1. Doctors start earning late: Absolutely no doubt about this! It takes a long time to do your MBBS, then you specialize further…well you are almost 32 by the time you start earning.

2. Doctors have a higher spending need: Doctors have to live like doctors, don’t they? So they spend more on clothes, car, the places they visit are expensive….so they have a lesser amount to save or invest.

3. Repaying educational loans: Not a very Indian concept, but people do borrow money to pay fees – and it has to be repaid.

4. Doctors are, well, for a better word, arrogant! Like all professionals they think ‘Investing / personal finance is easy, I do not need help. Well they are wrong. Their syllabus does not prepare them for anything in finance.

5. They are busy even when they start earning – they neglect their finances. (the fact that they neglect their own health is a matter of another story!)

6. They have no business sense – they do not know their costs, their variable costs, marginal costs, taxation, other revenues, etc. This puts them in a great stress – and largely have no clue about how to handle it.

7. They do not know how to sell their practice – running or otherwise!

Well there are many more reasons, some of which I have covered in my book for doctors. If you read carefully, most of these reasons come from a lack of knowledge of finance. Imagine asking doctors to attend a workshop on ‘Practice management’ or ‘Personal Finance’ – their immediate reaction is ‘We are not in it for money’ – well I think we are all in it for money, right?

If  99% of us work for money, how come only 1% of us make our money work for us?

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It can happen only with good wealth management techniques. Ha, the word wealth may mean different things to different people. When we talk of wealth we mean an amount of money which will let doctors do what they wish to do rather than what they must do. When Dr. Sunil Balinge and Dr. Dhavale decide to charge Rs. 5 for every patient in a slum in the suburbs of Mumbai, they are putting their wealth to good use.

The distinction is easy to understand – when Mr. Azim Premji, Mr. Ratan Tata and Mr. Rahul Bajaj work at their age of 70, it is by choice. When a 70 year old vegetable vendor or a taxi driver works hard, it is by force.

Wealth creation is largely for 3 purposes – one to support a good life style, second to help you in your non-earning times and very importantly to do charities.

There are enough books and magazines on wealth management, on real estate, on commodities – really that can get you active without earning a dime! Here I am creating a blog which is in the nature of a help for creating, preserving and giving away wealth.

Doctors as a group have a high IQ, they have undergone a lot of training and understand the advantages of discipline. All these are very, very useful ingredients for being a good wealth manager too. Surprisingly (or maybe not surprisingly?) creating wealth and managing wealth is a lot like managing health. Doctors only need to be re-introduced to some simple concepts like starting early, compounding, investing regularly, and some such concepts in investing. Sadly the MBBS course has no content on money – how to do business, how to look after your money, etc. I heard some colleges are making some changes, but I am not sure.

If doctors understand that a gynecologist cannot attend to your tooth and an anasthesist cannot perform a brain surgery, surely they will understand that a broker, a chartered accountant, a financial planner and a fund manager have different roles. Won’t they?

A doctor understands the compulsion of a chemist – he cannot charge for time spent, but a doctor can charge for time spent. This is the difference between a financial planner and a product seller. Simple is it not?

Investing is not really rocket science. Wealth management is not as difficult as say brain surgery. However the skills required are not frivolous either. Nor can it be learnt by watching television or reading a generic pink daily. And to even know whether you need a financial planner – and how involved you should be is not easy. You need to put in some effort at some basic learning….

So here we are empowering you to manage your wealth. You manage lives. This magazine will help you manage your life-style. Empower you to learn about risk, about retirement, about how to listen to your financial consultant, about how to document your assets, about how to plan for your kids’ education, how to set up a charitable trust and such other topics. I wish doctors keep reading my blog and giving me a feed-back about what they would like to see here.

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I am asked quite often why can you not suggest ’10 best stocks to buy’ or ‘top 5 mutual funds to invest’ or other simpler articles which can ‘lead us to action’.

I do have answers to all these questions, but it is difficult to convey it in a blog. The way to hell is paved with good intentions – ask any bureaucrat and he will tell you that. For example all the government ‘investor education programs’ are made by people who can do a 4 hour lecture and a 200 page on risk, but have never experienced risk! It is like a male gynaec talking about labor pain.

To me all lists in financial services literature is financial porn. If you think I have invented this word on the fly, sorry it is not original. See this link http://www.investorhome.com/porn.htm

It is easy to understand that a day and age when even smart educated people do not know the difference between a chemist and a doctor for people to ask for ‘Immediate, NOW kind of solutions’. I see the medical profession falling to this requirement of the ‘patient’ who is seen as the ‘client’. However I refuse to address doctors who ask for dinner and booze to attend my lectures.

Hey doc, you need me as much as I need you. If Wockhardt hospital were to do a lecture on how to take care of ‘MY heart’ I would attend it – and perhaps be happy to pay for it. I would not ask Wockhardt (Apollo, Hinduja, Ranbaxy, Fortis are you listening?) to give me food and booze.

Docs get chemists to do seminars and feel obliged to buy some medicine. It is like Wockhardt doing a workshop on ‘Heart care’ and in return expecting people to get a Angio done – just because they feel obliged. I would rather pay Rs. 500 for the lecture and be done

If I attend a free lecture and expect food and booze, well what I will get is porn. Understand doctors?

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If you are wondering what this means for doctors, read on!

Very rarely do doctors seek advice on investing in their own ‘profession’ – and try to make it a business. They seek outside investments. Clearly wealth creation from your own ‘profession’ – being converted into a business is a great thing to do. Is it possible for a doctor to do so? I think yes. Ask Dr. Prathap Reddy – the founder of Apollo Hospitals.

If you are a doctor earning well it is time you tried converting the profession into a business. This means you are earning not only on your skills as a doctor, but also on the ability to leverage the skills as a doctor-cum-businessman. What are the steps required for this metamorphosis from a larvae to a butterfly?

Well the following steps would be nice:

1.    Decide on how to grow the business – geographically (chain of small clinics with your brand name?) or by creating a hospital.
2.    Once you decide to set up a hospital – look for a good location where you can one day grow to be a really big hospital.
3.    Make a business plan – make your strategy, invest in resources, work the strategy and just do it!
4.    Be ready to let go of non medical functions to a partner with good management skills. Such a person should be brought in early in life so that the business can grow.
5.    Spend time on good systems, people, marketing, brand building, etc.
6.    Keep in mind funding sources – angel investors, venture capital and then listing. It is clearly the best way to create big wealth.
7.    Creating a big business has to start with a nice idea, perhaps a couple of like minded people to team up with you and the guts to launch the business.

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If you are wondering what this means for doctors, read on!

Very rarely do doctors seek advice on investing in their own ‘profession’ – and try to make it a business. They seek outside investments. Clearly wealth creation from your own ‘profession’ – being converted into a business is a great thing to do. Is it possible for a doctor to do so? I think yes. Ask Dr. Prathap Reddy – the founder of Apollo Hospitals.

If you are a doctor earning well it is time you tried converting the profession into a business. This means you are earning not only on your skills as a doctor, but also on the ability to leverage the skills as a doctor-cum-businessman. What are the steps required for this metamorphosis from a larvae to a butterfly?

Well the following steps would be nice:

1.    Decide on how to grow the business – geographically (chain of small clinics with your brand name?) or by creating a hospital.

2.    Once you decide to set up a hospital – look for a good location where you can one day grow to be a really big hospital.

3.    Make a business plan – make your strategy, invest in resources, work the strategy and just do it!

4.    Be ready to let go of non medical functions to a partner with good management skills. Such a

person should be brought in early in life so that the business can grow.

5.    Spend time on good systems, people, marketing, brand building, etc.

6.    Keep in mind funding sources – angel investors, venture capital and then listing. It is clearly the best way to create big wealth.

7.    Creating a big business has to start with a nice idea, perhaps a couple of like minded people to team up with you and the guts to launch the business.

stop listening to people who ask doctors to do SIP, ULIP, PPF,…..that is for employees. You have a choice of where to invest – make that choice wisely. Stop buying properties and some stupid shares just because you got some advise. The adviser needs to be changed, that is all.

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A small story might be in place. There is a simple mortal who is praying to Lord Shiva (Hindu God of Destruction of all evil). One of the smaller gods, Lord Indra, felt threatened by this little guy and wants to disturb his penance. So dressed as a simple man, Lord Indra, goes to this little guy and tells him “here is a lovely sword, will you mind looking after it for a while, please?”. The little man says yes.

After some time he touches the sword. Then he ties to see what it does. He cuts some grass, then a plant, then a small animal, then a big animal…then a man! He soon becomes a dacoit….and Indra’s work is done.

This doctor is a very successful guy who specialized in a particular field…and was doing very well, financially speaking.

That is to say till a 17 year old (from a large brokerage company – I am not naming the company) came and said “May I give you a bolt terminal”. When God wants to give you trouble, he takes away your brain. So in such a weak moment, the doctor said “yes”.

Then like a drinking habit…the Futures & Options (FnO) game started, first a small peg, then a large, then a Patiala peg now he is down financially. Every day he is signing cheque for paying a margin call. The doctor is down by a huge amount! His last 4 years income has been wiped out in just a few transactions. The equivalent is like saying, he did not bill any of his clients for the past 4 years.  Now the mood is somber. I told him Indra’s sword story. His father understood it. He may or may not have.

The takeaway is simple. Invest in the stock exchange – by the law of averages, you will get an average return. How much is likely to be the average return? It will be dividend yield + inflation + say 3%. However because your 17 year old ‘agent’ at the other end of the phone tells you, you enter the leveraged market, there is a  greater chance of losing a serious amount of your capital. This is all a clear case of “hope winning over experience”. There is very, very remote chance of a rookie making money with leverage on a regular basis.

Remember lenders love to lend to people – credit cards urge you to buy your shirt, cds, food stuff on their credit cards – and pay 5% p.m! Similar is the case with the broker who wants to fund you – they will fund you to pay the “margin”, give you Loan against shares, do margin trading for you,……the works. What they want is to earn about 8% of the amounts that you supposedly have in your bank account. It is a clear case of you knowing the game in full.

If you do not wish to spend time, effort and money on financial learning…..find out how expensive can financial ignorance is!

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Then it evolved…..to where we are today.

http://www.subramoney.com/book-written-by-me/

In the wealth ‘business’ we are still at the village doctor stage – you go to Goldman Sachs. They do financial planning for you. Ask you to invest in alpha, beta, omega…synthetic CDO, S&P rates them, then you buy the CDO. Unknown to you there is a vested interest for GS FOR THE SAME CD TO FAIL. So working at a cross purpose is not unheard of in the financial services world.

Now imagine in India you walk into a doctor’s clinic. He treats you and then says “I will not charge you  a fee because the pharma company is paying me money to recommend their product”. WE may feel jiterry. Actually we should. However we accept this scenario in the financial services industry. If a consultant tells us…’I charge Rs. 10,000 for a first meeting’ there is a good chance that the meeting will not happen.

Do doctors get good money to recommend drugs? Well Indian scenario as usual is murky -foreign jaunts are considered too cheap anyway, laptops are passe, using the company guest house in Ooty or Shimla is too less….so what works? Hard cash?

well take a look at what happens in USA…note the names – they sound Indian . Mera Bharat Mahan…

http://www.thebostonchannel.com/news/21106691/detail.html

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The greatest wealth in the world has not been created by inheritance – but by investing! It is only this generation that can make this comment. We are lucky to be living in times when we can make this statement. Let us take examples of Warren Buffet, Bill Gates, L N Mittal, Azim Premji, Ambani, …and I could go on.

If you are wondering what this means for doctors, read on! Very rarely do doctors seek advice on investing in their own ‘profession’ – and try to make it a business. They seek outside investments. Clearly wealth creation from your own ‘profession’ – being converted into a business is a great thing to do. Is it possible for a doctor to do so? I think yes. Ask Dr. Prathap Reddy – the founder of Apollo Hospitals. If you are a doctor earning well it is time you tried converting the profession into a business. This means you are earning not only on your skills as a doctor, but also on the ability to leverage the skills as a doctor-cum-businessman.

What are the steps required for this metamorphosis from a larvae to a butterfly? Well the following steps would be nice:

1. Decide on how to grow the business – geographically (chain of small clinics with your brand name?) or by creating a hospital.

2. Once you decide to set up a hospital – look for a good location where you can one day grow to be a really big hospital.

3. Make a business plan – make your strategy, invest in resources, work the strategy and just do it!

4. Be ready to let go of non medical functions to a partner with good management skills. Such a person should be brought in early in life so that the business can grow.

5. Spend time on good systems, people, marketing, brand building, etc.

6. Keep in mind funding sources – angel investors, venture capital and then listing. It is clearly the best way to create big wealth.

7. Creating a big business has to start with a nice idea, perhaps a couple of like minded people to team up with you and the guts to launch the business.

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And many others have made money because about say 30 years back (or say 50 years back) it was not very fashionable to “trade” equity. So when an electrode supplier liked the way L&T, Tata steel, Tata Motors or Hindalco were run, he was impressed, he bought the share and today is sitting on a few million rupees.

However some so called smart people have not chosen the shares to keep! They have got rid of Colgate, Hero Honda, Hindustan Unilever, State Bank of India, and invested in ‘B’ or even ‘E’ grade companies! The lure of the multi bagger is really huge. For me, the probability of an event happening is far more important – expected PV of the action is more important.

It is not uncommon for intelligent, competent people who have been successful in business or an academic environment to try their hands at trading on the markets. If I have been better than my peers in academics, I should be better than them in investing is it not?

In essence, because they have managed to outpace the competition in the business or university sector, they think they can do the same with investments. However, while this logic may be appealing, it does not always pay off and many of these individuals lose money for a variety of reasons.

If in a small incident like being “first” in a lunch queue happens by luck, or rather you are willing that it happened by luck, why will people not admit that they got a good share by luck? I do not know maybe a doctor can answer this question!

Speaking of doctors, they make excellent investors – ask the bank RMs who deal with them .

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A doctor’s expense sheet

Gross Income                                                 1,700,000

Pensions contribution                                                           100,000
Tax                                                                                                  250,000

Cash Inflow per annum 1,350,000

Outflow:
School fees                                             100,000
Electricity                                                  60,000
Petrol                                                           72,000
Driver                                                          72,000
Entertainment                                          55,000
Food                                                            144,000
Household exp                                          50,000
Telephone                                                    36,000
House EMI                                                400,000
Vacation                                                     100,000
Clothes etc.                                                  70,000
Maintenance charges                               16,000
Miscellaneous                                             60,000

Total Rs.                                                                             1,235,000

Surplus                                    115,000

I was quite zapped when he told me that on an income of about Rs. 17 lakhs he has almost no surplus to invest for his retirement. He is not very old by doctor standards – he is just 43 years old. But wait a minute, when he came to me, he and his wife were about to upgrade to a car costing Rs. 15 lakhs (EMI Rs. 28000 per month) and a house costing Rs. 100 lakhs  (differential EMI Rs. 25000 per month).

They were quite stunned when they tabulated their expenses and realized that one extra expense like a car or a house repair could create a serious cash flow crisis! Dr. Pradeep’s father (who retired as a clerk in BEST – Mumbai’s transport company) was living on his pension with his wife in another suburb of Mumbai. He had started a Public Provident fund account for Dr. Pradeep and made sure Dr. Pradeep contributed Rs. 70,000 to it annually. That was Dr. Pradeep’s only saving. He had no investments AT ALL. His life insurance (I estimated he needs Rs. 3 crores as a term cover – and that would cost Rs. 65,000 per annum) was also NIL. His medical insurance was NIL. His parents had a cover from New India for Rs. 300,000 for which his father was paying the premium.

Normally my alarm levels would have been lower – doctors earn for a very long period of time. However, Dr. Pradeep was a General Practitioner in a lower middle class area – and his clients ability to pay more fees was not certain. He had been in practice for about 12 years and his income had reached a plateau.

What can now be done? Want inputs from readers….!

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