Reese Harper, a Certified Financial Planner and founder of Dentist Advisor, specializes in financial planning for dentists. In this episode, learn his thoughts on the financial planning industry, how to be successful running a dental business and whether now is the best time in history to be a dentist.
In today’s episode, you’ll find out:
- How Reese got started with his firm
- His thoughts on the financial planning industry
- Money conflicts of interest in financial planning
- The typical wealth and income Reese sees with his dental clients
- How DSOs (Dental Support Organizations) are affecting dentistry
- What to focus on early in your dental career
- Why there’s a place for different business models in dentistry
- Why dentists have to think about the business side of things
- Why trust is everything in a producer-consumer relationship
- Reese’s thoughts on a fair price for a financial planner
- How income and net worth impact the cost of a financial adviser
- Is now the best time in history to be a dentist?
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Episode 45 Transcript
Travis Hornsby [00:00:01] Hello, everyone. Another wonderful episode of the Student Loan Planner Podcast for you today. I’ve got the man, the myth, the legend Reese Harper, the founder of the Dentist Money Show and the owner of Dentist Advisors. How you doing, Reese?
Reese Harper [00:00:11] Travis, it’s always a pleasure, man. I love talking to smart people, and you’re one of my favorites.
Travis [00:00:17] Good, good. Well, just for disclosure purposes, the audience should know, you know, Reese didn’t sponsor this episode, or he didn’t pay anything. It’s not an advertising thing. This is just a conversation between two podcasters just about the future of — We’ll talk a lot about dentistry because obviously Reese has got a lot of specialty and focus on that world. But we’ll talk about just general financial planning stuff, too. Everybody can benefit from this show. You don’t have to be a dentist to really get a lot out of this.
How Reese got started with his firm
Travis [00:00:41] Reese, maybe you could start off just telling us a little bit about yourself, your firm. And then maybe tell us one good thing about the financial industry and one lousy thing about it and just how it’s set up today.
Reese [00:00:50] Yeah, man. I was not planning on being a financial adviser. My undergraduate was actually in music. My graduate degree was in finance. So I kind of gradually got exposure to — I thought I was going to be a teacher of some kind. And I did English and music in my undergrad, and I thought, you know, maybe I’ll do some kind of teaching.
Reese [00:01:13] And I actually got a job — an internship — just at the end of my undergrad at a financial planning firm, and for the first time, I learned what financial planning was. This is, like, 2003. I just saw this big, confusing world that I was never exposed to during my childhood or during college or high school. And I was like, why didn’t anyone teach me about any of this stuff? Like, I’m going to be screwed if I don’t learn about it.
Reese [00:01:37] And kind of selfishly, I just got really excited about personal finance right from that moment. Investments and loans and debt service and how to make the right career choice and how to set up a business properly — it was just this whole world I had never been exposed to before. And I saw a lot of people working in the industry. And it was kind of a — I didn’t know at the time how young the industry was. The financial planning really didn’t even start until, like, the 1980s. Maybe mid-1970s, you saw some people doing financial planning. It’s really a new industry, and there [are] a lot of different people in different business models throughout it.
Reese [00:02:17] And it’s quite a cluster of confusion as to — All of them call themselves the same thing, right? It’s — You’re a financial adviser, a financial planner. But it could range from being, like, an insurance car salesman, like, at State Farm that — His business card says “financial adviser” on it to, like, a hedge fund manager [on] the East Coast to a financial adviser for dentists like me. They all call themselves the same thing.
Reese [00:02:42] And there’s not a lot of — at least until more recently, there hasn’t been a lot of specialization in the industry. I mean, dentistry is mostly just a general practice for the first 150 years. There really wasn’t, like, specialization in the dental industry for quite some time. And you’re just barely starting to see financial planning start to mature, establish a common set of curriculum for undergraduate degrees, to have a common set of ethical standards that are kind of being understood by the public as best practice.
Reese [00:03:17] But, man, in 2003 when I started, there was a lot of damage being done. I worked at a firm for three years. I learned some of the best things I’ve ever learned there. But I also learned some of the worst things that I had to kind of relearn because, in my opinion, the firm was not positioned in a way that would serve the needs of people the best way.
Reese [00:03:41] So I started my own business in 2007 and have just been working on it ever since. We’re a fee-only registered investment adviser that doesn’t sell any products for a commission. We just charge either a fixed fee, an hourly rate or a percentage against someone’s account to give them broad, comprehensive, personal CFO (Chief Financial Officer) type advice. That’s where we’re at. And that’s kind of a little bit of my journey.
His thoughts on the financial planning industry
Travis [00:04:05] Cool. And what about that one good thing about the industry and one thing that the industry is still —
Reese [00:04:10] Well, I’d say one good thing about the industry is you have a lot of people that really love teaching. They love helping. It really attracts people that wanted to go into something that was educational, and that was kind of a big, life-impact kind of motivation for a lot of people.
Reese [00:04:30] The downside is it attracts a lot of people that are super money hungry. So it attracts people that are trying to find a career where they could make a lot of money really fast, and there [are] a lot of ways that you can screw people over trying to make a lot of money really fast in this industry. And so that’s kind of one of the negative things. We’ve tried to curb that in how we compensate our advisers and how we have built our infrastructure and how we charge our clients. We don’t think anyone should be getting paid on a specific financial product of any kind if they’re going to deliver advice.
Reese [00:05:05] I don’t mind people getting paid commissions on products if they’re saying what they are. Like, if I’m a life insurance broker and I say I’m a life insurance agent and I get paid to help you find the best life insurance policy, that to me is fine. But if you’re a financial adviser and then you’re kind of hiding the fact that you make the majority of your money through insurance or through annuities or through REIT (real estate investment trust) transactions — I’ve just seen so many abuses of that that I’m really hesitant to ever suggest people work with someone in that kind of a model.
Reese [00:05:37] So it attracts people that are money hungry, but it also attracts people that really care. And I’ve met some of the kindest, most generous people of my life in this industry. So, it attracts both types.
Travis [00:05:47] So, can you quantify that? So a guy wants to come to my dental school and give a talk about why I need disability insurance, right? And so my disability policy is, like, $250 a month. How much does that guy get paid for selling that to me?
Reese [00:06:00] Typically, they can make anywhere from — Some companies are pretty conservative, so they don’t pay out as high a commission on the first year. But they pay higher renewals. So maybe the first year for a Guardian — one of the bigger companies — they might pay out 50% to the broker in that first year. But another 50% gets paid to his manager in their office, whatever his regional office is. If he happens to be the manager, then maybe he gets paid both. So could be up to 100% of whatever you put in the first year.
Reese [00:06:29] So if you put in $250 bucks a month, you might make $3,000 grand on that. And then on top of that, every year that you continue with the policy, the longer you keep it and don’t drop it, they get bonused for having you keep the policy. You know, they get about 18 — you know, 15% to 20% per year on an ongoing basis to continue to have you renew that policy. If you’re wanting to reduce your coverage or slow down because you’ve got enough liquidity to where you don’t need disability insurance anymore, he’ll have an incentive to make you continue the policy financially at least.
Conflicts of interest in financial planning
Travis [00:07:03] Sure. And everybody, I think, needs some sort of disability insurance for sure. Usually, it’s a guy. I say a guy, but usually it’s a guy that comes into your dental school to give a talk — or medical school or whatever. Basically, everybody in that classroom is a potential $3,000 check for that person. What kind of conflicts does that create?
Reese [00:07:19] A lot of conflicts because, for example, in the dental industry, I think there’s a more efficient way to get disability coverage down to the marketplace. The American Dental Association’s policy doesn’t pay a commission to any broker. The cost is substantially lower than what it would be if you had to pay a broker to go out and sell the policy.
Reese [00:07:42] Companies like The Standard and MetLife and Guardian: When they started, they built their compensation model to pay these brokers. But then they didn’t really envision a future where the public would be so educated that dentists were just saying, “I know I need disability. Like, I just want to have a direct-to-carrier purchase — a wholesale purchase.”
Reese [00:08:00] The American Dental Association has created a contract that’s pretty compelling. It doesn’t have all the bells and whistles that one might have if it was twice as expensive. But this American Dental Association contract might be a third of the price of the Guardian contract or the MetLife contract or the MassMutual contract. I don’t want to throw any particular carrier under the bus. But they’ve stripped out a lot of the cost, and the benefits are pretty strong.
Reese [00:08:24] I would feel comfortable personally owning a disability insurance policy through the American Dental Association. It wouldn’t cover me under all possible scenarios, meaning there are some scenarios that are very improbable that the most expensive policy would cover you for. But for 90 — maybe [92%] of claims that are paid, all policies pay out very similarly. If throughout your career you could save $100,000 by having a policy that covered you under 92% of circumstances, that might be a good thing.
Reese [00:08:57] But someone who is selling you that policy would never educate you on those differences real objectively. An adviser that you’re paying for advice could, if they understood well enough how to educate you on those topics. A salesperson would inherently have a hard time being open-minded to that because any type of policy that they didn’t get paid to sell, they’re not going to speak highly of it.
Reese [00:09:21] I just think that’s the inherent conflict of getting advice from anyone who gets paid to sell you something, whether it’s a realtor, a mortgage broker. Whether it’s a life insurance agent, a car insurance salesman — like, it’s difficult to get advice from someone who only makes money if you purchase their product.
The typical wealth and income Reese sees with his dentist clients
Travis [00:09:35] For sure. So, our clients — I was just pulling up the average of incomes and sort of dispersion of incomes for our dentists. One thing that’s kind of interesting is I think our dentists tend to have, like, typical incomes compared to the dental population at large, meaning that they typically skew a lot younger, obviously, because they have a lot of debt.
Travis [00:09:54] So our above-average figure is — we have above-average debt for every profession that we have data on. But I don’t think that our incomes are necessarily below average or way above average, either. Because obviously, if you’re way above average incomes, you’re probably not as in as much student loan debt, perhaps.
Travis [00:10:09] For example, our average — I just ran this today — our average dentist income [is] about $187,000. I think the average overall is, like, $195,000 or something like that. Our top 1% earners are making over $400k. Our bottom 16% — kind of, so like, the bottoms two standard deviations — I think our bottom one standard deviation negative, I think, is making, like, $120,000 or something like that.
Travis [00:10:32] There are some skew problems in that data, but I know that from conversations we’ve had that your clients are higher-than-average incomes. Tell us a little bit about the typical wealth and incomes of a lot of the clients that you’ve worked with.
Reese [00:10:45] I would say financial planning is kind of like a — If you think of a video game where as you progress along, expanding your — Take “Fortnite,” for example. You earn badges. You earn — Let’s say you earn badges for certain achievements that you unlock in a game. And in financial planning, similar things happen: [As you] progress in your net worth and your income starts to climb, you unlock different challenges. You unlock different problems. And we can call them “jobs” start to appear in your life that weren’t there before.
Reese [00:11:22] Most people reach out to a financial adviser when they feel like the volume of jobs that they’ve kind of unlocked or badges they’ve unlocked starts to get a little bit overwhelming or intimidating. And that only really applies to about half the population. Half the population, generally, they haven’t gotten to the point where they’re like, “I need a dedicated personal financial adviser.”
Reese [00:11:43] You see that in a lot of different surveys, and it doesn’t really matter. Your competency level does affect — Your experience level around finance will obviously play into this. A Harvard MBA (Master of Business Administration), for example, isn’t going to be as likely as a dentist to reach out for advice. But as your net worth and income climbs, that’s when you really start seeing your need for advice to show up.
Reese [00:12:03] So I’m prefacing my answer to your question with that just because I think it’s OK. In our practice, our average income for dentists is going to be more in the $300,000 range, on average. Our average dentist currently has about six years of practice behind them. So we target the, we’ll say the 50-and-younger kind of audience. But generally, we want them to have been in their career for a few years.
Reese [00:12:34] So we work with very typically [more] successful associates, more successful practice owners that have exceeded the average income point. And that’s why they’re reaching out to us because they’re unlocking these badges and jobs where they’re starting to get overwhelmed and intimidated.
Reese [00:12:50] It’s hard to say, like, chicken or the egg: Should you reach out to get help to where you can actually get to that point? Or should you reach out once the pain is there, and it’s just obvious that you need help? And I think more people would benefit from starting earlier.
Reese [00:13:05] So we’re launching a new mobile application that will reach down way lower into the market for just a low, low monthly fee and start giving advice to people. Letting them track their information. Prompting them with common pieces of advice that apply to most people at a much lower cost than a human.
Reese [00:13:22] Yeah, we see that most dentists are probably under — Their average income nationally is underreported quite a bit because it’s all payroll data. Most dentists — still the majority of dentist — still own a business, and their profits and their net income does not ever get reported on payroll data because they’re only paying themselves a salary, the minimum they can really justify paying themselves to limit their payroll taxes.
Reese [00:13:46] And so when you see average incomes of, like, $185,000 maybe or $190,000 for national averages, my gut is that the national average is probably more like in the mid-to-high $200,000s. We’re just not able to see that data because it’s not reported anywhere except on a tax return, and income statistics are never really collected from tax returns.
How DSOs (Dental Support Organizations) are affecting dentistry
Travis [00:14:08] So what percentage of your audience do you think are practice owners? Because I think that the DSO (Dental Support Organization) trend in dentistry — And this is, you know, obviously this has happened in medicine where, you know, basically everybody is employed by a hospital, right? What is that breakdown of owner versus non-owner? Because I feel like the DSO nature of the profession now, like, maybe the owners are doing better, but the associate — higher percentage of the workforce [that are] associates — is dragging that down. What are your thoughts, and what’s the data look like?
Reese [00:14:35] Yeah. That’s a great question. My assumption — Like, our data on our audience — Like, our audience is actually — We have a lot more associate consults than most people would probably guess. But our clientele is largely still practice owners. I’d say 80/20. But our consults are probably more like 50/50. People that are reaching out for help skew towards that associate side. And our audience is similar to the consults.
Reese [00:15:04] So we have a — Even though associates make up a minority still of the overall dental population, we have about a 50/50 mix of our audience being — And it’s mostly because our audience tends to be younger, and that’s where we’re kind of trying to make our mark in the industry. We want to get people to make smart financial decisions as early as possible.
Reese [00:15:27] As far as how the DSO thing is playing into this: From my perspective, I feel like as time passes, the goal of most of these dental management companies will eventually be to create a very good career for a dentist that pays and compensates them as well or better than what they could do on average out on their own. And they can do that by simply increasing fees to the patient. They can do that by reducing overhead costs. Improvements in technology and equipment.
Reese [00:16:01] The market is going to demand that the best providers are working in their mouths. Like, that’s just the nature of a professional service in most cases. I don’t feel that for most of us, especially when it comes to procedures that are painful or invasive, we prefer to have the highest quality talent working on us. And if DSOs and dental management companies of all types don’t provide the highest quality talent, then the patients are going to be frustrated, and they’re going to opt for a more expensive provider.
Reese [00:16:32] I see that happening in my industry all the time. We are not as cheap as going directly to Vanguard, even though we use Vanguard funds in a lot of our models. We’re not as inexpensive as Wealthfront or Betterment. But we get clients from those platforms quite often just because our experience is so much superior to what they can deliver with technology alone. Humans combined with technology will always be, like, a better service than technology alone.
What to focus on early in your dental career
Reese [00:16:59] And so I guess I’m just giving that out to dentists — or to any of you that may be in an industry that feels like it’s consolidating — I do think that for the most part, focusing on being the highest quality provider of service in your area of expertise, that will always protect your income. If you’re struggling from an income perspective, it’s either because you’re in the wrong business model, right? You’re not with a provider who is following the values I just espoused. Or your competency level is not there. Your hand speed is not there. Your skills set is not there.
Reese [00:17:31] And so I think early in your career, just stay focused on being the best dentist or the best provider of your service that you possibly can. And the market will shake out over time to reward you for that because you’ll be the last woman or last man standing that can actually do the work really well.
Travis [00:17:49] Right. Like, there’s a good book called “Good to Great” by Jim Collins that kind of talks about that exact concept, which is a lot of the best companies in the world have a wonderful track record for being the best in the world at one specific or one category of services or products and they just crush that. And then they show — Usually when they start going astray, they start looking into other fields where they’re not experts in, and they start getting out of their circle of competency. And then they’re just sort of good or just average, and that’s not something that’s going to have this huge positive client satisfaction where they’re going to tell all their friends and family.
Travis [00:18:20] So, that’s kind of been one of the reasons why we haven’t necessarily ventured out into the wealth management financial planning industry is because I think that we are one of the best in the world at talking about student loans. And I think that we’d be really good in financial planning wealth management, but I am worried about losing our focus.
Travis [00:18:37] And so I think that’s kind of a good message for a lot of these dentists and physicians and lawyers and all the professionals listening to this podcast is, if you want to protect your income, be the best.
Why there’s a place for different business models in dentistry
Travis [00:18:46] Now, I don’t think that means charge the most. I think that a lot of the dentists — I’d be interested to hear your thoughts — but a lot of the dentist we see making the highest incomes just do a small set of, like, general dentist procedures extremely well. And they’re very efficient, and they have that down. And then, yeah, sometimes we see the people doing, like, the high-end cosmetic dentistry. But we see people absolutely crushing it by doing bread-and-butter dentistry and just having a relentless focus on it. Do you see that at all?
Reese [00:19:10] Yeah, I think it’s a split. It’s just different business models. I just met with two different dentists over the weekend. One of them is producing a very high hourly rate, probably between $3,000 and $4,000 per hour on average. And the other dentist is producing between — His practice is producing on average between $700 and $900 per hour. And then I met with someone today who is struggling to do $300 per hour of production. Those are three different very different people.
Reese [00:19:40] The top two I mentioned: They have very similar businesses in terms of net income that is left over. It’s just that one has to do a lot more volume, and the other one does a lot higher-quality, narrow, procedural-targeted marketing. And I think there’s a place for both. That’s a beauty of capitalism is, as long as you’re consistent about what you say you do and you deliver on that promise, there will be a market that will often compensate you at the level that you need to get paid to do that thing.
Reese [00:20:10] Charging more isn’t really — Like, the way I look at my business is I need to make a 25% operating margin to run it properly. You know, I got to make 25% to feel like it’s worth owning. Otherwise, the risk is too great for me. And that’s a pretty typical service business margin in financial services.
Reese [00:20:30] Dentistry might be similar goals for some people. Some people might be contemplating 10% — or sorry, 20% as their profit margin and feel good about that. So bottom line is, I have to set my fees to make sure that that happens. I’m not going to make my fees less than I need them to be in order for me to generate that profit because ultimately long term, it’s not a sustainable business. Employees won’t want to work there. I’m not going to want to own the stock. No one’s going to want to buy it.
Reese [00:20:58] And so you have to kind of set your fees to what your market wants, and my market wants higher service. They want more competent advisers. They don’t want to be outsourced to technology alone. They want someone that will give them her cell phone number and let you text them on the weekends. They want to make sure that this person has 10 years of experience that they’re talking to. They don’t like wasting their time with someone who’s doing their first case.
Reese [00:21:21] To make all of those things happen, I have to have a certain financial model to support that. And we just try to make sure that we build the business to where it gives our client what they’re asking for. And then obviously, that’s for our high-end, personal CFO model.
Reese [00:21:37] And we also have our app-based model that people can, like, self-direct and track, and that’s our elements platform. It’s like, we have a lot of people right now in beta on that. We have about 50 users in it, and it’s a different experience. You know? I wanted to give young associates and younger doctors and my sister who teaches school and my brother-in-law a chance to learn what it is that — what is finance? And I didn’t — I couldn’t give them the same level of service without building a new piece of technology.
Why dentists have to think about the business side of things
Travis [00:22:11] I mean, that’s a great point. I’d like to hammer on it a little bit more because you said you need to make at least a 25% operating margin. A lot of dentists— like, some of the ones with more of that negative mentality mindset where they’re sort of in this depressive state with the declining reimbursement rates from PPO (Preferred Provider Organization) plans and things like that — This could apply more broadly to any profession, like, you know, pharmacy school or whatever where the reimbursement that you’re getting paid for stuff is going down. So, they’ll say things like, “OK, I get paid $65 for a cleaning for hygiene, and I lose $35 on every single cleaning that we do.”
Travis [00:22:45] My response to that is, well, maybe that’s, like, a loss leader, where that’s kind of a feed-in to a very high margin product. Right? So, it justifies doing that cleaning because you get 10% of those cases [that] turn into $5,000 treatment plans, right?
Travis [00:22:58] So, that’s kind of like, you know, a lot of these firms will offer — Like, Fidelity offers index funds because they want to sell people their active funds where they make a lot of money, right?
Reese [00:23:05] Yeah. Now Fidelity’s index funds don’t even have an expense ratio and no trading costs. It’s like they’re giving them away, right?
Travis [00:23:11] Right. So they’re giving them away, but they’re giving them away because they know that that’s going to have proximity to their really high margin things. So like if you’re — You have your own private practice where you’re not an employee, where you’re just not having to worry about the business aspect to things — you’re not thinking about it, don’t care about it — then you have to think like a business person.
Travis [00:23:29] So, for example, if you’re doing those cleanings for, like, $65 bucks a cleaning, then you have to know that your percentage of those cleanings is going to turn into this amount of business, which is going to justify that loss. Right? But if you’re not doing that, the fact that you’re getting paid $65 a cleaning is telling you is that there’s other practices out there that will do that. Right?
Travis [00:23:45] And so then you don’t have to have that overhead to do the cleanings. Then maybe you’re only known as doing, like, this set of procedures. Or maybe you drastically scale back the kind of patients you’ll do the cleanings for. Maybe you refuse to accept certain PPO plans and things like that.
Travis [00:23:59] So, I think that a lot of people think that, like, “Oh, that’s really bad and really mean to, like, not accept somebody’s insurance.” But if the insurance plan is going to cause you to lose money on doing that procedure, you have to stand up for yourself as a practitioner and say, “I’m not going to accept that plan.” And the problem is in, you know, a lot of these cities like New York and San Francisco, Los Angeles, it’s like everybody feels like they have to accept everything because it’s so competitive.
Travis [00:24:24] I would just say if you want to be in that market, like, you’ve got to figure out a business model that makes sense, or you need to just move somewhere else. Or if the business stuff stresses you out too much and you want to live in a place like that, go work for one of these DSOs that’s, like, super-sophisticated in how they think about overhead and just make a good living and have a high savings rate. Right?
Travis [00:24:40] But I don’t know if you wanted to share about some of that stuff you see, where people are just doing stuff for free because they’re not thinking about the business aspects of things.
Reese [00:24:48] You must be getting feedback about this from your listeners a fair amount to be in tune to that dynamic. Is that a fair thing? I mean, you’re probably hearing about this a fair amount, right?
Travis [00:24:57] Yeah. Well, people just complain that, like, “OK, I got to see, you know, 40 patients in an hour to make this model profitable, and I’m just so stressed out.”
Why trust is everything in a producer-consumer relationship
Reese [00:25:04] Right now, I wish I could play an audio clip from a friend that I got a couple of days ago that he sent me. I sent him a referral to a great dentist that lives close to his house. Right? He’s in this particular city. I sent him the introduction maybe — this is like a year ago.
Reese [00:25:20] And over the last year of kind of having him interact with this dentist, he finally sends me — We have this walkie talkie app we communicate through — my team and a lot of my friends are on it, too — called Voxer. He leaves me this long four- or five-minute message [telling] me how he just doesn’t trust this dentist that I sent him to. And he explained why he didn’t.
Reese [00:25:41] I mean, you know, he said, “Every time I meet with him, he’s just telling me that I need to do this thing.” And his example was that his wife had a cracked molar, and he said she needed a crown. And he’s like, “I said I wanted a second opinion, so I went to someone else to get a second opinion. And the person that I went to get a second opinion from said that she probably didn’t need a crown as long as it didn’t hurt.” And he’s like, “I liked that answer better.”
Reese [00:26:06] And then he said, “He said my tongue was too big and that I was having a problem.” If he would let me do the CT scan, that he could tell me if there was a way to help improve through some sleep apnea to help him sleep better — because this guy is a CEO, and he sleeps, like, four hours a night and is really stressed out. And he was really bothered that this dentist now was starting to talk to him about sleep apnea and a CT scan.
Reese [00:26:28] And it was really interesting for me to observe this because he’s like, “I’m not mad at you for sending me this to this guy. Like, but I’m just kind of bothered. Like, I feel like this whole industry is, like, a multi-level marketing scheme.” And this is a guy that doesn’t know anything about dentistry. He’s just an average — He’s an MBA from a prominent business school, and he’s in tune to marketing, you know.
Reese [00:26:47] And the thing — The reason I’m bringing this up in the context of your example is, trust really is everything. And in dentistry, if the right thing to do is to place a crown on this tooth that’s cracked or to recommend that we do a CT to understand if this person really could benefit from some sleep apnea treatment, we just need to be able to know that they can’t just spring that on somebody. OK?
Reese [00:27:15] When you’re dating, you don’t walk up to a stranger in a bar and ask, “Will you marry me?” Right? Because what percentage is going to say “yes?” Maybe, like, not under half of — a quarter of 1%. But a more effective approach is going to be you introduce yourself, and then you find some things that are in common. You ask for a small commitment. Like, “You want to go out some time?” Or, “Should we go on a date?” You build some rapport and some trust.
Reese [00:27:38] And then over time, there might be some signals that you start seeing that let you know that it’s a good time to, like, recommend something like, “Will you marry me?” Or — You’re going to have a much better, successful ratio of people saying “yes.”
Reese [00:27:49] And in dentistry, I just feel like because dentists aren’t taught business, like, at all, most of them being either creatives or artists or scientific kind of minded people — Some operate in a space that’s just a little less informed by business practices. You’ll jump into diagnosing. They’ll jump into doing whatever. They just won’t think about the patient’s experience.
Reese [00:28:15] So, in the example you give of LA and New York and a few markets where – Really, what’s happening here is the patient has no idea what a cleaning is to begin with. The patient doesn’t know what a cleaning is. What’s a cleaning? What physically is happening in my mouth? What are the different types of cleanings that could exist? What is root planing? What is periodontal treatment? What is an exam? What is the difference between an exam with x-rays, an exam without x-rays? What’s the difference with x-rays and periodontal treatment and root planing and scaling and —
Reese [00:28:47] Just explain to me this thing a little bit better, and then tell me what the differences in cost might be. If the insurance — your insurance — pays $60 bucks, that qualifies you for this type of cleaning. I’m sorry, but your insurance company is just super cheap. And they just don’t pay very much. You can find another dentist that will do this type of cleaning for you — and I will, too. But this type of cleaning that I would recommend has four more features to it that we think are really important. You don’t have to pay for them. But you might want to consider it, and here’s why.
Reese [00:29:21] If I got that message well in advance of the appointment — not, like, in the chair, but like weeks ahead of time — On social media, I see your Instagram feed, and you’re talking to me about this. And you’re teaching me and educating me [on] the difference between the two types of cleanings that are out there or the three types. Or how insurance companies just keep reimbursing less and less and less, and they’re not allowing dentists to actually have time to perform a proper comprehensive oral exam or hygiene visit. I’m going to get all behind that, right? I’m just going to be like, “Jeez, like, I didn’t know this existed. I appreciate that transparency that my dentist is sharing this with me.”
Reese [00:29:59] There’s a little bit of trust that starting to get built up because I actually now know the difference between different types of cleanings. I didn’t even know that before.
Reese [00:30:07] Anytime you have a third-party payer get involved, they’re just going to commoditize your industry. Insurance is not a bad thing. You just have to be able to know what the patient is feeling and be able to get to the point to where you’re educating them, and you’re their trusted adviser. Like, you are the person they trust around oral health care.
Reese [00:30:26] This dentist that I sent my friend to clearly did not bridge that gap. Right? There just wasn’t trust there. And even after a year, there wasn’t trust. And that’s just another sign to me of, like, this guy’s doing $1.9 million in collections and really successful. Probably, you know, north of half a million dollars a year in income easily. This is a successful dentist that has a massive trust gap still in his business. And if those trust gaps were filled, he’d probably double the size of his business. And he’s already successful, and he’s a great clinician. And these diagnoses that he provided were actually very logical and the right pieces of advice. Like, they’re probably the right diagnosis, but the patient didn’t trust the person.
Reese [00:31:09] So, I don’t know. I think it’s — Like, it’s just really important to, like, realize you are the person with the knowledge, and you can control the outcome that the patient has. If you were an associate and you want to go tell your practice owner, like, this idea and just say, “You know what? Like, I don’t want to only be stuck doing 20 minutes, and we got to be in and out. And I don’t want the hygienist is to be rushing through this procedure.”
Reese [00:31:34] And if you’re a doctor and you’re feeling constrained by the way that your medical system is forcing you to see your patients, like, you need to speak up and, like, start sharing the message with the patients of what’s going on and voice the concern. That’s the only way things will get changed.
Reese [00:31:51] And man, I’m surprised, like, at how many practices do that and are — they’re able to — once you gain — Whoever owns the patient, right? Whoever controls the patient will win. And right now, if you’re in a model like that, the insurance company controls the patient. You haven’t built the trust, but you can get that trust back real quick.
Reese [00:32:10] Man, it’s like one Instagram post away from owning that trust. It’s just one post away. But like, you have to go earn that trust. You can’t just get borrowed trust from an insurance company because they’ll still own the patient.
Reese’s thoughts on a fair price for a financial planner
Travis [00:32:23] What would be — Let me ask just kind of a broader question. What would be the — I think the Vanguard and the robos and things like that provide tremendous value for what they charge. But [the] key is, like, what they charge, right? So if somebody is more successful than average and wants a fee-only financial planner — and this is obviously dependent upon what industry you’re in, too, because, you know, certain professions might have higher fees for the fee-only planners that are really good in that industry. Tell me what you think a fair price is for, like, different levels of financial advice, from the person that doesn’t give the cell phone number out to, like, the personal CFO to, like, you know, like, somebody who charges too much. What would you kind of guess that range would be?
Reese [00:33:04] Dude, this is such a good question. And what I would say is, I’ve got a massive job ahead of me to educate the public on what financial planning even is, right? That’s the job that I have because people don’t — They don’t know how to compare it because they don’t know what jobs this person’s going to do. If you just tell me it’s a hygiene visit, it’s a regular oral exam — one costs $400 bucks and one is free with my insurance — I would never pick the one that’s $400 because my current view of that oral hygiene visit is that it’s a [commodity] — It’s the same thing. Like, I don’t know the difference as a consumer about the difference between these two things, so I’m just going to pick the one that is cheaper because I think they’re the same.
Reese [00:33:55] Last night, I had a conversation with a guy that is making several million dollars a year. And he asked a very similar question to the question someone would ask about their oral hygiene visit. Like, why is one, $400 and why is one free? He was just saying, “I don’t really get why some advisers are 1%. And some are 2%, and some are 0.5%. And some are free. I just want my returns to be really high. I just want my returns to be good. So, like, I don’t know what to pick. They’re just taking money out of my account, and I just want my returns to be good.”
Reese [00:34:26] This person is very successful. What he’s describing, in my vernacular, is he’s talking about one financial planning job that he wants to get done, which is “get me the highest returns possible for my level of risk that I want to take.” Or “give me the highest returns possible with my money.” That’s what he’s trying to get done.
Reese [00:34:45] But there are, like, hundreds of other financial planning jobs that are not being done in his life. And when I started describing them to him, I pulled up our app, and I just kind of showed him some of the jobs that we’re trying to tackle in order because that was the easiest way to show it to him.
Reese [00:35:01] And I was like, “Well, what about personal spending? Like, are you tracking your personal spending? And are you trying to monitor that at all?” And he says, “No.” I said, “OK. Well, do you think that would be important?” He’s like, “Yeah it’s been a huge pain. Like, me and my wife are not on the same page with that and —”
Reese [00:35:16] And this is a problem he’s having at the higher-income threshold. A lot of us just getting out of school probably know this. But maybe we don’t monitor it so well or know a lot about it. Just within personal spending, there [are] probably, like, 20 jobs. Should I increase a budget category or decrease a budget category? Should I enjoy life a little bit more and, like, buy a car? Or do I have to pay off this old beater and just, like, stick with it? I don’t know what decision to make with my cars. Or, I don’t know what decision that I’m going to be able to make with vacations. Is it OK at this level of my life to take that kind of a vacation? Or am I, like, a lavish kind of person? These are, again, all within the category of just personal spending. Right? And I could list 10 personal spending items.
Reese [00:35:59] But there are, like, 12 [that] I consider financial elements: big elements of categories — just groups of financial planning. One of them is debt, which you guys do an amazing job with, Travis. One category — a general area is debt. But debt is a big category. I mean, are we talking about student loans? Are we talking about refinancing your primary mortgage to take out equity to pay off an investment property? Are we talking about a building? Are we talking about practice debt? Are we talking about snowballing debt? Are we talking about a reverse mortgage on an existing bit of paid-off real estate?
Reese [00:36:32] There [are] a lot of, like, jobs that people have to do with debt, and sometimes they’re only doing a couple of them. And so what I’d say is — I’ll just list the categories. To me, the categories are, like, retirement accounts, liquidity and cash. How much, you know — Managing your liquidity properly, that’s a big area. Real estate is a big area. Your career and/or your practice growth, that’s a big category, a big area. Personal spending; personal savings plan; tax planning; debt; insurance; estate planning, like your will and your trust; your investments; and financial independence, like your retirement kind of financial independence track. Those are our 12 elements that I think encompass — All financial planning lives somewhere within those 12.
Reese [00:37:22] But within those 12 categories, there might be, at different stages of your life, you know, five or 10 main jobs that you have to tackle. Student loans might be on your mind right now inside of debt, but as soon as you get a year in — Like, I’m having a conversation with someone today that texted me about, “I’ve got this $80,000 scanner I want to buy, but who should I finance it through? And what kind of amortization schedule should I pick? And or should I just pay cash for it?” Well, now that job has come up, and that wasn’t there a year ago. And probably next year, he’ll ask me about whether he should expand to seven opportunities instead of five or whatever.
Reese [00:37:58] And so what I’d say is, in each occupation, everyone has got these 12 categories. Every occupation contains these 12 categories. There are specialist financial advisers who know the jobs that exist for your occupation within those categories. So a dentist’s insurance jobs are very different than an executive at Boeing’s insurance jobs. They’re just different. There [are] different policies. There [are] different calculations you need to run.
Reese [00:38:27] And so what I’d say is to start out with — just know that the fee you pay should be proportional to both the number of jobs that people are taking responsibility for. Like, how many jobs, how many categories are you going to own so I don’t have to think about them? And then second, the expertise and industry expertise that they have in those jobs in your occupation.
Reese [00:38:49] So you start by saying, “How many jobs does this person handle?” Like the guy I told you the other — that I talked to last night that was like, “I just want somebody to give me high returns.” That’s what — He was telling me this because he was, like, wanting me to be his adviser instead of his current guy. And I had to like tell him, like, dude, that’s just one of many jobs.
Reese [00:39:08] And the funny thing is, our investment management fee was lower than his current financial adviser. Right? But I was doing, like, all 12 of these jobs — and really deeply for this person — for the same percentage fee that his current adviser was charging. But his current adviser was only doing one category, which was investing, and only doing one or two of the jobs within investing. It was really — My firm is probably going to do 50 hours of work for this customer, this prospective customer, and his current firm might do four hours of work. But we charge the same percentage. That’s crazy, Travis.
Reese [00:39:48] Like, the industry right now, it’s just so — It so varies, and you just need to ask really carefully, of the 12 categories I just listed, like, how many of these do you actually cover? And then have them describe to you how they cover them. How do they — What kind of depth and detail do they go into? On our website right now, there’s a new white paper that I just published. If you go to DentistAdvisors.com and you click the education library, you’ll see “10 Questions [a Dentist] Needs to Ask Before Hiring a Financial Advisor.” I really tried to write this guide objectively, to try to help anybody — even dentists or non-dentists — how to identify the financial adviser that’s good for you. For me, that’s kind of how I would rank it.
Reese [00:40:32] Now, what should the cost be? I think one and a — like 1.5% on someone’s money or 3% on someone’s money or 0.5% on someone’s money. It’s kind of arbitrary because until you know how much money you have and you’re going to be paying that person, it’s hard to know if that’s too high of a fee. But I would say that I don’t like ever seeing — We don’t have fees that are in the 2% range. Our highest fee is 1.5% on small accounts. You know, on a $1,000 account, that’s only $15. So, you know, it depends on the size of your account.
Reese [00:41:10] If a firm is willing to work with you in the early years when you don’t have any money and charge you a percentage on your account that really is not enough for them to get paid, but they know that one day when you get wealthier, you’ll have more money with them and they can make money later — I don’t really have a problem with that. We don’t work exactly that way. We kind of think it’s important to get paid appropriately for the work you’re doing at each stage and bring the cost down as much as possible.
Reese [00:41:36] The White Coat Investor and I kind of butted heads on this a few months ago because he felt like there should be a fixed amount cap. I think the thing he said is, “You’d never — you only pay a four-figure amount for a financial advice. Period.” So, like, no one could be worth more than $9,000 in a year. Like, that would be the maximum.
Reese [00:41:55] I just think that’s kind of a weird arbitrary line to draw because it’s not really — Number one, what if someone has a $10-million-dollar net worth, and they want you to work 10 hours a month for them? And they want a certain quality of individual? Like, you can’t regulate fees that way. I don’t think that’s a healthy way to do it.
Reese [00:42:13] But I think teaching people the principle of, like — If you remember one thing from this, remember this: Like 90% of the financial advisers out there, they’re not going to do jobs for you. They just are going to sit on your money and wait for you to call them. That is the truth. They’re — until you hold them accountable or they hold themselves accountable to an actual service model or treatment plan of some kind, they will sit on your money and probably not call you until you call them. And that’s a very reactive service model. I don’t think that’s good.
How income and net worth impact the cost of a financial adviser
Travis [00:42:44] I tend to agree more with the White Coat Investor on, like, what the average fee should be. Like, I mean, I think that the four-figure amount for most people is a very fair fee in terms of what is coming out of your account. So, for example, like, your 1.5% fee for small accounts is frankly, like, you’re losing money on that because it’s a small account. It is a good idea to have some sort of — If you have a flat-fee option, I think long term, most people will do really, really well working with a planner where they’re paying an all-encompassing flat fee even, if that’s an option. Or somebody is charging for the planning work, which is separate from the investment management work. Then, you know, you’ve got two separate fees.
Travis [00:43:19] So obviously, the 1% of assets under management fee for over $100,000 in assets probably needs to include a lot of that financial planning work. But I think that you’re probably better off when you have that 50 hours of work that you’re going to do, and you’re paying, like, an approximate $200 an hour times 50 hours kind of a fee for that thing.
Travis [00:43:38] But obviously, you know, if you have a practice that’s doing, you know, $2 million in revenue, then maybe that fee should be higher. Like, for example, I had somebody once that got pitched a $20,000 financial planning and investment fee, which sounds ridiculous by that one-size-fits-all standard. But the person was, like, a $1.5-million-dollar-earning surgeon who had this really complicated practice ownership structure, and the firm was going to do tax work and things like that. But I think it does depend on the value received.
Travis [00:44:07] So I guess my opinion is probably a little different than yours, but my opinion is that most people should use Vanguard or one of the robo-advisers to get to a minimum level of wealthiness because it’s really about cutting your spending and saving. If you want to invest in the financial planner early, you certainly can. I think it wouldn’t be a bad idea to have a fee-only fiduciary for sure.
Travis [00:44:27] But I think that it’s really pretty freaking simple early on: Save more money. Put more money away. If you don’t enjoy finance at all, then you probably do need to hire a fee-only fiduciary at some point.
Reese [00:44:39] Yeah, I want to support that. My view is, I think most [people], as their income and net worth climb, there are more jobs that they need to have completed properly. But if their income is lower, than there’s less that needs to be completed. We have clients that we charge $99 a month for. We have clients at $200 a month. We have clients at $400 a month. And we have clients at $700 a month. If you go to our website, you can see all of our pricing, like, really transparently on our site. And then we also have this app-based interaction that is — Like, right now, we’re going to be less than $100 a month, but you’re going to get support and chat support and help.
Reese [00:45:16] To me, the real question we should be asking is, what jobs should financial planning be doing, and what should it not be? Is investment management worth more than 10 basis points? Probably not. Like, it’s literally — It’s a complete commodity. 0.25% for managing money? I mean, the expense ratios of index funds are the appropriate fee for the cost of normal market exposure, and for managing money, I don’t think there should be a percentage fee that probably exceeds 0.5% — like, just for managing accounts.
Reese [00:45:53] I do think there’s a lot more — There’s a lot more complexity that people start unlocking as their income goes higher. And so I hesitate to tell people, “This is the fee you should pay for this thing.” Because if you’d have told me, like, 10 years ago I’d be paying $35,000 year for accounting today, no way. Like, it’s never going to happen. I do my own bookkeeping. Like, I’m going to be fine.
Reese [00:46:15] I just think that the message for this audience, if you’re going to work for a hospital or you’re going to work for a DSO, I think paying, you know, between $2,000 and $3,000 a year for advice is going to be ample. You’ll get a lot of advice for that. You probably need a good piece of technology and an interaction four times a year with someone really smart for a few hours.
Travis [00:46:37] Like, something less than 2% of your income, basically.
Reese [00:46:40] Yeah. Like, well under 2% of your income. If you’re making $100,000 a year and you need eight hours — one year, maybe you’re at 2.5 or max 3 that first year because your income is low — but your income should drive the fees that you’re paying. If you choose to pay them through your investment account, they still should correlate to a very low percentage of your income. Even if you’re paying 1.5% on your investment account, hopefully that’s more like 1% of your income or 1.25% of your income. Or if it’s 2% of your income, it better be really valuable and real comprehensive.
Reese [00:47:12] I like using the income percentage as a guideline. But practically, what I’ve found, it’s just simpler for people to say — In our business, we tell you what your complexity is, and if you’re a $99-a-month complexity score, then that’s your fee. If you have a $9-million-dollar net worth, we’re going to assign a complexity score of you that’s — it’s going to be, like, $1,100 a month. If you’re $22 million dollars in net worth, it’s going to be $1,800 a month.
Reese [00:47:37] We have an exact amount of hours we know that’s going to be required the bigger someone gets because they have more estate planning. They have more tax deductions to keep track of. Their retirement plans are more complicated. Their insurance policies are much more consequential now. The ownership of all their assets is much harder to keep track of. As your net worth and income goes up, you just need to pay for more.
Reese [00:47:57] But I still think it goes back to a percentage of income as a benchmark for a good guidepost. But a lot of people just choose to pay through their accounts. If you’re in our middle complexity and you have $400,000 with us, you don’t pay your monthly fee anymore. Your monthly fee is gone. So, we’re getting it from your investment account now. And clients seem to prefer that.
Reese [00:48:16] If a fixed-fee model was the best model, I’d advocate for it. But my experience is, it works as long as your income and net worth don’t change. It works. But most people’s income, in dentistry at least, it changes as they progress and get more sophisticated. And so you have to change them from one fixed fee to another. And that’s kind of a pain, too, because they’re like, “Why did I used to be $2,000 but now I’m $4,000?” And a lot of them just would prefer to pay 1% on their account or whatever.
Reese [00:48:46] So I didn’t want to disagree with White Coat on that. My disagreement is just, like, don’t tell people a dollar amount for what their fee should be. Tell them the principle that should be driving it — like a percentage of income or — A percentage of income I think is a really good guidepost. I like that much better. It sparks a conversation, as opposed to someone blindly going like, “I read that I wasn’t supposed to pay any more than $4,000 a year.” Well, maybe that’s too much for some people, and maybe that’s too little for others.
Reese [00:49:14] I just want people to think past memorizing one thing. You know? But you know, that’s just my bias for education, Travis. You know me.
Is now the best time in history to be a dentist?
Travis [00:49:21] Yeah. So let’s — We have about five minutes left. So the last question I want to ask before we ask where we can find you is, do you think now is the best time in history to be a dentist — or any professional, for that matter? What’s your take on that? I asked that question on Dentaltown and got a lot of hate mail. All these people saying that now is the absolute worst time by far, and everybody is focused on their debt-to-income ratio when you can pay your student loans as a tax and not a debt. So what do you think about, like, that upside potential? Is that upside potential better than it used to be or worse or what do you think?
Reese [00:49:51] I think that anytime you have a lot of tension in a market, there’s a ton of opportunity for the smartest people to succeed. I feel like if you’re — If you’re listening to the patient right now, you’re providing them what they want, [then] there’s a massive opportunity. I would say in financial planning, there is massive pressure right now where we have robo-advisers propping up. I have, like, 20 robo-adviser accounts myself, just because I’m trying to, like, see how all of them are working.
Reese [00:50:23] It’s amazing, like, how much activity is happening in dentistry. You have the rise of the DSO. You have leveraged technology. You have several companies going public, like Smile Source —
Travis [00:50:32] Like Google. Instagram.
Reese [00:50:33] You have Google. It’s crazy. All of this creates tension in the market. It’s a great time to differentiate when there’s tension. And I just think that for me in my own business, we’ve grown exponentially because we’ve stayed focused not what people are saying, like commentary on the industry. Like, “Oh, it’s contracting. People aren’t going to pay for an adviser.”
Reese [00:50:56] I’m just staying focused on the job. I’m like, “OK, well, no one is doing this job right here.” The job of, in taxes, making sure someone’s deductions are actually fully implemented on the return. Making sure all interest expense is deducted on the tax return. That job is not being done properly right now, even though everyone’s got a CPA (Certified Public Accountant). Or making sure that everyone’s life insurance policies are being reduced as their income goes up or as their net worth climbs.
Reese [00:51:23] Or — Like, you can find the jobs that are not being done and do those jobs, and people will pay you for it. And in dentistry right now, as that industry becomes more commoditized, I promise there are dozens of jobs that are available that the customer wants you to do, anywhere from better oral hygiene to better diagnosis to more efficient scheduling to mobile dentistry to lowering the cost of dentistry to increasing the service quality. You can pick your angle. Like, anytime there is tension in a market, like, there is tons of opportunity.
Reese [00:51:55] And our clientele — I gave you the average income of our clientele. But the top quartile of our clientele, we have a pretty large demographic of clients across the country, and it’s very, very bright for a lot of people. I think the top 10% of the market is doing better than they probably ever done.
Reese [00:52:13] It’s just that bottom quartile that if you go — If you’re going into dental school and you just think you’re going to get out and be able to just get a job and it’s going to be great, it won’t. Dental school is too expensive right now to reward the average producer. Like, it will only really reward the top quartile and top third. And you just have to position yourself to — You don’t have to be the smartest. You just have to be able to get up out of bed in the morning and know that there [are] a few things that you’ve got to do that no one else is doing, and you’ll be really successful. And that’s my two cents on it.
Travis [00:52:44] I think it’s good. I think that it is the best time in history to be a professional in a lot of industries. Maybe not everyone. Like, definitely not pharmacy school. It’s very challenging. But, you know, in most professions, I think it’s the best time to be in that profession with the caveat that it is definitely not the easiest.
Travis [00:53:01] So, look at income inequality everywhere. Everywhere in the world, you have a widening gap like never before, and that’s just because you can literally point to the value of “what this person is producing in the economy is exponentially more than this person.”. Not in every case. Obviously, you can make arguments about, you know, all the hedge fund manager kind of stuff.
Travis [00:53:22] But as a general rule within professions, one dentist might be producing massive, massive amounts of dentistry more, have that trust factor down to a science. And one might just be just hoping that it would be easy and hanging a shingle and just assuming everybody’s going to say “yes” to every treatment plan.
Travis [00:53:35] So that’s all the time we have for today. I’d love to go all day, honestly. But Reese, where can people find out more about you and your firm?
Reese [00:53:42] Just go to DentistAdvisors.com. You can go to the education library and learn about articles and courses, podcasts, sketches, different videos we have there. You can look at our services, schedule an appointment, learn about how we invest money, learn how our service models work for your level of complexity.
Reese [00:53:59] Also, you can go to Facebook and just hit our Facebook group. That’s DentistAdvisors.com slash group. And you can ask questions there and learn more about how our advisers see this stuff. We all kind of have divergent opinions on some of these topics, so it would be interesting to see what some of my guys might say to some of the questions Travis asked today.
Reese [00:54:17] So, thanks so much for having me, man. I really appreciate all that you’re doing and continue to see a lot of our clients have a lot of success getting help from you. So, thank you.