I was recently interviewed on The Wealth Anatomy Podcast, a podcast run by a financial advisor and a veteran by the name of Ryan Michler. Ryan had the wonderful, life-changing opportunity to deploy to the Middle East with the military. His deployment affected him in a way similar to the way my deployment affected me…neither of us ever wanted to do that again so we got out of the military. I went on to be a civilian doc and started WCI a year after exiting the military. Ryan studied to pass his financial advisory exams while in Iraq and upon returning, began working as a financial advisor. He now runs a podcast aimed squarely at the same audience as this blog. Obviously, his blog and podcast are part of the marketing effort for his advisory practice, but that doesn't mean there isn't great information there. He recently interviewed me on the podcast, so you might want to check that out. If you like what you hear, check out the other 17 and counting podcasts on the site. This post is a transcript of that interview. We have no financial relationship.
Ryan: We’ve got a great show lined up today with Dr. Jim Dahle from White Coat Investor. An emergency room physician himself, he talks with us about how doctors should own their finances on the Wealth Anatomy podcast episode 14.
Ryan: Welcome to the Wealth Anatomy podcast. Whether you’re a first time listener or if you’ve listened to all 13 episodes, today, I am glad that you’re here.
I’ve got an amazing guest lined up for today. So let’s just jump right into this.
Today, I’ve got Dr. Jim Dahle. He’s a practicing full time, emergency physician. He’s an author. And also a blogger at the extremely successful site https://www.whitecoatinvestor.com. And, he focuses on providing financial information specifically for doctors.
In fact Jim’s blog is one that I personally turned to. And I know many of you listening today are probably familiar with his work. He’s got some great stories to share with us today. And I know that this episode is going to be jam-packed with a ton of useful information to help you succeed.
Jim thanks for being here on the show today.
Jim: You’re very welcome. I’m glad to be here.
Ryan: So in addition to practicing full time which I know we’ve talked a little bit about, you’ve been blogging for about three years at www.whitecoatinvestor.com. Can you tell us a little bit about why you started White Coat investor?
Jim: Well, that’s a good question. And part of it is I’m kind of lucky that I have the time to do it. As you know any kind of blogging or any podcasting is immensely time consuming. But due to the nature of when I practice Medicine, I’m left with a bunch of weekday mornings that are free.
Jim: And when your weekday mornings are free and all your friends are at work, you kind of have to find something to fill your time. And so blogging seemed to be the natural extension of that, because I work so many nights and weekends and holidays in emergency department. I certainly have the time to do it. But more importantly, I saw a need for it.
I watched doctors getting taking advantage of by financial professionals. And doctors, despite their years and years of education had never had any financial training whatsoever. And combined with a little bit of naivety and doctors ended up being more of a target for financial professionals than a more classic client.
Jim: And so I started it, mostly to help doctors get a fair shake on Wall Street. What I mean by Wall Street is the insurance industries and the real estate industries and the mortgage industries and the financial advising industries and mutual funds and stock brokers and all that.
Just to help them have the information they need which is relatively basic but it’s never taught to doctors at any point in their college or medical school or residency training. So I’m trying to fill that gap. And it turns out it was a gap that really needed to be filled as the website took off like crazy.
Ryan: That’s great. You know when I run across that too, I actually fell into working with doctors by happenstance but I ended up starting to work with a lot of medical schools and also dental schools. And you’re absolutely right. They come out of school and residency with so much clinical information and so much education about their specific field of Medicine but rarely did they get any business training or financial training as well.
So what’s been the most rewarding thing for you in starting White Coat Investor with past three years?
Jim: Well, the best part about it is I get several ‘Thank you’s’ a day, from people and real people out there that I’m helping. And that’s the most rewarding thing.
I mean the mission of it is definitely to help others. I mean I make plenty of money at my day job or night job whatever it may be that I don’t need the income from the website. It feeds my entrepreneurial spirit. But the thing that keeps me going is that I’m actually making the difference.
I’m starting to see doctors that are talking about concepts like a Backdoor Roth IRA, in getting their disability insurance lined up whereas three years ago, I wasn’t seeing that at all on online forums or at other blogs or even in person. And so that’s been really rewarding to be able to really see that I’m making a difference.
Ryan: That’s great! And you talk about two concepts that hopefully we’ll get into a little bit more which is a Backdoor Roth IRA. And then also we’ll talk a little bit about disability insurance if we can as well.
So you had mentioned that you had some bad experiences with some financial advisers. And I’m a financial adviser. And I see it. In fact I was trained by large financial institutions and insurance companies. And so I know that abuse is out there. And I’d love to hear a little bit about what some of the experiences that you’ve had with some financial advisers in the past.
Jim: Sure. Well, I mean I think what really got me to start learning about this stuff and really getting into it was just I feel like I was getting burned over and over again, every time I interacted with any kind of financial profession. I had a friend sell me whole life insurance that was completely inappropriate for me. I needed a big long term, level premium term life insurance policy. And I ended up with a little tiny whole life policy. And it really didn’t meet any of my needs.
Then I had a realtor that encouraged us to buy a home when really we had no business buying a home whatsoever. I had a mortgage lender. I was doing a refinancing and he tried to slip in a pre-payment penalty at the last minute which I barely caught. And then I had a financial adviser that I thought was fee-only. It turned out to really only be fee-based, and just put me into a bunch of high expense ratio, loaded mutual funds. And at that point I said, I just got to start learning about this stuff. And so I did. I started picking up books. And started reading everything I could find on the internet. And after awhile I realized this isn’t that complicated.
And the first few things you’ll learn are so high yield. They’re worth of hundreds of thousands or even millions of dollars for doctor, to be able to learn this stuff early on in your career and avoid some of the big mistakes anyway.
Ryan: Right. And so what are some of those first few things that you did learn that you feel like you’re going to translate into literally millions of dollars over the course of your career and in your life?
Jim: Well, the biggest problem that doctors have in particular is they have difficulty managing the jump from their residency income to their attending income.
Now a typical doctor will make $40,000 or $50,000 as a resident for three years. So he comes out of medical school owing $200,000 or $300,000. He makes $50,000 for three years. Then all of a sudden he’s making $200,000 or $250,000 or $300,000 a year. And it’s very difficult for doctors to manage that jump. They assume they’re going to be able to spend four, five or six times as much as they were as residents. And the truth is they simply can’t. They can increase their lifestyle quite a bit, probably even double it. But because they have to start making payments on those student loans, they have to really start getting serious about retirement savings since they're now in their mid 30’s. And they start paying for things like disability and life insurance and that kind of stuff. They just can’t quadruple their lifestyle.
So doctors can’t just figure out how to live like a resident for a few years after residency or even a little better than a resident, like I said you can still double your standard of living. But still have gobs of money with which to build wealth. Whether that’s saving enough for a down payment on your dream house or whether that’s paying down those student loans or really jump starting your retirement funds. That’s the key. That’s the secret on becoming wealthy as a physician- it's the first few years out of residency.
Ryan: And I ran across that all the time. And I refer to it as arrival syndrome. And what I see is I see doctors that graduate. They get into practice. They start making great income, top 1% in income earners in America. And all of a sudden they feel like they deserve the brand new vehicle that they probably really shouldn’t be driving or, like you said, having a real estate agent trying to get you in the home that you just had no business getting into. And so almost like this entitlement stage. I’m really glad that you address that. So Jim, the question I have for you is you had mentioned that you have some time available just due to your schedule. What do you feel like a doctor can do even if their time is limited or minimal time but they want to get some of this financial literacy and some of this financial information? Jim: Well, the trick is I mentioned earlier the first few things you’ll learn are so high yield. That’s where the real bang for your buck is. I recommend docs read one financial book a year. I don’t think that’s too much to ask. Well, a lot are playing at some point or going on vacation at some point and can read a financial book. And investing a few hours and learning a little bit about the financial world will have huge dividends for a typical doctor. Ryan: Right. Jim: Following a blog or a podcast, anything like that of course is also a great thing to do. But mostly, docs just need to realize that this is part of their job too. They have to not only learn Medicine, they have to learn about Finance. Ryan: Sure. So you mentioned that reading obviously, is a big part of being financial successful. And I want to talk about your book which is ‘White Coat Investor: A Doctor’s Guide to Personal Finance and Investing’. And we’ll get into that a little bit. But are there other books that you’d recommend in addition of course to yours? Jim: Sure. There are lots of great books out there. I’ve got a whole list on my website that I recommend to people. But a good place to start is I usually recommend they read something on personal finance, something on investing and something on behavioral finance. And I think that’s a great place to start. But books that I often recommend include things like the ‘Boglehead’s Guide to Investing’, ‘The Investor’s Manifesto’ by another doc William Bernstein are also great investing books to get into. There’s a book called ‘The Physician’s Guide to Personal Finance’ which I think is particularly good for physicians looking for personal finance information. I also like Andrew Tobias’ book, he’s probably on the, I don’t know, the six or seven or eight edition, ‘The Only Investment Guide You’ll Ever Need’. It does talk about investing. But it’s got a lot of great personal finance in it that I think people will find useful. And then as far as the behavioral finance or behavioral investing, I like Belsky’s, ‘Why Smart People Make Big Money Mistakes’ and Jason’s Zweig’s, ‘Your Money and Your Brain’. But I think those are great places to start until people realized this stuff isn’t that complicated. Ryan: That’s great. What we’ll do is we’ll make a list of all those books and in the show notes we’ll also probably make a link to the posts that you have where it actually shows and breaks down all of the books that you recommend as far as reading goes.
You know when you brought up an interesting point and that is that a doctor has a second job which is to learn about this information. And a lot of the time I’m talking with my client, the doctors that I worked with that there’s just certain things that you can’t delegate. And obviously, you know and the people listening to this show know better than this but you can’t delegate your health. I don’t really believe that you can delegate relationships. You’ve got to be actively engaged. And the third thing is even coming from a financial advice or standpoint is that you can’t delegate your finances. Now you can get help with of all three of those things but there has to be some ownership and it has to be some accountability when it comes to those three areas of your life. Jim: That absolutely correct, I agree! You can't just hire a “money guy” to take care of all this stuff for you. You have got to learn at least enough to know that you’re hiring the right person. Ryan: So which brings me to a really good question, if there’s a doctor that’s going to go out and look for advice and look for an adviser to help manage and coach and teach some of these principles, what should the doctor be looking for an adviser that would help them make a great decision? Jim: Yes, although probably the majority of people coming in my website are do it yourself type investors, that’s a very small minority of doctors. The vast majority of doctors want a financial advisor. So I’d say 80-90% probably. Ryan: Right. Jim: But my answer for that is you want to get good advice at a fair price. And the most important thing is the good advice. If you’re not getting good advice, it doesn’t really matter what the price is. There is no price low enough for bad advice. Right: Right. There is a cost for a bad advice, right? Jim: Absolutely! But I think the main thing is to realize–the first thing is avoid the commissioned salesman as an adviser. Ryan: Sure. Jim: Somebody that doesn’t have a fiduciary duty to you to do the right thing for you and your finances. That’s not someone you want to be getting financial advice from. The down side of these high commission products if they’re high commission for a reason, it’s because they don’t sell themselves. They need a salesman to sell. Ryan: Right. Jim: And so it turns out that when you pay for your financial advice via commissions not only you’re paying quite a bit of money without realizing it but you’re also being put into the worst possible investments. Because the higher the commission the worst the investment. And so that’s the first thing. The second thing is to make sure that they are–actually have some training in giving advice. It’s unbelievable how little training is required to call yourself a financial adviser, right?
I mean within a matter of days or weeks, you can pass all licensing tests you need to legally be able to give advice. Even the most difficult test and courses in financial advising are really months to a year. It just isn’t similar to a Law or Medicine or Accounting or those kinds of fields. And so you need to realize that. And then realize that there are those who do have the higher degrees or rather designations in the field, the CFP, the ChFC, the CLU, the CFA. These types of designations that actually means something are worth looking for.
Jim: The designations that come behind most advisors' names really don't mean much and maybe they attended two or three weekend seminars.
Ryan: Right. And you bring up such a good point. I mean the burden to entry in this industry is low. It really is. And I actually started with the company that was more of a multi-level marketing company than it was financial firm. It was more of a sales and marketing group rather than, ‘Hey, we want to provide valuable financial information to your clients.’ And so I quickly escaped that because I realized that’s not what I am looking for. What I am looking for is learning this information and then being able to deliver it. And make it relevant to people that I’ll be serving.
Jim: So once that you’ve determined that you’re getting good advice, I think the next case is to focus on the price. And a lot of people just don’t realize what the going rate is for financial advice. I mean lots of docs are paying 1% or more of their assets under management for financial advice. And if you’ve got a $2 million or $3 million portfolio, that’s $20,000-$30,000 a year you might be paying for financial advice whereas there are people out there willing to do it for anywhere from one thousand to five or six thousand dollars a year. There’s no reason to pay $25,000 when you can get good advice for $5,000.
Jim: And whether you’re paying that as an asset under management fee or whether you’re paying as a flat yearly fee or whether you’re paying it as an hourly rate, it doesn’t really matter. It’s all about adding it up and seeing what the total cost is.
And so good advice at a fair price is what I think people are going to be looking for when they’re looking for a financial adviser. But to understand that you’re getting good advice, you almost have to read a few books just to understand what good advice looks like.
Ryan: And I think it all comes back to what we had talked about earlier with the delegation is that man those things cannot be delegated in a way as much as you’d like to do it, as much as you’d like to use it as an excuse of I’m busy or I’m not a specialist or whatever else it may be when it comes to finances. You’ve got to have some level of understanding, even if you do hire an adviser to understand what’s going on with your portfolio and your money. No one’s going to care more about it than you do.
Jim: Absolutely, I agree.
Ryan: So I’d like to learn a little bit more about the premise of your book which is called ‘White Coat Investor: A Doctor’s Guide to Personal Finance and Investing’.
Can you tell me a little bit about why you decided to write that book and then maybe a premise behind or some of the information that a doctor would gather from that book?
Jim: Yes, the book naturally grew out of the blog. I had people telling me, ‘You need to write a book….You need to write a book.’ And they were right. I needed to write a book because now I’m reaching the entire segment of my target population that I wasn’t hitting with the blog. So, that’s been really rewarding being able to do that.
The other benefit of writing a book is – and this is a little bit bizarre and undeserved. But as soon as you write and publish a book, people assume you’re an expert.
Jim: You don't get that just because you’ve been writing a blog for a couple of years. And so it actually gives me a lot more credibility despite the fact that I wrote it and basically, self published it.
Jim: Like many of the new books coming out in the last five or ten years. But it gives me a little more credibility that I have otherwise. But the premise of the book, I was originally going to title it ‘Millionaire by 40’ and subtitle it ‘How Medicine can still be a pathway to a good life.” And I kind of focus grouped it among some of my blog readers and they thought it was going to turn some people off. So I ended up changing the name. But the point was if you’ll make good financial decisions, Medicine can still be a pathway to a good life despite the fact that doctors are being paid less and medical schools are costing more and there’s a lot more hassle and paperwork and liability involved with Medicine than ever before. But if doctors will make good personal finance investing decisions, they can still have a very nice life. As I often tell medical students when I have them over to my house for dinner, ‘If you can’t live on $200,000 a year, you’ve got a spending problem not an earning problem.’
Ryan: Well, and one of the things that I always think of is that in the way that we offer advice about building wealth, it has more to do with the things within your control than the things outside of your control.
So I think it’s easy to blame financial woes on the stock market or the economy or whatever else it may be but the fact of the matter is people are successful regardless of what outside factors are doing, so, it’s really a matter of finding out what your habits are and what you are doing that are within your control. And I know that’s going to actually be exciting for some people because they can see that, ‘Hey, I can make this work regardless. And I don’t turn other people off that are looking for excuse not to succeed.’
Jim: Right. I mean getting rich is not that complicated. You make a lot of money. You save a good percentages of it. And you invest it in some reasonable manner and you’re going to get rich.
Jim: Doctors have already got the earning part set.
Jim: So all that’s left for them to do is make sure they’re saving an adequate percentage of it and invest it in a reasonable manner. It is not complicated but it doesn’t mean it’s not difficult. I mean it’s a little bit like weight loss that way. You know weight loss is very simple but it’s not easy.
Ryan: Absolutely. Yes, and it’s the same thing to building wealth. And so yes, I think the underlying tone of the conversation that we’re having is it is well within your control if you’re making the right choice and the right decisions. And you’re taking those ideas and concepts that are simple, that are easy to understand, and you just actually start implementing those things. And that’s the biggest key there, it seems like to me.
Jim: I agree.
Ryan: Are there any other words of wisdom that you’d like to share with the Wealth Anatomy community for us?
Jim: Oh, I don’t know that I’m full of words of wisdom. But I think the key is to realize that there’s five or six or seven financial topics you really need to know well, whether it’s how to pick mutual funds, how to put a portfolio together, how to get adequate life and disability insurance, how to manage your student loans and that none of those topics are particularly overwhelming. It takes a little bit of a reading, a little bit of a research, a little bit of a practice, a little bit of discipline. And all of that is something that’s well within the capability of somebody who has been getting into and through medical school and residency. It’s just a matter of finding the information and internalizing it and putting in the time to take care of the stuff.
Ryan: Right. Well Jim, I really appreciate you being on the show and sharing some of that information. What I’m going to do is I’m going to make it available, all the notes and the information that we talked about. And you really gave us a lot of resources and books that we should be looking into. That’s going to be available on the website. But if people want to reach out to you, if they want to buy a book or connect with you at your blog, how can they do that? What’s the best way to get in touch with you?
Jim: Well the book is easy to buy. It’s available in Amazon or Kindle. You can buy it on Barnes and Nobles as well. Eventually I hope to have it on iBooks but it turns out it’s a little harder to publish there.
The blog is the easiest way to get a hold of me. I read every comment posted on it. And of course, there’s an About page there and contact me form there or you can just email me at [email protected]. But I interact with dozens of people everyday and I find that the most rewarding part of the whole experience.
So you shouldn’t hesitate to contact me if you have any questions or concerns.
Ryan: That’s great. Well, again I really appreciate you being on the show. And I look forward to having you back soon.
Jim: Yes, I had a good time. Appreciate it.
What do you think? Do podcasts help you get excited about actually doing the financial tasks you know you need to do? Comment below!