What Physicians Must Know About Financial Planning: The Objective Phase

In the last column, we reviewed how a medical SOAP note (subjective, objective, assessment and plan) is similar to a good financial plan.  We also discussed the many parts of the subjective assessment the planner makes.

The objective phase of the financial plan consists of more questions and a careful document review. The questions asked by the planner are more focused on gathering specific information regarding:

• History of income
• History of spending
• Financial responsibility of others
• Desire for a legacy at death
• History of insurance claims
• Medical history, expected health in the future
• Other advisers and the relationship with them (estate planning attorney, insurance advisers, etc.)

Note the above are just some of the topics that might be discussed.  Conversations often ensue as a result of these questions that touch on both objective and subjective factors.

The document review is variable, but a good planner will generally review (at least):

• Insurance details, including life, disability, property casualty, long-term care, malpractice, and health
• Estate planning documents
• Tax returns
• Business tax returns
• Investment account statements
• Titling of real estate and investment accounts

The financial planner is looking for a variety of information in the objective portion of the review.  Tax returns offer a wealth of information.  Estate planning documents are rarely understood, and the planner seeks to translate what they say into something understandable. 

Titling is vital to both estate planning and asset protection issues.  The review of the investment accounts often reveals risk tolerance and what the future nature of the relationship might be with the planner going on to determine ongoing management of assets.

Some of the “finds" as a result of the objective review may be:

• Improper titling of assets that leaves the physician open to creditors.
• Poorly designed retirement plans.
• Inadequate savings.
• Property casualty insurance premiums that are too high.
• Inadequate or overly expensive disability insurance.
• Missed opportunities to save on taxes.
• Inadequate educational savings.
• An inadequate death benefit of life insurance, often due to whole life instead of term policies.
• Elements of estate planning overriding asset protection issues, often assets are in living trusts instead of in a protected fashion.
• Poor choices for investments. It is hard to relate the many terrible asset allocations I have seen, often driven by commissions.
• A mismatch between what is learned subjectively on savings rates.  Often families underestimate how much they are spending.

Next week, I will share guidance regarding combining the subjective goals and concerns with the objective data reviewed.