banerjee in 2013, “Different financial adviser licensing bodies have different licensing requirements but compared to graduating medical or law school, they are all about the equivalent of one semester in summer school.”
Problem two: Financial institutionsThe big financial institutions do not build products they think will perform well over time. They create products they think you will buy. Actually, they create products they think financial advisors can sell to you. “Nervous about retirement? How does income forever sound?” It sounds great, except upon further analysis of the product it turns out you are just returning me my own money for the first twenty years.
Problem Three: You don’t have timeDentists are not poor investors. However, just like any other professional you are pressed for time. The financial industry knows this, so will offer to provide quick and easy solutions to your financial needs. But here’s the problem – successful financial management takes time. It demands a dynamic model that quantifies where you are today, developing strategies to get you where you want to go, and then implementing those strategies. Successful financial management is 99 per cent perspiration.When my father started this company, he provided fee-for-service practice and personal financial plans. When I joined on in ’98, we started looking at what we were doing right and where clients were getting the biggest bang for their buck. This is what we realised: we were designing great plans, but the dentist was too busy to implement them. Imagine creating a treatment plan for a patient, but not providing the treatment. This is what we used to do. Many of our clients would end up going with something easier and less time-consuming instead of the right financial move. We realized early on that financial success is not the result of a financial product. It is about creating targets and constantly monitoring your progress towards those targets.
Problem Four: Most financial advisors don’t have timeIn my experience, the main focus of many people in the business of providing financial advice is revenue. New clients are hard to come by since everyone and their brother is a financial advisor. When advisors do get a new client, they get the client to commit to a product that will be maintained by a big financial institution as opposed to dedicating the time required to deliver value annually on their own.
In ConclusionI am not saying all financial advisors are bad. However, it is widely acknowledged by the dentists I talk to that not all financial advisors have their best interests as their top priority. A good piece of advice came from one of the dentists who contributed to our new book, The $6 Million Dentist: “Seek out good financial advisors, the bad ones will find you”.
