Atlanta Financial Blog
3 Tips for Physicians to Find the Best Financial Advisor
December 15, 2019
Believe it or not, some financial advisors do not have to abide by their own version of a Hippocratic Oath. As a physician, you are a fiduciary, a professional who is obligated to put your patients’ best interest first. But, did you know that not all financial advisors are required to abide by a fiduciary standard? As a physician, you have a Hippocratic oath. It’s a smart idea to find a financial advisor that is bound to the same set of standards to serve your interests first.
Here are three things you should ask in your search for a financial advisor.
How are they paid?
Chances are good that you’ll want transparency from your financial advisor about how they get paid. There are two main types of payment arrangements in the industry: fee-only and fee-based.
Understanding the differences between these payment arrangements is critical. Fee-only financial advisors generally act as fiduciaries. In other words, they promise to act in the best interests of their clients at all times. They do not receive commissions or incentives from insurance companies or brokerage firms for recommending particular products.
While fee-based advisors also charge asset management fees for their services, they may also be compensated for selling certain products. This may cause a conflict of interest when it comes to giving you advice.
Always ask a prospective advisor to describe how they are paid and whether or not they hold themselves out as a fiduciary.
What are their credentials?
As a physician, conducting thorough research may be second nature to you. One of the most valuable research tools for vetting financial advisors is BrokerCheck, a website maintained by the Financial Industry Regulatory Authority (FINRA). Use this site to learn more about the backgrounds and certifications of brokers and financial professionals before you start to work with one. BrokerCheck reveals which types of securities licenses a prospective financial advisor holds and whether they’ve ever been disciplined or involved in arbitration. It also shows any customer complaints that have been lodged against the advisor.
As for credentials, the most well-recognized financial planning credential is the CERTIFIED FINANCIAL PLANNER™ (CFP®). The CFP® program consists of five comprehensive areas of personal finance. The designation is awarded after candidates pass a 6-hour board examination covering the entire curriculum and submits to a background check. Candidates must have at least an undergraduate degree in order to start coursework for the CFP® program and must have three years of relevant work experience in order to use the credentials. The certification also requires ongoing continuing education courses.
Do they understand me?
As a physician, it’s important to work with an advisor who understands your unique needs. Sure, you are likely to be a high-income earner. But you have special considerations that many other professions don’t have due to the significant changes in the industry, income compression, tax reduction needs, and asset protection concerns. And, you may have started with significant student-loan debt and entered the workforce later than many other professionals, so you may need to make up for lost time when it comes to saving for retirement.
Ask a prospective financial advisor if they specialize in working with physicians. We consider advising physicians on their financial life to be both an art and a science that comes only through experience, knowledge and understanding of your specific situation.
It’s a smart idea to find a financial advisor that understands you, is credentialed, bound to a high set of standards, will always serve your interests first and specializes in working with physicians. Someone who treats their profession like you do.
The Setting Every Community Up for Retirement Enhancement (“SECURE”) Act was signed into law on December 20, 2019. With all of the discussion in the news around the political uncertainty, impeachment, and the looming trade war, one of the largest changes to retirement savings laws in recent years was passed with very little fanfare. However, some of the changes will be significant. I have tried to highlight what may impact the majority of our clients and readers.
The Act has a lot of positives such as simplifying rules and making 401k plans potentially available to more workers, pushing back the RMD age, and allowing contributions to IRAs past age 70. The negative impact I see is the elimination of the stretch IRA which is a clear move by the government to raise tax revenues by forcing money out of inherited IRAs sooner. I will discuss in more detail below, but this should be a time to review beneficiaries and discuss whether any change in your legacy planning should be made in response to the new laws. What do you need to pay attention to?
A few months ago, I saw a sale sign in front of my neighbor Gina’s house. She’s lived on my street even longer than I have, so I was surprised that she was selling her home. I bumped into her a week later at the supermarket and asked her where she was planning to move. She told me (with some regret) that she was downsizing to a less expensive house. The alimony payments she’d been getting from her ex-husband had ended last year, and she hadn’t prepared for the loss of that income. She soon realized she could no longer afford to live in her home.
I’d like to believe that everyone understands the value in a year-end review of their personal finances. Statistics that I’ve seen indicate that over half of people who make resolutions indicate a change to household finances and saving money is a priority in the new year1. What is a bit of surprise to me is that so many put off (or neglect all together) actually reviewing their finances before year’s end. My conclusion: one of the biggest deterrents is the time it takes to get things organized.
When it comes to being successful with money, strong organization will empower you more than anything else you can do to take control of your finances moving forward. With my personal and professional understanding of the challenges of this process, I’ve put together an 8-step checklist to get your finances organized, take inventory of where you stand, and ultimately get you ready to close the books on 2019.