Top Challenges 2021: #7 Saving for retirement

Physicians have different financial concerns at different stages of their careers. Older physicians are keenly aware of retirement while younger physicians are focusing on getting their careers started and often staring down a pile of student debt.

What they share in common is a need to save money for their own future and the security of their family.

“Saving money takes hard work,” says Joel Greenwald, M.D., CFP, principal of Greenwald Wealth Management in St. Louis Park, Minnesota. “And the hard work that it takes is understanding where your money goes. A lot of doctors just don’t bother to take the time to understand where their spending is going. And they figure it’ll take care of itself or they’ll just continue to make a nice income.”

Finding the right financial adviser for you and your situation is key to developing the right savings and investment strategy. Here are some important questions to ask as you find the best adviser.

Are you a fiduciary 100% of the time?

Unlike most professionals, financial advisers have a choice of operating under one of two professional standards: suitability or fiduciary. The fiduciary standard requires advisers to act in their client’s best interests whereas the suitability standard does not.

Advisers fall into one of three camps: fiduciary all the time, suitability all the time or both. Those who do both “wear two hats,” switching back and forth between suitability and fiduciary standards.

Don’t settle for the part-time fiduciary. It’s best to verify they’re acting as a fiduciary all the time.

How many physicians do you work with?

Cutting-edge advisory firms are building niches to stay relevant and provide the best possible value to their clients. Industry experts say firms should target between 50 and 150 clients per adviser depending on the level of services provided. If they’re dedicated to a specific niche, at least 50% of those clients should be within it. The more specific their niche, the better. Ideally your adviser has a manageable number of clients with a very high percentage of physicians just like you.

How does your firm’s revenue percentage breakdown?

Today, most financial advisers are proudly beating the financial planning drum.

Some firms offer “free” financial planning and use it as a backdoor sales tool to sell more financial products. Others bundle it with investment management services and consider it a value add. And then some firms charge for stand-alone financial planning services only or in combination with other services.

Are you fee-only or fee-based?

Fee-only advisers can accept fees only directly from clients. They’re not permitted to accept any referral fees, commissions or kickbacks from third parties. Fee-based advisers accept client fees and commissions or other types of compensation. Understand your adviser’s fee structure and you’ll be well equipped to identify conflicts.

How much exactly am I paying you for this service?

As uncomfortable as this question is, it’s legitimate. Financial advisers traditionally haven’t done a good job of explaining how their compensation and services work. Nonetheless, you have a right to know. As a client, how can you possibly measure the cost/benefit of working together if you’re not clear on services and costs?