Summer Reading

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This week I heard a 47 year-old physician, who is not our client, say that he believed he would be retiring in about 5 years or less. Normally, when I hear these kinds of comments, they are filled with excitement and anticipation about the freedom of moving on to something else other than the daily grind of medicine. He, on the other hand, was talking about it with a tone of surrender, rather than victory in a goal achieved. He has a very successful practice and appears to have his financial house in order, and obviously derives a great deal of satisfaction from his calling to heal. When asked about why he would give it up, his response revolved around frustration with governmental and insurance company intervention. I am concerned that this feeling is becoming all too common among practicing physicians. This leads me to wonder whether retirement decisions are not as much emotional as intellectual for doctors. If you find yourself in these shoes, I have found three short books that might help you sort it out. I will briefly introduce you to them in no particular order.

In The Money Code, Joe Duran, CEO of United Capital, introduces the reader to what he calls the 5 Money Secrets: 1) Your life will be filled with tough choices. 2) Your entire life is determined by how you make decisions. 3) Your biases will affect every decision you make. 4) You will be distracted by things that really don’t matter. 5) You must have a good process to make good decisions. I especially like the last one, for it reminds me of the admonition that better outcomes are usually derived from starting with a better theory. According to Duran, “the goal of this book is to provide the lasting financial solutions you have been looking for.” In looking for those, he asks the question, “Money: what’s it good for?” In short, he answers, “to avoid pain, to feel good, and to take care of the ones you love.” The heart of the book is written in a rather conversational style around a fictional character, Jack, who learns a way to make better financial decisions. Duran draws steadily upon the illustrations of Carl Richards, the author of The Behavior Gap. We have used Richards’ material for years and find it very worthwhile.

The second book was written by a physician, Dr. James M. Dahle and is titled The White Coat Investor, A Doctor’s Guide to Personal Finance and Investing. Some of you may already be regular readers of his blog of the same title. The last chapter tells of his mission to “help physicians get a ‘fair shake’ on Wall Street.” Since our firm can meet all nine of the criteria he recommends looking for in a financial advisor (one of which is gray hair), it’s easy for us to like his book. I do take at least one significant issue with it however: He is a died-in-the-wool modern portfolio theorist and appears to only believe in passive investment in a policy portfolio. That is one way, and a reasonably good way to do investments, but it totally ignores the more recent scholarship of endogenous risk, developed by Mordecai Kurz of Stanford University. Knowing and attending to those limitations in connection with investments is crucial in our opinion. Structural changes in the economy do matter, but they are ignored in the construction and maintenance of a set-it-and-forget-it portfolio policy. He does a good job of outlining how a good advisor can add value – and it’s probably not how you think. One of five ways he lists: “An experienced advisor provides the greatest value by protecting your portfolio from your own behavioral mistakes.”

Finally, I will introduce you to my friend, Holly P. Thomas’ book, The Mindful Money Mentality, How to Find Balance in Your Financial Future. She begins by saying that her “hope for this book is that you will begin to cultivate ‘mindfulness’ about your relationship with money.” We see so many people in our practice planning retirement who, having heard the commercial about The Number, fear they don’t have “enough.” Ms. Thomas rightfully questions whether money can ever be the only benchmark, or if it becomes a tool that enables you to live the life you truly want.

All three of these books have a common thread, addressing issues that confront those of us who, comparatively speaking, are well off. A far cry from “Money for Dummies”, these books speak to thoughtful readers with limited time, who recognize that because they are well-off they have more responsibility, not simply more freedom.

“AN EXPERIENCED ADVISOR PROVIDES THE GREATEST VALUE BY PROTECTING YOUR PORTFOLIO FROM YOUR OWN BEHAVIORAL MISTAKES.” JAMES M. DAHLE, MD

Scott Neal, President of D. Scott Neal, Inc., a fee-only financial planning and investment advisory firm with offices in Lexington and Louisville can be reached via scott@dsneal.com or 1-800-344-9098.