How physicians can choose the right financial adviser

Many physicians are overconfident when it comes to their finances, and Joel Greenwald, MD, a former internal medicine physician who has spent the last 16 years working as a certified financial planner (CFP) for physicians and dentists, admits he was one of them. 

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“I read Barron’s, Forbes and lots of books, and I thought I really knew what I was doing,” Greenwald says.  “It wasn’t until I took the CFP curriculum and started doing financial planning that I learned I hadn’t been doing such a great job for myself.”

“The term is whales,” says William Bernstein, MD, author, physician, neurologist and financial adviser to high net worth individuals. “Physicians are targeted because they tend not to be sophisticated, but it is worse because they’re overconfident. When you are a physician, you are an expert in your field, and you think you are able to do finance. In reality, you’re about as able to do finance as you are to fly a commercial plane.”

So, to get professional financial help, how should physicians select a financial adviser? 

“There are about 100 designations out there that financial advisors use, and many of them are the equivalent of a weekend course,” says Jim M. Dahle, MD, FACEP emergency room physician, owner of whitecoatinvestor.com and author of White Coat Investor: The Doctor’s Guide to Personal Finance and Investing.

The four types of advisers that Dahle recommends physicians seek are: certified financial planner (CFP), Chartered Financial Analyst (CFA), Chartered Financial Consultant (ChFC), or a CPA with a Personal Financial Specialist  (PFS) designation. “Those are the four designations that, to me, say the financial adviser is serious about this,” Dahle says.

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Dahle, Greenwald and Bernstein all recommend selecting someone who is also a fiduciary or who will sign the fiduciary pledge, which can be found online, stating that they will put the interest of their clients first.

 “As doctors, you take a vow to do what’s right for your patients, so you assume that applies to other professions,” Dahle says.

After reviewing a financial adviser’s credentials and determining whether he or she puts their clients’ interests first, the next step is to find out how a financial adviser gets paid and find out explicitly whether the fees are one-time, ongoing and if they increase overtime. 

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“Make sure they freely and openly discuss the fee structure,” Bernstein says.

Some advisers get paid commissions by investment companies, others charge asset management fees, and sometimes, the fees are taken out of assets so bills aren’t even sent.

Sometimes the fees are percentage based, and what might be minimal at first, eventually could grow quite large. “The main issues are that people get bad advice, or they pay too much for good advice,” Dahle says.

Greenwald says it’s important to work with advisers who understand the specialized issues medical professionals face, like six-digit student loans. 

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“You don’t want your adviser learning from you about the special needs of physicians,” Greenwald says.  “The adviser doesn’t have to specialize only in working with medical professionals, but ask them who are the clients they work with.”

It’s a good idea to interview more than one financial adviser and to have a set of questions and issues to discuss. “You want to find out how sophisticated they are, so you should ask them to discuss the work of financial academics,” Bernstein says, adding that the names Kenneth French and Robert Shiller should mean something to them.

Greenwald says you should go about hiring a financial adviser the way you’d go about hiring anyone else in your office. 

“You do not need to meet for one hour with everybody you’re interviewing,” Greenwald says. “Go online, do your research, talk to people and get names. Then, I would arrange a 15-minute phone call. You can learn a lot in 15 minutes, and then you can narrow it down to one or two people and then go into their office for a one-hour meeting.”

“The best thing physicians can do is get a second opinion,” Dahle says.