Dental Retirement Plans Need Regular Checkups Too
After meeting with a number of dentists to discuss their financial futures, we have found that many of dental retirement plans could use a good cleaning. Like a patient’s mouth after years of neglect, dental retirement plans also need scheduled checkups. Dentists often claim they spend most of their time fixing other dentists’ “work.” We have the same job, but instead of teeth, we fix their retirement plans.
While most already have a dental retirement plans advisor, the majority are not working with a 3(38) fiduciary advisor. From personal liability and excessive fees to poor investments and sub-optimal plan design, there are plenty of areas that may be overlooked if an advisor is not carefully reviewing their dental retirement plans. Our goal is to thoroughly look at every plan we come across and fix the problems other advisors have missed.
The most common issue we see is exposure to personal liability. It’s like playing football without a mouth guard. If you knew the risks, you’d wear one. But a player who is not coached to understand the risks of playing football is left exposed. Likewise, most business owners do not realize they are personally liable for the investment decisions on their company’s dental retirement plan unless they are working with a 3(38) fiduciary (someone who is legally bound to work in the client’s best interest).
Now, one would think that all advisors would adhere to the fiduciary standard, but unfortunately, most just offer solutions suitable to the client’s initial needs and may even be collecting large commissions that are not in the client’s best interest. We have seen this happen to business owners many times and rarely find fellow 3(38) fiduciaries advising on retirement plans. This may be because only 5% of advisors are 3(38) fiduciaries; Twelve Points is proud to be part of that 5%.
Another area that is often overlooked on the retirement plans we come across is dental retirement plan design. It is similar to deciding whether to do a bridge, crown, or implant; all might work, but it is vital to present the pros and cons of each to the patient to gauge their comfort level. When it comes to retirement plans, being a business owner in the dental industry has big benefits — thanks to having a steady income, dentists have more advanced options available to them that have larger benefits over a SIMPLE IRA or the traditional 401(k). We go into detail of the tremendous amounts that dentists can save with a more advanced plan here.
Next, we come to a topic that is sensitive (much like cavities): the fees. If left untreated, they will continue to grow until they eat away at the assets (teeth). Most of the time, when we review an existing dental retirement plan, the funds that are in it are way too expensive. There are usually options available that include the exact same fund and cost less because they are a different share class. The only difference is, the more expensive shares provide their current advisor with a higher commission. We avoid this conflict of interest by not taking commissions, instead getting the least expensive share class within the same exact fund.
When it comes to the investments themselves, there are a lot of options. Much like when you make inlays and outlays, you have porcelain, gold, or composite options, as well as those made from lesser known materials. Most of the time, we find the traditional mixture of stock funds and bond funds in dentists’ retirement plans. While these may great vehicles when the markets are climbing, when they are at all-time highs, we instead look elsewhere for growth and conservation of wealth. This is why we recommend plans that include the traditional stocks and bonds, but also offer alternative investments, such as managed futures, real estate, and commodities, to offset the risk of overvalued investments. These may sound a little foreign, but they actually make for a more conservative portfolio when allocated correctly.
Much like all the different ways in which dentists care for patients’ mouths, we care for dental retirement plans. All it takes is a quick consultation with us to let you know if your retirement plan has any “cavities” that need to be fixed.
If you’re serious about the health of your dental retirement plans, schedule a consultation today!