Education & Workforce Development

Planner sinks his teeth into dentists' finances: Four Quadrant builds business around one industry

July 25, 2005

Dentists know a lot about operating a dental drill, but sometimes not so much about operating a business.

That's where Four Quadrant Wealth Advisors likes to comes in.

Indianapolis-based Four Quadrant provides its dental clients with financial advice on everything from running the money side of their practices to building their retirement funds. As one of a fairly small number of financial advice firms that focus on a single type of client, Four Quadrants limits its clients to dentists or medical doctors.

Jason Smith, Four Quadrant's founder and president, said he started his business last year specifically with that market in mind.

Smith noted that dentists often find the financial side of their practices difficult. Many dentists receive little or no business education in dental school, so starting a practice is new territory for them.

It doesn't help that many dentists get out of school carrying staggering student-loan burdens, the 31-year-old Smith said.

Darren Klingler, director of professional services for the Indiana Dental Association, agreed that dentists often find the business side of dentistry a struggle.

"It's definitely a continuing issue for dentists," he said. It's a particular concern for new dentists setting up their own practices instead of joining an existing practice as an associate, he added.

Klingler said dentists can turn to practice management companies to help set up a practice or just go to a CPA. After their practice is established, many turn to financial planners to help grow the practice or advise them regarding personal financial matters, he said.

Still, there aren't many firms around that focus on dental practice, Klingler said.

"Dentists really appreciate someone who takes an interest in their special requirements," he said.

Smith, who grew up in Tipton, has had an interest in dentistry and its special requirements for a long time. His grandfather and his uncle are dentists; his wife, Kara, plans to become an orthodontist.

However, Smith said he always was interested in the financial and business side of things. He took a mix of communication and marketing courses at the University of Evansville, then worked for several financial companies, including Lincoln Financial Advisors Corp. in Indianapolis.

"But I really wanted to have my own business," he said.

Smith was aware right from the start that many dentists felt some accounting firms and financial planners didn't understand the dental business all that well. Someone who did understand the different challenges facing dentists would be in a position to tap that particular market.

He made it a point from the beginning to specialize in dental clients; in fact, he hasn't had a non-medical client for five years. After four years at Lincoln, Smith decided to go on his own and opened Quadrant. He said he had built up a client base and wanted to try some of his own ideas.

Smith said the financial burden dentists face can be substantial, particularly new dentists starting their own practices. The cost of equipping a dental office, even for one dentist, is around $415,000, he noted.

Many dentists have student-loan burdens ranging from $150,000 to $240,000, Smith added.

As a result, many practices face a perpetual cash-flow crunch for the first 10 years or so, Smith said. That doesn't make for a very efficient operation and also makes it hard to start socking away funds for retirement.

"It's not unusual to sit down with a 50-year-old dentist who is way behind his savings for retirement," Smith said.

He takes a very hands-on approach to managing finances for his clients, he said, putting them on plans that are designed to make their practice as efficient as possible, holding down expenses and maximizing returns. Saving a good chunk of this income is just as important.

For example, he encourages his clients to be cautious if they decide to construct their own building to house their practice. It's easy for dentists to get carried away and build something with more room than they need, he noted. As a result, he pushes his clients to determine what they actually need instead of what they just want.

"We ask our clients not to spend more than $10,000 on anything without consulting us first," Smith said.

Four Quadrant has 62 clients at present, Smith said, and his goal is to reach 100, but no more than that.

"We would rather have 100 really successful clients than 400 clients we could see maybe once a year each," he said.

Building that client base hasn't been difficult due to the large number of graduates that emerge from IU's School of Dentistry and settle in Indiana.

Smith's single-profession approach is pretty uncommon in the financial field, said Jake Dunton, a CPA and head of Indianapolis-based Dunton & Co. PC.

Still, many financial advisory and accounting firms are increasingly specializing in two or three types of clients, he noted. For example, Dunton & Co.'s clients mostly are construction firms and not-for-profit groups. The idea is to build up an area of expertise in certain fields.

"Otherwise, you're just another CPA firm," Dunton said.

Even firms that specialize, though, usually don't do it to the exclusion of any other kind of client. Dunton notes that other firms, including his, round out their customer base with a variety of other clients.
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