Post card from Europe....Brexit

Posted by Neal Durling on 24 June 2016
Post card from Europe....Brexit

What a day to be holidaying in the UK with a planned trip to Spain, France and Italy over the next 10 days!

This morning Europe awakes to the unexpected news that the UK has voted to leave the EU with the reaction in currency and stock markets being both predictable and logical.

The value of Stirling in currency markets has reduced quite significantly and as global funds flow back to the traditional safe haven of the US dollar, other currencies like the Australian Dollar will also experience some movement.

Local and Global Stock markets have also moved sharply lower as the market reprices a decision it "called wrong" and digests what this might mean and a lengthy period of uncertainty in Europe.

Naturally the usual colourful media commentary will add spice to the occasion and in turn heighten fear and volatility but what can we expect in Australia and why as a client of Medical Financial should you not be overly concerned?

The Australian Dollar will likely weaken which should be good for exports and the Reserve bank may bring forward an interest rate cut if it feels it necessary to stimulate confidence. Stock markets will be volatile and will likely undershoot fair value over the next few days as some investors who are over leveraged are forced to reconsider their positions and others who are poorly informed panic.

At Medical Financial we are conservative by nature when considering investment strategy and portfolio construction so our clients should not fall into either of these camps and those following a disciplined regular investment strategy will benefit from the pricing movements.

As things become a little clearer and we start to look more objectively at how things might look going forward common sense will return but it may take a few days or weeks to occur.

In other news the Maroons have taken out origin, again, England are runners up to Wales in the group stages of Europe and the weather in England is still colder than a Queensland winter.

It will be nice to head south tomorrow.

Posted in: News   0 Comments

Has the rising tide that lifted all ships turned? Issues getting in the way of wealth creation.

Posted by Neal Durling on 13 June 2016
Has the rising tide that lifted all ships turned? Issues getting in the way of wealth creation.

No one wants to wait for anything anymore, or is that just me! We all expect lovely houses, smart cars, foreign holidays and the latest lifestyle accessories.

What's led to this? Over a period of time (the last 20 years), increasing incomes in real terms combined with an environment of high growth and increased asset prices, has made us all feel rich.

As a financial planning specialist, I believe there is a shift underway that we're moving away from an environment of high growth where market returns did most of the 'heavy lifting' for us. 

Over the past twenty years, we could rely on rising housing prices and investment returns to grow our wealth. During this time, "he who borrowed the most made the most". There are a lot of people who made a lot of money simply by borrowing money and "investing". It didn't really matter where!

Yet, in spite of lessons learned from the GFC, banks are still prepared to lend us lots of money. This makes it easy to spend more and, overtime, cultivate the wrong behaviours. When it comes to your own financial life, beware of this.

In today's environment, we see a number of issues getting in the way of wealth creation.

Debt is currently cheap due to low interest rates. However, because of this, there's a danger of overcommitting to lifestyle assets (such as cars, houses, etc.), limiting the opportunity to invest profits until a lot later and thereby losing the benefit of time.

It's very easy for overspending to become a wealth-destroying habit. This can be especially damaging when you consider the other financial demands facing medical specialists today, such as:

  • Having children later - this means high costs later in life
  • Higher schooling and university costs compared to the last generation
  • Higher housing costs and mortgages
  • The time it takes qualifying to be a doctor and the cost of this.

As discussed by my colleague Sean in the last post:

All the major economies are struggling with a lack of inflation and lower growth rates. And in a low-growth environment, people have to invest more to get the same results or invest for a longer period of time.

Keep in mind that our current historically low interest rates are set at levels by the Reserve Bank of Australia to stimulate demand. Interest rates are low because we are in a low-growth environment so it's not all good news.

The consequences of this are:  

  • Incomes are not likely to grow as they have in the past.
  • Debt is unlikely to be discounted by inflation as it has in the past.

Against this backdrop, can house prices really buck the trend and keep going up? I, for one, don't think so. And I would be cautious of excessive leverage with this.

What strategies are needed to achieve financial independence?

The upshot is if you are building wealth now you will likely need to do more of the 'heavy lifting' earlier on, by saving more, for longer, and you'll also need to have a strategy to repay debt rather than relying on inflation to discount it.

You will also need to be more selective about what you invest in, as the "rising tide that previously lifted all ships" may have turned, or become decidedly "choppy."

In this low-growth environment, in order to build wealth, you need to take a more methodical, considered approach to investment and debt.

With this in mind, in order to help you enhance your financial future for the long term, we advise you to:

1. Understand what your goals are and what they will cost.
2. Model different financial scenarios with realistic returns to see the bigger picture and assist with decision making.
3. Develop a financial strategy to get you where you want to be over time.


If you are interested in reading more on this topic, why not download our white paper for medical specialists on helping people to make good decisions in order to build wealth.

Or for specialist financial planning, accounting and tax advice for medical professionals, please get in touch with our team by calling 07 3363 5800.

Posted in: Wealth Creation Financial planning Planning Financial independence   0 Comments

Chasing financial independence in a low-growth environment

Posted by Sean O'Kane on 24 May 2016
Chasing financial independence in a low-growth environment

Superannuation is a major focus of this year's budget, with the biggest changes announced to superannuation in a decade.

Changes affecting higher-income individuals, such as medical specialists, include:

  • Lowering of the concessional contributions cap to $25,000
  • Limiting of the non-concessional contributions through a lifetime cap for non-concessional contributions of $500,000
  • A reduction in the threshold from which an extra 15% tax applies on contribution to super, from $300,000 to $250,000.
  • $1.6 million superannuation transfer balance cap, limiting the amount that can be transferred to tax free retirement phase

So what does this mean for medical specialists? And how can effective financial planning help you make the most of your income?

These changes mean medical specialists will need to consider and seek out alternative investment strategies that generate effective returns as part of their financial planning.

What's more, they also need to consider how to do this and start preparing at an earlier point in their career.

There is also a broader issue at play here. All the major economies are struggling with lack of inflation and lower growth rates. And I, for one, don't think this is likely to change in the near future.

Lack of inflation is a real concern in Australia, as elsewhere in the world. Earlier this month the Reserve Bank of Australia dropped interest rates in an effort to stimulate growth.

So if the world economies are struggling with lack of inflation, why does this matter to individuals?

Simply put, in a low-growth environment, people have to invest more to get the same results or invest for a longer time period.

Let's consider three scenarios, where $100,000 is invested and achieves growth rates of 3%, 6% and 9%. If this money was invested for 20 years, the results would be $155,797, $239,656 and $364,248 respectively. I extrapolated the 3% growth figures to see when it would reach $364,248 to be equivalent to the 9% growth rate and it was year 44!

So what should you do?

Firstly, don't rush into any rash decisions. Often people think buying an investment property is the answer, particularly as negative gearing seems to be the sacred cow that won't be touched. However, even if there is meaningful capital growth in residential property, this can only form part of the solution.

The good news is medical specialists should have the incomes to be able to set more aside to invest in order to create financial independence. However, my experience in providing advice to doctors for many years is there's always a lot of competing interests for that income and they're often a lot more attractive than saving!

So it's important to have a plan, and to understand what your financial future looks like if you stick to it. And if you have a plan, now would be a good time to review it to make the necessary changes to ensure you are still on track to reach financial independence at the age that you want.

In our next blog post, we'll look at these competing interests for income and discuss strategies to manage them in order to achieve financial independence.

If you are interested in reading more on this topic, why not download our white paper for medical specialists on helping people to make good decisions in order to build wealth.

Or for specialist financial planning, accounting and tax advice for medical professionals, please get in touch with our team.

Posted in: News Wealth Creation Financial planning superannuation   0 Comments

How much? Setting a consistent pricing policy to grow your practice.

Posted by Matt Connor on 27 April 2016
How much? Setting a consistent pricing policy to grow your practice.

In this blog post I'd like to talk about the importance of developing a clear and consistent pricing strategy for effective medical practice management and ongoing business growth.

There are two main aspects I'd like to cover.

1) Why consistency is vital setting a pricing policy and enforcing it across the practice.

Quite often we find in a GP surgery or other medical specialist practices there are a few different doctors and, as a consequence, disparity across the surgery with what the doctors are charging. It may be that one doctor has friends come in and they may not charge them, while other doctors may be sure to bill each and every patient their due amount.

However, consistency is important. In a practice there should be a clear policy so that patients that use the practice have certainty around what they're going to be paying. For instance, in a GP practice, a patient may have a favourite doctor but if he/she is not available, they may find they are being charged a different price, which can cause problems.

A pricing policy administered in the medical practice software, and a pricing list of key services should be available for all patients. This is not only beneficial to the patients, but also to the practice managers and owners when it comes to end-of-year tax and financial planning.

2) Why it's important to set your practice pricing to work for you.

Setting an effective pricing structure is one of the most important things you can do to contribute to the growth and success of your practice. We suggest you decide on your pricing policy by increasing your understanding of where the money is coming from.

Make sure you understand every Medicare item number billed, and what quantity is processed every month or quarter. It's important to have a good understanding of which Medicare item number generates the majority of revenue for the business.

This analysis will help you understand what your business does for people and where the most demand is. It helps with business planning and understanding the skills the surgery needs and provides to attract customers.

It's also important to be aware of where your practice sits in the marketplace compared to your competition regarding pricing. The Australian Medical Association (AMA) puts out price lists. Have a look at this to help inform your pricing mix within your service offering.

Once you understand where the bulk of your earnings are derived from (this may only be 3-5 items), then it's also worth investigating what your competitors are charging, and deciding where you have scope to charge more, or need to hold or reduce your pricing to meet the competition around you.

It's important your pricing is commensurate with what you're doing and the value you offer to your customers. Make sure that the amount you charge is in line with what the service is worth and what the marketplace is demanding.

Brisbane medical practice: A case study

I had a meeting with a group of specialist medical professionals who were partners in a Brisbane practice together. Quarter to quarter, they were running at a loss. This was due in part to recent growth and expansion. They were slowly building up non-owner specialists and had recently moved. So this loss was in part a function of expanding the business.

However, we then discussed pricing and opened up their practice software. They explained that they bill a fixed amount for particular items, but also give away free services occasionally to keep people happy and to bring them in. Medical Financial Group determined from looking at the prices that they were giving away 20% of total revenue. Scrutinising internal data helps to give practice owners a reality check and realise they've been way too generous.

Be informed. Be consistent.

A successful medical practice will be aware of what is earning them money and their position within their local marketplace. Although many medical professionals work independently, having a clear practice-wide policy that is consistently applied will provide certainty to both patients and doctors and contribute to your practice's sustainable growth and profitability.

In conclusion, the key things to remember when setting your medical practice's pricing list are:
1)      Research market prices make sure you're aware of what others are charging and how you fit into the marketplace.
2)      Understand your practice operating costs your price list should be informed by your own practice's operating costs to ensure you aren't running at a loss.
3)      Develop a pricing policy and stick to it.
4)      Communicate and share this with all staff and patients.

If you'd like to find out more information about how a consistent pricing policy can help your medical practice grow, our team of financial services professionals is here to offer expert advice.

Posted in: Pricing Planning   0 Comments

Finding financial certainty in an uncertain world

Posted by Neal Durling on 18 March 2016
Finding financial certainty in an uncertain world


Many of the private medical professionals we advise have commented that now, perhaps, is the best of times to be earning - that they can't rely on the same revenue forever as incomes in their speciality could drop over the next five years.

I can't say for sure if their predictions will be correct. But, as a financial planner, I'm interested in why they are thinking this. I believe their concerns do reflect changes taking place across the Australian health services sector. In this post I'd like to address some of these developments.


1. The Federal Government's Medicare Benefits Schedule (MBS) Review.

The review, which is led by a taskforce of independent clinicians, is considering how the more than 5,700 items on the MBS can be aligned with contemporary clinical evidence and practice and improve health outcomes for patients. Already, the MBS Review announcement in April 2015 has caused a downturn in diagnostic related procedures, and the associated talk is changing patient behaviour. Among other providers, diagnostic imaging group Capitol Health has reported a 52% drop in underlying net profit for the six months ending December 2015.

2. Australians are downgrading or cancelling their private health insurance cover at the same time as healthcare expenditure and claims have continued to outgrow GDP over 10 years.

With approximately 500,000 Australians downgrading or cancelling their private health insurance cover in 2015, it is likely this will directly impact on private practice revenues. This is no doubt due to premiums rising well above inflation for years at about 6.5 per cent a year. At the same time Australian healthcare expenditure and claims have outgrown GDP over 10 years.

3. With health system costs increasing, health insurers are increasingly looking for ways to reduce claims and manage profits by boosting competition and managing the costs associated with claims.

As well as increasing premiums, health insurers are lobbying for "increasing competition" and greater "information sharing", "standardising simple products and terminology" and "reducing information asymmetries" between consumers and providers. Recently privatised Medibank believes that boosting competition and standardising simple products and terminology would save up to $200 million and $330 million respectively.

NIB has also suggested that Health Minister Susan Ley improve "information sharing for consumers and insurers". It has launched Whitecoat, "the TripAdvisor for healthcare", to reduce information asymmetries between healthcare consumers and providers (including GPs, dentists and other types of medical professionals).

4. The rise of corporate health service providers.

Over the last few years, I've noticed the trend of a number of fairly large businesses or corporates increasing their market share and buying out private medical practices and, as a result, making the market more competitive. In these situations, doctors may be attracted by the prospect of partnership and security, or they may feel the threat of competition affecting their decision to join. However, arguably there is less opportunity for doctors to increase their earning potential when they form part of a corporate service offering.


The three key things I advise all my financial planning clients to do are:

i) Develop a sound protection strategy for the things you can't control. For example, put in place suitable insurance covers, income protection, estate planning and binding death benefit nominations. You never know what might be around the corner, but it is possible to prepare yourself financially for unexpected outcomes.

ii) Make consistently sound financial decisions by spending less than you earn. Invest wisely and become a bit wealthier each year. Be cautious about over committing based on potential future earnings, which cannot always be guaranteed. Or at the very least, wait until you have a plan B such as other investments. Take advice and grow your wealth steadily with a prudent, methodical and logical approach over the long term.

iii) Make the most of your opportunities when you have them. Recognise when times are good in order to invest for when life is not so good. Know that at some point in all of our lives, some kind of issue will likely arise to impact our finances. Make sure you prepare so that you are able to deal with it and recover as quickly as possible.

Like many things in life, this approach to organising your finances sounds simple but it's not always easy. If you're uncertain about how to make the most of your money over the long term, our specialist medical financial planning team is here to offer expert advice.

Posted in: Wealth Creation Financial planning Planning   0 Comments

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The information on this site is of a general nature. It does not take your specific needs or circumstances into consideration, so you should look at your own financial position, objectives and requirements and seek financial advice before making any financial decisions.

The financial planning services are provided by Medical Financial Pty Ltd trading as Medical Financial Planning (AFSL 506557)