Put yourself in the place of
someone who wants to raise money for a new project —
a film, a factory or a scheme to revive old oil wells
in Alberta now that oil prices are soaring. Who do you
put on your list of prospects?
The first group might be dentists,
the second almost certainly doctors. Whether you have
money to invest or are barely scraping by covering your
day to day expenses, all the unsolicited mail and telephone
calls you get urging you to invest should tell you one
thing: you're a target.
This wouldn't be much more than
a nuisance if the profession were better at saying no.
But it's not. Every year your colleagues lose money
on schemes they had no business being in in the first
place. Hard knocks can be good teachers. Some advice
from physicians who've been there and have since returned
to sound financial health follow.
CHECK
THE RECORD
"You've got to learn to ask probing questions," says
an Ottawa cardiologist who lost "tens of thousands"
in mutual funds over the years. He was approached by
a financial advisor about 15 years ago who had been
given his name by a friend. She was personable and seemed
to know what she was talking about. Though she presented
herself as independent, she was in fact directly associated
with two mutual funds firms and used them exclusively.
She put all of the physician's considerable RRSP holdings
into funds that carried either front or rear end loads.
The funds took fees — in one case amounting to
over 5% — at the time they took them over. "I just
didn't pay much attention. The market was going up and
I seemed to be doing OK. What really hurt were the fees
I had to pay after I'd already lost a bundle in the
2000 crash."
The doctor was twice wronged —
by the fees and by a fund that performed well below
even the sagging market. He's since spread his risk
around and pays close attention to the performance of
his investment relative to those in other funds.
AVOID
TAX HITS
A 52-year-old St John's, NF, physician has substantial
investments outside his RRSPs thanks to an inheritance.
"For the first five years I had the money in mutual
funds. Here's the thing: I only paid, I think, about
1.5% a year in fees but they bought and sold stocks
like there was no tomorrow. I ended up paying a lot
in taxes due to capital gains."
He's since moved his account to
a broker and buys individual stocks. "The fees are higher
but I control when we buy and sell. That way I have
a handle on what I'm going to pay in capital gains and
on dividends. I'm in about a dozen individual stocks.
The broker never makes a trade without checking with
me first. It's working out."
BUDGETS
WORK
"I had no idea where the money was going, I only knew
I was on a financial treadmill," admits a 39-year-old
family physician with a busy Scarborough, ON, practice.
He went into practice eight years ago. "I'd been studying
all my life, I was married and had a two-year-old and
another on the way. I wanted it all and my wife and
I just started racking up debt." A new house, four credit
cards and two cars pushed the couple to the edge despite
his six-figure income. Those days are now in the past.
With careful budgeting — and only a single debit
card — expenses are finally under control. "For
the first time, savings are a possibility," says the
doctor.
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