Virtual OMA Women event attracts more than 300 participants
Doctors spend years studying to practise medicine, and yet most get little to no training in how to handle their finances through the various stages of their lives from medical school to practice, potential incorporation and retirement.
That’s why Drs. Jane and Paul Healey founded the online Physician Financial Independence group and are criss-crossing Canada to advance financial literacy among doctors.
“My hope is that you will come away with ways you can navigate the financial industry,” said Toronto pediatrician Dr. Jane Healey at the recent Financial Wellness for Women, a virtual OMA Women event that attracted more than 300 women physicians.
The Healeys have reached thousands of physicians with their tips on how to take control of their finances and collaborated with Dr. Stephanie Zhou to develop the first formal financial curriculum for medical students at the University of Toronto. The Healeys’ Facebook group has grown to more than 28,000 members and is a space where physicians can teach each other about personal finance and happiness.
“We sometimes look at our friends when they’re undergoing a health crisis in their family and say, ‘Wow it’s really hard for non-medical people to navigate the health-care system,’ Dr. Healey told the virtual audience. “This is what I'm hoping to give you — to teach you the skills of how you can navigate the financial system, which unfortunately has been taking advantage of us for many, many years.”
Dr. Healey defines financial independence as having the skills to save hard-earned money so that it can be traded for autonomy.
She says achieving that freedom requires three steps — and they apply equally to men and women.
Unlike non-registered investments, growth in an RRSP is not taxed each year. Because of that tax sheltering, over 25 years a $6,000 annual investment with a five per cent return would be worth $300,000 in an RRSP, and $215,000 in a non-registered investment, where growth is taxed annually.
There are five key mistakes that can create unnecessary roadblocks along the path to financial independence, says Dr. Jane Healey.
“You have to, first, make money — you go to work, which we’re all quite good at. You need to save money and then, finally, you need to invest that money so that it grows.”
“You have to, first, make money — you go to work, which we’re all quite good at. You need to save money and then, finally, you need to invest that money so that it grows. To do this effectively, you need to be evidence-based. You need to be informed.”
The initial thing to understand are the financial “buckets” available for investments — RRSPs, TFSAs, RESPs if you have children, and incorporation — and knowing you should fill them in that order.
The path to financial independence also requires an understanding of the various investment choices available:
If using a financial manager, these options carry a range of management fees.
For example, a passive index fund that contains hundreds or thousands of stocks is already diversified, doesn’t require tweaks and adjustments as the market fluctuates and has no fund manager, so the costs to manage are low.
Actively managed fund managers who buy and sell frequently to try to turn a profit believe their skill will yield higher returns, and charge high fees that increase the overall cost.
Evidence shows that active investing (buying and selling stocks frequently) underperforms compared to passive investing (buying an index or basket of stocks and holding them for decades).
“Warren Buffett is probably the most successful active investor in our history,” Dr. Healey said. “And yet Warren actually believes that passive investing is the way to go for most people.”
A dozen years ago Buffett tested the theory by watching what happened to his $1-million investment in the passive S&P 500 index compared to $1 million invested in actively managed hedge funds by a wealth management company.
“As time passed, he actually started to beat the hedge funds by a lot,” she said. “What this is showing us is how (the wealth management company’s) fees, the hedge funds costs, were eroding the returns and they just couldn’t keep up because the fees are so high — over time and with compounding, it really affected their returns.”
Dr. Healey said she believes financial advisers should be paid only when needed for the services they provide — similar to the model for accountants — and not a percentage of a person’s investments each and every year.
She encourages people to spend a little time learning how to self-manage their funds, create a brokerage platform account, which is “pretty much one step harder than Internet banking,” and make passive investments themselves.
Alternatively, a robo-adviser, a service that automates investing for you from your home, can be set up to automatically invest your monthly deposits in evidence-based passive investments.
For retirement savings, Dr. Healey says the OMA Advantages Retirement Plan is an evidence-based low-cost investment that automatically adjusts for risk as a person ages and is a good option for those who want their investments to be easier and more hands-off to manage. The plan also has an option that allows investors to purchase an annuity that provides guaranteed monthly income until death.
There are many investment options to choose from, and which one is right for a person might change as they age and accumulate wealth and knowledge, Dr. Healey said.
“Typical financial adviser management unfortunately costs a lot of money, and if you decide, ‘I’m OK with that, that’s good value for my money’, that’s OK because you assess yourself whether the money you spend brings you value and happiness.”
This article is for informational purposes only and should not be considered investment, tax, financial or other professional advice.