[Editor’s Note: I get an email several times a month from doctors who are considering going into financial planning. Apparently, the grass is looking greener over there for some reason for a few doctors. Steven Podnos, MD, CFP is a physician who has made the jump into the financial planning world. He is basically a full-time financial planner and a part time physician with the Air Force Reserve. I asked him to write an article about his experience having a foot in both worlds. This post is what he sent me. We have no financial relationship.]
I began the practice of Pulmonary and Critical Medicine back home in Florida in 1986. Within ten years, I became disgruntled with the difficult lifestyle, increasing regulation and constant liability concerns. So, I began looking for another career that I might find satisfying.
The Transition to Financial Planner
Steven Podnos, MD, CFP
Up until that point, I had been doing financial planning and investing for myself and several family members. I loved reading about many aspects of financial planning, although finding objective information was difficult. I also felt that my peers and I were easy game for financial hucksters of every type. Around 2000, I came across an article that mentioned fee-only financial planning. Being intrigued, I called the only such planner in my county and asked about his work. It sounded much like being a physician for a family’s money instead of their health. He steered me towards getting the Certified Financial Planner (CFP) education and certification (this took three years). Before achieving the CFP certification, I took an exam called the Series 65, which allowed me to hang out a shingle as a financial advisor.
I told some friends and family that I would be doing planning on the side while still practicing full time. A few families stepped forward that first two years (still my clients!) and I was hooked. After about 3-4 years, I was getting busy enough by referral to tell my medical partners that I’d like to start a transition out of the practice. I did so between 2005-2007, gradually taking less call and hospital time, and then leaving the practice around 2009-10 completely.
Interestingly, many physicians were reluctant to hire me, and I heard from some “what do you know that I don’t?” This was bizarre-they would give their life savings to a suit at a brokerage who maybe had a few weeks of sales training, but my CFP certification and some years of experience mattered little. In time, these barriers dropped and today about half my practice of 105 families are medical.
Around the same time I was leaving the practice, I realized that I was missing some aspects of medical practice. Military service had always been of interest, so I was pleased to find that the Air Force Reserve was interested in someone my age (started at age 50, almost eight years ago). Other than some rare locum tenens work to keep up my skills, my medical practice has been limited to my Reserve duty a few weeks a year.
Ethics in Financial Services
One of the first things I learned entering the “business” of financial planning was that it was mostly a highly unethical environment. Well over 90% of all “advisors” and insurance agents in the field are paid to sell products regardless of their suitability for the client. To this day, I’d have to admit that I have yet to see fair and honest work done outside of the fee-only environment. I suspect it would be the same if we physicians were compensated by which drugs we prescribed, rather than for patient care. It would be hard to remain ethical.
Along this line of thought, I am astounded by how many smart physicians continue to use stockbrokers for their investments. In every case I’ve seen (when new clients bring me their brokerage statements), these physicians are paying very high fees for mediocre if not toxic portfolios. Fee-only planning is no longer a secret, and I can’t understand why anyone would use any other method for their financial advice.
Similarities to Medical Practice
As I initially thought, fee only planning is very much like a medical practice. The process is along SOAP note guidelines-we take a subjective history, review objective data, come up with an assessment and follow through with a plan. We are fiduciaries, seeking to have our clients achieve their goals with a minimum of hassle and expense. I have found a great deal of support and camaraderie in the fee-only community, a breath of fresh air. I love my work!
Physicians are Too Trusting, But Not Bad Investors
Physicians get a bad rap in the financial world. They are thought to be bad investors, and easily fooled. This is an unfair assessment. In medicine, we learn to function in a highly ethical world that depends on sensitive and important information being exchanged on a regular basis. We have to make critical decisions quickly over and over. In the “non fee-only” financial world, you have a highly unethical world, filled with salesmen waiting to sell you what pays them the best. Put these two groups together and the physicians lose out due to naiveté.
I can offer your readers no better life advice than to find themselves a fee only planner to guide them in the areas of estate planning, insurance issues, educational issues, asset protection and more. If a physician feels that they are a competent investor (unusual), they can obtain this advice on a retainer or hourly basis rather than paying the more common assets under management fee. Start at the National Association of Personal Financial Advisors website and search for a planner near you.
What do you think? Have you ever considered becoming a financial advisor? How would you go about it? Would you choose an advisor who had previously (or still is) a physician? Why or why not? Comment below!
Thanks for sharing your experience. I always wonder if I might benefit from a CFP consult, but I’m too busy shaving off hundredths of a percent in fees to justify the cost! Transitioning from accumulation to retirement is a weak knowledge area for me and is when I might spring for the cost–then again, Jim has started to address this.
Paying for a few hours of a good financial planner’s time may be money very well spent, even for a diehard do-it-yourselfer. A second opinion never hurts, and even if you get nothing out of it, you’re only out a few hundred dollars.
G,
True financial planning is so much more than investing/ investment management. A good financial plan will help you see your financial future and give you peace of mind that you are on track. I charge a flat fee for financial planning that doesn’t include investment management, so there is no hundredth of a percent. I am sure someone near you can do the same. A good financial plan takes at least 15-20 hours to make. Your planner should meet with you for at least 3-5 hours just to talk about your real goals and motivations,i.e. being conservative and retiring at 62 are not real goals. How can we show you your future without seeing it ourselves by meeting for enough time that it takes. That is why I don’t like the hourly rate, if you just want a consult on investments that may work, if you want a full plan then hourly will probably cost more than a flat fee, non-asset based cost.
I have recently thought about perusing CFP certification. It is probably just a naive dream at this point, but something I have considered more and more each day. Maybe its just the soul crushing daily grind of residency that makes me consider an alternative career/back up/side gig, but the increasing dissatisfaction in medicine with increasing regulation, decreased reimbursements and ever-increasing fear of litigation makes one think about an escape route out of medicine. Although I am sure this is probably true for most WCI readers, I can’t wait to read the next financial book or to read the next blog post, etc… and let’s just say that I am less than thrilled to read the next issue of annals of EM. Its rewarding to have friends and co residents ask me how to start a roth IRA and what to invest it in, how to set up solo 401k with their moonlighting job, why they shouldn’t listen to the attending who is doing day trading or why they should just have “a money guy”, etc. They genuinely want help and advice… I get this satisfaction to some extent in medicine, but it seems to be increasingly infrequent. Thanks for the interesting post. Also, just want to give a shout out to WCI… I recently became a onehundredthousandaire (not bad for a resident!) and I owe a lot of it to the advice and strategies from WCI.
It’s as if I could have written the comment from EMresident!This is exactly how I feel, 4 years post-residency graduation. While pediatrics primary care offers me the satisfaction that I can get from medicine, in the past 2 years since my epiphany in the world of personalo finance, I have noticed that I derive more joy in reading personal finance blog posts, reading a financial book or helping a friend or colleague on an investing topic or related matter. My adrenaline literally rushes on discussing these issues. I’m wondering if this is a mid-life crisis I’m going through (I’ll be 40 next year). I have considered getting a CFP and starting to do financial planning on the side. However b/c I’m a late starter (only started saving for retirement 2 years ago), I know I have an uphill task. However I might still consider this route in 16 years (hoping to be financially independent by then). This articloe has certainly helped. If and when I do consider becoming a financial planner, I would only be doing it for the joy and fulfilment it will bring me, not so much as for the financial remuneration, so I will be comfortable with only a few clients.
Congratulations and thanks for helping your peers!
My thoughts exactly. The certification exam has a 50% pass rate, but probably wouldn’t be too hard after MCAT, Step 1-3 etc. The 6000 hours of experience though…hard to give up that time as an attending to work at a desk shuffling papers at Etrade.
How did the author gain the third E – that is “experience”? Did he do series 65 then started managing/advising a few known families for 3 years and was accepted by CFP board? Basically how to gain experience to show CFP board to get the license? Would like author to chime in here.
Last week I came upon this blog. Pretty decent material. Would like to ask if the blogger has ever considered himeself getting into CFP seeing as he apparently has a large following here. Still probably tough to let go of generating 200/hour vs doing this etc (thinking out loud)
I am a resident, but been managing money for me and family and friends so this post was relevant.
It’s also tough to let go of doing something you spend a decade training to do and that you still enjoy!
Sorry, I did not see the question until today.
By 2002, I had already been investing family money and our group’s pension plan for over a decade. I read voraciously in order to come up with a reasonable strategy. At the same time, over almost twenty years of practice, I often did independent research on a variety of topics such as pension plan design and asset protection.
When I first opened the financial planning practice, I had only a few families, and was able to devote a great deal of time to rounding out my knowledge. It has become much easier to do so with the internet.
For those interested in pursuing a financial planning career, the Kitces Report “nerds eye view” is a good blog to read.
As you can see from the guest post, giving advice to friends, family, colleagues is easy, when you actually put that planner hat on and have to ask for that business relationship is when it gets more difficult. It is not easy, quick to build a financial planning business where you net 100-300k income. It is not easy, no matter how smart you are or how many doctor friends you have. This entire blog was created and based on the widely held view that financial planners/ advisors are over-paid and not really needed in general. I don’t necessarily disagree with this for the right people.
There is no doubt that the readers here can pass the CFP exam if they give it the time and respect it needs and deserves, the guest post here took 3 years. It took me one year but I was a business major and finance was my specialization in college. The CFP marks are great but it will not make you any money, people will not flock to work with you because you are a CFP. You take the CFP for your own benefit and knowledge that you want what is best for your clients. There are over 700k financial advisors and only about 70k CFPs. I bet by and large the CFPs have smaller books of business than many of those non-credentialed advisors.
I think the 3 years was referring to the experience requirements, not the CFP course/test.
It looks like he was directly referring to the time it took him to take all the courses and prepare for the board exam.