[Update- 3/31/2015- For those who are unaware, GL Advisors is either out of business or rapidly heading in that direction. Most of their employees have left after their owner was accused of embezzling funds from the private investment fund mentioned late in this article. Numerous readers have informed me that their service rapidly deteriorated over the last year due to loss of personnel in the business.]
I often get readers asking me about a financial advisor or financial advisory firm. There are thousands of them across the country and I don’t know most of them from Adam. I often take a quick look at the website, express my concerns, remind them of some things to ask about, and send them on their way. However, when I start getting a lot of questions about the same firm, especially if the firm targets physicians for clients, I try to eventually find out a little more about them. GL Advisors is one such firm. I recently had an interview with Todd Balsley, the Chief Marketing Officer for GL Advisors and had the chance to go direct to the source to get some answers to common questions about the firm. I have no financial relationship with Todd or GL Advisors, but I’d love to sell them an ad sometime.
Focus On Student Loans
The reason I hear about them so often is that they have exploited a niche and filled a gap in financial information out there- student loan management. This has never been my strongest point, mostly because I only ever really had one student loan, and it required pretty much no management. I took out my $5000 loan as a college freshman in 1993, paid no interest on it for the next 17 years, and paid it off with devalued dollars all in one lump sum when I left the military in 2010. I’d say I managed it pretty well. Most of my med school classmates who graduated in 2003 refinanced their loans at 1-2% upon graduation and are paying them off about as slowly as they can. I’d say they are also managing their loans pretty well.
More recent graduates are in a lot worse shape, unfortunately. Subsidized student loans are no longer available, graduate school Stafford loan interest rates start at 6.8%, and tuition at my medical school has more than tripled over the last 10-15 years. Many of today’s med students will have $300,000-400,000 in debt by the time they graduate, and that number will increase even more during residency and fellowship. Managing student loans is becoming an ever-larger issue for physician financial planning. Enter GL Advisors. They are a bunch of Harvard Business types who realized in 2003 that many graduate and professional students weren’t refinancing their loans as they should, so for a fee, they began assisting students and graduates in getting the lowest possible rates and best terms. The student loan landscape has made dramatic changes over the last decade, and GL Advisors has stayed ahead of the pack in managing them appropriately. They have also added on other services, including tax preparation, asset management, and management of a couple of unique mutual funds.
What’s So Hard About Managing Student Loans?
Judging by the number of questions I get from students, residents, and attending, this is one of most confusing financial issues most doctors deal with. A med student has to decide what kind of loans to take out and how much. As a resident, he has to choose between forebearance (no more deferment unfortunately), making regular payments, and Income Based Repayment, or its improved version- Pay As Your Earn or Income Contingent Repayment (ICR-A). (Hint- go with IBR/ICR-A.) He must ensure his residency and fellowship qualify as 501(c) institutions. He has to apply initially for IBR, and renew it each year. He then has to decide how to file his taxes to minimize his residency income (married dual earners probably want to file “married filing separately” (MFS) to lower the IBR payments as much as possible. Upon completion of training, he has to decide whether to pay off his loans (and how fast) or try to seek forgiveness of part of them through IBR, Public Service Loan Forgiveness (PSLF) or other programs. He may also have the opportunity to consolidate loans and will have to resolve any issues that occur when loans are transferred from one servicer to another.
The Fine Print
Like most advisors, GL Advisors will meet with you once for free, give you a little information and try to upsell you to purchase the rest of their services. They also do some educational meetings at residency programs, particularly on the East Coast where most of their advisors are. Mr. Balsley says the initial meeting basically gives the student enough info to do it on his own, or if they choose to retain the services of GL Advisors, they’ll do the work for the student.
Previously, they would charge a resident $495 per year for the financial planning, student loan management, and tax preparation. However, their new fee schedule is $395 total for all of residency and fellowship. You could even sign up as a medical student (same price) and have GL Advisors help you choose which loans you actually take out. This lower fee no longer includes tax preparation (extra fees for that if you want it) but it does include asset management up to $60,000. In essence, you could get financial planning and asset management for four years of med school, 3 years of residency, and 3 years of fellowship all for $395, or less than $40 a year. Even this cheapskate has to admit that’s probably a pretty good value.
It doesn’t take a genius to see that you can’t run a viable financial planning business for $40 a year. Obviously GL Advisors have to make some money from somewhere else to stay in business. They make some money from the commissions for life insurance and disability insurance that they appropriately sell you, but like most advisors who market to residents, they primarily hope you will stick with them as you become an attending and start making the big bucks. Financial planning fees do go up as an attending, and once your assets under management are over $60K, you’ll have to start paying additional asset under management (AUM) fees. They’re cheaper than most, ranging from 0.40% to 0.85% of AUM per year.
Asset Management Services
So it appears that this firm is one of the few out there claiming to be experts at managing your student loans. That’s a very valuable service, especially for a resident or new attending. Should you stick with them for the long term? Their asset management services have a lot of great things going for them. First, they focus very heavily on keeping fees, commissions, and other costs down. I love to hear advisors talk about costs, both their own and that of the investments they manage. In investing, unlike the rest of life, you get (to keep) what you DON’T pay for. The less you pay your advisor and mutual fund manager, the more you get to keep. The AUM fees listed above aren’t the very lowest I’ve seen, but they’re far less than average and among the lowest I’ve seen for any type of advisor that focuses on physicians.
They are not a DFA-authorized advisor, instead primarily using the commission-free ETFs available on the TD Ameritrade platform (mostly Vanguard.) They basically centralize this process, developing a portfolio that is then adapted to an appropriate risk level for each client. They add in some individual securities for larger accounts and also manage two very interesting mutual funds that they use for their clients. The first is composed primarily of the consumer debt of their clients (not their student loans unfortunately) and currently has a yield of 9%. It’s a little bit like Peer to Peer Lending that way I suppose. The second used to be a successful hedge fund, but has recently morphed into a regular mutual fund that still follows a Global Macro strategy. Regular readers know I’m not a fan of active management (and GL does do some active management of the entire portfolio), but I do like low-cost advisors who focus on fees. One reason the fees are so low is that they do a lot of work over the phone, via email, and via Skype, so their “brick-and-mortar” costs can be minimized. They’re more than willing to work with you even if you don’t live in a city with one of their branches.
A Few Last Words
Would I hire them for myself? Probably not. If I had taken out student loans I would become the world’s biggest expert on IBR and PSLF and figure out the process myself. I also prefer managing my own investments. But if I were a med student staring at $300K in loans and didn’t know anything about finances or investing I can think of a lot worse ways to spend $395. I don’t recommend you turn your financial reins over to any advisor and fail to learn at least a little bit about this stuff yourself. But I also don’t have a problem with paying a fair price for good advice. With GL Advisors the price is more than fair and as near as I can tell without becoming a client, the advice is good.
What do you think? Have you used GL Advisors? Was it a positive or a negative experience? Comment below!