Your voice. Our vision.
Read some answers to questions asked during recent MD Forum events.
What affect will the present instabilities of Southern Europe, Greece and Spain, have on the Atlantic markets?
Bill Horton: The fact that the European Central bank is coming in with the support of Germany is critical to that role. You have to have confidence in what is going on in the economy Greece can now have confidence because of the support of the Central Bank. There will be an impact due to these instabilities, but it will not be as dramatic as what it seemed like in the past weeks.
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What is new about the CMA philanthropic endeavors?
(Brian Peters) Associated with the CMA is the Canadian Medical Foundation (CMF) The CMF has 3 primary functions:
1. Helping students gain medical education. Most recently helping aboriginal students on their path to a medical career.
2. Invest in physician health and wellbeing.
3. Medical outreach in 3rd world countries. The CMF raised $300,000 to support Doctors without Boarders and other organizations operating with Haiti.
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What transactions have occurred with Industrial Alliance regarding the life insurance policies?
Brian Peters: There was a transaction made with Industrial Alliance surrounding our life insurance. The transaction did not affect our ownership of MD Life Insurance Company - we still own 55% and they still own 45%. However, it did result in the transferral (an 'assumption reinsurance agreement') of MD Life Plan policies such that policyholder obligations and administration duties are now assumed by Industrial Alliance (note that Industrial Alliance had always provided the back office administration for the policies and much of the product development work). It was not a 'demutualization', as when you bought the policy you did not put money into MD Life Insurance Company and you did not become a shareholder. So the transferral of the policies is not considered 'demutualization'; meaning that you would not expect to get money back. Money did come into the MD organization as a result of the transaction, but it was not significant and is used to fund other products and services including making sure that we have the right insurance policies available to our clients.
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What has MD really done to respond to the crisis and adapt to the economy?
Brian Peters: MD has weathered the recent economic crisis very well. We were already in the process of making changes to improve our effectiveness at delivering value to CMA Members as a result of a strategic review we undertook in 2007. The end objective is to simplify our relationships with physicians in every aspect where we do business. At the end of 2008, MD Financial's business results reflected market conditions, but were stronger than many competitors in the financial services sector. We ended the year with a positive cash flow unlike many other financial services providers, who were in net redemption at that time. We did take action on several fronts earlier in the year to ensure we could remain sustainable in what looked like very uncertain times. This included reducing the number of initiatives and programs we were delivering to reduce expenses. We were able to streamline activities and reduce expenses through creative synergies across the organization. We have simplified the organization - we now have fewer companies through which to offer our products and services. This results in cost savings that can and will be reinvested in technology. We unfortunately had to reduce our work force, by approximately 5% to maintain that critical balance to provide you with the service you need in a cost effective manner. Furthermore, with no debt and minimal exposure to ABCPs, we do not share the risk profile of many other financial institutions; therefore we are able to conserve cash for the long term.
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Is MD in business to make a profit? Recent downsizing, the sale of Saxon, a new technology platform (that was required by your regulators), the use of external consultants, etc. - why has MD changed?
Brian Peters: We are not profit-maximizing. When we make money, part is put aside as prescribed by our regulators. The recent downsizing was done in accordance with our culture and values. Rightsizing of the organization was based on where we have to be to serve physicians better and keep adequate reserves to cover the costs of technology and market impacts.
With regard to Saxon - we sold our 30% interest in a publicly listed company to another publicly listed company - it was a tremendous deal to get into and out of - and could have created conflicts of interest.
We hire consultants because we're not big enough to do everything on our own. The catalyst for our new technology platform was regulatory, but we used that to get a system that really works for us and our clients. We haven't changed - we do not "have evil intentions that run counter to how we did in the past"; our ownership hasn't changed. We focus on physicians.
We're living in a cynical environment and it's good to be questioning. We don't take our clients' trust and faith in us for granted. You have choices; to be your first choice; we have to set the bar very high. I appreciate your expressing your concerns - it's important to have dialogue with clients and members.
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What is the Global Portfolio Strategy? Why do your competitors call it cookie-cutter? Can I hold other funds/stocks?
MD Financial commits to helping clients achieve their financial goals. In order to deliver on this commitment, we evolved a sophisticated investment framework based on a deliberate set of investment beliefs. MD advisors follow a rich discovery process to help you identify your goals, needs, wants and wishes - and to develop multiple purpose-driven portfolios with the potential for solid performance relative to the ups and downs of the market. We are passionate about acting in the best interests of our clients and are committed to helping them reach their objectives. We call this our Global Portfolio Strategy - or GPS. GPS is a methodology that provides true risk management while optimizing return potential - a sophisticated evolution of our current approach. It leverages the expertise of DB Advisors, one of the world's foremost asset allocation experts - to bring a new perspective on risk - an evolution that makes sense in a changed investment world.
We are recommending our financial advisors introduce clients over time to the correct asset mix defined by this new strategy. Our job is to ensure we continue to offer the best financial solutions to earn your business every day.
You may have heard such things from our competitors as "MD Management is now limiting the investments you can hold". Nothing could be further from the truth. We continue to offer, on behalf of our clients, both MD and non-MD products.
We hope that you have taken or will take the opportunity to discuss the portfolios with your advisor.
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You often refer to advisors as salaried - but don't they get a bonus for selling MD Funds? What is the compensation structure for MD Management Financial consultants?
MD Advisors are paid no commission. Their salary represents 75%-80% of their earnings, the rest is based on meeting goals derived from the underlying measures of providing sound advice geared to the best interest of the client, such as; "Know Your Client" updates and referrals, corporate targets for assets under administration, net cash flow and new physician clients across all lines of business. There is no financial incentive for advisors to recommend MD Funds, or any other specific product. This compensation model allows advisors to focus on providing advice and solutions that meet the needs of members, rather than resulting in the profit of the firm or their own personal gain. This is a very unique feature of MD Financial - MD advisors are paid to act in their client's best interest - and it's important to understand how different MD is from the industry in this regard.
Comment added by Dr. David Bach
...I trust what the advisors tell us. I know that if I want to do something on my own they'll say, "We suggest you only put a small part of your portfolio here and you should have your main investments following your long-term plan". That's the sort of sound advice I get from MD and that's what I want my friends and colleagues to get. It is not necessarily what you get at other places. I think part of the reason is because the incentives at MD are geared to our own interests as doctors, whereas incentives elsewhere are geared to the commission salary of their advisors or the profit of the firm.
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Why was the website portfolio summary changed? I found the previous format with all accounts summarized according to the total in each MD Fund and the percentage of the total portfolio more helpful than the present format.
Brian Peters: We've made some necessary technology changes and will take client comments and suggestions under advisement. This was not a historically well-used feature for online clients and was not included in the initial deployment of the new system. We have heard from other clients expressing similar concerns and will appropriately prioritize this feature for future upgrades, relative to other priorities.
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