Disclosures: Bhatia and Mandell report no relevant financial disclosures.
July 13, 2020
4 min read

Six more financial actions to take during the pandemic

Disclosures: Bhatia and Mandell report no relevant financial disclosures.
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In a previous column, we discussed several steps physicians should consider to shield their families’ finances during the COVID-19 crisis.

We discussed protecting health, focusing on liquidity and cash reserves, communicating often with one’s financial advisor and continuing to invest. In this article, we discuss six additional actions physicians should be taking.

Action #1: Focus on the long-term – macroeconomics

One of the topics we encourage doctors to discuss with their trusted financial advisors is the long-term history of the U.S. stock market and economy.

Looking at 100+ years of data can help nervous investors reduce stress when seeing previous serious shocks to the system, such as world wars, the Great Depression and the great recession, as well as subsequent recoveries. Doing this can help physicians apply the ancient wisdom, “This, too, shall pass,” to the financial arena.

Sanjeev Bhatia, MD
Sanjeev Bhatia
David B. Mandell, JD, MBA
David B. Mandell

Action #2: Focus on the long term – microeconomics

Perhaps more valuable than reviewing long-term macroeconomic history is re-examining your personal (microeconomic) long-term future. This means reviewing your long-term financial model with your financial advisor using assumptions that reflect our new reality, ideally, through adjustable, iterative software where variables can be altered, with best/medium/worst cases saved for future review.

Once again, most doctors who are years away from retirement may see that even the short-term pain of today will have a relatively minor impact on their long-term plans. This realization can be burden-relieving.

Another benefit of looking at one’s personal planning model is to re-focus on cash reserves and personal spending. In good times (ie, the last decade), many physicians lost some focus on both personal spending and maintaining a sufficient “rainy day fund.” Times likes these can lead to an appropriate re-emphasis on these two key elements of financial modeling.

Action #3: Make tactical investment changes ... or don’t

Moving from the long term to the short term, there may be tactical investment changes to implement during this crisis. For some, this will simply mean rebalancing asset class allocations to their long-term strategic percentages.

As an example, an investor with a long-term strategic model of 70% stocks and 30% bonds and alternatives might see those percentages move significantly from those benchmarks during a stock downturn, especially if stocks lose value when bonds and alternatives remain steady or gain in value. Simply rebalancing back to the 70/30 split would require some trading – even if both the client and advisor agree nothing should change for the long-term model.

For others who need cash to maintain their practices or pay personal bills, securities may need to be sold regardless of or in addition to rebalancing. Determining which assets to liquidate and how to minimize tax implications is extremely important in these situations.

Finally, many investors may make no changes to their portfolios. In all three cases, of course, physicians should be driven by rational decision-making, ideally with the assistance of a professional advisor.

Action #4: Make sure your financial advisor is acting in your best interest

As we explained in prior columns, understanding the distinction between a financial advisor operating under a fiduciary or suitability standard is crucial – yet it is one that even many experienced investors do not comprehend.

Stated succinctly, one set of investment advisors operates under a professional standard that requires them to make suitable recommendations to their clients without having to place their interests below that of the client. A key distinction in terms of loyalty is also important, in that this type of advisor’s duty is to the firm he or she works for, not necessarily the client served.

In contrast, another set of investment advisors operates under the fiduciary standard, meaning they have a fiduciary duty to their clients, with a fundamental obligation to provide suitable investment advice and always act in their clients’ best interests.

There is no better time than during this crisis to understand how one’s advisors make money and to whom they owe their duty. Ask the right questions and you will learn the answers.

Action #5: Protect against other risks

As we all deal with COVID-19, we are primarily attentive to the health care, practice and personal financial risks directly impacted by the crisis. For those who have the capacity to do so, this can be a good time to focus on protecting against other risks as well.

Physicians can re-examine their insurances, from disability insurance and life insurance to long-term care coverages for themselves or family members. Others may finally get around to legal planning that they have put off, including asset protection and estate planning.

Action #6: Use down time wisely

We encourage all physicians to productively use any down time resulting from the COVID-19 crisis.

For many physicians, elective surgeries were banned outright for a period, and practices temporarily closed or experienced a significantly reduced case load. For these reasons and others (lack of travel, conferences, children’s activities), many doctors have more time on their hands now than at any time in their careers.

Even as you return to a more normal workload, we encourage you to spend some time focusing on the actions described here. Take the opportunity to become educated on financial matters that have been on your “to do” list by taking advantage of the free education available in the Residency to Retirement column and at www.ojmgroup.com/education.

Additional resources:

The newly published Wealth Planning for the Modern Physician: Residency to Retirement is available free in print or ebook formats by texting HEALIO to 555-888 or at www.ojmbookstore.com. Enter code HEALIO at checkout.

For more information:

Sanjeev Bhatia, MD, is an orthopedic sports medicine surgeon at Northwestern Medicine in Warrenville, Ill. He can be reached at: sanjeevbhatia1@gmail.com.

David B. Mandell, JD, MBA, is an attorney and founder of the wealth management firm OJM Group www.ojmgroup.com. You should seek professional tax and legal advice before implementing any strategy discussed herein. He can be reached at mandell@ojmgroup.com or (877) 656-4362.