There was a recent discussion in the blogosphere and on internet forums about whether docs are better served by an adviser who specializes in physicians. I summarize the discussion below.
Rick Ferri, a professional investment manager, posted a blog recently giving his investing advice for doctors. He’s a good guy, and usually gives solid advice, so I recommend a read. The basic gist is that there is little special about physicians that requires a specialized adviser and that like most financial advisers, doctors who become financial advisers are just ripping you off. As with all financial advice, buyer beware. An excerpt below:
I have sympathy for doctors. They are hounded by the financial services industry from the day they leave medical school. They’re showered with invitations to attend free seminars, special events, and even gain access to special investment opportunities that are “just for doctors.”
Every broker, financial advisor and insurance agent wants a piece of the doctor market. They all claim to have something special to offer, but that’s a tough sell. The financial services industry is fairly homogeneous with little separating one advisor from another — except cost and experience. Read more here
For an opposing viewpoint, check out this recent thread from Bogleheads.org, particularly these posts from financial advisers specializing in physicians:
SteveP302 writes:
A fee only advisor that handles predominantly physicians has a definite advantage for their clients. Although physicians can in some ways be similar to other upper middle class income clients, they in fact do often have some specific concerns and problems. At the top is malpractice liability. This risk is high and constant, and makes asset protection issues very important. Asset protection issues touch on the titling of property, other insurance coverage and especially, estate planning. An advisor that deals regularly with these inter-active issues will usually offer unique and valuable advice.
@ben_utley writes:
As a fee-only financial advisor who has spent the past 15+ years serving the needs of physician families, I agree with much of what has been said here. Specifically, I agree that the *investing* needs of physicians are no different than the needs of anyone else who has above average income.
However, there seems to be an implicit assumption that all financial advisors do is render investment advice. There is more to financial success than investing well.
Everything else advisors do might easily be categorized as “financial planning”, including advice and guidance regarding insurance, taxes, estate planning, banking, budgeting, major purchases, etc.
Money touches almost every aspect of a person’s life, so good financial advice should be based on a person’s life, not merely their investments.
I have personally dealth with the major life events that physicians and their families face: birth, death, marriage, divorce, practice buy-ins, malpractice suit, bankruptcy, identity theft, embezzlement, and yes, even retirement. I can assure you that every one of these events contains at least one wrinkle or nuance that an unspecialized advisor might miss, and in some cases, there are substantial issues that might slide by unspecialized advisors.
Physicians have their own culture, politics, communication style, family dynamics and outlook on life that lead them to either accept or reject advice that might help them build, maintain or enjoy financial success. So the delivery of the advice is as crucial as the content of the advice.
So if you are a physician and you’re looking for advice, look for a specialist. But be warned: the real thing is rare. Most advisors who “specialize in serving doctors” have nothing more than a specialization in *marketing* to doctors, and those of us who are true specialists are selecting our clients as carefully as they are selecting us.
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Unfortunately, now it is your turn to make a decision. You can do it yourself, get advice from a physician-specific adviser, or find an adviser who doesn’t necessarily specialize in doctors. My take is that it is more important that your adviser is low cost and gives solid advice than that he specializes in physicians. I, like many of you, have been ripped off by an adviser who claimed he was a specialist. That being said, if you can get a solid, low-cost adviser that is also intimately familiar with physician-specific issues, why not use him/her? As usual, if you decide to use an adviser, follow these tips to ensure you’re not getting ripped off.
Disclosure- The three individuals quoted above earn their living giving advice and/or managing investments for others including physicians and so have natural financial conflicts of interest on this subject. I don’t have a financial relationship with any of them.
What do you think? Is a physician-specific advisor worthwhile? How much more would you pay each year to have one? Comment below!
I found this post after one of my clients–a resident–forwarded your Stealth IRA (HSA) article to me, asking what I thought about the strategy (I’ve been recommending it for years). Then I scanned your blog and found this article. You quoted my post in Bogleheads (I’m @ben_utley, and my twitter handle has changed to @WBenUtley to make it easier to find me). It’s a mark of professionalism that you took the time to give a balanced and impartial view of the conundrum physicians face when they are selecting an advisor, and I just wanted to thank you for treating me, and the subject, fairly. Some of us really are trying to do the right thing.
Thanks for the comment. It’s good to see people passing some of my stuff around.
There are a few good advisors out there. And most docs probably need one. If only we could somehow hook the two parties up without getting all the salesmen in the way.
Any specific comments about North Star Resource Group? They came to my med school and did a dinner presentation stating they specialize in MDs.
My comments about North Star may not be fit for print. The good news is that after coming into contact with them I became highly motivated to learn this stuff on my own. I don’t see the names of the “advisors” who “advised” me on their website list of advisors anymore, but I’d steer clear of that operation.
Here’s a litmus test that works pretty well for finding a good investment manager. Go to the website and look for a tab called “Fees.” If you can’t find one, there’s a reason. Then go to the tab called something like Products and services. If variable life insurance, variable annuities, and whole life insurance are prominently displayed, steer clear.
wci – sounds like you have (or had) some pretty strong feelings about north star
what in their approach / philosophy rubbed you the wrong way?
anything change in the intervening 5 years?
I have no idea. I can’t follow every advisory firm out there to see what they’re doing. Plus most of them would hide it from me if they could (and they can.)
What did I not like about my experience? It was mostly my own ignorance. I didn’t know fee-based was different from fee-only. I didn’t like that I was sold the wrong term life policy. I didn’t like that I was put into crummy mutual funds.
Strong feelings? Nah. But like NML, they’re partially responsible for the existence of The White Coat Investor.
I am interested to learn your thoughts on Edward Jones and their financial services, specifically about their fees. So far, the company has served us well in residency and fellowship starting my wife and my Roth accounts, but I wonder if a post about top financial advisor that have appropriate fees for their service if one does not feel comfortable investing independently as most physicians do not would benefit some of your followers. Thank you!
Edward Jones would not appear on that “top list.” In fact, it would be more likely to appear on a “bottom list” or “list of places I wouldn’t send my worst enemy” or “places I rescue white coat investors from most frequently.”
Glad your experience hasn’t been horrible. I would say you’re the exception to the general rule and in fact I suspect that your confidence in your advisor is misplaced. I bet we can demonstrate that pretty readily if you will post your current investments.
Here’s my list of recommended advisors: https://www.whitecoatinvestor.com/financial-advisors/
None work for Edward Jones or similar commission-charging firms.
I have a feeling you are about to open my eyes to something my husband I were entirely naive on, despite reading The White Coat Investor in residency. We need to focus more attention on financial planning and managing our own finances as my husband finishes up fellowship, we hope to have student loans paid off in the next 5 years and will start saving more for future retirement.
Current investments:
Traditional Roth: $9000
Roth IRA: $46,000
Wife’s Roth IRA: 30,000
529 account: $5000
It is a 1.35% annual fee.
Those are investment accounts, not investments. Post the investments and I’ll break your heart.
Obviously 1.35% is highway robbery (average is 1% and it’s pretty easy to find someone below average) but it’s not that much on such a tiny asset base (just a little over $1,000 a year, which isn’t a bad price for good advice, which you probably aren’t getting).
Want to list the mutual funds the “advisor” has you in? Be sure to include share class because I bet they’re loaded mutual funds.
Both the Roth IRAs and the 529 accounts are all mutual funds with various funds such as Franklin DynaTech Fund, CPBFX, JPPEX, LGLOX, MDLZX,TRGXX, LBNOX, Ect.
What do you suggest at this point? We are 6 months out from fellowship finishing!
Our goals were to first-pay off loans, purchase a reasonably priced house (500,000) so we are not over 2x our gross annual starting salary, and then start to contribute more to wealth/retirement.
I suggest you fire your advisor and move to a real one or learn to do this stuff yourself. Those are all expensive actively managed funds. At least he gave you the no-load version.
Don’t feel bad, I (and many, many other docs) have made this same mistake.