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What Physicians Need to Know about Investing Before Hiring a Financial Advisor

by Kurt Ullman •

Buying Stocks

Dr. Chen doesn’t agree that these are the only options. She says that investing in individual stocks can be done by anyone and with little time expenditure. “This is my huge tip on how to invest; put your money where you shop and what you use daily,” she said. “I don’t know anything about turbines, but I do know from personal experience that Apple makes good products, and I see people packing the aisles at Target. Companies that are very integral to your life, and you know others feel the same way, are likely to do well going forward.”

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Explore This Issue
July 2019

Because you spend time with these products, you get a feeling for when things are beginning to change. You can consider selling, often before problems are seen in the quarterly reports.

Real estate can be a good investment because it often runs counter to stocks and bonds. While owning it can be time consuming, investing in syndicates, private real estate investment funds, or publicly traded companies takes away most of the time commitment. Many physicians have been successful investing in medically related real estate such as offices or surgery centers.

“I believe it was the late Jack Bogle, founder of Vanguard, who said ‘Stay the Course…is the most important single piece of investment wisdom I can give to you’,” said Dr. Dahle. “Any reasonable plan that is funded adequately is going to work as long as you have a plan and stick to it.” 

Kurt Ullman is a freelance medical writer based in Indiana.

Questions for Your Advisor

Finding a good advisor is an important part of investing. One of the first important moves is to decide between an investment advisor (IA) or financial planner (FP). While both help you manage your assets, their services differ in important ways: The IA helps handle your stocks, bonds, and other investments; FPs have a more varied practice and give advice on retirement and estate planning, as well as insurance needs, in addition to investment input.

Among the questions you should ask when interviewing a person to assist with your finances are the following:

  1. How do you get paid? Some charge an hourly fee, some charge a percentage of the portfolio, and others are paid by commission on the products they sell you. While many independent experts suggest fee-only advisors, either can work for you as long as you understand the fees and total costs incurred.
  2. What are your qualifications? There are around 100 different certifications in the field. The two most often seen are the certified financial planner (CFP), and chartered financial consultant (ChFC). Both require experience and at least 200 hours of education, followed by a certification exam. Length of time as an advisor is another qualification. Many states regulate financial advisors; see if your state does, and find out whether you have access to any complaints that have been filed.
  3. How will you communicate with me? Some investors are comfortable with hearing more often from the advisor, while others may want to be left alone unless there are buy/sell decisions to be made. Will the person you are talking to make the decisions, or is a team involved? Will you have access to team members as needed?
  4. Are you a fiduciary? Fiduciaries are required by law to work in the best interests of the client. Others are only required to recommend options that are “suitable,” even if they are not the cheapest or most ideal for you.
  5. What is your investment philosophy? Have your advisor describe to you how they will assist you and who their typical clients are. Make sure you understand exactly what they are going to do to reach your goals, and don’t be afraid to keep asking questions.

For Further Reading

  • The White Coat Investor: A Doctor’s Guide To Personal Finance and Investing, by James M. Dahle, MD (2014)
  • The Physician’s Guide to Personal Finance: The review book for the class you never had in medical school, by Jeff Steiner, DO (2013)
  • Freedom Formula for Physicians: A Prescription for First-Class Financial Health for Doctors, by Dave Denniston, CFA (2015)
  • The Doctors Guide to Eliminating Debt, by Cory S. Fawcett, MD (2016)

Source: physiciansonfire.com