It is no surprise that physicians are at a disadvantage when it comes to personal financial management. Although physicians receive the best medical training in the world, they are not provided with the knowledge necessary to deal with the business realities of practicing medicine or their financial well-being.
During residency and fellowship, physicians are focused on their clinical responsibilities and often lack the time or the inclination to concern themselves with financial issues, such as managing debt, creating a budget, obtaining necessary insurance protection, or contributing to retirement plans. Suddenly, upon completing their training, physicians are ready to establish a financial plan. So, should you hire a financial planner? Let’s look at 10 reasons to hire a financial planner and 1 reason not to.
1. Medical Schools Don’t Teach Physicians about Financial Planning
Physicians are typically forced to learn financial planning and investing the hard way, because there is no other way to develop the skills and experience to feel confident when managing their personal finances. Good financial planners, particularly those who educate their clients, can tell you everything you need to know and exactly when you need to know it, which saves you time and headaches.
2. “See One, Do One, Teach One” Does Not Apply to Financial Planning for Physicians
Every physician and every family has a different financial situation; therefore, there is no way to improve your personal financial planning without making many mistakes. Establishing a financial plan is in many ways like purchasing a diamond. Although the jeweler may hand you the loupe to help you see the diamond that you are considering, without being educated first, would you see its flaws? Probably not, because you don’t know what you are looking for or how to differentiate between a high-quality gem and a low-end stone.
As financial planners for physicians, we’ve learned everything we can about financial planning for physicians, have written countless financial plans for physicians, and can teach you what you need to know to achieve financial security for your family.
3. It Takes a Doctor to Know a Doctor
It takes a physician to know a physician, and this same logic applies to financial services professionals. As a medical practitioner, you have a network of specialists to call upon when you are out of your depth. But when you do your own financial planning or when you use a financial advisor who doesn’t specialize in financial planning for physicians, you lose the benefit of that network.
4. Surgeons Don’t Operate on Family Members
Surgeons don’t operate on family members, and neither should they operate on their own portfolios. When it comes to investing, you only have 2 emotions–greed and fear. When the market is increasing, you regret not buying more (ie, greed), and when the market is going down or sideways, you feel you have made a mistake (ie, fear).
In fact, one study titled “Investment Behavior and the Negative Side of Emotion” showed that people with lesions in the areas of the brain that control emotions were more successful as investors than individuals without these brain lesions.1
The study’s participants were each given $20. In a series of transactions, they were asked to bet $1 on the outcome of a coin toss. If they chose not to bet, they kept their dollar. If they chose to bet their dollar and won, they received $2.50. However, if they lost, their dollar was taken. The participants with the brain lesions were more successful than the participants without the brain lesions. The study’s authors attributed that success to a lack of fear. Early in the study, all participants were willing to bet their $1 on the coin toss, but as the game progressed, the participants without the brain lesions feared losing more money, and decided not to continue playing.1
As a physician, you may have to desensitize yourself in certain situations, but when it comes to your money, emotions can make you your own worst enemy. A solid financial advisor can help you make a plan and stick with it so that you’re more likely to have a positive outcome.
5. You Are Already Late to the (Financial Planning) Party
Physicians don’t usually start making “real money” until they complete their training. At that time, they realize that they are in their 30s; financially, 10 years behind their peers who are in other professions; and have lost a significant amount of time and money that they may never regain. It is also around that time that they need to buy a house, pay off student loans, and cover the cost of childcare. A good financial planner for physicians can help you save more money earlier so that you don’t find yourself burned out and wishing you had put away more money earlier in your career.
6. Financial Planning Takes Time
When you are not sleeping, eating, performing procedures, or are in the clinic, you may want to spend some time with your family. Do you really want to sift through the financial news, read over your insurance policies, tackle your estate planning, and manage the minutiae of your student loans? A financial planner for physicians can perform all of these tasks for you, giving you some energy to enjoy what is left of your free time.
7. Making the Wrong Financial Move Is More Expensive than Hiring the Right Financial Planner
Everybody in your practice knows a physician who made a huge financial mistake. That physician is the one standing in the operating room long after he or she should have retired. We’ve heard them say, “I wish I had met someone like you when I finished residency.” In fact, if you are actively looking to create a financial plan, have your financial plan reviewed, or want advice in one or more areas and do not want to risk dealing with a salesperson, you can hire a fee-only Certified Financial Planner. Two good places to start your search are the National Association of Personal Financial Advisors (www.napfa.org), the leading professional association of fee-only financial advisors, and the Financial Planning Association (www.fpanet.org/), the largest membership organization for personal financial advisors in the United States.
8. The Doctor’s Lounge Only Tells Half the Story
From the outside, it may appear that your colleagues are brilliant financiers. They’ll brag about all the money they’ve made in the market, but they won’t say a word about the huge losses they racked up along the way. A financial planner for physicians can help you make better decisions and prevent the mistakes that your colleagues have made.
9. You Could Use a Financial Scapegoat
Now that you’re a physician, there is a lot of pressure regarding money. For example, your mother and father need help buying a house. Your brother-in-law wants you to invest in his restaurant. Your colleagues are pressuring you to invest into a medical office building. Although you want to “do the right thing,” you know that that decision may not be the right decision for you. When you have a financial advisor (and everybody knows it), you can say, “My financial advisor said no.” It makes your financial planner the bad guy, not you.
10. Your Family Is Counting on You
You may be the only one in your household who understands the money situation. If something happens to you, your family may have a tough time managing the finances unless you have a financial advisor who can help them pick up where you left off. If your wife or husband is not involved with managing the personal finances, a financial planner can help you work together to become financially stronger as a couple and even model good financial habits for your children.
So what is the one reason not to hire a financial planner for physicians? It’s simple. You should not hire a financial advisor unless you intend to follow his or her advice, because the best advice—like the best medicine—will not do you a bit of good unless you actually take it as directed.
- Shiv B, Loewenstein G, Bechara A, et al. Investment behavior and the negative side of emotions. Psychol Sci. 2005;16:435-439.
W. Ben Utley, CFP, is the president of Physician Family Financial Advisors, a fee-only financial planning firm helping physicians throughout the United States to pay off student loans, save for college, and invest for retirement. Visit www.physicianfamily.com, or call 541-463-0899.
Lawrence B. Keller, CFP, CLU, ChFC, RHU, LUTCF, is the founder of Physician Financial Services, a New York–based firm specializing in income protection and wealth accumulation strategies for physicians. He can be reached at 516-677-6211, or by e-mail to Lkeller@physicianfinancialservices.com with comments or questions.