How to Choose a Fiduciary or Financial Advisor for Physicians

Financial advisors specializing in serving doctors, such as Physicians Thrive in Omaha, will understand their clients’ unique careers and issues. These trusted partners can provide training and experience to help physicians avoid financial pitfalls, plan for the unexpected, and make the most of their income and assets. Meanwhile, doctors can focus on their primary goal of serving patients, knowing their assets are protected, well managed, and growing to achieve individual goals.

Related: Can Physicians Have Cool Cars and Houses and Still Retire Early?

Why Choose a Fiduciary as a Financial Advisor for Physicians?

Doctors’ educational requirements and career paths differ considerably from most other high-income professionals, including lawyers, accountants, and CEOs.

Between college, medical school, and a residency program, it takes between 10 and 14 years for doctors to embark on their careers as fully-trained medical professionals. Afterward, typical doctors can look forward to earning a high income. Still, physicians generally begin their careers older than other professionals. Thus, doctors may have a shorter career window before retirement. Also, many fully trained physicians often work long hours, carry substantial debt burdens, and have little time to add a comprehensive financial education to their vast store of medical knowledge.

Finding the right financial advisor for physicians still offers a significant challenge, even locally here in Omaha. Doctors need an advisor who understands their unique experiences, how to steward growing assets, can manage risks, and has a vested interest in tending to each client’s accumulated wealth. Many doctors will benefit by finding a trusted partner to help guide how they manage and grow wealth.

That’s why understanding the difference between suitability and fiduciary standards for financial pros is one critical piece of financial literacy that doctors should learn before choosing a financial pro to guide them. This brief definition explains the difference between the SEC’s definition of fiduciary and suitability standards for financial professionals:

• Suitability standard: Typical brokers must adhere to the suitability standard, which means they must offer advice that suits their client’s interests. While brokers who operate under this standard should provide doctors with suitable advice, they may also choose suggestions with their personal bottom lines in mind. This less-strict standard also allows brokers to consider their own interests.
• Fiduciary standard: This stricter standard compels financial advisors only to consider a client’s interest when they make recommendations. The SEC offers guidelines to prevent fiduciaries from considering their own interests when guiding clients towards particular services or products.

Fiduciaries Treat Clients Like Doctors Treat Patients

Because of their training in medical ethics, doctors might assume that all financial professionals operate the same way that they work. Good doctors consider the individual patient and provide medical advice based on the patient’s best interests and not that of their wallets. Doctors may assess the patient’s overall health, medical condition, recovery time, risks, insurance, and budget. Determining the best solution would not involve considering which treatment option provides the physician with the highest profit margins.

If doctors only operated under the suitability standard, they might always suggest the most expensive treatment. For instance, orthopedic surgeons might always recommend high-profit surgery as a suitable therapy for an injury, even if they believe physical therapy or medication could provide a patient with a practical, cheaper, and less risky alternative.

Instead, doctors typically work under a fiduciary-like standard. In the same example, the orthopedic doctor could first suggest less invasive and risky therapies. They might turn to surgery only if those treatments don’t provide healing or relief. Thus, physicians should consider an advisor who adheres to the fiduciary standard to ensure that their financial partner will live up to their expectations and approach clients the same way they work with patients.

Related Reading: How to Work With an Investment Advisor

Why Hiring a Financial Advisor for Physicians Presents a Challenge

What makes a doctor’s financial situation unique from that of other high-income professionals or medical students and residents?

Typical Medical School and Residency Financial Concerns

During medical school and even into a residency, most financial questions may revolve around managing debt, living costs, and educational expenses. According to the AMA, medical school graduates owe an average of $200,000 for school loans. Meanwhile, first-year residents earn about $60,000 a year.

Thus, a resident’s typical income compares to that of many college graduates, but these new doctors may owe considerably more debt. During those years, students, recent graduates, and residents may focus more on their immediate personal finance issues than on long-term planning. At the same time, some residents or students might look ahead in anticipation of future earnings. Still, most of them find their schedules so busy with coursework and rounds that they’re not likely to spend too much time planning.

Dramatic Changes to a Doctor’s Financial Situation After Completing a Residency

After completing a residency, a doctor’s financial situation will usually change dramatically from school or residency days. Even in some lower-paying medical fields, salaries average well over $200,000, and some specialties and practices can earn two or three times that much. Thus, doctors can switch from middle-class incomes to affluence in an extremely short time.

The highest paying specialties generally require the longest residency periods. Even though it looks like certain practice areas pay very well, top specialists may have a shorter earning period to pay debts and build wealth. Thus, physicians must establish goals and develop a solid plan to ensure they make the most of their high-earning years. They should also plan for the unexpected in case they can’t work in their chosen field as long as they hoped.

Read more about planning for the unexpected: Why Doctors Need Own-Occupation Disability Insurance

During the decade or so that pre-med and medical students and residents prepare for their careers, they gain enormous knowledge about science and medicine. Because they’re so busy competing for top spots in schools and hospitals, these prospective doctors usually don’t have much time to learn about finance. Finding a trusted partner to help manage their potential wealth offers a prudent solution.

How a Financial Advisor for Physicians Should Help Doctors With More Than Just Investing

After investing time and money in their careers, physicians will undoubtedly want to make sound investment decisions to ensure they can protect and grow their money. At the same time, they should set goals to ensure they have a way to measure financial success.

Doctors may also picture financial management as primarily focusing on investments, like stocks and other equities. To set goals and measure progress, physicians should also take some time to consider many different aspects of sound financial management beyond simple investing.

A sample of these critical areas of financial management include:

• Debt and credit: Even if doctors can earn high salaries, many won’t feel comfortable until they’ve figured out how to reduce student loans, other credit balances, or perhaps even debt incurred for starting a new practice. The cost of carrying debt can reduce overall gains considerably, and large debt-to-income ratios can impact credit scores.
• Taxes: As salaries increase dramatically, so do income tax rates and bills. A solid financial plan should always include ways to legally minimize tax burdens so physicians can keep more money after working hard to earn it.
• Insurance: Some doctors may need to purchase insurance policies, including professional liability, life, disability, property, and health insurance. A good advisor can help with strategies to purchase high-quality coverage for the lowest cost.
• Diversified portfolios: Prudent investors understand that various financial sectors perform better or worse because of seasonal, economic, or political factors. Diversification manages risks and might include such assets as stocks, bonds, real estate, etc.
• Retirement and estate planning: Retirement might seem a long way off, but time passes quickly. Doctors want to plan for comfortable retirements and ensure they can care for themselves and the people they care about.
• Financial reporting: Trained in science and medicine, doctors understand the value of hard data. A proper financial management plan requires timely reporting to gauge progress and make informed choices.

Fee Structures for Financial Advisors

Doctors earn income in a variety of ways, such as salaried employees, independent contractors, and self-employed practice owners. Naturally, financial advisors also expect to earn compensation for their services. Beyond understanding their unique requirements for a financial advisor, doctors should consider the different ways advisors get paid.

Naturally, doctors will want to know how much the services will cost. Also, how advisors earn compensation can offer clues about their incentives or possible biases. Most financial advisors, including Physicians Thrive in Omaha, earn compensation in one or a combination of these ways:

• Fees from clients: Many fiduciaries work for flat fees, an hourly rate, or a percentage of the assets managed. They may charge different amounts for various services, like investment advice, tax planning, etc.
• Commissions from sales: In this case, the advisor doesn’t directly charge clients. Instead, they earn a commission from the provider for brokering various products, like insurance or mutual funds.
• Salaries: Some firms pay their advisors salaries. The advisor’s salary, bonuses, and other compensation may depend upon the number of clients or the total wealth managed.

Upcoming changes to Retirement Planning: SECURE Act 2,0 – what it means for you.

Why Physicians Should Consider Specialized Advisory Services

US News supported the idea that doctors have unique career experiences and risks, so they need specialized financial assistance. Medical professionals can earn high salaries. At the same time, career-entry requirements mean that doctors typically begin their careers a bit older and more in debt than other professionals. Since many doctors work as independent contractors or run their own practices, they might also need extra protection against lost income because of an unexpected disability or death.

Thus, doctors need to include financial independence, risk management, controlling taxes, and debt reduction as primary goals in their plans. Of course, physicians also have their unique preferences and objectives. While many share similar goals, they might prioritize individual factors differently.

For instance, some doctors may intend to work at a hospital for a few years to save money and build credit to start their own practice. Others may hope to retire early or need to reduce their debt burdens. Many physicians have multiple goals. A financial advisor for physicians should combine comprehensive knowledge about the profession with a willingness to take each client’s individual goals and situation into account.

Want even more info about what to look for in a financial advisor? Download our eBook: Essential Elements of Financial Planning

Local Vs. Online Financial Advisors

A common question our physicians often ask us is, which is better: a local financial advisor in my hometown, such as Omaha, or someone that is not local? Online and local financial advisors can offer the same services. These could include financial advice about taxes, credit management, investments, insurance, and retirement or estate planning.

Working with a local financial advisor may include visiting their offices during business hours. An online financial advisor can provide the same services online via phone calls, emails, or even video chat. Thus, online advisors make it easy to keep up with the same high-quality level of service anywhere in the country with access to a mobile phone or computer.

Should a doctor move to a different city or state, they can keep the same online financial advisor without the headache of trying to find a new financial advisor in the new location. Physicians Thrive, located in Omaha, provides financial advisor services to doctors nationwide. By keeping the same advisor, the relationship remains intact, history is not lost and the doctor doesn’t have to spend any time moving their accounts or getting a new advisor up to speed.

Physicians Thrive: A Trusted, Comprehensive Financial Partner for Doctors

As a doctor, you need comprehensive financial planning from a trusted fiduciary who understands your unique goals. Physicians Thrive offers a proven system, combined with personalized advice, to handle investing, taxes, retirement planning, and much more.

Better yet, Physicians Thrive only serves doctors, so your advisor will understand your unique needs and situation. Physicians Thrive advisors also have years of experience helping other doctors achieve their financial goals. Find out more about our proven approach as a financial advisor for physicians in Omaha, and then contact us today to get started.

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