How physicians can select a financial professional aligned with your values and goals.

AS MEDICAL PROFESSIONALS, our days are consumed with patient care and professional responsibilities- sometimes leaving little time to learn about finances and investing. However, neglecting this aspect of your life can have significant repercussions.

Even for those well-versed in personal finance, having an expert’s objective insights can be useful to check in, validate strategies, and propel progress toward your financial goals.

Finding a trustworthy adviser that will give good advice at a reasonable price can be difficult. One must ask: How to find the right financial advisor? Here’s a streamlined guide, tailored specifically for medical professionals.

Understand your financial needs

Before embarking on your search for a financial adviser, it’s crucial to understand your financial goals and needs clearly. Are you seeking assistance with budgeting, retirement planning, investment management, tax strategies, estate planning, or a combination of these? How involved do you want your adviser to be in managing your finances? Knowing your needs will help you narrow down the type of adviser you need.

Know the types of financial advisers

The landscape of financial professionals can be overwhelming, with a plethora of designations and specialties. Understanding the differences is essential for making an informed decision. Here are some common types of financial advisers to consider:

Robo-advisers. These digital financial planning services are often lower cost. They are suitable for straightforward investment management but lack the personal touch for more complex financial needs.

Financial planners. Financial planners can help with a single issue or can help devise a comprehensive financial plan. Almost anyone can call themselves a financial planner. Financial planners do not have to register with a state or federal agency unless they are also investment advisers, broker-dealers or sell insurance. Certified Financial Planners (CFPs), on the other hand, have completed extensive training, must pass the CFP Board Exam, and log hours on the job and continuing education to maintain certification.

Investment advisers and broker-dealers. Investment advisers focus primarily on investments and might be ideal if you’re primarily interested in growing yourinvestment portfolio. Services can range from a la carte to full-service management. Broker-dealers can also sell commissioned products such as insurance and mutual funds. Investment advisers and broker-dealers must be registered with the SEC, FINRA, and/or state or local governments.

Money coaches and counselors. Money coaches and credit counselors don’t require any official training (though they could go to a coaching school and obtain a certificate) and are not regulated by any government body. They can offer budgeting and spending advice but usually do not give personalized investment advice or generate a comprehensive financial plan. If they do, understand that they are not registered with the government and are not regulated.

Fee structures to consider

Understanding how financial advisers are compensated is crucial for minimizing costs and avoiding conflicts of interest. Costs can add up quickly and decrease the power of compounding interest.

Fee-only advisers charge a flat fee, hourly rate or percentage of the assets they manage for you. They don’t receive any commissions for selling products, which minimizes conflicts of interest. Fee-only advisers can help physicians keep costs low and get good advice. Assets under management (AUM) fees of 1 to 2% are common in the industry. On a million-dollar portfolio, that costs $10,000-$20,000 a year. Since most doctors require portfolios of $3-$5 million portfolios to retire, they are generally overpaying their advisers with AUM fees to the tune of $30,000 to $100,000 a year. Flat-fee advising is usually much more cost-effective.

Commission-based advisers earn money from the financial products they sell to you. While this doesn’t necessarily mean they won’t act in your best interest, it’s something to be cautious about, as it could influence their recommendations.

Fee-based advisers are a mix of both fee-only and commission-based structures.

Fiduciary status

As health care professionals, the principle of acting in the best interest of our patients resonates deeply. Similarly, a financial adviser’s fiduciary status ensures they prioritize your financial well-being. Registered Investment Advisers are held to fiduciary standards, while broker-dealers may adhere to less-stringent suitability standards. Under the suitability standards, broker-dealers are required by law to act in the best interest of their employer, not their client. Understanding an adviser’s fiduciary status is paramount for ensuring aligned interests.

Credentials and background check

Verify a financial adviser’s credentials through reputable sources such as the SeC’s Investment Adviser Public Disclosure website or FINRA’s BrokerCheck. Additionally, check for any disciplinary actions or complaints filed against the adviser. This thorough vetting process helps ensure you’re partnering with a proficient and reputable adviser.

Alignment with your financial philosophy

Beyond credentials, your financial adviser should align with your values and philosophy. During initial meetings, assess their understanding of your goals and evaluate their focus on helping you achieve them. Beware of advisers who prioritize product sales over understanding your unique needs.

Final thoughts

Choosing the right financial adviser involves alignment of philosophies, transparent communication and mutual trust. By thoroughly vetting potential advisers and understanding their services and fees, you empower yourself to make informed decisions that align with your financial objectives. Remember, a true adviser advocates for your financial well-being and empowers you with knowledge. Choose wisely, and invest in a partnership that fosters your financial growth for years to come. •