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We all know that physicians face unique problems when planning for the financial future. Most doctors start their careers much later than others and tend to start with a high debt load from extensive schooling. But, once they truly begin the salaries are often quite robust and need proper management.
Finding a financial planner who specializes in physicians
Due to physicians’ unique set of financial issues it makes sense to find financial planners who work primarily or exclusively with doctors. There are quite a few out there because after all, from a financial planners point of view, doctors are quite lucrative. But make sure you vet anyone before you sign on. A few pointers …
- Do you know anyone personally who can refer you to a planner? Particularly in finance you want to work with someone recommended by a trusted colleague.
- What is their fee structure like? More on that in a bit, but you want to know how their fees are structured and if they’re right for you and your goals.
- What other services do they provide? Are they just asset management, does their financial plan include personal expenses? What about tax preparation? Make sure their services fit your needs.
- What credentials do they have? Depending on the state you can literally just declare yourself a financial planner and start looking for clients. According to the White Coat Investor, good ones to look for are Certified Financial Analyst (CFA), Certified Financial Planner (CFP), or Chartered Financial Consultant (ChFC).
But fees matter, especially as your portfolio grows
Financial planners charge people through a variety of means. They all have plusses and minuses. Here is a summary …
Fee Only: You pay a flat annual rate and there are no additional incentives to the planners, they do not receive commissions for selling you additional products.
Paying Hourly: You only pay for the planners time and nothing more. They are incented to give you the best advice to make sure you stay with them. These planners are more likely to offer additional services to their clientele.
A Percentage of Assets Under Management (AUM): The planner gets a percentage of your portfolio on an annual basis. If you have assets below a million try to get below 1% fee of less. If over a million look for 0.25% to 0.5%.
Beware of “Residentia”
The New York Times interviewed physician financial planner Ben Utley about the tendency of newly minted physicians to finally get the first big paycheck and go out and buy a house two to three times the size (and mortgage payment) they need, medical school loans be damned.
In the same article, Steve Podnos, a physician turned financial planner, explained how doctors can become easy marks. “Doctors are used to a tremendous exchange of information on a very open level. There is no guile, no trickery.” That is not always as true in the financial services industry.
Going it alone
Just as you don’t want your patients coming in with reams of questions culled from questionable sites on the internet, you might want to take a reality check to see if you really can handle your own finances. It’s not from lack of smarts, but from lack of time.
Physicians are stretched so thin at their practices that they rarely have extra time for anything beyond family obligations. As portfolios grow, they’ll need increasingly sophisticated forms of management. If you’re just not a numbers person, take the time to find the right person to do it for you.
Let us know you’re tips for managing money well. Do you hire a pro? Or do you feel confident in your abilities? If you’re an M.D. or a D.O. you can continue the conversation inside Sermo.
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