In times of political uncertainty, how should you manage your assets?
Dentist financial advisor Andy Upchurch has this advice.
Whew! What an election cycle. Facebook has ceased being a site to connect friends, family, and high school classmates you haven’t seen in decades. It’s now a repository for all things political. That being said, regardless of which side of the aisle you stood on before November 8, Americans are all on the same side of the aisle now in one regard: Donald J. Trump is the President of the United States. There is no doubt his election has brought with it a tidal wave of emotions, expectations, and uncertainty, as well as an equity market on a bullish run since November 9. Politics aside, what does this mean to you? How will this enhance or inhibit your personal financial goals?
First things first, it’s a call to getting back to basics. The recent election has polarized the country, with many thinking the next four years are going to be rough sledding, and an almost equal number feeling prosperity is just around the corner. As polarizing as President Trump may be, it’s crucial that you understand that prudent planning can protect you in the event of the worst case scenario...or put you in position to capitalize on a favorable economic climate. In order to plot a successful course, however, we must first note the challenges that we can control.
Challenges
Financial disorganization
This is the root cause of many financial issues that plague the typical dentist. This problem is exacerbated by the numerous financial instruments a practicing dentist owns (insurance, investments, planning, etc.), and how each of these segments oftentimes fail to “communicate” well with each other. Disorganization clouds or hides underlying problems. Oftentimes, these problems are quite curable if recognized earlier, but difficult to recover from if discovered late. I liken this to any number of dental health-related issues. Whether it is a simple cavity or early stages of periodontal disease, early detection and treatment makes all the difference. Disorganization makes the discovery of underlying issues complex at best.
Focus on rate of return/accumulation-only planning
Don’t get me wrong—rate of return is important. Moreover, the "accumulation stage" of your financial life is important as well. It's imperative to note, though, that the accumulation stage is only one of three stages to consider, with the "distribution stage" and "legacy stage" being the remaining two (figure 1). Hyperfocus on the accumulation stage, and a singular desire for high rate of return without regard to risk or how those assets will spend in retirement are critical errors made by many advisors and dentists alike.
Figure 1: The financial life continuum
Lack of prioritization
We’ve all heard it before: “Have your priorities in order.” This is usually referencing your work/life/family balance. It’s also critical when working to achieve your financial goals and in building and protecting a healthy balance sheet. In the absence of prioritization, everything ends up “tied for first,” and we all know that’s not the case.
Out of balance
This is usually one of the negative consequences to the previously listed challenges. In my day-to-day dealings with dentists around the country, a quick review of their balance sheets usually illustrates a lack of proper balance between investments, protection products, and debt service alike.
Committing to change
Now that the challenges are identified, what should you do? First things first: make a commitment. Commit to addressing the challenges listed above. Going back to basics and controlling what you can control is the first step down the path of financial security and independence.
Strategies for success
Here are five specific things you can do to put yourself in the best position for what's ahead.
1. Bring a professional level of organization to your personal finances.
Don’t allow underlying shortcomings to derail your long-term financial progress, especially because you didn’t know they existed. The adverse result of allowing disorganization to cloud your financial picture is the stark reality that you might miss your retirement/financial independence goals and dates. This is an unacceptable result, as time is one commodity you cannot purchase or recover.
2. Make sure you and/or your advisor focus on all three aspects of your financial life continuum: accumulation, distribution, and legacy.
Being mindful of how current plans will perform for you in the future is crucial.
3. Prioritize your financial goals and attack them accordingly.
There are many things to consider when making this list, with time, predictability, and personal importance being three keys.
4. Optimal balance
If you could come away with one key piece of advice from this article, it would be this philosophy. This balance has multiple levels of complexity, however, as it pertains to how all of your financial instruments relate and coexist.
5. Work with a dental-specific financial advisor who understands the rigors and challenges of your chosen profession.
I often tell my clients, “Sometimes it’s hard to see the picture when you are inside the frame.” An outside professional review of your balance sheet (someone outside the frame) is oftentimes very helpful in discovering both problems as well as opportunities.
Takeaways
Only time will tell what President Trump’s administration will mean for the economy. From a purely financial perspective, history tells us there is usually uncertainty with the changing of our country’s leader. We must resist the urge to say, “This time is different,” as those words have been uttered countless times during crisis and leadership changes through the decades. As it turned out, it wasn’t different, and making drastic decisions based on emotional speculation could have proven detrimental for your balance sheet. Focusing on rate of return alone, and attempting to guess market machinations under a new president’s regime can be a recipe for disappointment. Getting back to basics and diligently working towards a state of optimal balance in your balance sheet will help you weather many storms as well as navigate calm financial seas.
ALSO BY ANDY UPCHURCH: "What's going on with the market?!" Advice for dentists in a volatile financial climate
Disclosures:
Registered Representative and Financial Advisor of Park Avenue Securities, LLC (PAS), 4201 Congress Street, Suite 295, Charlotte, NC 28209. Securities products/services and financial advisory services offered through PAS, a registered broker-dealer and investment advisor, (704) 552-8507. Financial Representative, The Guardian Life Insurance Company of America, New York, NY. PAS is an indirect, wholly owned subsidiary of Guardian. Continuum Financial Solutions is not an affiliate or subsidiary of PAS or Guardian. PAS is a member of FINRA, SIPC.
Material discussed is meant for general informational purposes only and is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon only when coordinated with individual professional advice. This material contains the current opinions of the author but not necessarily those of Guardian or its subsidiaries and such opinions are subject to change without notice. 2017-34587 Exp 1/19.
