Key Takeaways:
- Physicians face unique financial planning considerations, such as managing high incomes, medical school debt, and insurance needs. So, partnering with the right advisor specializing in financial planning for physicians is valuable in aligning your goals and income with an expert who understands your career cycle.
- In addition to assessing your goals and expectations for hiring a financial advisor, there are many questions and factors you can consider before choosing one, such as their experience, fee structure, and fiduciary status.
- It’s beneficial for physicians to partner with a financial advisor at every stage, from early career and growth to retirement, to help create a debt strategy, manage cash flow, and reach their long-term goals.
When it comes to finances, physicians are unique. While they earn high salaries, many doctors graduate from medical school with significant debt. Then, they must navigate pivotal career choices such as whether to specialize, enter private practice, and more. As you might expect, these decisions significantly impact their financial future.
Unfortunately, while focused on patient care, many doctors lack the formal business skills needed for successful financial management. This underscores the need for professional financial expertise. In fact, a recent Doximity poll of 2,087 doctors revealed 53% already work with a financial advisor and an additional 15% are considering hiring one soon. These findings cut across various specialties, with the exception of neurology, where only 41% of doctors have a financial advisor.
Finding the right financial advisor with expertise in the medical field is essential. The best advisors will help physicians achieve their financial goals while sustainably practicing medicine. In this article, we’ll discuss how physicians can pick the perfect financial advisor, including the roles of financial companies and firms, and the importance of referrals.
Finding the Right Financial Advisor
Before hiring a financial advisor, it’s important to determine what you want. Are you looking for general advice and planning or are you ready to invest for your future? What are your short-term and long-term goals; better yet, what are your dreams? Answering these and other questions can help you choose the best fit for you.
When searching for the right advisor, carefully assess their qualifications, as anyone can call themselves a “financial advisor.” Unlike the medical field, where board certification is standardized, there are over 200 professional designations in the world of investment advice.
However, considering a few key factors will help you effectively narrow down your choices.
These include:
- Ask for referrals from friends, relatives, and professional colleagues. Recommendations can often provide the most reliable information. Be aware that online searches may not always provide accurate information about credentials.
- Consider a large firm or solo advisor. Would you prefer working with a financial firm or an advisor with a solo practice? Each has its positives and negatives.
- Check credentials. Financial advisors who adhere to their industry’s best practices include CERTIFIED FINANCIAL PLANNERS® (CFP®s) and registered investment advisors (RIAs).
- Determine fiduciary status. Legally, a fiduciary must act in the client’s best interest, offering a layer of trust and security in the relationship.
- Ask about fee structure. For instance, are these advisors fee-only or do they earn commissions?
- Review experience. From private practice to working in a hospital, it’s important to work with an advisor who understands the world of doctors and physicians.
- Screen your candidates. Ask questions about their experience, client base, communication style, and other factors that can affect your relationship.
- Be thoughtful and reflective. Your advisor’s ability to align with your career goals, personal objectives, and risk tolerance is essential for a successful partnership.
Finding the right advisor is just the beginning. As your career evolves, so will your financial goals, expectations, and needs. For example, you might consider leaving clinical work, starting a private practice, retiring early, or taking on locum tenens work. Therefore, it’s important for your advisor to be capable of adjusting your portfolio strategy while staying committed to your financial growth.
When is the Right Time to Hire a Financial Advisor?
Considering the various financial scenarios and decisions physicians face, many wonder when hiring a financial advisor is most beneficial. Working with a financial advisor can be valuable for doctors at every career stage, from starting and paying down debt to planning your retirement.
Early Career Planning: Building a Strong Financial Foundation
If you’re just entering the medical field, financial planning is all about building a strong financial foundation that positions you for success for your short-term and future goals. A financial advisor can help you organize your finances and develop a clear roadmap based on your objectives, income, and other needs. Here are some ways a financial partner can help you early in your career:
- Create a Medical School Debt Strategy: Designing a clear plan to manage and repay student loan debt is critical to your cash flow and goals. An advisor can help you create a realistic and sustainable plan so you can still enjoy your growing wealth.
- Establish a Budget and Emergency Fund: While you have a high income, it’s essential to establish a budget to meet your obligations and avoid lifestyle creep or spending more as you earn more. You should also add your emergency savings to your budget to ensure you have at least six months’ income saved in case of an extenuating circumstance, like an unexpected repair, injury, or loss of income. An advisor can help you bring these financial essentials together: repaying debt, managing income, and saving for the unexpected.
- Begin Saving for Retirement: Saving for retirement early via a Roth IRA or 401(k) gives your funds more time to compound, benefiting you long term. An advisor can walk you through your account options, tax implications, and investing strategies based on your time horizon and risk preferences.
Mid-Career Transitions: Managing Growth, Debt, and Investments
As you settle into your career, your practice and life may evolve, requiring more advanced strategies to manage, grow, and preserve your wealth.
- Optimize Your Strategies: Now is the time to assess your strategies, identify new opportunities, and help ensure your hard-earned money works efficiently for you. An advisor can help you optimize your tax strategy, save more, manage your risk, and explore investment opportunities for excess funds as your income increases.
- Evaluate Insurance Needs: Ensuring you have sufficient insurance coverage is critical as you have more to protect, like a growing family, income, and career. From disability to malpractice and life insurance policies, an advisor can guide you through what you may need for your situation and can often collaborate with your insurance agent to secure the appropriate coverage.
- Plan for Long-Term Goals: Doctors often delay their long-term goal planning because they are focused on patient care, research, and other career demands. Still, taking a proactive approach is important to help you reach new objectives like buying a practice or funding your children’s college education. An advisor evaluates the various areas of your life to help adjust your plan for new pursuits while keeping your finances on track.
Nearing Retirement: Maximizing Wealth and Minimizing Risk
When you’re five to 10 years from retirement, financial planning with a trusted advisor can be crucial to helping ensure you can enter your next chapter on your terms.
- Design a Retirement Withdrawal Strategy: A strategic withdrawal plan can help you manage your cash flow and taxes to sustain your retirement. An advisor can explain the tax implications for certain accounts, calculate your income needs, and time your withdrawals to manage healthcare premiums and later, required minimum distributions.
- Adjust Your Portfolio Allocations and Risk: We often recommend reducing your investment risk and making strategic allocations to protect your funds before retirement. An advisor can help you implement guardrails that will preserve your capital so you can make the transition with ease and confidence.
- Plan Your Legacy: Later in your career, you may have a better idea of your final wishes and legacy goals. An advisor can help you bring that vision to life while managing your taxes and considering your family’s needs through estate planning strategies like charitable giving, trusts, and more.
Partner with Blankinship & Foster for Your Financial Future
If you are a doctor, working with financial advisors for physicians goes beyond managing your financial standing. These experts are your go-to for a wide range of services, including retirement and estate planning, and tax and wealth management strategies. What’s more, they can offer in-depth risk analysis, helping you align your financial goals with your career path.
Partnering with the right advisor, such as the professionals at Blankinship & Foster, can help you effectively manage your finances, allowing you to focus on your primary mission of patient care. This harmonious balance between financial stability and professional dedication is the ultimate goal, and with the right guidance, it’s a tangible future. We explore the various financial stages doctors experience along the path to retirement in our four-part series, The Essential Guide to Retirement Planning — download your copy today.
Contact us if you would like to learn more about how we specialize in helping physicians reach their financial goals at every stage.