By Raymond Fazzy

“We tried to use things that were basically proven concepts.  They were new in the sense that they were being used for physicians.”  Marc Singer, Singer Xenos Wealth Management

Malpractice And Asset Protection

Marc Singer, co-founder of Singer Xenos Wealth Management in Coral Gables, Fla., saw his firm transition into a medical practitioner specialty shortly after starting the company in 1986.  At around that time, a large insurance company in Florida decided to drop out of the malpractice coverage business, sparking a crisis situation for doctors in the state.

Singer Xenos responded to the furor by developing asset protection strategies for doctors without malpractice insurance – usually by using a combination of traditional estate planning strategies.  The strategies included transferring wealth to protected assets such as annuities and life insurance, spousal transfers and, less frequently, the use of limited partnerships and offshore trusts. 

“We tried to use things that were basically proven concepts,” Singer says.  “They were new in the sense that they were being used for physicians.”

The demand for the firm’s services became so great that all of its new clients were doctors.  Today, the firm has about 450 clients – about 350 of them physicians – with about $750 million under management, Singer says.  “We felt very strongly that we were able to keep a lot of good doctors in practice because they felt safe enough that they could practice without risking their life savings,’ he says.  “That became part of our corporate culture.”

After 20 years in this area of specialization, Singer says he feels that doctors are currently dealing with two major issues.  One is that they tend to be poor investors.  Their poor investment choices, he says, are not the result of being stupid.  Rather, he says, physicians are too trusting of financial service practitioners.

“It’s because of the environment they’ve been trained in,” he says.  “When an expert in an area provides a recommendation, they tend to follow it.  It’s like if a

neurosurgeon says, ‘Yes, I think brain surgery is required,’ they will trust the advise and give the go-ahead.”

The other issue, he says, is that of declining income.  Singer says his typical client is making about 50% of what they earned 12 years ago because of cuts in reimbursements.

For example, he says, an obstetrician-gynecologist who was making about $400,000 a year 12 years ago would probably be making about $250,000 today before adjusting for inflation.  This has made life especially hard for established physicians who started working in their profession more than a decade ago.  “If they’re living well at a high cost of living, planning for retirement is a real challenge,” he says.

The income constrains spill over into investment strategies in the sense that physicians need predictable results, Singer says.  They can’t risk any losses because their income-earning years are fewer than most, and because they have few opportunities for increasing their income.

“They don’t have what we call risk capital that they can afford to lose,” Singer says.  “The can’t work harder and make it up.  They can’t expect increases in their salary.”

On the contrary, what they can expect is living under the shadow of malpractice lawsuit.  Singer has seen cases where a physician’s life savings have been wiped out, wither due to a massive judgment or lack of asset protection.

Working in a state with high malpractice risk but liberal asset protection laws, Singer’s strategies focus on providing doctors with enough protection that they can opt out of paying for malpractice insurance.  In South Florida, he notes, about 5,000 doctors “go bare” – practicing without malpractice insurance.

Singer says he sees anecdotal evidence that going bare helps reduce the risk of malpractice lawsuit.  “The theory is that a noninsured doctor makes less of a malpractice target,” he says.

It’s a strategy, he says, that is not widely applicable because many states legally require practicing physicians to have malpractice insurance.  Even in states that do not have the requirement, doctors are sometimes forced to get coverage by the hospitals they are affiliated with.

Lawrence B. Keller, founder of Physician Financial Services in Woodbury, N.Y., works with advisors in a state where “going bare” isn’t possible.  His firm works with mostly younger doctors, and focuses on strategies that include the use of estate planning, insurance, tax planning and investment management.

“Physicians today aren’t like those in the past, who knew that if they saw enough patients the income would be there,” he says.