Money management is an intricate task. Founder of Career Money Moves, LLC, Dr. Atelisha “Lisha” Taylor, MD, MPH, encourages physicians to hire a financial advisor to help navigate that terrain. An advisor can answer questions like knowing how much to invest, which accounts are the right fit, what insurance is appropriate, and how to proceed before spending a sizeable amount of money. Physicians may hire a professional to help with a particular task. For instance, a doctor concerned with estate planning might hire a lawyer, whereas a doctor concerned with taxes may hire an accountant. Dr. Taylor notes that while some physicians may only need an advisor for specific guidance, others may be best served finding someone to take the reins by managing and investing all the physician’s money.

Given that they occupy a high salary bracket, financial advisors highly desire clients who are physicians. As such, Dr. Taylor urges doctors to do their due diligence when considering hiring a financial advisor, making sure to hire someone qualified and capable of managing large amounts of money. Just because a financial advisor knows a medical colleague does not mean the advisor is a good fit for any physician. Likewise, the sheer act of a financial advisor sponsoring a high-end lunch at a medical conference lunch does not equate to having superb financial advisor skills. According to Dr. Taylor, physicians should look into a potential advisor’s educational resumé and confirm that the advisor is adequately certified to manage money. Dr. Taylor notes that a quality financial advisor should be a fiduciary who must act with the physician’s best interest in mind and hold certifications like certified financial planner (CFP) or chartered financial analyst (CFA).

Doctors have specific and varied financial options, so hiring a financial advisor who is aware of all these options and their pros and cons is essential. Dr. Taylor points out that physicians often have significant student loan debts, devote a great deal of time to training, and might have unforeseen, notable fluctuations in income. They may maintain several qualified accounts, including 401K, 403b, 401a, 457b, HSA, and (backdoor) Roth IRA. Doctors may also be able to purchase a practice or invest in a surgical center. Additionally, physicians may have other sources of income that, according to Dr. Taylor, allow them to open more tax-advantaged accounts.

It’s not enough for a financial advisor to know all the options available to physicians; a quality advisor should be able to deduce what works for each specific doctor’s situation. After all, physicians are individual humans with particular and personal needs and desires. According to Dr. Taylor, a quality advisor will inquire as to what each particular client’s financial goals are, devising an efficient strategy to reach them by asking the right questions to create a bespoke plan for each physician. Example questions might include asking about their client’s desired retirement age, plans to pay a child’s college tuition, outstanding debts, or large expenses.

Physicians should make sure to hire a financial advisor who has a transparent pay structure. Dr. Taylor points out that fee structures vary. While some financial advisors charge a transparent, flat fee (which Dr. Taylor notes is ideal), a number are “fee-based”—charging a flat fee while also earning money on commissions and investment products, which could ultimately lead the advisor to provide biased advice to maximize their profits. Physicians must also clearly know what services they are paying for. Dr. Taylor suggests that physicians educate themselves concerning financial advisors’ charges, as some charge an “assets under management” fee, which means that the advisor gets paid an amount based on the total value of the physician’s managed money. While Dr. Taylor notes that this fee is typically around 1%, it might be significantly more, and 1% might amount to 15% or 20% of the doctor’s yearly profits. She suggests that physicians should generally plan on paying around four figures annually for a quality financial advisor.

According to Dr. Taylor, it is essential that physicians continually evaluate their financial advisor’s work by asking key questions like how much money I have invested, how much money we invested this year, what is being invested in, what is my asset allocation, why is money allocated to a particular investment, what was a specific investment’s yearly return of profit, and how does the yearly return compare to the “market.” Dr. Taylor notes that any quality financial advisor should be equipped to answer these questions.

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Physician’s Weekly | April 18, 2024