Shush! Did Someone Say, "Marketing"?

What is the largest known “brand” or name in the dental industry? Arguably, it is the American Dental Association (ADA) and what is the ADA doing to preserve and expand market share? They are associating themselves with known industry sectors of online CE and Marketing through their recent equity position with two Utah companies, ProBusiness Online and Intelligent Dental Marketing, (www.adaceonline.org and www.adaidm.com). One, of course, is designed to offer “the standard” in online continuing education and will prove to be an excellent resource; the other is all about marketing.

Why think marketing? Because today’s consumers are spending their discretionary dollars in our economy and they are buying lots of other things besides dental care. One of the fastest growing segments of dental care is cosmetic care. Why, because patients don’t care about dental care like they do about “feeling healthy”, “looking younger” and if it doesn’t have to hurt, looks good and is convenient, then you’ve got yourself another cosmetic patient. Congratulations, boomers are going to be spending 2 to 3 billion dollars to have great looking smiles in the next 10 years. How are you going to take advantage of this opportunity? It’s a gold rush, only it’s porcelain.

An important piece to anyone’s image is how they present themselves to their public. Isn’t it interesting that the ADA who has long taken the lead in endorsing practice management as a necessary competency in dental school education, is now again taking the lead at endorsing online CE education and marketing as important components to its own marketing strategy? Why has the ADA done this? Because it knows that today’s dentist needs the additional help that is available through these two mediums and because its very survival is based upon providing value, in addition to leadership.

I have had a look at the marketing package that the ADA’s Intelligent Dental Marketing (IDM) sent me and it was excellent as it allows you to pick and choose what your custom marketing plan might look like and cost. I found the materials included in their sample proposal to be both comprehensive and attractive. You can relate to IDM, by choosing from their catalog or by working with their marketing consultant online and over the phone.

How much does the ADA’s solution to a comprehensive marketing approach cost? Well, it depends on you and what you want. For example, if you are just starting out or attempting to re-define your mix of procedures to reflect your interests and core competencies, then you should be spending as much as 30% of your operating budget on marketing. After you are more established, you should be spending less and less. How much money is 30% of your operating budget? Well, the ADA/IDM thinks this is about $2,400 per month.

What’s included? Logo, image design and coaching, identity package printing, website design and coaching, website hosting/maintenance, direct mail post card and coaching, direct mail print/delivery (3,500 pieces per month), practice brochure design and coaching and printing (2,000). Of course you can cherry pick through their catalog of possibilities and, for example, just decide to purchase office wall art posters that promote “healthy smiles” that you create, $129, or case presentation tools or on-hold messaging systems, etc. or any number of options available from the ADA catalog, www.adaidm.com, 1-877 942-8855.

Ask Your Financial Advisor to Explain This:

Ask Your Financial Advisor to Explain This:

As always, there are some things that you can control and some things that you cannot control - things like the economy, demographics, and supply and demand. Today, I will be writing about the economy because we live in “interesting times” and because things are different now than they have been in the past 50 years.

First, there are high short-term interest rates in Europe and the United States. Why mention Europe? Because the point of this article is to make the point that the US is not in control of its money and to ask the question, “Is that your money too?” This discussion is being put forth to start some dialogue and to get you to think about some of things that are out of your control, like the economy, and to prompt you to ask your financial advisor for their take on this change.

Case in point, right now there is a fully inverted yield curve on U.S. Treasuries and the global economy is thriving, new records of economic activity are being measured, stock markets are up, and debt creation is soaring. Traditionally, this situation is the opposite of what one would expect. Why?

Let me explain… an inverted yield curve, defined as three-month Treasuries yielding more that 10-year Treasuries, always means recession, not boom. “The yield curve has predicted every U.S. recession since the 1950’s…”, so what is going on?

To understand this logic, you have to understand that the banks, (the source of all money), make their money by borrowing short and lending long for cars, mortgages, boats, etc., so the greater the spread between the short and long rates, the more profitable the banking business. But, invert this yield curve and the banks find themselves paying more for deposits on savings accounts than they earn by lending. For the global economy, traditionally, this used to mean bad news because the U.S. spending fuels export driven economies of Asia, Latin America, and the Middle East. A credit crunch, (increased short-term lending rates), used to mean world pain. Not so today, what’s changed?

Consider a new paradigm, that the structure of the world’s economy has changed. Author, John Rubino, says consider these things:

1) Today, we have the free flow of capital around the world. This means that cash moves in and out of any one market without any restrictions. This also means that the inverted U.S. yield curve is only inverted from a U.S. investor’s perspective. For example, over in Japan, where they have artificially low over night bank interest rates, (something like 0.5% on what in the U.S. would pay 3%), there is an interest in investing their Yen into our U.S. over night notes because for them, a U.S. inverted yield curve is a steep yield curve! This concept of investing in one bank from another is called the carry trade, the over night carry trade. What has changed is that now Japanese banks and other capital from around the world are participating in the carry trade.

2) There is, at least, one more reason that is even bigger than the amount of money the Japanese are pouring into the U.S. over night market carry trade. I’m talking about the central banks, the mother ship of all banks of any given country, that are buying U.S. dollar debt. The central banks of Japan and China have something like 3 Trillion dollars of U.S. bonds. These government banks have chosen to recycle their trade surpluses back into U.S. Bonds. The reason they do this is because if they did not do this, their own currency, the yen and renminbi, would become less valuable at international exchange rates making the cost of their exported goods more expensive to the U.S. market that they serve.

3) The reason why this is working is because of the new paradigm in the economy, namely that 90% of all foreign money that is buying U.S. securities, is no longer private investors, but foreign governments. They are buying Treasuries, Corporate bonds, mortgages, and stocks because by doing so they keep their own currencies “fairly” valued so the status quo continues, namely the Japanese and Chinese keep selling competitively priced goods to the U.S. consumers, and at the same time, by actively exchanging the trade surplus created into the purchase of U.S. debt, they effectively are giving the U.S. the equivalent of unlimited credit with which to buy more goods at an ever increasing trade surplus that keeps getting “sanitized” by the re-investment of the trade surplus back into U.S. Securities. Got it?

OK, good, because there is just a little bit more to all of this. What has happened with this recycling of debt to a seemingly unlimited potential, is a massive demand for high-grade debt notes, more in fact than the entire U.S. Treasury has. In fact, that’s the reason for something called, “Securitization”, or the building of lesser-grade debt into higher-grade bonds, like gathering up a bunch of home mortgages or credit card imbalances and creating a SPV, “special purpose vehicle.”

Now, here is the reality check… Securitization’s impact on business practices in the financial sector has been seismic. U.S. banks no longer have to hold debt for long periods of time. They can sell it to foreign central banks and use the proceeds to make more debt available and hence, banks have been transformed into the suppliers of raw material for the global economy. This also explains the U.S. banks willingness to lend money in spite of the inverted yield curve. Knowing that they don’t have to hold this debt, they repackage it into an SPV and sell it to central banks with a trade surplus.

The final piece of this transformation is the credit insurance that has recently come on side, meaning they have created new ways to insure against losses involved in borrowing, enter the CDS, “credit default swap” that insure against any losses involved in defaults by a given borrower. Enter hedge funds that have discovered that writing CDS is like writing flood insurance in a drought period. The challenge in finding flood insurance is in finding people who want it, but who doesn’t want cheap money. So, what has changed is that now the banks provide the credit as they always have, but this time the hedge funds are providing credit insurance so the resulting re-packaged “high-grade” debt is being snapped up by central banks that have a trade surplus with the U.S.

I’m not finished yet… armed with cheap credit, a growing number of companies are buying back their stock. For large companies, a strategy of stock buybacks is used to support share prices in the absence of any internal growth opportunities. For the smaller companies, this could make them a target for a leveraged buy out from private equity firms armed with cheap money. Global M & A rose 38% in 2006. And default rates are falling because even the most troubled company can get credit these days.

The result is that the U.S. government is not totally in control any more; securitization has made bank reserve requirements irrelevant. Meanwhile, most financial transactions that are electronic are perceived to be safe and liquid and so can perform some of the functions of money. Combine this new-age credit creation with huge trade imbalances and the result is a unique set of challenges for today’s central banks. Imagine that you are running the U.S. Federal Reserve Board, your economy is running an alarming trade deficit, U.S. dollar backed bonds are ending up in the accounts of your biggest trading partners’ central banks and in response you have engineered an inverted yield curve, which always worked in the good old days, but you know what, it isn’t working now, is it?

This time is different, the banks are still lending like crazy and credit is still cheap. Why? Perhaps the global financial system has shifted away from gradual interest rate changes that were connected simply to shifting mortgage rates. This time, there is a new player on the field that is driving demand for the supply of money and that is the M & A lending activity that is trumping the mortgage backed securities of yesteryear.

Now for the trillion dollar question - is money this cheap sustainable or are we headed off the cliff inevitably, with everybody’s debt mounting and mounting for a great fall? Eighteen months ago, our overseas debt became greater than our overseas assets, a situation, that in the past, would have caused a decline in the value of the U.S. dollar. The U.S. is now the world’s greatest debtor. Those countries holding this debt, largely Japan and China, are dependant on U.S. consumer spending. A rapid falling dollar would be more of a problem for Japan and China than for the U.S. Meanwhile, U.S. banks are continuing to make money on the inverted yield curve by taking more and more risks on credit. For example, 71% of all companies with Standard and Poor’s credit rating had the lowest quality rating in 2006; in 1980, by comparison, only 32% had this poor rating.

How big is this new economy? The value of global credit insurance alone is half the size of the global GDP and it is growing exponentially. Much of it is held by hedge funds that don’t publish audited balance sheets. So, it is clear we are in uncharted waters, and we already know that the social security is not properly funded so we cannot count on that design for our futures either.

Thinking like a CEO means taking into consideration all the situations that are in your control and all the situations that are out of your control, like the economy. I hope this little piece has given you a heads up and reasons to discuss this overview with your financial advisor(s).

Today’s Investment Opportunities – April 1, 2007

With the economy slowing and sector leadership waning, investor interests may be best served by considering funds, and management teams, that have shown a knack for good, old-fashioned stock-picking. Here’s an updated list of what we find attractive at present and a few thoughts as to why these funds might make sense in your portfolio.

If you recall, we added “bear market” and “market neutral” investment options to our list at the beginning of July 2006. Not the most auspicious time to do so, but we’re not just looking for funds that “zig when the market zags”. In order to make the list, these funds have to provide not only downside protection to a portfolio, but also a modest level of risk-adjusted excess return, or alpha. So, even if we get the ensuing market direction wrong, our market neutral and bear market funds have a good probability of mitigating directional bias.

As it turns out, a good example of a fund with these characteristics is the Prudent Bear fund we mentioned in July. From our work, the fund’s beta relative to the U.S. market was roughly -0.75 over the past year (through March 31, 2007). Given the broad U.S. stock market returned positive 11.28% over the last 12-months, one would expect Prudent Bear to have lost roughly 8.4%. Yet the fund generated positive returns of 7.4%. This difference of 15.9% would have allowed one to both insulate an investment portfolio to short-term moves on the downside while capturing a good deal of the market’s upside. We like that.

We present all three of the market neutral and bear market funds we recommended last July in the table below along with two funds we’d be unlikely to hold in either model portfolios, or client accounts, namely the Rydex Inverse S&P 500 and ProFunds Bear funds. The column marked “Beta Implied 1-year Return” is an estimate of the return an investor should have expected from just fund’s beta exposure to the broad market. The fund’s “Excess Return” is simply the difference between the fund’s total return and its Beta Implied 1-year Return.

A logical question that might arise – why do both the Rydex and ProFunds offerings show any positive “Excess Return”, given that they both attempt to mirror the overall market in the opposite direction? The answer stems from two sources. First, part of this benefit is due to the strategy that each employs - investing the proceeds from shorting futures in risk-free short-term obligations. This accounts for maybe 5% of each fund’s total returns and, given that Prudent Bear is roughly 75% short, about 3.75% of the excess return generated by this fund as well. The remainder of the excess return generated by Rydex and ProFunds can be attributed to the mis-match between the S&P 500 Index and the Russell 3000 index.

We’d be unlikely to recommend, much less hold, either the Rydex or ProFunds offerings simply because we don’t place much faith in our abilities at accurately calling the direction of the overall market over the short term – and that’s what benefiting from these funds requires. Yet in cases where an active market neutral or bear fund manager shows an adept ability to add modestly consistent excess return we’re more interested, as that excess return (assuming it persists) actually mitigates the risk if our directional biases are wrong.

Our opportunity list, shown below, is comprised solely of actively managed mutual funds that should be available through the Fidelity, Charles Schwab and TD Ameritrade fund platforms as “no-transaction fee” options. However, if you find an error in availability, let us know and we’ll be sure to correct it next quarter.

Changes in Fund Recommendations

Deletions

Chase Growth, Hillman Focused Advantage (CHASX & HCMAX) – both fund’s risk-adjusted returns have fallen off markedly since last July. We recommend swapping out of each into Janus Contrarian (JSVAX) and/or Allianz NFJ Dividend Value – D (PEIDX).

Fidelity Value Discovery (FVDFX) – still producing solid returns, we recommend continuing to hold in taxable accounts, but we’d rather dedicate new money to either Kinetics Paradigm (WWNPX), Kinetics Small Cap Opportunities (KSCOX), or Delafield (DEFIX). Realize the overlap between Kinetics Paradigm and Small Cap Opportunities is sizeable, so we’d select either one or the other.

James Equity & James Small Cap (JALCX, JASCX) – deterioration in both funds merit a move to greener pastures. We suggest Delafied (DEFIX) for owners of James Equity and Cambiar Conquistador Inv. (CAMSX) for James Small Cap holders.

Touchstone Small Cap Value Opportunities (TSVOX) – Shorter term prospects might be brighter with Cambiar Conquistador Inv. (CAMSX) or Royce Value Plus Service (RYVPX).

Fidelity International Discovery (FIGRX) – fund has closed. We’d recommend continuing to hold but new money is advised to look to Quant Foreign Value (QFVOX).

Additions

Janus Contrarian (JSVAX) – it looks like Janus is getting its groove back, and Contrarian is one of the timeliest of their offerings. Solid risk-adjusted returns for the past few years add to its attractiveness.

Allianz NFJ Dividend Value – D (PEIDX) – steady, consistent performance along with a modest expense ratio make this fund attractive in the large-cap value sector.

Delafield (DEFIX) – a solid way to get mid-cap value exposure. Much more cyclically positioned than either Kinetics Paradigm (WWNPX) or Kinetics Small Cap Opportunities (KSCOX) and hence a likely complement to either.

Royce Value Plus Service (RYVPX) – a nice small cap opportunity, Royce has done a great job with many of their small cap offerings and Value Plus Service is both well diversified and most timely.

Cambiar Conquistador Inv (CAMSX) – a relatively unknown fund with only $63MM under management, he performance has been solid since inception. This looks like a good opportunity to get in on the ground floor though the ride may be bumpy at times.

Fidelity Real Estate Income (FRIFX) – a nice conservative offering that seems to be completely misunderstood by Morningstar, who give it a one-star rating. The fund invests in preferred shares of real estate companies (REITs and operating companies) and is much more comparable to fixed income offerings than other REIT funds. A good fund for those seeking retirement income with some upside.

Alpine International Real Estate (EGRLX) – in our opinion the U.S. REIT sector is both picked-over and over-priced relative to the risk inherent in the sector. However, international REITs are in their infancy and, as the market develops, we’d expect a lot of opportunities for early investors. The yields are currently low, but expected to rise over the next few years as the REIT structure matures overseas. Funds in this sector are not without risk, but tuck this fund away for five years and we think you’ll be well rewarded.

Tax Deductibility of Management Fees

A few questions have come up from clients regarding the tax deductibility of investment management fees paid for ongoing advisory services such as those offered by Pariveda. Here’s a quick overview.

Investment management fees are considered a “below-the-line” miscellaneous expense for the taxpayer and are therefore deductible to the extent that they, combined with all other miscellaneous expenses, exceed 2% of the taxpayer’s adjusted gross income (AGI). The taxpayer is eligible for the deduction regardless of whether the account(s) in question are taxable, tax-deferred, or a combination.

However, in cases where the taxpayer falls under the Alternative Minimum Tax all “below-the-line”, including those for investment management fees, are disallowed.

Until a few years ago, there was confusion surrounding whether advisory fees paid for tax-deferred accounts such as IRAs and 401(k)’s had to paid from funds within the account, or whether these fees could be paid from outside funds, and if so, if these fees would be considered tax deductible. All this was cleared up in a 2005 private-letter ruling:

Advisers say the IRS clarified a gray area when it ruled that a wrap or asset-based fee for an IRA can be paid with outside money - and not run afoul of contribution rules - as opposed to having to be paid with pre-tax dollars from the IRA. The rule also clarified that the wrap fee paid with outside money would be tax deductible.

Interestingly, while advisory fees paid for tax-deferred accounts are deductible, brokerage commissions are not.

Retirement Savings of Dentists in Private Practice

ABSTRACT

Background Retirement planning is an issue that concerns all working people. In this article, the authors present their analysis of the results of a 1995 American Dental Association survey that asked dentists questions about their plans to finance their retirement.
Methods. The ADA's Survey Center conducts a periodic "Survey of Current Issues in Dentistry," which gauges dentists' opinions about a variety of topics of interest to dentistry. The authors analyzed the results of the 1995 survey in which retirement savings was one of the topics.

Results The majority of responding owner/dentists whose primary occupation was private practice (40.7 percent) indicated that they were relying only "a little" on the sales of their practices to finance their retirements. Overall, dentists whose primary occupation was private practice reported saving an average of 10.5 percent of their income specifically for retirement. The average total amount of money dentists invested in various retirement plans increased with age and was highest for the 55 to 59 and the 60 to 64 years of age cohorts. The only exception was the 401(k) plan, in which the peak occurred in the 65 years of age and older cohort.

Conclusions Fifteen years ago most dentists retired between the ages of 60 and 69 years. Recent trends show that dentists are retiring at younger ages. This means that while in practice, dentists must save enough to support themselves for 20 or more years of retirement.

Practice Implications The transition from private practice to retirement can be difficult. Therefore, planning for the future is important. Dentists can benefit from making appropriate decisions based on age, investment goals, risk tolerance, monetary constraints and time until retirement.


Brown LJ, Lazar V. Retirement Savings of Dentists in Private Practice. JADA 1999; 30(8):1210-18. Copyright © 1999 American Dental Association. All rights reserved. Reproduced by permission. For free access to the full text of the article, please click here; http://jada.ada.org/cgi/reprint/130/8/1210.

What Does Your Future Look Like?

Some say that tomorrow's dental industry will become more polarized, with the more successful practices working, acting, and looking radically different from the less successful ones. This is pretty important in light of a 2004 CNN study that found that only 43% of American workers were happy with their employer.

Leadership is often the quality that separates the great practices from the good ones, where are your going with yours? To advance into the future with confidence create a business vision by involving your entire team in the process. Please note that ultimately, handling stress, teamwork, working in a professional manor towards patient satisfaction and service is our goal, the higher purpose to which we serve. Yet, we have to arrive in the future financially sound and to provide dentistry of the highest quality, the dentists themselves have to be financially fit. What to do?

Did you know that in 2010, demographically speaking, there will be more baby boomer dentists selling there practices than is any time in history before or sense. It will be a peak year in supply; it will be a buyers demand market placing downward pressure on the value of dental offices. What else do we know? We know some good news and we know some bad news. Let’s take a look at some good news first. According to a study on ‘The Economics of Dental Practice – Present and Future’ by H. Barry Waldman and Steven P. Pealman released late last year in CDA Journal, the good news is “The combination of increased practitioner income, increases in proportion of the population reporting visits for dental services, decreases in the number of dental school graduates, decreases in the dentist-to-population ratio, and increases in the numbers of female students and practitioners (many of whom report significantly fewer work hours than their male counterparts), portends favorable economics for the dental practice.”

The bad news is that “the cost of dental care is “felt” in a greater extent than for other health services. Current and future funding arrangements for dental services could be vulnerable to economic downturns, efforts to control business overhead costs and continued minimal government support… Compared to other health services the reliance on 1) out-of-pocket funding for a major share of dental expenditures, and 2) limited government support of dental services raise questions regarding the infrastructure of dental economics.” The details of these findings are in the report, November 2006, Vol. 34. No. 11, CDA, Journal.

The Introspective Leader's Advantage

Your leadership style is influenced, in part, by the natural role you tend to play. Perhaps you're a mentor-type, a great talent-spotter, or a clinical perfectionist. Whatever your style, throughout your career you've probably heard that you have a reputation for demonstrating certain qualities.

If someone pointed your style out to you, there'd likely be a flash of recognition. Chances are, however, unless you've asked, no one is spelling it out for you. This means that it's up to you to stop and think about what your natural leadership style actually is. Leaders who take the time to truly understand their natural roles and how those roles affect those around them have an advantage over those who don't take this inward-looking journey.

Finding your Role - Once you've identified the role or roles that you believe you most naturally fill, it's useful to test them by looking for objective supporting evidence. Start by listing a few of the ways your chosen role might manifest itself at work. Are these actions that you come by naturally? If so, great; If not, ask yourself why not. What is limiting your ability to fill the kinds of roles you would like to fill?It's possible that your selections are slightly off course. If there is no patient demand, it is possible that the role you'd like to play isn't aligned with your abilities. In that case, you need to reexamine the range of roles you identify with and assess whether your aspirations are clouding your perceptions of your strengths and weaknesses.

Is it the Right Role for You? - At the extreme, an increased understanding of your role can help you determine whether your position offers the alignment you need if you are to be satisfied over the long term. Consider the dentist - we'll call him Paul - who, in 2004, bought into a large practice.

Paul was flattered to be at the head of such a large practice, even to qualify for the loan. But many of his colleagues felt that he would be happier as an associate (his longtime position prior to his current position). He does not know if he is doing a good job as owner, he has not had the benefit of any business training. He has been taught he is a dentist, not a business person.

At leadership levels, the opportunities to let natural roles emerge often are limited by the regular demands of a wet-fingered dentist or by situational circumstance, such as key staff out on maternity leave, an intense periods of work resulting from new procedures, or an accounts receivable problem. All these things factor in to the mix of required and voluntary things you do each day. It's true that the day-to-day demands of a dentist can easily obscure the kinds of avenues a leader might prefer to pursue. The struggle is to try and find the balance to free up time to do more of the kinds of things that make your work ultimately rewarding.

Gaining a Deeper Understanding of your Role – If we work with the mind set of a dentist as a CEO - we'll call him Paul II - whose clinical schedule is so intense that it crowds out most of the chances he has to step back and reflect or to mentor younger members of his staff, as he would like. The daily demands of Paul II play to his strengths as an intense perfectionist, and practice builder. But they don't allow him to be the people mover he also would like to be. Paul II knows that he is good at envisioning and articulating a long - term strategic view. He knows he is good at motivating and mentoring younger staff, if he only had the time. He knows that his time is invaluable in their eyes. In rare free moments, he meets with these people, answering their requests for general guidance and pep talks. Yet Paul II finds it difficult to incorporate that mentoring into what is already an overloaded schedule. His typical workweek is six days. Does Paul II have "an issue" delegating work? It's possible. More likely, the structure of his “control” isn't optimal. His practice is running him rather than the other way around.

Recently, however, Paul II has made some progress in incorporating more of his would-be role as mentor and visionary into his job, despite the organizational circumstances. His practice has begun offering a coach facilitated “SOS” Staff Meeting to help develop a “vision” and to help get his staff to be more accountable and responsible for their own success in the practice. He has now built into his schedule staff meetings designed to allow his staff input and time to develop strategies that they can collectively commit to as goals. This provides quality time between himself and his staff that they crave (and, by the same token, to allow himself to "indulge" in the kinds of mentoring behaviors he rarely has time for otherwise).

Becoming a Better Leader – Paul II is well aware that he needs to address the design and structure of his team. In the meantime, he has found a way to make his working life more enjoyable in the short term (Staff Meetings) and to send a message that he wants to leave a “Vision” for the long term.This CEO/dentist, Paul II, is also a good example of the benefit of having an increased understanding of one's own natural roles. He has begun to identify others' natural roles as well and, in doing so, is better able to temper the advice or counseling he gets and gives. He is also better able to set appropriate benchmarks for his staff with the understanding gained from staff meetings that actively discuss the roles that dominate his team now. Paul II is constantly seeking people (advisors and or coaches) who will instinctively help the team gel to become more effective.

The point is, at work, if you see something heading your way that doesn't play to your strengths, you can divert it or avoid it. However, you'll be rewarded if you bring people into the practice who can handle the kinds of things you're not great at." Are you managing your practice on the fly?

Adapted from Harvard Business School Press from Your Leadership Legacy - Why Looking Towards the Future will Make you a Better Leader Today by Robert M. Galford and Regina Fazio Maruca. Copyright 2006 Robert M. Galford and Regina Fazio Maruca. All Rights Reserved
http://www.management-issues.com/2007/1/30/opinion/the-introspective-leaders-advantage.asp

A Good Question From A Canadian Dentist

(Reprinted here with the permission of the Canadian Dental Association)

Q: I've found myself in the position of having to decide where to live, 7 years after graduation. My husband has been relocated to Vancouver and I am very ready to own my own practice. The question is, do I wait and associate in Vancouver and buy in Toronto because the remuneration is that much better (ie return to Toronto to live permanently) or do I buy in Vancouver because you do just as well? I realize both are very similar cities- small downtown practices or big all day and all night suburban practices.

I like both cities for different reasons so it's not a lifestyle decision per se.

I'm just wondering how dentists do across the provinces. Does anyone know the stats on that? The last thing I want to do is throw myself into an already saturated mix.

A: Your query is one of the most common questions that new and practicing dentists ask. Determining a good practice location has to take into consideration a wide variety of issues and information., most of them dealing with personal lifestyle choices.

But in terms of some data that may be helpful, incomes in the locations you have indicated, and population: dentist ratios may serve as good indicators for further exploration.

The population: dentist ratios in Vancouver and Toronto in 2005 were 852, and 934 respectively. The Canada average ratio was 1734, therefore both of these urban centres have a much greater concentration of dentists. However, this is to be expected, as the catchment area of patients is from the city centres. Nonetheless, these figures indicate that Vancouver may be slightly more saturated than Toronto, but not a significant difference.

When looking at salaries, occupational income data from the 2000 Canada census indicate that the average employment income for dentists was $108,034. This is the latest information we have from public sources on dental incomes. The average employment income in Vancouver was $79,138 versus $90,139 in Toronto. However, it should be noted that in every city male dentists reported earning significantly more income than female dentists. The median income of female dentists working in both Vancouver and Toronto were between $85,000 and $90,000, therefore, there were no significant differences for female dentists.

When taking this information into consideration, I would say that the differences in these two cities seem negligible and the most important factor when making this decision should be lifestyle considerations.

Costa Papadopoulos

Manager, Health Policy & Information
Canadian Dental Association

Editor’s note:

The CDA makes this information available from their website at www.cda-adc.ca. They have resources for your dental career,
http://www.cda-adc.ca/en/dental_profession/index.asp, and for members they have additional resources at the CDA Resource Centre at http://www.cda-adc.ca/en/members/login.asp or try
http://www.cda-adc.ca/en/members/resource/research/index.asp.

The American Dental Association keeps demographic information too. However the smallest area they cover is by county, not by city. They also have a large state and regional report called the Distribution of Dentists. These materials are available for a fee from their catalog department at www.adacatalog.org or https://siebel.ada.org/ecustomer_enu/start.swe?SWECmd=Start. Also you can go to the ADA home page, www.ada.org, and there, in the middle of the page is a link on Survey Research for Dentistry, or http://www.ada.org/ada/prod/survey/index.asp. Here you can find the free resource of FAQs at http://www.ada.org/ada/prod/survey/faq.asp.

What Is the Lifecycle of a Dental Career?

By analyzing the life cycle of a dental career we know that the first 10 years make up a period known as the rapid growth phase. At the end of this phase most of the practice’s assets will have been depreciated down significently. The next 15 years will be the peak earning years. Around the 25th year in practice a dentist will experience a slow but steady decline due to his or her desire to work less. According to the past president of the CDA, only 6% of dentists will be able to retire at the age of 65 in a manner and standard to which they are accustomed.

Don't miss out on the most missed opportunity in dentistry, that of capturing the goodwill value of your practice more than once in your career. This is accomplished by selling your practice more than once. For example, by years 10 -15 you have substantially built-up most of your practice's goodwill value and you have depreciated down most of the value of your assets. Think about it, this is the time when your practice is at its optimum value to sell, not thirty years later when you have reduced your schedule and are generally slowing the practice down.

This does not mean that you would have to move from your community, as you could consider selling 1/2 of your practice or all of your practice and commuting to a different area outside of any restrictive geographic covenant.

Mutual Funds with Re-invested Distributions? Don’t Overpay Your Taxes!

It’s tax season again, and that means questions, questions, questions. Over the course of the next few months we’ll be putting forth what we believe to be useful tidbits for investors with taxable accounts. This is the first.

Say you’re an investor holding mutual fund shares in a taxable brokerage account. You’ve elected to “re-invest” all distributions in the fund, meaning that dividends, as well as short and long-term capital gains are all paid out to you and then re-invested into additional shares of the fund. Your initial investment was $2,500 and over the past 3 years capital appreciation and re-invested distributions have allowed you to build up a sizable stake in the “XYZ Fund”. Further let’s assume that in each of the past 3 years the fund paid out $200 in distributions that were re-invested. On the last day of 2006, your stake is worth $5,000 and you sell your entire position. What’s the gain on which you’re taxed?

If you answered $2,500 (the $5,000 sales proceeds less the $2,500 initial investment), you’d be wrong and, more importantly, end up paying too much in taxes.

The correct tax basis is the summation of all money used to purchase shares – both the initial investment and all re-invested distributions. In this case this amounts to $3,100. So, when you go to sell the XYZ Fund, your realized gain would be $1,900 (the $5,000 sales proceeds less the $3,100 adjusted cost basis of all your shares).

Further, while the distributions are re-invested in additional XYZ shares each year and the re-invested amount added to the share basis, the distributions themselves are taxable in the year in which they’re paid out, regardless of the fact they’re re-invested. For example if the $200 in the first year were comprised of $100 long-term gains and $100 in short-term gains, you’d recognize these payouts on your year 1 tax returns.

Finally, if a re-invested distribution is held less than a full year, the shares purchased with this distribution are taxable as short-term gains (or losses) in the year the position was liquidated. Using our example, assuming the fund paid out its last distribution on December 1, 2006 and the entire position was then liquidated on December 31, 2006 the shares purchased with the last distribution are short-term gains or losses. The remainder would be taxed as long-term gains/losses.

Most accounting software such as Intuit Quicken and Microsoft Money automatically account for these distributions correctly. However, if you’re not using personal finance software, the steps noted above should help you avoid paying too much to Uncle Sam.