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Guest columnist Dr. Ronald Dritz invites young anesthesiologists to join him for a series of articles focusing on the lifecycle of financial health. In this installment, he identifies the key players in a personal investment team that will help set your portfolio on a trajectory to long-term success.

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As you begin to accumulate some wealth the question will quickly arise, “where should I invest these funds to enable them to grow?” There seem to be an almost endless array of investments to choose from; equities, ETFs, REITs, futures, Treasuries, corporate bonds, mutual funds, etc, etc. The list goes on and on. All investments carry a certain amount of risk. And it is a well known axiom of investing, to achieve greater returns you must accept greater risk. How can you quantify and integrate your personal risk tolerance into an investment portfolio that makes you comfortable with both the return on your investments and the risk you are carrying in holding those investments? A good portfolio should not only give you good returns on your investments, but also give you a good night’s sleep.

Here is a publicly available tool that I have found useful in demonstrating and quantifying the interplay between personal risk tolerance and your investment time horizon. Armed with the information from the above referenced questionnaire you may want to begin the process of creating an investment portfolio.

Creating Your Investment Team

The funds you are able to set aside in your investment portfolio are an extremely important part of your life. The performance of your investments will have a determinative influence on when (or if) you can retire, what sort of retirement lifestyle you achieve and the estate you leave behind. Good decisions made early in your financial lifespan are essential in achieving your financial goals. I believe that an investment team is a vitally important part of successful personal financial management.

My personal financial journey has led me to suggest the following members for an investment team:

• Financial counselor/planner. This is the person who can lay out a long term financial strategy. When do you want to retire? What kind of annual savings will you need to support your retirement? Can you live on a budget that enables the annual set aside necessary to fund your retirement? When changes inevitably occur in life (a marriage, a divorce, another child, etc.) your financial counselor will be able to assist you in making the necessary course corrections.
• Financial manager. This is the person who executes the financial strategy in consultation with you. They can help you create a portfolio that reflects your financial strategy and incorporates your personal risk tolerance and risk capacity.
• Accountant This is the person who manages the interface between your financial portfolio and your tax liabilities. A good accountant can suggest strategies to minimize your tax burden, avoid mistakes in funding tax advantaged retirement plans and manage those plans to maximally fund them.

Prior to the 1990’s most investment firms were organizations that housed stock brokers who were able to facilitate stock trades on the stock exchanges. The financial model was that each trade carried a fee. This fee was incurred whether the trade resulted in a profit or a loss. The stock broker advised you on trades within your portfolio and ethically should have given good advice. But the financial incentives were somewhat malaligned. The model incentivized the stock broker to make as many trades as possible. The more trades the more fees.

More recently the model has changed. Investment firms still provide advice and carry out trades. But rather than charging based on the number of trades, the newer model charges a percentage fee based on the total value of your portfolio. The greater the value of your portfolio, the greater their fee. Thus the incentives are better aligned.

The large investment houses (Charles Schwab, Vanguard, Fidelity, etc) now provide the advice and management of a Financial Counselor/Planner and a Financial Manager as part of the product they supply to their clients. Sometimes all these services are provided by a single individual, sometimes by a team. But regardless, they are all pulling the rope in the same direction; towards maximizing the value of your portfolio. When you win, they win.

“How can I find a good accountant?” I’ve been asked that question more than once. Unfortunately, there are no prospective, double blind, randomized studies of accountants comparing outcomes. But there is a certification standard. Make sure your accountant has CPA after his or her name. Ask for recommendations from people you trust. Interview the candidate and see if you hit it off. And, if after making your choice, things don’t work out, make a change. It’s not perfect, but with a little effort you should be able to find someone who can satisfy your accounting needs.

With a good team and the proper funding you’ve gone a long way towards achieving your financial goals. Next time we’ll consider some financial strategies that can be used to get you there.

Ronald Dritz, MD, FACA, practiced anesthesia for twenty-eight years in northern California. He held numerous positions of leadership including Chairman of Anesthesia, President of the Medical Staff, hospital and health system board membership and served as Finance Chair of an IPA medical group. He is happily retired and lives with his lovely wife in Emeryville, California.

The ASA Committee on Young Physicians is pleased to present this monthly article series on personal finance. These articles are not written by hedge fund managers or real estate tycoons but by practicing physicians. Some have business degrees and some do not – but every contributor is an anesthesiologist who has some guidance to offer the rising generation of attending physicians. It is not the intention of the committee to offer definitive financial advice, but rather some pearls of wisdom to consider while developing a personal fiscal plan.

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