Dr. Edward J. Clemons, 44, was doing well operating his dental practice in Durham, North Carolina. But all his business success didn’t exactly prepare him for the challenges he faced a few years ago. With three children, one of them college-aged, Clemons had to figure out how to pay for their college education. And due to a whopping $60,000 loss at the hands of his financial adviser in 1998, he was eager to clean up a quagmire of financial mistakes.
Clemons’ adviser had invested his portfolio primarily in start-up pharmaceutical companies, which he described as “having great potential if they develop but no history of performance.” Although Clemons was making a good living running his business and serving as the president of the Durham Academy of Medicine, Dentistry and Pharmacy, the gamble left a modest $70,000 in his portfolio.
Looking back at his relationship with his financial adviser, Clemons says it was “difficult, because he didn’t seem to be hearing what I was saying. He was putting me into [investments] he wanted me in rather than what was in my best interest.”
When Clemons learned that LaShana Broussard-Morris, a financial consultant with Smith Barney, was interested in addressing the Durham Academy later that year, he was more than happy to hear what she had to say. “When I spoke to Ms. Morris, I realized that her philosophy was more in line with my goals.” At a follow up meeting with her, Clemons outlined his goals and made out a financial profile. From that, she developed a portfolio plan for him, which included his retirement, his children’s education fund, a growth fund, and an account that Clemons manages with his adviser’s supervision.
Broussard-Morris saw that Clemons’ financial affairs needed a thorough reorganization. “I realized that what he needed most was structure,” she says. “He had a college-aged child (now a 21-year-old graduate student) and two younger children. I went for a diversified approach to blend in with his aggressive risk profile.” Morris used an asset allocation model comprised of 80% stocks; 11% balance mutual funds, which included the Smith Barney Aggressive Growth Fund (SHRAX); and 9% cash. Some of the companies in Clemons’ portfolio include Biogen (Nasdaq: BIIB), New York Community Bancorp (NYSE: NYB), and insurer American International Group (NYSE: AIG). The $70,000 he had when he met Morr
is mushroomed into $200,000. It includes a retirement account for his wife, who is the office manager of his practice; his own SEP/IRA; a SEP account for his two employees; and 529 plans for each of his two youngest children, to which he contributes between $2,000 and $3,000 a year.Clemons has also incorporated real estate into his investments. He owns the $350,000 building that formerly housed his practice, and his home, which has a similar value, was recently refinanced. To create another income stream, Clemons recently moved his dental office to a space valued at $500,000 in a more upscale neighborhood, and he leases the old building to ensure that “good real estate would be available in a largely minority area.”
Overall, Clemons is pleased with how much his financial picture has brightened. “Ms. Morris has gotten me organized and on track financially. She has helped keep me in line with my goals and objectives. I now have a general overview of my financial picture, which we assess on an annual basis. So far it’s meeting my expectations.”
The last thing for Clemons to do is act on Broussard-Morris’ recommendations regarding estate planning. “Once I’m fully settled in my new office, that’s the next thing I will tackle,” Clemons says. Broussard-Morris says there’s no time like the present. “I have stressed that it’s important [for Clemons to have] a succession plan for his business and personal assets, and to ensure that they go to whomever he wants [should] something happen to him,” she says. “Estate planning is critical, especially for doctors who work so hard and lack the time to put all the details in place.”