This slide is about mistakes physicians commonly make that compromise their financial wellbeing and how to avoid them.

1. Helping Physicians Avoid
Common Financial
Mistakes
Michael Zhuang
MZ Capital Management
To Schedule a Appointment
Email: info@mzcap.com or
call 301-452-4220

2. The Story of Dr. Jones
• 71 years old retired doctor
• >$10mm in accumulated wealth before
retirement
• Only a few financial mistakes ….
• Now worry about running out of money

3. What mistakes?
• No practice succession planning
• Bad real estate investments
• Bad estate planning
• Bad life insurance purchase
• Bad annuity purchase

4. No Succession Planning
• Very profitable practice …
• Great reputation in specialty
• The practice was simply given to
associate doctors without anything in
return
• Consult a practice succession attorney
after the fact. TOO LATE. There goes
$1mm.
• How many of you have Succession Plan?

5. Bad Real Estate Investments
• Invest $5mm in multiple properties in
multiple states at the peak of the market.
• Can’t get out, rents can’t cover taxes and
expenses.
• $10k negative cashflow
• Stressful to travel and manage
• There goes another $2mm and counting

6. Bad Estate Planning
• Put away $3mm in irrevocable trust to
save taxes
• Now can’t touch the money
• There goes another $3mm.

7. Bad Life Insurance Purchase
• $5mm worth of life insurance benefiting
his 3 children and 2 grand children.
• Paying $56k a year a insurance premiums
• Second to die permanent life – pay until
spouse dies

8. Bad Annuity Purchase
• $2mm left in SEP IRA,
• $1mm in variable annuity that guarantees
“double money” and save taxes at the
same time.

9. Annuity Guarantee “Double Money”
• $1mm purchase price
• Guaranteed Amount of $2mm if stay 10
years without any withdrawals.
• Starting in year 11th, maximum allowable
withdraw rate 5%.
• Value of this income stream is 640k using
6% discount rate
• Guaranteed Amount is NOT annuity value.

10. Real Annuity Expenses
• Deducting from annuity value every year.
– Mortality and Administrative Charge: 1.4% to 2.4%
– GMDB (death benefit charge): 1.9%
– GMWB (living benefit charge): >0.75% no cap
– Variable account expense ratio: 1.4%
– Surrender Charge: 8% decreasing over 10 years.
• How much is total expenses?
• What other risk? How much left for living?

11. What Caused This Mess?
• Too busy with practice
• Lack of knowledge
• Not ware of conflict of interest

12. Quiz: Who Are Legally Required to
Put Your Interest Fist
• Financial Advisor
• Insurance Agent
• Registered Investment Advisor
• Stock Broker
• Fee-Based Financial Advisor
• Fee-Only Financial Advisor
• CPA
• Attorney

13. Answer to Quic
• Financial Advisor – It depends
• Insurance Agent - No
• Registered Investment Advisor - Yes
• Stock Broker - No
• Fee-Based Financial Advisor - No
• Fee-Only Financial Advisor - Yes
• CPA – Yes (but)
• Attorney - Yes

14. How Are Financial Advisor
Compensated
• Example of a Morgan Stanley Fee-Based
FA.
– 1.2% asset management fee
– Put your assets in mutual funds that charge 1.3%
expense ratio including 12b-1 fee of 0.5% and loads.
– Your total cost 2.5%, MS’s total take 1.7%.
• Example of a Fee-Only FA
– 0.4% to 1% asset management fee
– No load/No 12b-1 fee funds with 0.3% expense ratio

15. 5 Issues Concerning
Most Physicians
• Investment (myself)
• Tax mitigation (team)
• Practice Succession (team)
• Wealth Gifting and Transfer (team)
• Asset Protection (team)

16. Good Financial Advisor?
• Check record at http://www.adviserinfo.sec.gov
• Find out if he receives commissions.
• Speak in plain English instead of industry jargon.
• Know issues facing physicians and has good
references from physicians
• Is interested in provide ongoing support.
• Spend time to get to know you.
• Give you confidence to make your own
decisions and support your priorities and values

17. Michael Zhuang
• Carnegie Mellon MS in Applied Math and
Quantitative Finance, PhD candidate in
Financial Economics
• Founded MZ Capital 6 years ago, many
physician clients all over the country.
• Write for Morningstar, Physicians Practice
and KevinMD.com
• Quoted in ABCNews, CBS MoneyWatch
and Barron’s

18. My Services and Fees
• Financial Review (FREE) – find out hidden
issues in your personal finances
• Financial Planning ($500 to $1000) –
create a plan for you
• Ongoing Wealth Mgmt (1.0% to 0.4%) –
Provide ongoing support in carry out the
plan. Give you confidence in making smart
decisions