By Evelyn Juan
- Dentists can set up a holding company to shield assets from lawsuits
- Splitting income with a spouse can save on taxes
- Advisers should be ready to deal with accountants
Dentists naturally may see themselves first as people who help patients with their teeth.
Murray Neilson, a certified financial planner at Vancouver-based Nicola Wealth Management, reminds them that they are also business owners.
Neilson, who began catering to dentists more than 20 years ago, emphasizes that a dental practice is an asset that can be sold. He helps his clients set up holding companies, which he said are essential to selling their practice and to protect their assets from lawsuits, and coaches them on tax-efficient compensation. For instance, dentists can often save money by splitting income with a spouse defined as a shareholder.
In addition, Neilson often helps them set up an online vault for all their financial documents, including tax returns, investment statements and insurance policies. Many dentists have a lawyer, an accountant, a stockbroker and an insurance agent, who generally don’t communicate with each other.
Neilson found his niche when a client asked him to conduct a seminar for other dentists, telling him that his friends “make good money but they are broke.” Today, dentists gross C$700,000 (US$700,071) to C$1.5 million in Vancouver but they usually pay 30% to 40% of that for expenses plus taxes. They need to be careful that their earnings are properly managed, Neilson said.
In the past decade, Neilson said, many dentists have been retiring later, working into their 70s, well past the typical Canadian retirement age of 60. Many can’t afford to retire early after suffering losses from investments in 2008 on top of paying too much in taxes and not having a retirement goal, according to Neilson.
Developing a planning practice focused on dentists isn’t easy, he said. It requires dealing with gatekeepers, usually an accountant, and dentists are typically hard to reach.
“You’ve got to be really patient; you have to be pleasingly persistent,” said Neilson.
He started in the 1990s and acquired more than 1,000 clients. Neilson sold his practice to pursue other interests in 1997, then bounced back into the business in 2004 at the age of 58. He now has 150 to 200 clients, who are all dentists, many of them only in their 30s.
“I started from scratch,” said Neilson, who wishes to stay in the business even when he reaches his 80s. “I contemplated what I wanted to do with my future and came back like a child in a candy store.”