People often tell me I don’t seem like the typical financial advisor. I take that as a compliment. Because I’ve worked hard to avoid being typical. I don’t do business like so many others in my profession, and I don’t treat my clients that way.
Maybe that’s because I didn’t come to this profession in the typical way. Neither of my parents worked in financial services, and while we always had everything we needed when I was growing up, we certainly weren’t wealthy, so I never learned about the stock market or investing or anything like that.
I grew up in a suburb of Atlanta, Georgia. I played basketball and football in high school, and was good enough at football to get a scholarship to Florida State University. That was during the Bobby Bowden dynasty years, so I was lucky enough to win a national title. I was also unlucky enough to suffer a career-ending injury. Since I had been told I was good enough to be drafted in the NFL, that was devastating for me.
It was also an early lesson in preparing for life’s unexpected events. Fortunately, my father was smart enough to take out an injury insurance policy for me. Many college players don’t have that. So, I received a settlement. And as many 23-year-olds would do, I made some good decisions with the money, and others that weren’t so good, but I learned from all of them.
One of my smart decisions was investing in real estate after college. At least until 2008 hit and that investment no longer looked very smart. But along the way, I decided to get my real estate license, and then something happened that I didn’t see coming, but I should have. Helping people buy and sell real estate became my primary focus. I liked it, and became pretty good at it, but as you know, it’s a seven-day-a-week job and you’re always getting calls and texts, and your family sometimes has to come in second. By then, my wife and I had started having children (we’re up to five now!) and I knew I needed to do something else.
I’ve always been interested in business and finances, and I love numbers. I was a finance major in college, but I wish I had been a math major. How many people say that? As it turned out, people were asking me for financial advice long before I entered financial services. Especially my real estate clients. It almost became part of the service I provided.
Then one day the financial services firm I was using asked me if I’d be interested in working for them. I took the plunge, and I’ve never looked back. In many ways, it’s like real estate, because what I do first and foremost is help people.
One of the other things that makes me untypical is that I specialize in working with dentists, which you probably guessed from the title of this book. So, how did that happen? I began working with emergency room physicians, and they were good clients, but they’re employees of a hospital, not doctors who have their own practice. And even if a client is highly compensated, I’m limited in planning opportunities compared to someone who has their own business.
One day a friend who is an orthodontist became a client. Through him, I met other orthodontists, dentists, periodontists, and other dental professionals who owned their own practice, and as I began working with them, I realized this was a niche where I could really help people.
Because let’s face it, just because someone is a good dentist doesn’t mean he’s a good businessman. And if you own a practice, you own a business. Which means you face many financial challenges.
One of the most common ones I’ve seen is getting a handle on cash flow. You earn a good income, but where does it all go? Compounding the confusion, my industry tends to focus on the wrong thing. Typical financial services people love to talk about rate of return. Which can be sexy (“Think about what you can do with that extra 2%”) but we can’t control it. We’re at the mercy of outside forces. But one thing we can control is our rate of savings. I can mathematically show you how your rate of savings is more important than your rate of return.
Here's why. Most people are not very good at saving. We tend to spend whatever we have. Even if you’re making well into six figures. It’s easy to spend a lot of money. Inflation is real. Lifestyle creep is real. Kids are expensive.
So, when I help my clients manage their cashflow, I’m creating a ton of value for them. I’m helping them fix what’s wrong in their world now, and making things better in the future.
One of the ways we do that is through tax diversification. No, I’m not a CPA. I don’t do tax returns. But I do tax planning because most people have the wrong tax strategy. They’re actually doing reverse tax planning. It’s not their fault, they’re following advice…but that advice is wrong.
How much money are you putting into your 401(k) or IRA? If you’re relying too heavily on tax-deferred accounts, you’re setting yourself up for tax challenges in retirement. I talk to my clients about getting as much money tax-free as possible. Many “typical” advisors don’t give their clients the information I do, or the strategies I provide. In fact, I would argue that we are in the lowest tax rates we're going to see in our lifetime. So why would you go whole hog into tax-deferred accounts, where you’ll pay higher taxes when you take the money out than you’re paying on that money today, at a time when your income will probably be lower than it is today? To me, that’s an inefficient use of your money, and it’s one of the most common mistakes people make.
I’m also a big believer in being protected against life’s unforeseen events. They’re called unforeseen because you don’t know they’re coming. But guess what? They’re coming. Bad things happen. A negative life event is going to happen to all of us at some point. The question is how bad and how big will it be? Whether that’s an accident, a lawsuit, an illness, death or divorce, something is going to happen. Are you protected? Is your family protected? Is your practice protected? We have to make sure everything is protected and that the plan works regardless of what life throws our way.
Speaking of planning, often someone will meet with a financial advisor and they’ll say, “Okay, put X amount of dollars into X account every month for the next 20 years, and you'll have a pot of gold at the end of your rainbow.” Well, that's not how life works. Life doesn't work linearly. Average returns aren't the same as actual returns. There are so many things to take into account, which all fall under the category of “life happens,” and just planning to put this much money into this account for this many years doesn’t consider any of them.
I like to say the best long-term plan is a series of well executed short-term plans, because life happens. Things change. Look at what happened to me in college. Now, I have a teenage daughter. Soon she’ll be driving. That’s a life event. It also means my auto insurance is going to skyrocket. That’s a budget event. Two years after that, she’s out of high school. I hope that means she’ll be in college, but maybe she’ll be doing something else. Whatever the scenario, putting $1,000 a month or whatever into this fund or account for 20 years doesn’t take that into effect. And in my opinion, my industry is notoriously bad about that.
But whatever type of plan you have, even if you don’t have any plan at all, I can’t stress this enough. Save. Save more. Save as much as you can. The more you save, the more options you have. People who are making a half million or even a million dollars a year may not think they need options, but people who make a million dollars a year often spend a million dollars a year. And the reality is, if you don’t save money, there’s no such thing as retirement. You work until you die.
That’s one of the biggest fears for dentists; one day they’ll die with a drill in their hand because they couldn’t afford to retire. In fact, that’s one of the first questions I get when someone meets with me for the first time. “Will I be able to retire?” Most of the time, the answer is, “It depends.” That comes back to all those things we should be taking into consideration. I need to know what retirement means to them. Some people want to do nothing. Some want to work two days a week until they’re 75. Some want to walk out the door at 55. So, the first thing is to figure out just what their idea of retirement is.
Most of the time, they have an idea but they have no plan. Or if they have a plan, there are usually a lot of holes that they’re not aware of. One reason for that is I’ve found that a very large percentage of dentists have never had a real advisor. They’ve bought this product from this guy, and this policy from this other guy, and opened an account with this guy over here, but they’ve never worked with someone who looks at everything all encompassing, and do what I like to call a financial x-ray of everything they’re looking at.
There are many scenarios where the plan is to sell the practice. That’s it. They have all their eggs in that basket, but the basket is pretty flimsy. Maybe they have a partner but they don’t have a buy-sell agreement. Maybe they have an associate, but there’s no life insurance policy on the practice owner which would fund the associate’s purchase of the practice if the owner dies.
I hear stories like this all the time. A dentist dies with no plan in place. His widow tries to sell the practice, and other dentists are like vultures who buy it in pieces or wait her out and buy the entire practice for a song. Shouldn’t you have a plan in place to prevent that from happening to you?
The flip side of that, which is becoming more and more common, is dentists are selling their practices long before retirement age. They’re being swallowed up by larger practices or dental conglomerates, and I know how tempting it can be. When you’re 45 years old and you get this multi-million dollar offer, it’s easy to say yes. But you’d better have a game plan for the second half of your life. Because you’ve just sold the golden goose. You’ve turned off the cash machine. Is the money you’re receiving enough to support you the rest of your life? That’s also something I help dentists with.
Currently I have a client who’s 40 years old, and he’s in conversations that could lead to someone offering him $15 million for his practice. That’s a lot of money. Uncle Sam is going to take a nice piece of it, but what would be left is still pretty good. But what does his life look after that? What will he do? You can only do so much traveling. Sometimes I have to say, “You know what? You really shouldn’t do this. Not yet.” Being willing to give someone the answer they really don’t want to hear is also something that sets me apart from many of my colleagues.
Which brings me to this book. It’s an opportunity for me to reach more members of the dental community than I can through my practice. And the more people I can reach, the more people I can help. I learned a lot doing these interviews, and I hope you’ll get just as much out of reading them. I believe the insights and information in this book will help you see what’s possible for you and your practice, both now and in the future. More important, it will help you avoid mistakes most people don’t even realize they’re making.
In fact, if you happen to come up to me one day and say, “Ross, I read your book six months ago…” I hope you finish that sentence this way: “…and it really opened my eyes.”
So, let’s get started.