Ask a successful practice owner where their wealth is, and the honest answer is often: in the practice, and maybe the building. That concentration built the wealth. It can also put it at risk.
What is concentration risk for a dentist?
Concentration risk is having too much of your net worth tied to a single asset. For many dentists, that asset is the practice (and often the real estate it sits in). It built your wealth, but if its value falls when you need it most — a soft market, a health event, an industry shift — there’s little to fall back on.
Why does it matter more as you succeed?
The more successful the practice, the larger the share of your wealth it tends to represent, and the more your financial security depends on one illiquid asset you also happen to work in. Success quietly increases concentration unless you plan against it.
How do you build wealth outside the practice?
- Fund tax-advantaged accounts fully (see retirement plans compared).
- Build diversified, low-cost investments in taxable accounts.
- Avoid piling all “extra” capital back into the practice or a single property.
- Keep an appropriate cash reserve so you’re never a forced seller.
Wealth that is independent of the practice is what turns a good income into real freedom.
Frequently asked questions
Often both, in balance. Reinvesting in the practice can be worthwhile, but building diversified wealth outside it reduces the risk of depending on a single asset. The right mix depends on your goals and timeline.
There’s no single number, but the goal is enough diversified, liquid wealth that your security doesn’t hinge on the practice’s value at any one moment.
Founder & Financial Planner · Investment Adviser Representative · Series 63 & 65
Ian McGinnis is the founder of Dental Wealth Partners and a fee-only financial planner dedicated to dentists. As an investment adviser representative (Series 63 and 65), he built the firm to give dentists coordinated, fiduciary advice across their practice, taxes, investments, retirement plans, and long-term goals — the whole picture in one strategy. A graduate of Belhaven University, Ian previously worked at Davis Private Wealth, MML Investors Services, and Northwestern Mutual, and is based in the Jackson, Mississippi area. He is the author of The Wealthy Dentist and hosts the Smiles & Cents podcast.
Keep reading
- Retirement plans for dental practices, comparedA comparison of 401(k), safe harbor, profit sharing, SEP-IRA, and cash balance plans for dental practice owners — and how to choose.
- “Buy, borrow, die,” explained: PALs and box spreadsA plain-English, balanced look at the “buy, borrow, die” strategy — how pledged asset lines and box spreads work, and the significant risks involved.
- How to value a dental practiceThe main methods used to value a dental practice, what drives value, and how buyers and sellers should think about the number.