The first step in finding a good financial advisor is understanding what type of investor you are. Some people are true do-it-yourself investors who enjoy learning about personal finance, managing investments, and building their own financial plans. Others prefer to fully delegate those responsibilities to a professional. Many physicians fall somewhere in the middle. They want guidance on specific topics or occasional help building a plan, but they are also cost-conscious and willing to learn enough to handle certain parts themselves. The challenge is that even simple financial questions like whether to do a Roth conversion, pay down debt, or prioritize retirement contributions often require a detailed understanding of an entire financial situation before good advice can be given.
A quality financial advisor should be a fiduciary who puts the client’s interests ahead of their own. Fee-only advisors are generally preferred because they are paid directly for advice rather than through commissions or product sales. Advisors should also have an evidence-based understanding of investing and use reasonable long-term strategies built around diversified portfolios, low-cost index funds, and appropriate asset allocation. Professional designations like CFP, CFA, ChFC, and PFS can help identify advisors who have completed meaningful education and training, though letters after a name are only valuable if they actually represent substantial expertise and experience.
Cost is another important consideration. Paying for good advice can absolutely be worthwhile, but physicians should understand what fair pricing looks like and avoid overpaying simply because a fee structure is considered “industry standard.” A 1% assets under management fee may be reasonable on a smaller portfolio, but it can become extremely expensive as wealth grows. The ideal advisor relationship is one where the services being provided actually match the client’s needs and where the advisor understands physician-specific financial issues like student loans, asset protection, late starts to investing, retirement account complexity, and high tax burdens. The goal is not simply to hire an advisor, but to find someone whose philosophy, expertise, and pricing align with the type of help you truly need.
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One of the most common questions we get is, what does a good financial advisor look like, or what should we look for when we're hiring a financial advisor? The truth of the matter is, you shouldn't start this search or this question by asking about the advisor. You should start it by asking about yourself and knowing yourself and what you need and what you're looking to have done.
In my experience, there's basically three kinds of investors. There are do-it-yourself investors, and my guess is this is something like 20% of doctors. These are people that do it themselves in lots of things in their life. Sometimes they'll watch a YouTube video and fix a little thing on their car. They'll often mow their own lawn or shovel their own driveway, or maybe prepare their own taxes, those sorts of things. They're do-it-yourself type people. They tend to be fairly fee sensitive and don't mind learning new things. They're not afraid to make a few mistakes, and they view finances as one of their hobbies. They like learning about this stuff. They like reading financial books. They like listening to the White Coat Investor Podcast, or reading the White Coat Investor blog, or they're members of our communities on the subreddit, or the WCI forum, or the Facebook group, right? Those are the sorts of people that tend to do well as do-it-yourselfers, and it's very reasonable if you're willing to learn how to be your own financial planner and be your own investment manager to do this yourself. That is not crazy at all, but it's not for everybody. So, I figure the do-it-yourselfers are about 20%.
On the other end of the spectrum are people that the industry refers to as delegators. These are people who are not financial hobbyists. They're not that into this stuff. They don't want to read financial books, certainly not more than one of them. They want a financial person to help them. They want to outsource all these tasks. They want to outsource acquiring this knowledge to somebody else. They hire somebody to do their taxes. They hire somebody to mow their lawn. Why wouldn't they hire somebody to also do their financial planning and manage their investments? I figure this is probably about 30% of doctors that are delegators, and the good news is the financial services industry is very well set up to take care of delegators. There's a lot of great people that we can send you to if you go to the recommended list of White Coat Investor.com that can serve delegators very, very well.
Unfortunately, that leaves 50% in the middle between the do-it-yourselfers and the delegators. We call these people validators. Maybe you can call them consultants, people that want to consult with somebody from time to time, that want some financial services, that want some financial advice, that want some financial assistance, but they don't necessarily want to pay for a full service financial advisor that's going to do all their financial planning, that's going to do all their investment management. Maybe they're a little more fee sensitive than a typical delegator might be, and they look at the price of financial advice and go, “Wow, that's a lot of money. I bet I could learn to do some of this myself to save that money.” They're not necessarily hobbyists, but they're usually willing to learn a little bit if it's going to save them a bunch of money.
The problem with the validator spectrum is there's a whole bunch of different kinds of validators, some who are willing to do quite a lot, some who are only willing to do a little bit, and finding a financial advisor that matches exactly what you want to do as a validator is actually pretty challenging. So, the good firms offer some sort of option for validators. Maybe they will just do financial planning with you and help you put together a financial plan, then you've got to implement it and maintain it. Maybe they just consult with you for an hour about one subject, like student loans. Maybe they are available to meet hourly for an hourly rate to answer your questions.
Now, a lot of people think they can ask their questions in about three minutes and get answers in about five more minutes. The problem with that approach is the advisor actually has to know a whole lot more about you to give you the right answer. So even what you might think is a simple question might require three or four hours of financial advisor time, and at $200, $500, or $800 an hour, that's not necessarily super cheap either.
The common questions we see out there are, should I do this Roth conversion? Should I make Roth or tax-deferred contributions? Should I invest this money or use it to pay down debt? These all sound like simple questions, but it turns out they're the most complicated questions out there, and nobody can do a really good job answering them without really getting to know you well and your financial situation. That's an operation that just takes time.
So, the main problem with validators is they think the services they want should be a lot cheaper than they actually are to provide those services. But whether you're looking for a financial advisor as a delegator or whether you're looking for a financial advisor as a validator, the key is to know what you want, what services you value enough to pay for them, what services you need, what you're not good at, and make sure the financial advisor is going to be providing those services.
As you look at financial advisors, some of the things to look for are that you want to have a financial advisor that is a fiduciary. What that means is they've essentially agreed to act in a Hippocratic manner, right, to put your needs and desires ahead of their own. So, to do the right thing for you, even if it's not necessarily the right thing for their pocketbook. We're talking about people who are fee-only advisors, meaning they just get paid to give you advice or do service for you. They're not getting paid commissions from somebody else. They're not a salesperson masquerading as a financial advisor.
This is part of the issue with the financial advisor industry, right? There's no legal definition of financial advisor, so somebody that is an insurance agent can call themselves a financial advisor. Someone who is a mutual fund salesman can call themselves a financial advisor. So it's difficult to distinguish the real financial advisors from those who are just masquerading as one, especially if you're not particularly financially literate yourself.
The second thing you ought to be looking for in a real financial advisor is an up-to-date academic understanding of the field. If they don't have any idea what the papers in the financial journals are saying, you probably don't want to be taking advice from them, right? For example, one of the biggest issues out there that there's very good evidence for is that index funds are generally the preferred way to invest in stocks, and so if you have a financial advisor that's recommending another way, you've got to really wonder about their actual understanding of the academics in finance.
A third thing that's nice to see in financial advisors is some sort of meaningful designation. The most common one out there is a CFP, Certified Financial Planner. It requires three years of some sort of experience, often that can be in a sales position, unfortunately, and it requires them to pass a test. That test typically requires a couple hundred hours of studying or so. Now, a couple hundred hours might not sound like a lot to somebody who's been through a medical residency and worked 80-plus hours a week, but it's better than what a lot of people out there calling themselves financial advisors have.
Some of the other more high-level designations include a CFA, Chartered Financial Analyst, although don't expect to see this in a lot of people working as a financial planner. A ChFC is often somebody who came through the insurance industry and now wants to do real financial planning, and so those are more meaningful designations in the field. Personal Financial Specialist, or PFS, is something you often see that's similar to that from people coming from the accounting field. So, somebody with a CPA may also have a PFS, and those are generally the meaningful designations.
But there's another 100 other designations out there, some of which take only a weekend course to acquire. So keep in mind there's often lots of letters after the names of financial advisors, just like there are after nurses, and don't be impressed by the number of letters unless you know what the letters actually mean.
In general, you want an advisor that works with clients that are at least somewhat like you, right? If you're a doctor, there are a few, not a lot, but a few unique financial things in your life. Big debt burden, some asset protection concerns, maybe a complicated retirement account situation, a late start, high tax bill. These are some of the doctor-specific issues. It's nice if you're a doctor looking for a financial advisor if they have at least a few other clients that are doctors like you are, because that means they'll have been through some of the concerns that you're likely to have.
I mentioned earlier about the importance of them having an academic understanding of the field. You want them to have a reasonable investing strategy. They need to be putting your money into things like stocks and bonds and real estate, and those sorts of things, not some crazy strategy involving options on crypto assets sold short with high amounts of leverage or something crazy like that.
You want a reasonable investing strategy, preferably. I like to see them using fixed or static asset allocations or mixes of investment types, and using low-cost, broadly diversified index funds. If that's the mainstay of the portfolios they're putting together, you're probably in good hands.
You want your financial advisor to be unbiased. I mentioned they need to be fee-only. You can't have somebody who's got a duty to somebody else. They might be putting that in front of you. You don't want them to be thinking, “Boy, I'd like to tell them the right thing to do, but I got to send my kids to college and put food on my table too.” You want them to be true fee-only, unbiased, or at least minimally biased. Anytime money changes hands, there's some bias, but minimally biased advisors.
My mantra over the years for financial advisors has been good advice at a fair price. Unfortunately, there are all kinds of prices being charged for financial advice and services, and so I think it's worthwhile understanding what a fair price looks like. What that typically looks like is something between $5,000 and $15,000 per year. The fewer services you need, the closer you are to that $5,000 mark. The more you need, the closer you are to that $15,000 mark.
But my point is, it shouldn't be $50,000. It shouldn't be $100,000, and this often happens when you're paying an “industry standard” 1% assets under management fee. It's a very fair price when you have $200,000. That's only $2,000 per year. It's a very unfair price when you have $20 million, right? 1% per year of $20 million is an awful lot of money, way more than you need to pay to get financial advice.
It's also helpful if the financial advisor is tied in with other services you might need. For example, if you have a need for tax strategizing, tax preparation, and they can also provide you at least good recommendations for people who can do that, if not bring them in house as well. That might also be something that you consider valuable with the financial advisor.
If you need help selecting a good advisor, know that we do some vetting for you. We have a recommended list at White Coat Investor.com under the recommended tab that will help you sort through what a good financial advisor looks like, and you can just go down that list and find the person that looks like they will work best for you, knowing that we've already taken a look at them and their required filings with the government, and had other White Coat Investors working with them for many years. Certainly, if we get complaints, we take people off that list. If something changes, we take them off that list.
But if you want to shortcut this process, that's a great shortcut, recognizing that we've already taken a look and tried to line you up with good financial advisors.
Hope that's helpful to you. Good luck out there figuring out who you are, most importantly, and what you need, but also connecting with somebody that you can trust and work with long term to help you reach financial success.
The White Coat Investor Podcast is for your entertainment and information only, and should not be considered financial, legal, tax, or investment advice. Investing involves risk, including the possible loss of principal. You should consult the appropriate professional for specific advice relating to your situation.
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