Veterinary practices are one of the “last frontiers” of independent medical professionals. Depending on the veterinarian, your pet is usually seen without the wait time that their human owner experiences with a human doctor. Your cat or dog will most often meet with the veterinarian and not a para-professional. Great care for our pets is a blessing and we enjoy advising veterinarians about business practices that will help them thrive.
Recently we were referred to a very successful practice that was interested in a second opinion on their 20 years-old retirement plan. The veterinarians, being busy in both their personal and professional lives, had not reviewed their plan. Being closer to retirement they were asking questions. We processed information gathered from discussions and plan documents. We found that each veterinarian was contributing to both a profit sharing and a money purchase plan. Their CPA firm had been filing an IRS Form 5500 for each of the plans at an additional expense to the practice. The investments that were used to fund the plan were the most expensive share class through a broker dealer representative. These compounding costs of the plans had been eroding their retirement plan performance for all those years. We knew we could help them immensely by implementing a single retirement plan specifically created for incorporated professional practices without lowering their tax-deductible maximum contribution. This step immediately cut their administrative and investment costs in half. Next, we showed them how moving their investments from a commission/fee-based broker dealer to a fee-only registered investment advisor would save additional costs thereby boosting their retirement performance even more. Being in the market they already fully understood that past performance doesn’t predict future performance. Our common goal was to give them an efficient plan that would provide them with the best odds of retirement success. We may not be able to control the market but we can control the costs. The investment strategy was then updated to their present financial situations to further enhance their opportunities for growth and lessen their risk of loss.
Many veterinarians find that the sale of their practice at retirement doesn’t play a major role in providing them with retirement assets. A cost and investment efficient retirement plan is crucial to their success after their working years. In this case the Veterinarians realized a 204%* cost savings under the new plan and are very excited to have the changes create such a positive result while reducing expense.
*IRS Form 5500 filing from 2 to 1 = 50% saving, cost of underlying investments @ $2.30 reduced by = 54%, actuarial costs eliminated = 100%