Financial advisors and wealth managers are not just for rich people or for investing in llama futures and bitcoin loan sharks. Health professionals have complicated financial lives. Huge debts, job search expenses, salary negotiations, moving costs, nanny salaries, high rents and mortgages near the medical center, wedding expenses, and even unforeseen costs like car accidents can make investing and saving for retirement seem decades away, but a wise planner can be a great resource while a veterinarian or anesthesiologist concentrates on her practice. Good financial planners excel at calming their clients down, getting clients sorted out with insurance policies (that they actually need), and making savvy decisions for the future. How does one find that person who is a walking Wall Street Journal/therapist?
First, decide what type of advisor you want. Do you want someone who accepts a flat fee, or who charges an hourly rate? These “fee-only” advisers, those who do not take commission, can be hard to find, but a browse of NAPFA—the National Association of Personal Financial Advisors at www.napfa.org is the easiest way to find a list. An hourly fee can be ideal for someone with a relatively simple financial life—renter, W-2 job—who just wants to make sure that everything is in order, and perhaps who needs some initial investment guidance.
Flat-fee advisors can be surprisingly expensive—often charging $5000/year and up for unlimited services. While this may be prohibitive for some, remember that all advisory fees are tax deductible, and financial errors, like not maxing out 401ks or even filing taxes as a married couple(!) can be costlier than your advisor’s fee. Having someone there to call about more complicated things, like inheritances and transferred property, can give some peace of mind without the guilt of incurring new fees every time you call an hourly advisor.
There are also commission-based and AUM advisors. Many family advisors fall into these categories, but do not think that you have to use your dad’s advisor for any reason. Commission-based advisors make money when they sell you products: a stock here, an annuity there, a life insurance plan over there. When someone makes money only when they sell you something—and not when YOU make money, you can see the potential conflict of interest.
AUM advisors get a percentage of assets under management. While many will turn up their noses at assets of less than $250,000 (that includes your retirement accounts), some will take you on at a lower amount. Expect to pay 1-1.5% in fees for assets under $500,000, and 0.5-1% for assets over that. Be sure to mention that you are a medical professional and that your assets will be rising as you pay off debt and make more money. AUM advisors have an obvious vested interest in making your money grow, but can also try to sell you products that are not in your best interest. For example, if you are in debt, an advisor trying to sell a whole life or universal life insurance policy is a definite red flag for someone looking for a commission. Term life insurance policies are cheap and affordable even on a resident budget, any other money should be put toward debt or more immediate goals, like buying a home or child care.
AUMs can be affordable if you do not have much in the way of assets yet, so tell your advisor that you expect him or her to act in your best interest, or as a “fiduciary”. They should make the same recommendations to you that they would a family member—not overly expensive mutual funds, not fancy life insurance policies for people who have maxed out all their IRAS and have no debt. If the advisor cannot make that pledge, head out the door.
If your advisor is also a CPA, consider it a bonus. Having someone doing your financial planning who knows and keeps up on the tax code means that you might defer a bonus until January, or employ a spouse as part of your LLC to get health insurance for both of you. A CPA credential adds an extra layer of certainty for these decisions, and may get you a discount on tax preparation if your advisor still offers it.
If you are the type of person who is comfortable doing business online and through Skype, the whole nation of financial advisors is at your fingertips, and most advisors do indeed run their businesses virtually to a degree. Locally, you can ask friends for recommendations or do a quick Facebook search. I searched “need a financial advisor” in the main search box and found a pile of public posts and private friend posts on the subject. From there, it was easy to search and cross-check against the NAPFA website.
Other doctors can be useful resources in finding an advisor, especially if they have an advisor who is used to the quirks of the doctor life cycle (needing disability insurance, not getting paid very well until age 30, crippling student loans, the tendency to overspend one’s first year of real work). But watch out for advisors who just see doctors as cash cows or who work with only high-net-worth doctors, like radiologists and surgeons. If that does not describe you, seek out someone who perhaps does not have a Tesla charger out in the parking lot, for a more tailored experience. I would have benefited had my original financial advisor told me that I was using the wrong loan servicer to qualify for the Public Service Loan Forgiveness Program, but likely her clientele was older and richer than I was and this issue had never crossed her desk before.