Have you read the Australian Government's 2015 Intergenerational Report, released in March this year? I'd be surprised if you had, yet this document has profound implications for both your personal and professional lives.
The report measures the long-term drivers of Australia's economic growth. One of these is our changing population structure, with some startling shifts predicted. The report finds that:
So is this good news or bad news for medical professionals?
Well, Australia's changing demographics are likely to increase demand for health and aged care services which is, of course, good for medicos from a financial perspective.
But it's a little more complicated than that.
How long will you live?
Living longer and continuing to be active is great provided that you have the money to support yourself.
Medical professionals spend a lot of time thinking about their patients' health and life expectancy, but what about your own? You may have done your financial planning assuming that you will live as long as people average today but, in fact, the intergenerational report suggests that you are likely to live longer.
Check out this life expectancy calculator to get an understanding of your likely life expectancy.
How much money will you need in retirement?
Consider this for a moment. If you are 35, just 'hitting your straps' in terms of income, and plan to stop work at 60, you have 25 more years of work to set aside funds for your retirement. That sounds reasonable, doesn't it?
Possibly. But if you turn out to be one of the lucky ones to reach 100 years of age, you will need to have sufficient investments to support you for another 40 years of living after retirement. Sobering isn't it!
Probably the biggest challenge we face in helping our clients plan for financial independence is getting them to understand how much money they will need to ensure they don't outlive their capital. So what is a safe amount of income to be able to take without eating into the capital? The accepted figure is around 4%. So, if you would like to have $200,000 per annum during retirement, and your retirement will last 25 years, you need to set aside a lump sum of $5 million. If you live longer, you will need even more. Are you on track for this?
Do I really need to worry?
When we raise this issue with clients, medical professionals will sometimes tell us 'But I'll continue to work' or 'My expenses will go down when I no longer have the school fees and mortgage to pay'.
And what do our financial planners say? Well, we explain that you may wish to work past 60 years, but wouldn't it be better to do this from choice rather than necessity? What's more, the job of a medical professional is actually quite physical and stressful. Many medicos end up scaling back their practices as they age and start to feel the stress of long days with patients, carrying out surgery, being on call, and generally supporting others. It's not an easy job.
As for cutting back on your expenses, I'd ask you to reflect on your current spending when you aren't at work. Personally, when I'm on holiday, I actually spend more money! And how do you want to spend your senior years? Wouldn't you like choices about where you go and what you do? There's a massive difference between my 60-year-old clients who can choose to retire, and those who feel that they have to work. It's no fun to be ageing and still trying to pay down debt.
Medical Financial Group's key role is to help our clients understand how financial independence looks for them and then empower them to make smart financial decisions to get them there. Our Brisbane-based experts are happy to provide financial planning, accounting and tax advice to medicos right across Queensland.
The ageing of Australia could be very good news for you professionally and personally but, as we live longer, you need to make the right financial choices. Are you planning to enhance your financial future?
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Medical Financial Group partner Matt Connor interviews practice management specialist Bob Brown of Eulan Brown. Eulan Brown specialises in managing the business needs of medical practices, and often works with medical professionals in tandem with Medical Financial Group staff.
Matt: With all your experience in running successful medical practices in Brisbane, what do you look for when you're selecting new administrative staff for a practice?
Bob: People might be surprised to hear that we generally advise GPs and other medical professionals to recruit more rather than fewer administrative staff, and to aim for a real mix: for example, a uni student to work as a junior, a 'normal' receptionist, a senior receptionist and a lead receptionist, with a range of part-time and full-time roles.
I find that the juniors bring a great tech-savvy skill set, with a good knowledge of apps, Excel, and other software. The same goes for interns. Junior staff who don't yet have family responsibilities are also great cover during school holiday times when senior staff may want to take time off and students are usually looking for work.
We suggest at least one of your lead reception staff be able to work five days a week with others working three days. You certainly don't want everyone working part-time and no continuity in the room. At the very least I'd advise you to have one staff member working a 4.5 day week.
Matt: Is salary the most attractive benefit when you're advertising an admin role?
Bob: Interestingly, no, not in my experience. I find that the most important benefit you can offer administrative staff is work-life balance.
Most people seeking medical administrative work are mothers who need some flexibility around their family responsibilities. Other staff have other commitments that they have to meet. If you provide a flexible, supportive environment, staff tend to stay with you and are generally very reasonable in terms of pay negotiations. We are always happy to employ those with young children and to be flexible around things like school hours.
Matt: Once you have the right staff, how do you create an environment where they can do their best?
Bob: Well, as I said, work-life balance is key. Beyond that, it's important to give them a voice in the practice and let them contribute to identifying and resolving any challenges.
We also provide staff with continuing education. For example, we provide annual refresher courses in Genie software, or other training that staff might identify. We also look at other stakeholders out there who we can bring in to provide learnings to staff. At one obstetrics practice, we invited an expert in to talk to reception staff about sudden or early death in pregnancy to help them develop skills in dealing with patients. We've also done training around medical indemnity and trigger points for litigation. Good training is good for the practice and very satisfying for staff in terms of their professional and personal development.
We also rotate admin staff through roles to keep it interesting for them. We have a lead receptionist, but all admin staff work on the front desk. They all book patients in, take payments, do typing, send confirmation emails or texts, sit on reception. Moving staff through various functions makes it more interesting for them and is also critical risk management. Nobody holds all the knowledge about one area.
Matt: How do you know when a practice is busy enough to take on more administration staff?
Bob: Look first at how quickly you're getting to telephone. Are you answering the telephone in a timely manner? If not, people will go elsewhere. People often give up if they're put on hold for too long. Also ask yourself if you're on top of all the everyday tasks.
And if you add another GP, other medical professional or allied health employee, you may need to increase your admin support accordingly, so that you don't put your existing admin staff under too much pressure.Matt: How do you make sure your admin staff deal with patients according to your practice policies?
We also keep quick-reference procedures cards at reception, cover any issues at staff meetings, and do refresher training as I said earlier.Matt: What exactly does Eulan Brown do for Brisbane's GPs and other medical professionals?
|Posted in: News Staffing||0 Comments|
We hear a lot in the news about mortgage stress, with Australia having one of the world's most expensive housing markets. But many people - including doctors themselves - are surprised to find out that even well paid medicos can end up overcommitted and struggling to meet their home repayments.
You've finished your training, time to buy a house?
The number one thing that our clients ask when they finish their training is 'how much can I spend on a house?'. After many years in training, living on a registrar's wage, and often with a young family, it's understandable that many newly qualified doctors put buying a home at the top of their to-do list. It's part of the great Australian dream.
Unfortunately, that dream can turn into a nightmare if you aren't careful. It's very easy to look at some of your colleagues in big houses and be tempted to set a big budget and buy the dream home. But, if you don't do your homework, you could find yourself struggling to make repayments. We see this more often than you might imagine.
Can you really afford that luxury home?
We work with our clients to develop a realistic budget for their home purchase. We start by looking at your income, and determining how stable it is. Will it increase in the future? If so, by how much and how certain of this are you? In the case of doctors going into private practice, we often suggest delaying their house purchase until they have established a pattern with their income, so they can buy with confidence.
Once we have an idea of income, we then need to have a good understanding of your current and future expenditure. For example, will your children go to private school? Do you have any other big expenditure plans? Or do you have current commitments that will cease in the near future?
Using realistic income and expenditure estimates, we then combine these to project current and future cash flow over a number of years. Often we find clients have done a rough one-year cash flow at the current interest rate, but have not thought much beyond this. By financially modelling future years we can clearly see changes in surplus cash. We can then model different purchase scenarios, including looking at the effect of increased interest rates. We also show on a year by year basis the home loan being repaid.
Two stories from our practice help to highlight some of the issues you need to consider with our help.
One husband and wife came to us looking to buy a million dollar home, confident that they could make the repayments on their joint income as doctors. When they looked into it more carefully, though, they realised the kinds of homes they were looking at were more like $1.4 million. When we worked through their life goals, it also became clear that they wanted to start a family and the wife wanted to work part-time after their children were born. Once I showed them the effects of their decreased income in future years, and possible interest rate rises, they realised their budget was well under their estimate.
Another client came to us looking to purchase a $1.2 million home. Had he been in his mid-30s, I would have confirmed that this was a reasonable decision. But, after lengthy training, he was actually in his 40s. I used financial modelling to show him that he would need to work at full capacity to 65 to pay off a mortgage of that size. With this scenario in front of him, he opted for a less expensive property.
Expert advice on finance and more
Sorting out your budget is only the start. Medical Financial Group can also:
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Business skills for doctors a must
If you ask most people what's required to be a good medico, they're likely to say that medical professionals must be highly skilled in their medical specialisation.
It's true that clinical skills must be of the highest standard. But when it comes time to learn the skills required to set up in private practice, business skills are also critical.
Think about it: you've probably spent more than a decade acquiring your clinical skills. It's a strategic investment to spend a little more time acquiring the core business skills that will make you an informed and effective practice owner.
Increase your knowledge, reduce your risk
Yes, you can employ a practice manager for the hands-on, day-to-day operational side of your practice. And yes, you should definitely seek advice from experts on aspects of practice management such as accounting, tax, and business development.
But, as an owner or partner, you need to understand business issues so that you can steer your practice in the direction you want it to go. As an informed practice owner, you'll also be able to ask the right questions of your managers and advisers, and fully understand the answers they give you.
To do this, you need to know about:
Good business systems and processes are the key to continuous improvement and risk management. In this post, I'd like to talk about two critical business systems: cash control and staff backup.
Cash control is critical
Almost every medical practice will have some patients paying their fees in cash. You need a system to handle cash from when it is received to when it is banked, and a mechanism to trace cash payments.
A procedure document should tell your staff what to do when cash is received (provide receipt, mark off in practice software, get authorisation from a second staff member) and include template forms to be completed when holding cash until it is banked.
When things go wrong
Without a formal cash control procedure in place, you are vulnerable to theft. I know of one practice where a staff member was able to pocket cash received and then delete the related patient consultation from the doctor's calendar, removing evidence that it had taken place. This behaviour was detected fairly quickly, but expensive legal fees were necessary to terminate this staff member's employment.
Backup is not just for computers
Staff backup is also critical in managing risk.
Many small practices feel that they can get by with one practice administrator or manager. It's true that overall labour costs are generally lower when you employ only one person even when they do a lot of overtime.
But being dependent on just one practice manager or administrator is dangerous. If that person gets sick, goes on holidays or, worse, decides to leave, all the intellectual property associated with running your practice is missing. And any disruption to the administration of your practice can have significant financial and reputational costs.
Having a second, part-time manager or administrator, even for just one day each week, is well worth the extra cost. It will give your practice some insurance if your primary staff member is unavailable for whatever reason.
Increase your knowledge, reduce your risk
Every one of my clients has felt more secure and confident once they acquired a better understanding of the business aspects of their practice. Watch our free practice management videos to kickstart your own business training.
|Posted in: Budget Staffing||0 Comments|
In this post I want to talk about a topic that's vital for all of us: personal insurance. In particular, I'm going to look at trends in insurance claims on super funds, how they're affecting those funds and, possibly, your premiums.
Insurance claims are on the rise.
In Australia, insurance claims for illness, injury and disability are on the rise due to a number of long-term trends.
Secondly, our population is ageing. This means more policy holders are reaching an age where they are likely to be claiming on their insurance policies or are leaving the pool of policy holders and taking their premium payments with them. The problem is compounded by the fact that there are also fewer young people available to enter the pool of policy holders.
Thirdly, over the last few years, insurers have broadened their definitions in a bid to win more clients, increasing the number of "defined events" that can be claimed for. Whilst this appears good for policy holders, ultimately it can lead to an unsustainable cost structure that has the potential to increase policy premiums and damage the insurance industry over the long term.
Lastly, lawyers are becoming more active in helping people make insurance claims against super funds, as a recent Sydney Morning Herald article points out. The disappointing aspect of this is many of society's more vulnerable are paying a significant portion of their claim to lawyers. Whereas, if you have a financial advisor, they will generally deal with the claim as part of the service they provide.
Insurance through super may not be so super.
Superannuation firms are obliged by law to provide insurance cover to members, and I believe the trends described will place increasing pressure on these funds. Over recent years, many premium rates have increased significantly but these often go unnoticed as the total dollar cost of the increase is often unclear. Plus premiums are collected through the super fund which is less transparent than the premium leaving your bank account.
As premiums rise, increasing numbers of educated, fit and healthy people are likely to leave insurance schemes run by super funds as they find better value insurance elsewhere. The result is a concentration of higher-risk members and ongoing premium increases as the claims experience worsens.
What does this mean for you?
You need to understand what personal insurance you have and whether a super fund is the most cost-effective way to get that insurance.
I think there's a myth that if you want to pay your insurance premiums from your super contributions, then you must have your insurance with that fund but that's not necessarily the case. It is possible to fund your insurance through your super but have your insurance provided by a different party. Also don't assume that if you have insurance cover through your super fund it will be cheap. Insurance through your super fund can often be quite expensive. You also need to review your insurance policies regularly and check any changes or premium increases.
It's always worth taking advice about your personal insurance from an independent adviser. At Medical Financial Group, we understand price is important but believe it remains only part of the value equation. We recommend the right protection strategy taking into account all of your circumstances. We review this each year to ensure that, if the worst happens, there are no surprises. This involves reviewing a client's changing needs as well as their super, insurance and estate planning arrangements to make sure they work together to deliver the required outcome.
Please feel free to contact me with any questions you may have via:
Phone: (07) 3363 5800 or
|Posted in: News Insurance||0 Comments|
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