Brian Hufford, CPA, CFP
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I am bombarded daily with emails that solicit my attention as a registered financial advisor. Most are concerned with how to more effectively market to individuals needing “wealth management” services. One that intrigued me recently was a $295 course on how to market to the super wealthy, those with a net worth in excess of $500 million. The email said: “The super wealthy are different than middle-class millionaires; they need deep resources for things such as personal security, private jet options and philanthropy.”
I found myself wondering how a $295 course would evaluate the desirability of a Gulfstream V vs. a Bombardier Challenger 604 or whether it would be preferable to go slumming with middle-class deca-millionaires via Net Jets.
One wealthy advisor concept, though, that has always intrigued me for hard-working, wealth-building dental clients is that of a dental family office. One definition of an effective family office that I read states: “A family office provides all the essential services for building and preserving wealth.” What are the essential services for building and preserving wealth in dentistry?
One of the first things I learned early on about the word “wealth” and dentists was that many dentists view the accumulation of wealth as a bad thing. Perhaps they believe that wealth and excellent clinical dentistry are polar opposites. Nothing could be further from the truth.
In fact, I believe that prosperity in dentistry and clinical excellence go hand-in-hand. Following are my thoughts on how a dentist can build a family office concept for his or her family that is intended to build and preserve wealth.
How do the super wealthy design and maintain their grounds and landscaping? Do they hire a famous landscape architect and employ gardeners? How do you maintain your grounds? Do you work with a nursery and a mowing service? The services are the same, just a difference of scale and degree. The super wealthy have employees to pay bills and family CFOs to protect and grow wealth.
Another area is outside or inside professional investment help. My financial group is concerned with the family office function, building, and preserving wealth. To me, the major difference in a family office and dental accounting services performed by outside accountants is focus.
Many dentists complain to me that they wish their accountants would be more proactive in saving taxes, advising on large financial decisions, and growing wealth. These dentists really are asking their accountants to fulfill the family office function. Accountants tend to view their role much more as providers of information to outsiders, such as taxing authorities and financial statement users. How would your accountant respond if you asked, “What will you do this year to assist me in growing and preserving my wealth?
The super wealthy fly on a Gulf Stream V from a private airport terminal. We fly Southwest and contend with Homeland Security. We simply pursue geographic destinations differently than the super wealthy; however, we cannot abdicate the family office role and hope to arrive at financial freedom.
You may have accountants, a financial planner, payroll services, retirement plan administrators, and money managers, but if you don’t have assistance with growing and preserving wealth with a very intentional focus, you may never arrive. This typically requires leadership from you.
The mental shift you must make is from viewing important financial decisions, such as how you repay debt or whether to invest in real estate as isolated financial problems. Each financial decision is not isolated. Each financial decision has many alternatives that could be explored and would likely be viewed differently through the lens of growing and preserving wealth.
Suppose, for example, that a rented house in your hometown has been for sale for months and the purchase price has recently been discounted by 20%. You think the house is a bargain and that real estate prices are at a bottom. You have good cash flow from your practice and can afford the additional debt.
Who do you consult for such a decision? Are your thoughts the final arbiter? Is this an isolated and unique set of facts that cannot be viewed in a larger wealth-building context? What if, instead of purchasing the house, you invested in a REIT (Real Estate Investment Trust)? Instead of owning one property that required management in your hometown, you would own a large number of properties that were geographically diversified, professionally managed, and fully liquid on any given day. How much real estate should you have in your portfolio?
You need a dental family office function in your life, one that is equipped and focused on growing and preserving wealth. Your informed leadership is essential to wealth-building outcomes.
Brian Hufford, CPA, CFP®, is CEO of Hufford Financial Advisors, LLC, an independent, fee-only planning firm that helps dentists achieve financial peace of mind. Contact Hufford at (888) 470-3064 or [email protected].
