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Blog | Healthy Financial Management for Medical Professionals

JTB Studios
Private Client Adviser
6 Nov 2019

Whilst this week’s blog is designed and written to help Medical Professionals it’s also very relatable to other high-income earners and business owners who are likely to be pushing into that top tax bracket.

As an established doctor or surgeon, you will probably be experiencing an acceleration in earnings and feel financially secure. However, after years of studying it’s likely, you didn’t study financial management to help you grow and sustain your wealth as your income accelerates. Nor do you have the time to think about putting plans and structures in place to protect yourself and your loved ones to ensure your financial security, both now and into the future, are we right?

Today we look at the most commonly asked questions and answers about the best way for doctors, surgeons and other medical professionals to manage their finances over the course of their career and life. We provide advice on goal setting and tax minimisation, tips to help you grow your wealth slowly and how to stay wealthy once you get there. We look at case studies from our clients and hear from Directors and Private Client Advisers on how to utilise a Self Managed Superannuation Fund to purchase a practice or consulting suites. With many clients within the medical industry here are the top questions we come across in discovery meetings and review meetings with them:

Should I invest in cash, shares or property?

Your investment selection should be closely aligned with the timeframe of your goals and when you’ll need that money. For shorter-term objectives, for say less than five years, savings should not be invested in assets that may fluctuate in value over that timeframe e.g. shares and/or property.

Should I consider a Self Managed Super Fund (SMSF)?

Generally, for superannuation account balances less than say $350,000 it may be beneficial to select an industry superannuation fund. These funds have low ongoing management costs, provide access to a number of investment options and offer low ongoing management costs, provide access to a number of investment options and offer low-cost insurance. However, for balances above $350,000, an SMSF may be appropriate. These funds provide a great amount of control and flexibility.

Interestingly if you are at the stage of your career where you are looking to establish or purchase your medical practice or consulting suites an investment strategy to consider is purchasing this within an SMSF structure. Directors and Private Client Advisers, Simon Curtain and Glenn Fairbairn discuss this strategy in further detail in a recent video

>> Watch Video.

Do finance lenders provide special benefits to medical professionals?

Due to your potential to earn a high income and with solid job security, lenders consider medical professionals to be at low risk of defaulting on their loans. Therefore, many lenders are willing to lend to a higher loan to value ration (LVR) of up to 95% without Lenders Mortgage Insurance (LMI). This can save in excess of $20K on a $500K loan.

How do I protect my income?

Your largest asset is the value of your income and future earnings. Therefore, it’s important to safeguard this against the risk of being unable to word due to illness or injury. Income protection insurance can provide cover of up to 75% of your income and as a medical professional some insurers will provide a monthly insured benefit of up to $10,000 per month even when actual income is below this level. Another benefit of income protection is that premiums are tax deductible. The best person to speak to about this is our Private Client Adviser & Life Risk Specialist Marcus English.

When should I start the financial planning process?

In short, now. As you most likely started earning income later than many of your peers, it is essential that you start as soon as possible. If you’re moving into private practice this requires an even stronger foundation. Working with an experienced and qualified financial adviser and accountant can help you structure the business aspects of your private practice and help you manage your personal finances to ensure wealth creation over the long term.

All-time top question: I make good money but lose a lot to tax. How can I minimise this?

There’s no doubt that a sizeable chunk of your income won’t make it into your pocket due to your high income attracting the top marginal tax rate. To stem the flow, there are a number of financial strategies available that professionals could consider implementing to reduce their tax liability each year. These include:

  • Salary sacrificing through superannuation contributions
  • Set up a tax-effective investment structure such as an SMSF and/or a discretionary or company trust
  • Purchase a car via a novated lease
  • Claim tax deductions via deductible debt

For more details on the benefits and considerations of each of these actions, we have provided further insights in this booklet specifically designed for Medical Professionals.

>>Download Here.

How does this work in reality, when a Hewison Private Wealth Adviser works with a Medico?

Last year Sarah came to us via a referral. Sarah is a fully qualified obstetrician with a young family and future earning potential of approximately $700,000 per annum and was looking to purchase her first home.  She was also looking to move into private practice with a fellow obstetric surgeon, who was already established with rooms. By doing so, she could charge $250 or up to $1000 per session or 30% of revenue.

As a busy working professional with irregular working hours and a young family, Sarah recognised the need for a robust financial plan. She engaged Hewison Private Wealth to work alongside her to broker her mortgage.

Due to their high income earning potential and the stability of their profession, surgeons almost never default on home loans, therefore, their borrowing options can be greater. The deal brokered for Sarah by the Hewison team through a private bank, enabled her to borrow upwards of 90% of the purchase price/valuation of the home with no requirement for Lenders Mortgage Insurance (LMI).

That is just one case study, there are many more.  With each individual client possessing different goals and objectives the need to deliver bespoke investment strategies, structures, life and wealth protection solutions are paramount.

Take a look at this handy checklist. Or, to delve deeper into your best bespoke strategy we invite you to meet with us. So we can do the future thinking for you.

Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.