For many financial advisors, the prospect of working at a firm that provides a guaranteed salary and an existing book of business with a roster of solid clients may sound too good to be true, but Ottawa-based MD Physician Services Inc. (MDPS) is proving that such a business model is indeed available – and flourishing.
“Our clients and [advisors] really want to have a relationship with a firm that does right by them,” says Brian Peters, president and CEO of MDPS, “and not what is right by the bottom line.”
The firm, which is owned by the Ottawa-based Canadian Medical Association (CMA), is divided into several subsidiaries, including MD Private Investment Counsel, MD Private Trust Co., MD Insurance Agency Ltd. and MD Management Ltd. (a financial planning firm through which physicians and their families have access to financial advisors and investment products, including retirement saving products).
The parent firm’s history began with MD Management. In the early 1950s, the CMA found that many physicians were lacking when it came to having structured investment and savings plans, leaving many doctors with uncertain retirement plans.
As a result, the CMA played an instrumental role in lobbying the federal government in 1957 for tax deferral for self-employed taxpayers who wanted to save for retirement. That lobbying led to the creation of the RRSP.
Twelve years later, in 1969, the CMA opened MD Management. Today, this unit has approximately 200 advisors, referred to as “financial consultants,” in 49 branches across the country.
In addition, advisors throughout the various organizations within MDPS are able to access a team of about 100 specialists, including discretionary portfolio managers, estate and trust planners and licensed insurance advisors. MDPS’s financial consultants are able to work as a team with these specialists to create a “one-stop shop” experience for clients.
As well, MDPS is the manager of the MD family of investment funds, a group of 13 proprietary mutual funds and several pooled funds and portfolios.
“While these are all separate groups, they really work as a team to bring the right advisor to the table,” Peters says, “whether the client has an insurance need or wants to talk to a portfolio manager. The financial consultant remains part of the process, giving clients consistency in their financial planning.”
With $32 billion in assets under management, MDPS provides financial services for more than 100,000 niche clients who are members of the CMA, which has a membership of 80,000 medical professionals, as well as extended family members and allied health professionals within a CMA member’s practice.
“We are trying to create an environment in which physicians have enough peace of mind, so they can deliver the best health care possible,” Peters says. “If that means we are able to provide financial advice for their parents or their children [as well], then we want to make sure we are extending that offer. Anything to allow [MDPS clients] to get on with the business of medicine.”
As CMA members, MDPS clients automatically receive free financial planning services. Additional services, including insurance planning, estate and trust planning, and discretionary portfolio management, is offered at a competitive rate. MDPS also specializes in helping physicians incorporate their practices for tax efficiency.
“Physicians are self-employed and don’t have a pension,” Peters says. “So, ultimately, we want to be able to help them save enough, in a tax-effective way, to provide a pension for income during retirement.”
Advisors are recruited from all channels and industries within the financial services sector, including the mutual fund dealer channel and brokerage firms. Although Peters is always looking to expand the number of advisors at the firm, he is also careful when choosing who to bring on board: “We just want to make sure we have the right people in the right chairs.”
Along with MDPS’s unique clientele, it’s the compensation model that stands out when the firm is compared with its competitors. That’s because advisors are given a guaranteed salary that starts at $60,000-$88,000 for a junior associate, as well as an incentive bonus once a year. Upon joining the firm, all advisors are given an existing book, usually of about 200 clients, to start.
“Being a salaried professional is completely different than being 100% commissioned,” says John Naas, a senior financial consultant with MD Management in Halifax. “I like the idea of being free of conflict and being able to provide unbiased advice. I am never in a situation in which someone can question my values.”
Although bonuses are given when advisors reach certain targets, they are not sales- or product-driven, Peters explains. Rather, the incentive has three levels, based on individual, team and corporate goals. A bonus is determined by such factors as new net money and the number of new physician-clients brought in – although growing the book comprises less than 5% of an advisor’s daily activity, as Peters doesn’t want large book sizes to take away from the time an advisor spends with clients.
In addition to the base salary and bonus structure, MDPS provides advisors with a rewards/recognition program, a defined-benefit pension plan and flexible work/life arrangements.
Peters has found many advisors in today’s financial services sector who are not happy with the constant pressure of the commissions-based model, which requires advisors to be hitting sales targets constantly and resetting goals on a monthly basis. Furthermore, he points out that he has never lost an advisor because of MDPS’s compensation model.
Peter Kennedy, a senior financial consultant in London, Ont., joined the firm just over a year ago. Coming from a bank environment in which he was a certified financial planner, it took some time to get away from the sales-driven attitude associated with being an advisor in the banking industry.
One of the key drivers in Kennedy’s decision to join MDPS was the ability to refer clients to a discretionary portfolio manager, estate planner or an insurance advisor without having to lose them as clients. The firm’s catchphrase – “the all-in-one expert office” – is based on the stance that management doesn’t want to see clients shuffled around to various advisors.
“I was used to referring a client to another partner and then losing that client as a source of revenue on my book,” Kennedy says. “Here, you’re able to give clients what they need and still be involved in the process. It’s about providing consistency for clients and maintaining a trusting relationship.”
Naas, who has been in the financial services sector for 12 years, has worked at both a major bank-owned brokerage and an independent shop.
When Naas was recruited to join MD Management five years ago, the idea of becoming an advisor who works with a specialized niche clientele piqued his interest.
“Working with a high net-worth physician involves more complex planning than the average client,” Naas says. “I like the focus and the challenge that it provides me.”
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