When physicians are your target

Despite the challenges faced by today’s physicians — the soaring cost of malpractice insurance and declining insurance reimbursements are just two — doctors remain one of financial advisers’ most sought-after niches.

After all, doctors are still well compensated and are likely to remain so, given our need for them and the extensive training they require. In addition, many doctors now provide ancillary services, which increase their income, while others are becoming highly paid executives of health maintenance organizations..

“There has been a change in the business model and the compensation structure of doctors,” said Tom Orecchio, a principal of Greenbaum & Orecchio Inc., an Old Tappan, N.J.-based firm with about $500 million under management. His practice includes both medical doctors and doctors of osteopathy, and has “an especially large number of orthopedic surgeons and internists,” he said.

Many of Mr. Orecchio’s clients own, or are in partnerships that own, health-related businesses.

“We treat these doctors as business owners, which starts with understanding the Stark laws,” said Mr. Orecchio, who also serves as chairman of the Arlington Heights, Ill.-based National Association of Personal Financial Advisors.

The Stark laws restrict a doctor’s ability to refer Medicare or Medicaid patients for additional services from a provider in which the doctor or an immediate family member has a financial interest. Like most laws, the Stark laws are complicated and extensive — and have lots of exceptions.

But Mr. Orecchio said that more doctors are becoming proficient at running their practices like small businesses and are learning how to maximize their values, whether through alternative lines of business or expanding the practice.

“In addition to familiarity with the Stark laws, we have had to understand how the laws around insurance reimbursements have changed and what that means. Surgeons, in particular, have found that changes in insurance reimbursements have cut their income,” Mr. Orecchio said.

“More seem to be wondering how long they can keep going on,” he said. “Perhaps this question isn’t unique to doctors, but what precipitated it is.”

While almost all wealthy clients are concerned about wealth accumulation and preservation, doctors often have additional considerations. Because of the schooling required, doctors usually start their careers later than other professionals and many are saddled with debt during their early years of practice.

The costs of starting a family, buying a house and providing for college may mean that saving for retirement is postponed.

Given these concerns, it isn’t surprising that some doctors have left private practice and gone to work for large institutions. “We’re treating them more like corporate executives and understand that they have different needs now,” Mr. Orecchio said.

“From an investment perspective, doctors are well educated, want to learn, and tend to be open to new ideas,” he said.

“I say we have two kinds of clients — those who just want a watch that tells them the time, and those who want to know how the watch works,” Mr. Orecchio said. “Doctors usually want to know how the watch works; I prefer to work with clients like that, because when things don’t go well, they understand what is happening.”

Becoming knowledgeable about the issues doctors face, and being able to help them reposition themselves to better deal with their new financial realities, is key to winning their business. When marketing to doctors, keep in mind:

• Doctors are over-booked and hard to reach. Since they use their receptionists and nurses to field their calls, be sure you have something they want to hear and that you are prepared to say it succinctly.

• Reach out in several ways including direct mail, newsletters and trade publications. Look for opportunities to speak at medical gatherings, attend fundraisers for hospitals, and volunteer at events such as health screenings.

• Doctors respect experts and like to deal with smart people. Provide them with information that is useful and relevant.

• Doctors need clients too. Include them in your professional network and find out their areas of expertise, the type of patient they like to work with and the kind of business opportunities in which they might be interested.

Libby Dubick is president of Dubick & Associates, a New York firm that helps advisers and financial services firms identify and develop distribution and marketing opportunities. She can be reached at [email protected].

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