The Professional Advisory April/2012

The

54 Professional

Advisory For Dental Professionals

IN THIS ISSUE CommerCialism: Has THe Pendulum swung Too Far? Dr. Ron Weintraub

one Per CenT sTraTegy For THe ToP one Per CenT David Chong Yen CFP, CA

mergers are a Viable oPTion David Lind

sequenTial buy-ins David E. Rosenthal BA., LL.B.

THe snowbird denTisT Mark McNulty BA, CFP, CIM

running away From realiTy Dr. Ian Wexler

lease PrioriTies Ian Toms B.Sc. (Hons)

plus wHaT PorT are you sTeering For? noTes From THe ediTor

Vol. 54 : April 2012

The Professional Advisory

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The Professional Advisory consists of a group of seven independent professionals who provide services to the dental profession, each of who specializes in a different field. They have gathered to keep each other informed of the latest developments relating to the profession, and to produce this publication which is designed to provide expert information and advice solely for dentists and their advisors.

What Port Are You Steering For? RALPH CRAWFORD BA., DMD It may just be my age or perhaps that liberal arts degree from almost 60 years ago that majored in Greek and Roman history, but I still like to drop into the neighbourhood public library, browse around and see what’s new and interesting. Recently, I came across in the classics section a number of works by Lucius Annaeus Seneca - often referred to as Seneca the Younger. My mind flitted back over those 60 years when I knew far more about Seneca than I can remember now.

Just a wee bit of history: Seneca, 4BC to AD65, was a Roman Stoic, philosopher, statesman and dramatist in the Silver Age of Latin literature. He was appointed tutor to the future Emperor Nero and upon Nero’s succession as Emperor in 54AD Seneca unofficially became Nero’s chief minister.

One of the fascinating things when delving into Seneca’s lifetime is the great number of profound quotations attributed to him. In reading some of the library texts and browsing the Internet I found more than 380 Seneca quotes dealing with almost every aspect of life. One quote that jumped out at me was: If a man does not know what port he is steering for, no wind is favourable to him. In other words, if you don’t have a goal, a purpose, and an objective then your future isn’t all that great. And thinking about The Professional Advisory - isn’t that what our contributors are attempting in every issue - to help readers know what port they are steering for.

In Mergers Are a Viable Option David Lind sets up a “favourable wind” to steer dentists when contemplating the most effective way to transition out of a practice. Ron Weintraub questions the matter of Commercialism: 1

Has the Pendulum Swing Too Far? Are we missing the port by not allowing the pendulum to come to rest with a combination of technical excellence and superior human interaction. A question: when Ian Toms describes the importance of setting the priorities to manage your lease position isn’t he making sure you are steering to the right port? And certainly, when Ian Wexler deals with Running Away From Reality, there must be some connection between that particular dilemma and not knowing what port you are steering for. The Snowbird Dentist, as referred to in Mark McNulty’s article, are certainly increasing in numbers but they better know what port they are steering for.

As Mark outlines, as retirement approaches, you’ll need to convert your portfolio from growth oriented to a self-fund pension plan. David Chong Yen’s One Per Cent Strategy for the Top One Per Cent makes it abundantly clear that when you know the port (tax rules) you are steering to when dealing with lending money to minor children, you can save money. In dealing with Sequential Buy-Ins David Rosenthal clearly summarizes that a sequential buy-in can be an excellent arrangement for buyer and vendor but they are complex and require careful planning. Isn’t that the same thing as knowing where the careful planning is steering you?

We give thanks to Seneca for leaving us insights into the wonders of his philosophy of life. To mention only a few of his contributions: his work De clementia is addressed to Nero and argues that mercy is the great sovereign quality of an emperor. How wise can you get? And in his 124 essays entitled the Epistulae morales, he addresses a myriad of moral problems. We especially thank him for reminding us that we must know what port we are steering to. Nor should we forget another of Seneca’s pearls of wisdom: But it is a pretty thing to see what money will do! Again, how wise can you get? pA

crawford@dccnet.com

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Commercialism: Has the Pendulum Swung Too Far? DR. RON WEINTRAUB www.innovativepracticesolutions.ca

Please send comments to drronips@rogers.com.

This issue may seem to be a strange topic for someone who heads an organization dedicated to increasing the effectiveness and efficiency of dental offices that avail themselves to our expertise. However, our core philosophy maintains that effective management protocols yield an opportunity to provide caring personal interactions at all levels of the patient experience.

Images That Words and Behaviours Project Increasingly, many offices inadvertently project a commercial image in their advertising and marketing endeavours as well as in their internal patient interactions. For example, the use of the term “patient” as the normative lexicon is currently under pressure in some offices yielding to “client”, one shade above the term “customer”.

The distinguishing feature between the two terms is that “patient” implies there is an overriding obligation to provide a level of care that supersedes a remediative service to the oral cavity and surrounding area and the ensuing attendant remuneration. The word patient also connotes the responsibility to provide the caring component of our healthcare service. To quote Mark Victor Hansen in his forward to Love is the Best Medicine for Dental Patients and Team, by Donald M. Dible and Richard H. Matthews, D.D.S: “Dental professionals are in the most part caring, loving, and sometimes even cuddly people”. In other words, dental practitioners value interpersonal communication with their patients.

There often is a disconnection, however, between that reality and the perception of many of the public.

Unfortunately, we sometimes unintentionally reinforce a less than optimal impression even though we attempt to achieve what is occasionally called the Totally Efficient Syndrome. Many excellent initiatives are available to streamline systems and make them more effective, but we must always be aware of not depersonalizing the office/patient interaction. For example, despite its electronic convenience, even a computer-generated automated appointment confirmation system can be personalized to avoid a recipient feeling having been processed. We always want to present an image of professionalism rather than commercialism with an end result of reaping rewards by having done so of attracting quality patients.

Strategies To Attract Quality Patients In A Professional Manner The term “quality patients” does not in any way preclude populations with limited resources or access to dental benefits. This segment of the practice requires more proaction on our part to help it access the care they require. Some strategies to employ to attract quality patients include the following: Internal Strategies 1. Promote your team and facility as respectful, caring, competent providers with a focus on treatment that is in patients’ best interest from a health maintenance standpoint.

2. Focus all team members on exemplifying this image and provide them with protocols applicable to projecting this in their various spheres.

3. Include tasteful internal and external marketing initiatives. Avoid “giveaways”, which are often viewed as bribes. Instead, use patients’ positive experience to motivate quality referrals by asking for them in a professional manner.

4. Emphasize engaging in detailed face-to-face discussions between the patient and either a treatment coordinator or the practitioner in order to make patients feel that their needs 4 2

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have been personally addressed. Instead of our necessary preoccupation with upgrading technologies (as one example, digital radiography) in which we attempt to impress our patients with the ability to demonstrate pathology, a personal discussion cannot be replaced.

External Strategies 5. Project a welcoming, personal, patient-focussed message on all advertising. Avoid signage limited solely to procedures performed in the office as most prospective patients assume a wide array of services is offered. A caveat would be if special services not generally expected in a general practitioner’s office, such as sedation or orthodontics among others, were available.

These features should be advertised discreetly in compliance with the Royal College of Dental Surgeons of Ontario regulations.

6. Use caution when employing non-traditional advertising venues. For example, bus stop bench ads featuring photos of the dentist and staff will not

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necessarily generate quality patients for an office.

With so many dental offices in many locations in large urban areas, attempt to represent an image that will resonate with prospective patients’ needs and wants, (in compliance with professional guidelines) in order to stand out from the crowd.

Pendulum Swings We can feel justifiably proud of the technological advancements we are able to offer our patients. At the same time, we must take pains to reassure our patients that they are being treated as human beings, a fact that results in more family referrals. Although dental technology is an outstanding tribute to dentistry’s attempt to bring remedial oral health to the population, nothing resonates as greatly with patients as discovering that the dental team truly cares about their health and well-being on a human level and is focussed on their needs. Let’s let the pendulum come to rest with a combination of technical excellence and superior human interaction. pA

Ron Weintraub is a founding partner with the Bayview Village & Downtown Dental Associates and brings over thirty-five years of knowledge and experience in the practice of general dentistry to the Professional Advisory. Large companies such as Patterson Dental, Ash Temple Ltd, Henry Schein Arcona, & the former Canadian Dental Co. have benefited from his insight. As owner of Innovative Practice Solutions, Ron advises dentists on practice enhancement, practice purchases, sales, location evaluations, associate buy-ins, and business mergers. Dr.Weintraub can be contacted at (905) 470-6222 Ext. 221 or drronips@rogers.com.

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One Per Cent Strategy for the Top One Per Cent DAVID CHONG YEN CFP, CA www. dcy.ca

Please send comments to dcy@dcy.ca.

Dentists who own investments personally, (outside of their corporation), and who are at the top tax bracket, which starts at $132,406, pay 46.42 per cent on their interest income. Where the dentist has poor children, regardless of age, taxes can be saved by deflecting income which would have otherwise been taxed at the top tax rate into poor children’s hands.

Did you also involve your minor kids (<18) in your tax savings plan?

The tax department sets and publishes the prescribed interest rate every quarter. The prescribed rate has been at one per cent since 2009. What is the importance of this rate? If you (not via your Professional Corporation, Technical, Hygiene Services Corporation) lend money to your minor children (under 18) through a discretionary family trust and charge interest at the prescribed rate, you are taxed on the interest income at one per cent of the loan but any income generated from the loan is taxed in your minor children’s hands. This is how you split income (reduce family’s tax bill) with your minor children and avoid the attribution rule (i.e., ways the tax department prevents you from income splitting with your minor children). Without this loan strategy, if you lend money to your minor children, all income, including interest and dividends (except capital gains) earned from the loan will be taxed in your hands.

Where children 18 and older are involved no attribution applies, i.e., you could lend money to them without charging interest or gift them the money and they can report all income earned therefrom. Hence for children 18 and older, you don’t have to do the

extra steps outlined in the paragraph above, and will still realize the tax savings. Here is an example: Example 1: Dr. David has a taxable income of more than $200,000, which is in the top personal tax bracket (46.42 per cent).

Dr. David has one minor child (Sara). On March 1, 2012, he lends $300,000 at one per cent to a discretionary family trust in which Sara is a beneficiary.

The trust invests in a three per cent GIC. Trust pays $2,500 ($300,000 x one per cent x 10/12) interest to Dr. David which he reports and pays tax in his 2012 personal tax return. The interest must be paid to Dr. David by the trust on or prior to January 30, 2013.

The trust on the other hand will have net earnings of $5,000 ($7,500 minus $2,500) which is paid to Sara for her schooling or summer camp. No taxes are payable by Sara.

In the case above, you have saved $2,321 ($5,000 x 46.42 per cent) of taxes if you are at the top tax bracket.

Example 2: Dr. David personally owns stocks of publicly traded companies and bonds including RIM, BCE, etc. assuming the current value of these stocks and bonds is the same as his cost. Dr. David sells the stocks and bonds to the discretionary family trust whose beneficiaries include children under 18 and who earn no income.

Since the current value is the same as the cost, no gain or loss is reported on Dr. David’s personal tax return.

The trust has no money to pay Dr. David. Therefore, the trust signs a loan agreement bearing interest at one per cent. All dividends, interest and capital gains will be taxed in the hands of the beneficiaries/kids.

Hence, taxable income which would otherwise have been taxed at the top tax bracket of 46.42 per cent will be tax free up to $10,822 (2012) per child. Having poor children saves taxes.

The key ingredients of this strategy are: • Create a discretionary family trust with help of your lawyer 4 4

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If you (not via your Professional Corporation, Technical, Hygiene Services Corporation) lend money to your minor children (under 18) through a discretionary family trust and charge interest at the prescribed rate, you are taxed on the interest income at one per cent of the loan but any income generated from the loan is taxed in your minor children’s hands.

• Prepare proper documentation on the loan with interest at current prescribed interest rate (currently one per cent) • Pay interest based on prescribed interest rate on or prior to January 30 of the following year to lender • Pay net earnings from trust to minor children for their expenses or deposit to their own bank account • File trust return

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• All steps are carefully executed and documented If you transfer existing investments, for example, stocks or bonds to the trust, you will have to report any capital gains, dividend or interest in your own tax return as you are deemed to have sold these at fair market value. In 2012, one could earn up to $10,822 of interest without paying any tax, assuming they have no other income.

The one per cent interest will at least be valid until June 30, 2012. The third quarter prescribed interest will be announced towards end of June, 2012. pA

David Chong Yen, CFP, CA of DCY Professional Corporation Chartered Accountants is a tax specialist and has been advising dentists for decades. Additional information can be obtained by phone (416) 510-8888, fax (416) 510-2699, or e-mail david@dcy.ca.This article is intended to present tax saving and planning ideas and is not intended to replace professional advice.

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Mergers are a Viable Option DAVID LIND www. ppsales.com

Please send comments to david.lind@ppsales.com.

There are many options to consider when contemplating the most effective way to transition out of your practice. The dictionary describes merger as the joining together of two or more companies or organizations. In essence, a dental practice is like a small company. However, many dentists do not consider the merger as a viable option because they do not understand how it will work or the many benefits for both parties.

Prior to being in the Dental Practice Valuation and Brokerage business, I worked in the Healthcare Financial business with Newcourt Credit Group.

Newcourt grew exponentially by consolidating several smaller companies and one that was quite a bit larger and was then itself acquired by CIT. I remember during one particularly robust period having four different business cards in the span of 18 months, yet I still had the same job! One of the most challenging aspects of all of this activity was dealing with the uncertainty and assuring our clients that we were still there to service them. In the end, the mergers were completed and our business changed to adapt, but at the core, our service to our clients remained the focus. These mergers were all done because we felt the combination of the businesses would provide a better platform for servicing our clients and a better opportunity for producing profit for our shareholders.

The same objectives apply in dentistry. If we can bring two (or more) practices together, and patients are provided with the same or better experience, while creating the opportunity to enjoy higher profits, then this is a viable option. This concept is particularly applicable to smaller practices that have gross revenues of less than $400,000 due to the fact

that in general, these practices have higher relative overhead percentages. Consider that a practice that grosses $400,000 has: one receptionist, one assistant, a waiting room, at least two operatories that are equipped and probably a spare operatory for future growth, suction and compressor, a laboratory, sterilization area, darkroom with film processor, etc. We can merge this practice in to another practice that is close by that may have an under-utilized facility and room in the schedule.

The benefits are as follows:

1. The Patient Experience. The most important factor in a successful merger is to be aware of the change that the patient is experiencing. They chose to be a patient of the merged dentist for several reasons and they are now faced with making another choice - do I want to continue in this new location or not? People do not like change and while this new location is a change, it is not as big a change as finding an entirely new dentist. Their first experience in the new location should be similar to their previous experience; the same recall card, confirmation process, receptionist, hygienist, dentist, payment terms and processes. The only change should be the location and the patients should see this change as positive because it may be easier to access, more modern or 4 6

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If we can bring two (or more) practices together, and patients are provided with the same or better experience, while creating the opportunity to enjoy higher profits, then this is a viable option.

more convenient.

2. Reduction in overhead. The combined entity will have a physical plant that will have the best of each of the previous locations but will not have two of everything, nor will it be paying rent for two locations. Even if there is not enough room for both practitioners to be there at the same time, the facility can be used more productively by extending hours.

3. Staff Attrition. It will be very important at the beginning that the patients see the same faces in order to feel comfortable in the new location.

Over time however, there will be opportunities as people move on, to create the right size team and salary savings will be realized.

4. Collegiality. Many dentists find it rewarding to have another dentist in their office with whom they can discuss a case or review a treatment plan.

It is not necessary that both share the exact same

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approach to dentistry but it is critical that they share the same philosophy of patient care. This should be determined early in the process.

There are a couple of things to be aware of when considering the above approach. Firstly, your premises lease; you don’t want to do this if you have several years left on your lease. The buyer may be willing to pay your lease for a few months but not a few years.

The seller must be willing to stay for a while in order to transition the patients. Plan it well enough ahead so you will be in a position to stay for between six months and two years. Lastly, your team, particularly your receptionist and hygienist, will also be important to the successful transition. Ensure they are paid at market rates and are willing to adapt and go along with the plan.

Selling a smaller stand alone practice can be very difficult. A well structured merger has proven to be a viable solution for many dentists. pA

David Lind is a Principal in Professional Practice Sales Ltd. (www.ppsales.com), which specializes in the valuation and sale of dental practices. He can be reached at (905) 472-6000 or 1-888-777-8825 or e-mail at: david.lind@ppsales.com

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Sequential Buy-Ins experience in dentistry and has run the practice successfully for many years. That wealth of experience can be invaluable to the associate. Having an in-house mentor on an ongoing basis is a wonderful resource to the associate.

DAVID ROSENTHAL The arrangement often works as follows. The parties BA., LL.B. enter into a purchase and sale agreement whereby the Vendor sells a portion of the shares of his or her Please send comments to david@drlaw.ca. dentistry professional corporation or, in the case of an asset sale, the Vendor sells an undivided interest Selling or purchasing a dental practice in stages, often in the dental practice assets. The percentage sold may called a â&#x20AC;&#x2DC;sequential buy-inâ&#x20AC;&#x2122;, is becoming more popular. be less than 50 per cent so that the Vendor still retains A sequential buy-in occurs where the owner of a dental control of the practice. practice (Vendor) and a dentist purchaser (Purchaser) agree to transfer the practice from the Vendor to the Purchaser in two or more stages over a period of time. This transaction is used where the Vendor is not prepared to sell his or her entire dental practice immediately but both parties want to enter into a long term plan and legally binding agreement that clearly set out the purchase and sale that will occur over time.

A sequential buy-in is not the typical arrangement for a buy/sell transaction. The more usual route is the Vendor sells 100 per cent of his or her practice, typically selling shares of a dentistry professional corporation or by a sale of assets. Where the Vendor still wants to remain after the sale, he or she does so as an associate of the Purchaser. An associate agreement is entered into with the Vendor as the associate and receiving 45 per cent of collected billings. While the norm is 40 per cent for associate remuneration, since the Vendor provides mentoring and assistance in the transition of the practice to the Purchaser, 45 per cent The Vendor and Purchaser become common shareholders in the case of a share sale or partners is usually the remuneration level. where assets are sold for a period of time until In a sequential buy-in, the Purchaser is typically the buy-in is complete. A detailed shareholders already an associate of the Vendor and has worked agreement or partnership agreement is the primary with the Vendor at the dental practice for a number of document governing their ongoing relationship. The years. The parties have worked well with each other. shareholders agreement or partnership agreement The Vendor wants an exit strategy but, for various will provide that the Purchaser agrees to purchase reasons, wants to retain ownership of the practice and the remaining portion of the dental practice from the continue to work as an owner.

Vendor at a future specified date or dates for a specific The associate wants to buy the practice and agrees to price. The price may be a fixed price or based on a do so over time. Why? Having the Vendor remain as formula that is sufficiently clear that the parties will a partial owner of the practice is an excellent support easily be able to determine what the price will be for for the Purchaser. The Vendor may have far more the next stage or stages of the purchase. 4 8

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If the Vendor dies or becomes disabled, the agreement should provide that the buy-out date for the Vendorâ&#x20AC;&#x2122;s remaining interest in the practice will be accelerated upon such triggering events. To ensure the Purchaser can fund the buy-out in such events, the Purchaser is required to obtain life insurance and disability insurance policies on the Vendor, with the Purchaser as beneficiary.

Similarly, the Vendor should obtain life insurance and disability insurance on the Purchaser. If the Purchaser dies or becomes permanently disabled before completing the final stage of the purchase, the Vendor should have the right to re-purchase the Purchaserâ&#x20AC;&#x2122;s interest in the practice at a specified price.

Insurance issues can be complex and require careful

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tax planning. The parties need to retain an insurance advisor who has specialized expertise in advising dentists, who understands these issues and is able to provide appropriate advice to the parties. Insurance policies should be arranged early in the process to ensure that the parties qualify for such insurance and that appropriate buy-out funding is in place.

A sequential buy-in can be an excellent arrangement for both Vendor and Purchaser in certain circumstances.

However, sequential buy-ins are complex and require careful planning and extensive legal agreements. The best advice is to retain professional advisors, including an insurance advisor, accountant and lawyer, who are very familiar with these structures and who focus on advising dentists. pA

David Rosenthal is a senior lawyer with Spiegel Rosenthal Professional Corporation whose practice is devoted to corporate, commercial and business law, with special emphasis on advising dentists. He can be reached at (416) 865-0736 or e-mail to david@drlaw.ca.

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The Snowbird Dentist MARK McNULTY BA, CFP, CIM www.yournumber.ca

Please send comments to mark.mcnulty@raymondjames.ca.

I recently met with Tom and his wife Mary in Naples, Florida. Tom is a retired Ontario dentist who spends winters in Florida. Of all the retired dentists I just met with in Florida, I have not seen anyone who is happier.

However, sadly Tom tells me that most dentists do not believe they can afford to retire. According to Tom, “The first question people ask me is whether I am bored in retirement. The second question is how can I be living off my portfolio at a time this?”

匀 ☀ 倀 ⼀吀 匀 堀 䤀渀搀攀 砀 ⴀ 堀䤀唀 䈀 漀渀搀 䤀渀搀攀 砀 ⴀ 堀䈀 䈀

There is a great deal of information out there on how to build your portfolio. However, very little attention is paid to the end game - structuring your portfolio to fund your lifestyle costs for the rest of your life. I find that even novice investors know intuitively that the volatility of their portfolio matters a lot more in retirement, but why is this true? The reason is because of Sequence of Return Risk.

What is this?

Sequence of Return Risk is the possibility that your cash flow needs, for example when you are living off your portfolio in retirement, can force you to sell securities when their value has declined.

Take the chart below as an example. It would appear that you would have been better off investing in the first security, the S&P/TSX Index - XIU with its average annual return of 9.2 per cent.

㈀ ㈀ ㄀ ㈀ ㈀ ㈀ ㌀ 㜀⸀ 㠀─ ⴀ㄀㐀⸀ 㤀─ ⴀ㄀㐀⸀ ─ ㈀㔀⸀ ㌀─ 㤀⸀ 㤀─ ⨀ 㔀⸀ 㠀─ 㤀⸀ 㠀─ 㘀⸀ ㈀─

㈀ 㐀 ㄀㌀⸀ 㘀─ 㠀⸀ ㄀─

㈀ 㔀 ㈀㘀⸀ ㄀─ 㘀⸀ ㄀─

㈀ 㘀 ㄀㠀⸀ 㤀─ ㌀⸀ 㜀─

㈀ 㜀 ㄀㄀⸀ ─ ㌀⸀ ㌀─

䄀嘀 䜀 㤀⸀ ㈀─ 㘀⸀ 㘀─

⨀堀䈀 䈀 眀 愀猀 渀漀琀 愀瘀愀椀氀愀戀氀攀 甀渀琀椀氀 一漀瘀 漀昀 ㈀ 猀 漀 琀栀攀 愀挀 琀甀愀氀 匀 挀 漀琀椀愀 䈀 漀渀搀 椀渀搀攀砀 爀攀琀甀爀渀猀 眀 攀爀攀 甀猀 攀搀 氀攀猀 猀 堀䈀 䈀 ✀猀 䴀䔀刀

However, look at the chart below. If you invested eight per cent of the portfolio annually, you actually $100,000 in both securities and started withdrawing would have been better off in the second security, XBB.

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There is a great deal of information out there on how to build your portfolio. However, very little attention is paid to the end game - structuring your portfolio to fund your lifestyle costs for the rest of your life.

After eight years, the value of the portfolio invested in XBB is higher by $7,016.

Why is that?

If your portfolio declines and then you withdraw money, there are fewer dollars available to participate in the recovery.

What should you do?

As retirement approaches, you’ll need to convert your portfolio from a growth oriented portfolio to a selffunding pension plan. To avoid poor market timing, you should start this process long before retirement. Modeled after institutionally managed pension funds, we use a Liability Driven Investing approach. The main focus isn’t an arbitrary investment return but rather an approach that puts your retirement cash flow at the forefront.

Break up your portfolio into “chunks”. The first “chunk” is the sum of money you will need to fund your retirement lifestyle in the first four years of your retirement. We call this the Four Year Rolling Reserve.

The reason four years is used is because there are very few four year periods since 1950 where the stock market would be in a negative position. This first chunk should be set aside in short-term cash and bonds.

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The next chunk is the amount of money you will need to spend in between five and ten years. Here again, we still do not want the funds in a growth portfolio.

However, we have time that allows us to afford the fluctuations in some alternative investments and “blue chip stocks”.

Finally, we have the money you will not need for at least a decade. We expect that when we look back ten years from now, the stock market will have been the best alternative for this “chunk”. While equities will be volatile, we expect to be well compensated for the ups and downs.

I should note that not all equities are created equal.

In other words, I realize that stating the final “chunk” should be in the stock market covers a broad range of investments. It is here you will need some good advice.

In Conclusion Tom and Mary have employed this “chunk” strategy for the decade they have been retired. They lived through the second biggest stock market crash in history in 2008, another stock market decline in 2011 and still have never had to reduce their retirement lifestyle costs. They enjoy a stress free retirement wintering in Florida and have never been happier. pA

Mr. Mark McNulty BA, CFP, CIM, is a financial advisor with Raymond James Ltd., Independent Financial Services - Member Canadian Investor Protection Fund. This article is for information only. Its opinions are those of the author, not necessarily those of Raymond James Ltd. He may be contacted at 905-470-6222ext 209 or mark.mcnulty@raymondjames.ca.

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Running Away From Reality DR. IAN WEXLER www.protect-ins.com

Please send comments to drwex@protect-ins.com.

I always thought of myself as a “glass half-full kind of person”. These days, I am not so sure! In performing a combination of general reflection and analysis of people, the economy, the state of the world, etc.

- maybe I am just getting a bit older and the rose coloured glasses do not work as well or as efficiently as they used to. Maybe it’s all because I am in the risk management business!

Ever since reading a book called The Black Swan by Nassim Taleb about five years ago, I began to see the world in a completely different light. The book was a confirmation that “crap happens” (so as not to offend some of my readers), and that it happens without rhyme or reason or warning. Without going into a lot of detail, I highly recommend this book for anyone interested in understanding how and why the dice, stock markets, world events, economies and just about anything unpredictable roll the way they do. As a warning however, please know that some of you will feel tortured while reading this book as it is filled with mathematical formulas and explanations that match the excitement and enthusiasm of your first organic chemistry textbook. What Taleb does accomplish is to lay out clearly how “not” in control we are of so many things. At the same time, he does lay out how we can try our best to maximize returns and to minimize our risks. This is where we see eye to eye, and when the light bulbs started to go off.

We live in a high risk world Just look around, read the newspaper, listen to the news, surf the web…the world is in pretty rough shape.

Let me highlight just some major issues as of today: • The European economy and Euro stand on the edge of breaking up with a recession in full force, rioting, unimaginable debt and no answers or resolution

in sight; • The Middle East undergoing changes unforeseen a few years ago with the Arab Spring, nuclear threats, and innocent civilians being massacred in Syria; • Japan’s perma-recession and ridiculously high debt levels; • The United States with a dysfunctional government, about 16 TRILLION in debt, worthless real estate, record unemployment and states that are about to declare bankruptcy (thank goodness for Apple!); • The US Fed, Bank of Canada and other central banks are artificially keeping interest rates at record lows in the hopes of propping up all of the above; • The world relying on China and other “emerging” economies to magically make all of the above better; • The questionable economic future of Ontario and Canada.

To throw on the rose coloured glasses for a second, it is not difficult, especially living in one of if not the best places in the world right now, to say “It will all be fine…just give it time”. But will it really? What are the odds that all of the above will be OK? Then there is “us” Here is what I see, focusing in on the lives of dentists: • Too many have little to no free time for things ranging from holidays, time with their spouse and kids, time to exercise or just time to chill; • Too many are stressed out, partially because of the above, partially because of business, partially because of a gazillion other things; • Too many feel that life is racing past them; • Too many are addicted to their Blackberries and iPhones to the point where many have simply given up on looking others in the eye for any extended period of time while talking or listening to them; • Too many have little savings and will not be able to retire when they originally planned to; • Too many have no financial plan other than selling their practice to fund their retirement; • Too many know of others that crap happened to, “but it sure ain’t gonna happen to me” (as their grandparents all lived to 90+). 4 12

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So where does this leave us?

I never thought getting into the insurance business would eventually lead me to see and experience things that no one else sees. I am the first person I know of that is a dentist, financial/insurance advisor, career coach and have been in over a thousand practices, met with even more dentists, seen how they run their lives and practices, and been privy to all of their financial information. At the same time, I never realized that for so many of my clients, I would wear another hat of “life coach”. I have never charged a single dime for this… ever. All I simply do, “if ” my clients ask me, is to give them advice based upon my experience and observations over a coffee or beer. In many ways, I look at or consider myself to be my clients’ protector, and not some guy who simply sold them some coverage.

So here is some basic advice to use as a starting point in how best to deal with life as a dentist. Hopefully, more than a few will make sense: • Stop working so bloody hard and spend more time on yourself and your family. The reality is that you will actually make more money; • Exercise more; • Take more holidays; • Spend less time on the computer, your phone, or Blackberry (and leave them home during holidays); • Read more fiction; • Get enough sleep; • Stop procrastinating; • Focus on your health, especially eating right and avoid stress; • Never use your phone or Blackberry while driving…your children, if they are not already, will be driving some day;

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• Put the phone or Blackberry away and look people in the eye when you talk to them; • Start saving money today and get a financial plan ASAP;

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I never realized that for so many of my clients, I would wear another hat of ‘life coach’.

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• Focus more on running and managing your practice….at least a half day a week; • Leave it to your financial advisor to focus on the impact of world events on your financial well being; • Give blood; • Donate to charity; • Protect yourself and your family from Black Swans….cause “crap is going to happen 100 per cent for sure” and you want to be ready when it does! pA

Dr. Ian Wexler is a leading authority on insurance issues for dentists. He is the founder and President of Protect Insurance Agencies Inc. in Toronto which provides specialized expertise in life, disability, critical illness, long term care, and other insurance products and services to over 900 dentists across Ontario for the past 17 years. He can be reached for questions or other enquiries at (416) 3913764 or drwex@protect-ins.com.

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Lease Priorities IAN D. TOMS B.Sc. (Hons) www. iantoms.com

- as time passes in a lease contract?

Set your priorities to manage your lease position.

• Recognize that your lease controls your practice because it governs the space within which you practice, who you can sell your practice to, what you can use the space for, when your patients can attend your practice, and so on. Take it seriously.

Please send comments to iantoms@pipcom.com.

In its simplest form a lease could be just one sentence: “Ian D. Toms as landlord and James W. Hilton as tenant agree with each other that James W. Hilton will lease the property known as 769 Hwy #7 E., Peterborough, ON from Ian D. Toms for the sum of $1,200,000.00 payable as rent each month in equal instalments of $10,000.00 for the term of March 1, 2012 through February 28, 2022 inclusive.”

That’s it. But wait minute. I don’t want my property used for certain uses, and what happens if tenant does not insure properly? And tenant says what happens if I want to sell the business I developed on the property? And so on. Over the term of a lease, there are an almost infinite number of possible tenancy circumstances. That’s why leases are such unwieldy pieces of machinery.

Each lease presents a bewildering array of detail and concepts which may apply only in a certain circumstance, often in conjunction with each other.

Further, a lease is written at one point in time but describes a process that continues over many years, during which the needs and circumstances of both landlord and tenant change - as do external factors such as the economy. To top it off, tenancies often continue for many years on terms contrary to lease.

In fact, most tenants, landlords and many professionals who deal with leases frequently don’t really understand what a lease means. As a result of complexity, lack of experience or understanding, the parties focus on a few of the more easily understood and quantifiable lease elements, at the expense of hundreds of other terms, resulting in a distorted negotiation and weak tenancy arrangement.

So how do you match your needs - known and unknown

• Do what you know and know what you do. Do not negotiate or manage your own lease affairs.

You need to retain a competent professional to manage your lease affairs. Choose someone with many years of experience both as a tenant and as a leasing professional who understands how each facet of the lease behaves over time and under predictable and unpredictable circumstances. Fees will be more than offset by cost savings to you.

• Understand your lease. Our office subjects every lease to a minutely detailed rigorous analysis during which over 500 points are inventoried and examined to determine what’s included, what’s missing, and what’s impaired. This system has been developed over 25 years personally dissecting many thousands of leases and clearly identifies negotiation priorities. 4 14

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Each lease presents a bewildering array of detail and concepts which may apply only in a certain circumstance, often in conjunction with each other.

• Know your personal and practice priorities. You can’t achieve what you can’t perceive. Spend time discussing matters with your lease professional.

Ask what’s possible, what’s reasonable to expect, and what’s likely. Explain your circumstances, views and concerns to your advisor.

• Listen to your advisor. There’s no point in hiring a professional and then not letting them do their job. Don’t demand a certain feature be included in your lease that you “heard from somebody was a good one” if you have to give away the farm to achieve it. Don’t fixate on one issue at the expense of others.

• Delegate the responsibility for lease negotiation and management to your advisor. Do not fritter and waste the hours that make up your day fretting about an obscure lease issue that has a small probability of happening many years from now. Let your advisor do the worrying.

• Clever lease management can correct lease deficiencies. Therefore, never assume just because a facility is or is not included in a lease that you can’t achieve whatever it is you are trying to achieve with your lease. Often certain lease facilities can be used in conjunction with each other to manoeuvre your position around to where you would like to be in the end. There is no perfect lease.

• Understand critical negotiation opportunities.

The most powerful negotiation position is during the offer to lease negotiation. The lease negotiation itself is second. You have a weaker, but important negotiation opportunity during term renewals.

Plan for and use each opportunity to progressively adjust your position over time.

• Finally, manage your lease. Do not violate lease terms and conditions. Do not antagonize your landlord repeatedly and then expect concessions at renewal time. Be aware of and do not miss term dates. Make lease management a priority. pA

Mr. Toms has been creating and preserving realty leasehold value since 1986 and can be reached at (705) 743-1220, by e-mail at iantoms@pipcom.com, or through his web site at: www.iantoms.com.

The views expressed in any article are those of the author alone. They should not be acted upon without the advice of your “professional advisors”.