Benefits to Leveraging Advisors

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Leveraging Advisors

Leveraging Advisors
Leveraging advisors is one application of Leverage that the wealthy believe is integral to their success, yet many Doctors ignore or undervalue it. Look at any wealthy person’s inner circle and you will almost always see key business and financial advisors who are involved in most of their decisions. The advisors’ charge is to help develop a plan, analyze how every step fits (or doesn’t fit) into their plan, and help them avoid numerous pitfalls that could arise from straying from the course.
Simply put, most successful business owners recognize that it makes more sense to hire advisors to help them handle their planning than it does to try to do it themselves. Doing it them-selves is not only a bad idea because the client undoubtedly does not have the experience and expertise in all the areas needed in planning, but it also violates the principles of Leverage.
By “doing it themselves,” Doctors would be spending their time sub-optimally, instead of in the desired highest and best use of their time. In other words, does it pay for a neurosurgeon to spend three hours of his time researching a disability policy when a disability expert could do it in one hour? Also, consider that those three hours could have been spent seeing patients and making more money than the disability expert will be paid. And do you think the Doctor would enjoy this research more than he would enjoy playing golf or relaxing on the beach? Probably not.
Finally, what is the likelihood that the Doctor will make the right analysis and decision on the policy? Is he an expert? Has he looked at hundreds or thousands of policies in the past? Why would you think he would do any better job performing this task than would the disability expert in performing a neurological exam?
Despite the obvious pitfalls of fighting the principles of Leverage, some Doctors make the mistake of foregoing advisors and attempting to “do it themselves.” They are stuck in the mindset of saving a penny and losing a dollar.
This leads us to a very important statement that may seem crazy at first:
Doctors must realize that time is worth more than money.
Instead of looking for ways to save money by doing things themselves, Doctors must look for highly qualified people to handle as many tasks as possible so they can focus on the best possible use of their valuable time. Since the right advisory team has expertise that physicians don’t have, the right advisors can do the job in much less time than the physician or the wrong advisors could. Since a job done poorly will need to be repeated, doing it right the first time, even at a higher hourly rate, can actually save money in the long run. Additionally, when a Doctor can pay someone to do what they do best, this gives the physician more time to do what he does best—which undoubtedly is what will make the most money (seeing patients, running a practice, investing in real estate, etc.).

Complexity Demands LePeople meeting at computer - Contemporaryveraging Advisors
We have found that, the greater the wealth of the individual or family, the more important the role of the advisor team. As the client’s wealth increases, the more complex the comprehensive financial situation becomes. As the situation grows more complex, the client’s need to Leverage the advisors’ expertise and experience to save time and maximize total benefit increases exponentially.
To illustrate how complexity grows exponentially, let’s consider the following two situations. The first chart below shows the relationship between two people. The second chart shows the six different relationships that exist when you have four people in a group.

Situation 1: Relationship Between Two People
In the chart above, you can see that John and Paul have one relationship. There is only one relationship when you have two people. This seems relatively easy to manage as you have two people and only one relationship. Let us see what happens to the complexity of the interactions when we have four people in a group. This is illustrated in the next chart.

Situation 2: Relationship Between Four People
In the chart above, you will see John, Paul, George and Ringo. There are two additional people than we saw in the first chart. Doubling the number of people in the group actually increased the unique interactions by 500% from 1 interaction to 6 interactions (John and Paul, John and Ringo, John and George, Paul and Ringo, Paul and George, George and Ringo). Though it only takes one good relationship for two people to work together, it takes six good relationships for a group of four people to work well together. If one of the six relationships is strained, the entire group may have to be disbanded.
This same analogy can be applied to the elements of your financial plan. All elements of your plan, and all advisors in your plan, must work well together. That means that it is at least 500% more work to manage four businesses or elements of a comprehensive financial plan than it is to manage two businesses or elements of financial plan. If you have eight businesses or elements of a plan, then you have 56 different interactions to monitor. You can see how the complexity of the situation increases quickly!

To see how this general theory of complexity can be practically applied to planning for physicians, we need to understand what the physician’s concerns are. Below is a partial list of common financial planning concerns among physicians:
· Managing growth of the assets
· Managing lawsuit risks from employees, patients, and competitors
· Protecting assets from eventual lawsuits
· Managing the investment risk while attempting to grow assets
· Managing tax liabilities to maximize after-tax growth
· Managing business succession and estate planning concerns
· Protecting family members against a premature death or disability
· Protecting family’s inheritance against lawsuits, taxes, and divorce
Surprisingly, physicians worry about all of the More

How To Work Less

Posted by & filed under Business Owners, Doctors, Education.

How to Work Less

Work Less and Enjoy LifeThere is no doubt that hard work is a key to success. However, this character trait is not one we can teach. Some people become harder workers as they mature, but seldom does a zebra change its stripes. There are generally hard workers and not-so-hard workers. The goal of this section on Leverage is to help you get the most out of any level of effort. Whether you fancy yourself hard working or laid-back, Leverage can help you get more out of your desired amount of effort. In this chapter, we will discuss the capacity problems of Leverage, how education can increase your ability to Leverage your effort and then suggest ways physicians can overcome the barriers of capacity.

You Can Leverage Hard Work…But Effort Is A Capacity Problem
The basic and inherent problem with effort is that you only have two hands and two feet, and there are only 24 hours in a day. If we consider the case of two landscapers (Lazy Larry and Manic Mike) with very different work ethics, we can illustrate these physical constraints we all have.
Let’s assume that Lazy Larry and Manic Mike earn $50 per house per week. If Lazy Larry works five days per week and landscapes 8 houses per day, he will earn $2,000 per week before paying overhead, staff, equipment, taxes, etc. Manic Mike can work seven days per week and landscape 10 houses per day. This would give him precious little time off for family or personal time, but he would earn $3,500 per week before all of his expenses.
Both of these landscapers might consider themselves successful (depending on their goals and values). But if hard working Manic Mike wants to make more money, there aren’t enough hours in the day or days in the week unless he does something that earns him more money per house or he finds a way to Leverage something other than his own effort. The next application of Leverage could help Mike do just that.

Leveraging Education
The idea of leveraging education to create wealth is no secret. In fact, it has become part of the American Dream. For over a century, immigrants have come to America and have taken advantage of the educational system. They have pushed their children to do well in school in hopes that they would get a good job and enjoy a higher standard of living. They have also pushed their children to find careers that pay them more money than a career like Manic Mike chose.
Leveraging education is a key element of building and protecting wealth. To prove this point, consider the following salaries of highly educated professions. When considering the earning potential of these professions, keep in mind that the median U.S. household income for the year 2007 was $48,201, which means that half of all United States households earned less than $48,201 per year. (US Census Bureau’s 8/27/07 Current Population Survey (CPS)). According to a USA Today article on 1/18/06, the first year salary plus signing bonus for an MBA (2 years of graduate school) was $106,000.
According to MD Salaries (www.mdsalaries.blogspot.com), the first year salary of a neurosurgeon ranged between $350,000 and $417,000 in each of these cities: Houston, New York, Miami, Los Angeles and Seattle. Neurosurgery requires the completion of four years of medical school, a one-year internship, and a rigorous 5- to 7-year residency. Thus, there is no doubt that leveraging education can help you earn more money per year and increase your wealth faster than if you had a job with a lower level of education. Physicians use this type of Leverage quite well.

Education And Effort Are Not Enough
Would you be surprised to hear that the neurosurgeon mentioned above and Manic Mike have the same problem? While we are not saying that Mike is performing brain surgery, we are suggesting that they both have the same fundamental problem—albeit at a different level of income. Mike doesn’t have enough hours in the day or days in the week to increase his business. Similarly, a neurosurgeon’s income is limited by the number of surgeries he can perform as well as constrained by the number of hours in a day and days in a week. Even if you assume that there is an endless supply of patients who need brain surgery, and there is an endless supply of lawns to be mowed, the surgeon is limited just like Mike. In other words, a landscaper earning $50 per house has the same capacity problem as a neurosurgeon earning $500 per hour because:
1. They are limited in the amount of money they can earn until they figure out how to Leverage what they do
2. They only make money when they are actually working
This is a lesson that savvy business owners and investors figured out long ago. As a result, the most successful business owners:
· Always focus on the Leverage of any business.
· Never consider increasing effort as a legitimate, long term means to increasing income.
· Never enter into a business that requires them to constantly “work” to make money.
For these reasons, we prefer to focus our articles, seminars, books, and personal consulting recommendations on strategies that help Leverage assets and Leverage people.

The Diagnosis
All teenagers have parents, teachers and coaches who tell them to work harder. We prefer to tell you—and show you—how to work smarter without having to work harder (or having to clean your room or take out the trash). The Lesson applies to anyone—no matter how hard working or lazy you may be. If you want to work less and build more, you can do it. Applications of this “smarter working” lifestyle will be the focus of the next two chapters.

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