Most medical specialists today – particularly Anaesthetists and Pain Management Specialists – face challenging times. Once considered a financial ‘meal ticket’, specialists today face multiple issues affecting their careers and job security, which also affects their ability to build financial independence.
High education expenses, government health budgets, increased patient expectations, risk of litigation, complex tax, business and remuneration structures are issues that all medical specialists must face. And of course, the COVID-19 pandemic has affected every part of our society and economy, which has meant overwork for some Anaesthetists and little work for others depending on location.
Anaesthetists also face other unique challenges – increased competition due to the specialty’s growing popularity, sub-speciality opportunities and the added complexity between choosing private practice or public hospital work, and the remuneration differences each choice offers.
These challenges, coupled with lack of time and lack of financial know-how, can make it difficult for Anaesthetists to become truly financially independent without the help of a professional adviser.
Planning your financial future including your business, investments and superannuation as well as managing your cash flow will reap future rewards. Failing to plan could see you fall short of your life and financial goals reducing what you can provide for your family and seeing you work longer and harder than you thought you would.
The right adviser who understands Anaesthetists and your unique issues can provide holistic, long-term advice. They can ensure your finances are in step with your long-term plans, dreams and importantly, block potential financial pain.
Now in its second edition, this paper outlines many key issues affecting Anaesthetists today. With many Anaesthetist clients, Signate Private Wealth has compiled this paper from third party research, knowledge of existing clients’ situations and recent interviews with both young and experienced specialists. The paper also provides case studies detailing how problems can manifest in real situations.
Anaesthesia in Australia today
Compared with other medical specialities, Anaesthesia has become more popular, but also more complex in recent years. The Australian Society of Anaesthetists’ (ASA) effort to improve the standing and remuneration of Anaesthetists has made an impact on its popularity.
The Australian and New Zealand College of Anaesthetists (ANZCA) has been working for some time to improve anaesthetic standards which has also seen the specialty grow. But this revision of professional guidelines has also increased the expectations and training for Anaesthetists. Furthermore, increased patient expectations and litigation risk has heightened its complexity.
The speciality’s comparative flexible and varied working pathways is another reason anaesthesia has become increasingly popular. Specialists can choose to work publicly, privately or mix the two and the sessional nature of the work also makes part-time work more possible than other specialties.
Like many medical fields, women now make up a growing number of Anaesthetists. According to the most recent Australian Bureau of Statistics figures, women now make up 34 per cent of medical specialists and Anaesthetists are one of the largest groups. More recent 2016 figures indicate that there are 4,482 accredited specialist Anaesthetists in Australia. This same report indicated that 27 per cent of this workforce are female. To plan for this increasing number of women in anaesthesia, in 2019 ANZCA produced a Gender Equity Position Statement.
These changes and improvements have also seen the profession become far more competitive. Anaesthetists now work with new technology with Dentists and Radiologists outside of theatres, so they have a point of difference. Others are involved in intensive care medicine and pain management, which are now distinct specialities. General Practitioner Anaesthetics (GPA) is also a growing field, particularly in rural and regional areas and Queensland has more GPAs than any other state or territory.
Key issues affecting anaesthetists
One of the biggest concerns for young Anaesthetists is the declining opportunities for public hospital positions and the effect on job security.
According to our interviewees and confirmed by the ANZCA Bulletin, several factors contribute: 1) cuts to state health department budgets; 2) the influx of international medical specialists: 3) growth in medical school graduates: and 4) the desire for more flexible hours.
The global COVID-19 pandemic has also seen a significant impact on job security, particularly for private Anaesthetists, as governments restrict elective surgeries. For some, work has completely evaporated, drying up cashflow and making it difficult for those without cash reserves to make ends meet. Extended economic hardship in the wider community may also reduce the demand for private medical care and surgery.
NO WORK = NO PAY
Private Anaesthetists only earn when they work. Anaesthetists rarely have the opportunity to grow a business with other staff contributing to income and build equity to create a saleable practice at retirement.
Many private Anaesthetists we interviewed indicated that their income is also often affected by how the surgeon charges and whether the private health funds set fees or is aligned with a known-gap system.
Although improved ANZCA guidelines help protect Anaesthetists, our increasingly litigious society continues to challenge the profession. In a 2005 comparative study of 640 NSW Anaesthetists, 95 per cent were concerned about the medical indemnity crisis. All respondents either had personal experience already of litigation (23.6%) or expected to have a claim made against them during their career (73.6%).
TOO MUCH DISPOSABLE INCOME
Many people understand the concept of ‘the more you earn the more you spend’. Many Anaesthetists we interviewed related well to this indicating they also felt pressure to ‘keep up’ with their friends and colleagues.
Interviewees felt they were often behind the earning ‘eight-ball’ compared to other professionals as Anaesthetists are generally not fully qualified until they reach their mid-30s.
Once qualified, many fall into the trap of spending what they earn; even as their cashflow increases. High income can often equate to high debt on houses, cars, private school fees, and expensive family holidays which may mean delaying smart financial decisions. With a large income increase, and a delayed taxation system, private Anaesthetists can quickly build up large tax bills that are not budgeted for.
As a result, debt can get out of control, tax liabilities are often ignored, and savings are squandered. And if the unexpected happens like personal illness or loss of income, assets may become exposed.
PRIVATE, PUBLIC OR REGIONAL?
The question of whether Anaesthetists work privately, publicly or a combination of both is also a personal decision and one that affects remuneration.
For those looking at private practice, Anaesthetists can join an established group or work alone. Both options are lucrative but can create financial and operational complexity.
Despite lower earnings, others prefer to choose the public system for many reasons – job security, the supportive team environment, relative financial simplicity, as well as the research and training opportunities it provides.
But the lack of positions available in the public health system – particularly in Queensland – has forced many Anaesthetists to prematurely consider practising privately or taking a regional post. Some also look into the Rural Locum Assistance Program (Rural LAP) or more specifically the Rural Obstetric and Anaesthetic Locum Scheme (ROALS) to guarantee job security.
Long working hours along with the demands of busy family life or extra study, leaves most Anaesthetists with little time to focus on their finances. For younger Anaesthetists, they spend years training to care for people’s health leaving them little time to hone their financial skills and retirement and planning for the future just seem too far away.
As a result, many Anaesthetists either rush or avoid making major financial decisions which often leads to poor outcomes. Time poor professionals seldom pay sufficient attention to how they spend money on large capital items and interviewees indicated that they often make poor decisions on lifestyle assets such as cars or the growing property market.
Not taking the time to consider these decisions may mean that it takes you many more years of hard work to achieve financial independence than it should. For some, you will not achieve financial independence at all.
NOT FINANCIALLY FOCUSSED
Like many other medical specialists, Anaesthetists admit they chose medicine for a reason – they are not financially focussed. Understanding the basics of tax, superannuation, personal insurance to protect income and investment strategies do not come naturally.
Anaesthetists’ high cash flow means they may be offered a range of investment opportunities, many of which may look sophisticated and attractive. With limited time and knowledge to interrogate the opportunities, some invest without a coherent strategy resulting in disappointing or worse counter-productive results.
COMPLEX TAX SYSTEM
Our research shows many Anaesthetists also find the Australian tax system daunting, particularly if they are overseas-trained. Even Australian-trained specialists find it and the financial jargon complicated. Some anaesthetists we interviewed craved for their advisers to educate them in a similar way medicos handover in ‘SBAR’ – clearly and simply.
TOO MANY PROFESSIONALS
Our research shows that most medical specialists use a variety of professionals for financial advice – accountants, private bankers, lawyers, investment advisers, stockbrokers, and insurance agents – and these are often not co-ordinated.
Many interviewed commented that it would be more effective to have one point of contact to handle all financial management issues – like a Personal Chief Financial Officer (CFO) who can project manage all the various transactional advisers.
OUR NATURAL BEHAVIOUR AROUND MONEY
A final key issue that affects all of us including Anaesthetists, is a branch of science known as ‘behavioural finance’ which has evolved to study the interaction between human behaviour and economics. This interaction often affects our financial success.
According to this theory, our behaviours towards our finances are hardwired and we often act in ways which are not in our best financial interest. Common investor behaviours that most of us relate to are:
Many intelligent professionals think that because they are good at what they do, they will also excel in managing their investments and financial affairs. Medical specialists have a tendency to overspend to fund an affluent lifestyle, assuming the cash flow will last forever.
- RISK AVERSION
Academic research has shown that investors are more troubled by a loss than pleased by an equivalent gain. However, by being so afraid of losing money, investors can often reduce their opportunity for gain. In other words, sometimes not taking risk can be risky itself.
We tend to judge ourselves quickly if our actions do not immediately generate a positive response. Fear of regret can lead investors to hold onto losing investments for too long hoping they will ‘come good’. Alternatively, if you have invested soundly, as part of a long-term asset allocation strategy for example, it pays to stick to your investment objectives rather than engage in costly, knee-jerk trading.
Case study – Luke and John
LUKE AND JOHN BOTH:
- started as private Anaesthetists two years ago.
- do one session a week at the public hospital.
- are 39 years old and earn about $650,000 per year.
- They are each married with three young children at private primary schools.
- have a $750,000 mortgage on a house worth $1.3 million.
- have partners who work part-time each earning $40,000.
LUKE AND HIS WIFE:
- sought financial advice when he was in his final year of training.
- planned ahead for his private practice tax payments, saving 40 per cent of his gross billings in an offset account.
- bought a $70,000 SUV through his business when he started in private practice.
- will keep their existing house and pay the mortgage quickly.
- are budgeting for private secondary school fees, an investment portfolio and annual family holidays.
- are both maximising their super contributions of $25,000.
JOHN AND HIS WIFE:
- haven’t sought financial advice.
- didn’t allow for his tax payments, and has taken a loan for $200,000 to pay for his first year’s private income tax and is arranging to pay the ATO in instalments for last year’s tax.
- bought a $150,000 SUV when he started in private practice using a chattel mortgage.
- have upgraded their home increasing their mortgage to $1.8 million.
- often find themselves with cash flow problems depending on when he receives payments.
- are sometimes overconfident when it comes to finances.
- do not have the cash to contribute extra to super.
Here is where they are in five years.
- Although John lives in a more expensive home than Luke, his overall net asset position is far less than Luke’s and he has significantly more non-deductible debt.
- Luke’s net asset position is $2.9 million. John’s is $1.7 million.
- Because of John’s high loan repayments and more opulent lifestyle, his annual cash flow is significantly less than Luke’s who lives within his cash flow and has less debt.
- Luke’s after-tax annual cash flow is $150,000 more than John’s.
Case study– Miranda and Belinda
MIRANDA AND BELINDA BOTH:
- work part-time in the public system, with one day private per week.
- are 43 years old and earn about $200,000 per year.
- have two children at private secondary schools.
- are married to medical specialists who each earn $500,000.
- have $1.5 million in debt – home and investments.
- use their income to fund school fees, holidays and entertainment.
MIRANDA AND HER HUSBAND:
- sought financial advice early from her parents and later through a financial adviser as senior registrars.
- recently bought a new family home to be closer to the kids’ schools for $2 million with an increased mortgage of $600,000.
- have life, trauma and income protection insurance.
- reduce costs of an annual holiday with homes for exchange.
- maximise contributions into a self-managed super fund of $25,000 each year and their super fund is now worth $600,000.
BELINDA AND HER HUSBAND:
- have sought ad-hoc financial advice.
- bought a new home for $2.4 million and owe $1.6 million.
- have income protection and trauma insurance for her husband.
- were involved in a failed investment while attempting to reduce tax and now owe $150,000 on the loan.
- travel overseas to ski twice a year.
- only take employer super contributions (no additional contributions) and their combined super fund is $400,000.
Miranda and Belinda both develop breast cancer and take six months off work. Here is where they are in two years.
- Miranda receives $500,000 income protection and trauma insurance payout tax free for her breast cancer.
- Miranda pays down her mortgage to only $100,000.
- Miranda’s and her husband’s super together is now worth $800,000.
- Belinda and her husband’s super together is only $500,000.
- Without Belinda’s income, Belinda and her husband’s annual cash flow is negative $5,000; their mortgage is still $1.4 million and they owe $150,000 for the failed managed investment scheme.
Choosing your personal CFO
If the issues in this paper resonate with you, you might like to speak to a financial adviser, or what we refer to as a Personal Chief Financial Officer (CFO). But choosing the right one for you and your unique situation can be difficult. Below is a checklist of questions which you may like to consider.
¨ Does your adviser have a solid understanding of the medical profession and in particular the issues Anaesthetists face?
¨ Do they understand how uncertain times like COVID-19 can uniquely impact you and are they helping you plan ahead?
¨ Do they look at your whole family situation including your partner, your children and extended family if necessary, not just your individual situation?
¨ Do they work with you to manage your cash flow now to build income producing capital outside your professional income?
¨ Do they work with you to carefully manage your lifestyle expenses, presenting facts not assumptions?
¨ Do they work closely with other professional advisers to ensure you have a collaborative financial approach?
¨ Accountant and tax agent
¨ Private banker / business banker
¨ Insurance broker – life, business and general
¨ Lawyer – estate planning, family, and conveyancing
¨ Real estate agent / buyers’ agent
¨ Do they listen and consider your past, existing, and future goals and desired outcomes?
¨ Do they understand the differences between working as a medical specialist in private practice and the public system? Do they keep up to date with the ongoing changes?
¨ Do they demonstrate they understand how tax, superannuation, insurance and estate planning impact you in the context of your overall financial situation now and in the future?
¨ Do they specialise in providing advice-based solutions based on your needs and outcomes not product-based solutions?
¨ Do they offer a transparent fee for service, rather than commission-based advice?
¨ Do they offer regular reviews of your affairs to ensure you stay on track?
About the authors
Craig Abela is Signate Private Wealth’s Practicing Principal and Financial Planner and is passionate about helping many clients, particularly medical practitioners, work towards financial independence through the right wealth management options.
Peter Stevenson is also a Practicing Principal and Financial Planner. He has been recognised for a number of awards and is seen as one of the leaders in the financial planning industry. With a strong governance focus, he provides individual strategies that suit clients and their stage of life.
James Sali is a Certified Financial Planner® and is passionate about understanding clients’ wants, needs, desires and ambitions, to ensure that he can tailor plans to their individual circumstances. James has strong attention to detail and he clearly communicates with his clients.
About SIGNATE Private Wealth
Signate Private Wealth makes a difference in clients’ lives by helping them navigate through their financial complexities. With offices in Brisbane and the Gold Coast, the team at Signate Private Wealth develop long term relationships with clients to maximise their financial potential. Signate Private Wealth provides clients with a full range of financial solutions so they can achieve their most important aspirations.
Signate Private Wealth’s solution to achieving this is to become our clients’ ‘Personal Chief Financial Officer’. As a Personal CFO, our role is to intimately understand our clients’ professions and the financial challenges and benefits they face, their personal values and their financial goals. We then co-ordinate a team of the right professionals to take care of all their financial requirements, so our clients can focus on the things that are more important to them.
IMPORTANT INFORMATION: This document has been prepared to provide you with general information only. It is not intended to take the place of professional advice and you should not take action on specific issues in reliance of this information, in preparing this information, we did not take into account the investment objectives, financial situation, or particular needs of any particular person. Before making an investment decision, you need to consider (with or without assistance of an adviser) whether this information is appropriate to your needs, objectives and circumstances.
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