Maui was always a favorite vacation spot of mine growing up. One of the best parts was my aunt and uncle’s snorkel business. We would wake up early for the calm water, quickly eat a pineapple donut for breakfast, and set sail. Having been in business for decades, they knew the island well. Whatever you were looking for (or not looking for, like sharks), they could find it.
Thirty years later, I am now taking my family to Hawaii. While we still enjoy the water and all it has to offer, things have changed, most notably the coral reefs and the ecosystems they support. (more…)
This post was co-authored by Wealth Advisor Lowell Parker, CFP® and Information Systems Manager Rodney Gonzales.
As banks become increasingly difficult for cybercriminals to hack, high net-worth families are the next logical targets. These criminals are organized, patient, and in some cases, well-funded. Cybercrime is also underreported, and while the court system is catching up with the expansion of laws and penalties for cyber-related crimes, cases remain hard to solve or even prove.
Having your personal information compromised isn’t a matter of “if,” but “when.” It’s less expensive to take preventative measures than it is to investigate and eliminate threats. It’s imperative that you take the right precautions both externally, with your vendors and service providers, as well as internally with your home computers and networked systems. (more…)
Physicians with at least one retirement account (for example, an IRA, Roth IRA or 401k) and one taxable account will benefit from higher returns with comprehensive asset location. In asset location, all accounts supporting the same financial objectives (for example, providing income in retirement) are viewed collectively as a single portfolio. Asset classes (for example, U.S. stocks or government bonds) are preferentially placed in either retirement or taxable accounts.
In taxable accounts, high-yielding assets have a higher tax burden than in retirement accounts. These assets are prioritized for placement in retirement accounts. In contrast, tax-free municipal bonds bear no tax burden, so they are preferentially placed in a taxable account. The result is the risk-adjusted expected return from the sum of all accounts increases. This is particularly important for physicians who, by virtue of being in high tax brackets, pay a lot of taxes.
Consider what happens if you place a high-yielding investment in a non-tax sheltered account. You must pay 39.6% (top tax rate) on non-qualified distributions from that investment, as opposed to sheltering that high-yielding asset in a tax-deferred account. Clearly, your net returns are dependent upon more than just appreciation. Smart asset location matters, especially for high income earning physicians.
Think of it like a hospital – a complex entity separated into different wings and departments to maximize efficiency. Each department houses doctors and staff who are best equipped for their roles. Emergency room doctors are going to be dealing with people needing the most immediate and intense level of care. An ER doctor wouldn’t treat a patient with a sprained finger while someone who was just in a traumatic car accident sits in the waiting room. In much the same way, your aggregate investment portfolio can be separated into different accounts and investment vehicles. Inside each of those vehicles are investments and holdings that are suited for the particular account type.
A more efficient hospital will lead to greater outcomes and profitability. The same is true for your portfolio. Strategic asset location maximizes efficiency and leads to better outcomes and portfolio growth.
Last fall I had the pleasure of interviewing Dr. Juan Aragon, Executive Director of Primary Care, Specialties and Physicians’ Services at Evergreen Health.
His story begins in Costa Rica where he grew up and completed his medical training. His journey into medicine was sparked on a casual car ride with his father who asked Juan the question: “what are you going to do for a living?” When Juan told him that he wanted to be a missionary, his father pressed back, asking how he would pay the bills. Right then and there, Juan decided he would go into medicine.
After starting a medical training program in Costa Rica, Juan took 9 months off for bible school at Capernwray Hall in England. His goal was to mature, away from his family, and spend some time in self-reflection to ensure that medical school was truly the right path for him.
Juan finished medical school at age 24 and took a job in the remote location of Drakes Bay on the Oso Peninsula in Costa Rica. Juan was the second doctor Drakes Bay ever had and, needless to say, he gained a ton of clinical experience there.
Missionary work continued to call to him, so he left Drakes Bay to work for a bible school, and did pro-bono work for the affiliated hospital. This is where he learned the administrative side of medicine. And, how much he liked it. He wore a lot of hats: Chief of Human Resources, Chief Risk Officer, etc., and by the time he moved on, the school had built up an unprecedented $300,000 cash reserve.
In 2008 he received his Master of Medical Management, Health Systems Management from Tulane University. He moved to Seattle in 2009 to start his career at Evergreen Health.
After learning about his background, I asked Dr. Aragon a series of questions, as follows:
Lowell: How do you give back?
Juan: My religion – Christianity – should have a visible impact. It is not just a philosophy. Early on I gave back with my talents and skills via board participation. I focused on organizations that had youth programs, like the YMCA, with the goal of helping kids navigate the messy teen years. I have continued to work with the YMCA in tandem with Evergreen.
I am currently involved with the University of Washington Masters in Health Administration program. I see these kids as the ones who will be here when I am not. Investing in their future is paramount. My participation in panels and business cases also helps me learn and succeed in my current role at Evergreen Health.
Lowell: How do you “Live Fully”?
Juan: At the end of the day when you look back at a day’s worth, a year’s worth or even 10 years’ worth of time, you need to ask: did I invest enough time in my family that I am preparing them to be better individuals to face the challenges of this world than I am? Am I fully investing in the people I love the most? Was I conscious enough to be grateful to the people who contributed to my life, in recognition that I am where I am because of them? Answering “yes” to these question brings fullness. A friend once told me – “be grateful with your treasures, be grateful with your talents and be grateful with your touch.”
Lowell: What is the best piece of financial advice you ever received?
Juan: Live like it’s your last day but plan like you are going to live a hundred years. Don’t get into credit card debt. Save enough money to have fun. Always have the attitude that if you are willing to give, opportunities will present themselves constantly. Look at things as opportunities. The same thing is true with investing: Don’t leave it all in one place. Leave it where you can take advantage of opportunities.
Lowell: Do you miss practicing medicine?
Juan: Yes. But, I made the choice in 2008 to pursue an administrative career. I find alternative ways to be with people, and I see the long term impact that my work will have on patients. I know that at some point, I or my loved ones will need these services and I want to make sure they are the best services possible.
Lowell: What is the biggest challenge and opportunity for health care?
Juan: Challenge – Affordability. Our health care is so expensive that it is not sustainable. For the past 6 years, we have tried 200 experiments and none have delivered results. Opportunity – Same thing. If you think about how our nation was formed, it has always figured out how to force its way through complex problems. The US is the way it is because it figures out innovative solutions to transform the market. We will break through. Consider the innovations of Amazon, Google and Apple for instance.
Lowell: What advice do you have for physicians?
Juan: As you are figuring out what you want to do with your life, take the time to figure out what you are passionate about. Make sure you have the skills and financial support to do it. Figure out your priorities and have a plan to make sure those priorities are met. As long as you have a plan, you know where you are going. You can figure it out. Ask for help. Design the map to fit your lifestyle. Develop a plan to make enough money and enjoy it. Have a plan and understand choices and tradeoffs. Understand where true north is. Figure out how to overcome obstacles and stay on track.
Society presses kids to have it all figured out; this pressure is incredible. You do not have to have it all figured out. Have a plan. Talk to smart people. Work hard. Have a good attitude. Don’t think that when you go to college you need to have your retirement date figured out. It’s okay to not know all the answers. Never be afraid to ask for help.
Juan is an impressive person, and I thoroughly enjoyed speaking with him. His global perspective, work ethic, and humble attitude bring a unique perspective to the medical field. I hope you glean some insight from his thoughts, and that they lead you to a fuller place.
Medical technology (medtech) angel investments can be a great opportunity for physicians to engage as mentors with startup companies within their field of expertise. A cardiac surgeon, for instance, can offer expertise to an entrepreneur building a new stint. Typically the physician will make some level of investment and be heavily involved in the company, hopefully seeing it and their investment prosper.
Another route is to invest in multiple companies and be much less involved. Obviously, it would be difficult to offer day-to-day or even month-to-month mentorship for more than one or two companies as a busy physician. In this case, you need to be economical and look for resources to help you with your investment selection. Most major cities have angel investment groups that, for a nominal fee, will help you vet companies and offer other resources as you make your investment decision.
Your best option for plugging in to medtech angel investing in Seattle is WINGS.
Whichever route you take (mentor or passive investor), be aware of the risk and return. While not much has been written on the subject, the white paper “Returns to Angel Investors in Groups” by Robert Wiltbank and Warren Boeker does a nice job of setting the expectations.
Here are seven things you need to know when considering medtech angel investments:
Risk. 30% of your investments will fail. 30% will return your money. 10% will go big. 20% will return something. To succeed, you must understand this and have the wherewithal (assets) and stomach (guts) to ride out the losses.
Time horizon. Companies that fail (lemons), fail faster than those that succeed (plums). Proper investment requires patience and the ability to reinvest over periods of time.
Invest 5-10% of your portfolio assets. Your risk is concentrated and your return is dependent upon “home runs.” Subjecting more than 5-10% of your assets is just too risky.
Diversification. Single company risk is big with these investments. Prudent investment requires investing in at least 15 to 20 companies.
Involvement. If mentoring within your field of expertise is the desired path, how much time do you have to devote to it?
Do your due diligence, or depend on a group such as WINGS to help you do it. Success rates and due diligence are highly correlated.
If you’re serious about becoming a medtech angel investor, learn the local landscape. Spend some time with local groups, such as WINGS. Figure out how much you want to invest and what role you want to take on. Most importantly, know your downside risk, be mechanical in your decision-making and limit your investment to 5-10% of your total portfolio.