I'm a Physician: Do I Need a Financial Advisor?

By Financial Advisor Carrie McDonnell

Quite often high income professionals, like physicians, find themselves caught in a cycle of indecisiveness when it comes to seeking financial advice. On one hand, many physicians acknowledge that they don’t have the time, interest or expertise to make effective investment and financial planning decisions. On the other hand, many become overwhelmed by the process of choosing a financial advisor they can trust when faced with all the options. Years can pass with no action being taken, leaving physicians and other busy high income professionals feeling insecure about their financial future.

Do I need a financial advisor?

Doctors commonly have significant cash inflow and outflow due to high salaries and medical school debt. Because of this, having a financial advisor develop an investment and financial plan can help the high income earner to maximize growth of investments, systematically address debt and reduce stress by laying out a clear, streamlined process for accomplishing goals. However, due to the potential in the industry for high fees, lack of transparency and conflicts of interest, physicians should seek out money managers who are fiduciaries on all accounts at all times. Fiduciaries are legally and ethically obligated to provide advice in their clients’ best interests. Only 12% of individuals registered with the securities industry are registered solely as investment advisor representatives, which requires them to be fiduciaries on all accounts.¹ Many financial professionals are dually registered broker dealers who aren’t required to meet the same standards, so asking the question, “Are you a fiduciary on all accounts?” is recommended.

What can a financial advisor offer?

First and foremost, creating a thoughtful investment plan using low fee diversified funds with strong historic performance data is critical. The effect of a low performing portfolio can be devastating to the trajectory of your savings over time, so address the investment content immediately. This applies to both personal accounts - IRA’s or taxable brokerages - as well as 401(k)s. Depending on the investment options available within a 401(k), a knowledgeable advisor may be able to build a unique plan that produces higher returns than the target date fund many 401(k) participants choose. Considering how much a high income professional contributes to a 401(k) and the amount of time that money has to compound, small improvements to your 401(k) returns have big impacts.

What should I expect to pay in fees?

Seek out a fee-only fiduciary. Avoid financial advisors/broker dealers who earn commissions. If a financial advisor is charging more than 1%, they are charging too much. Beyond the advising fee, be sure to ask about any additional fees - the industry is full of them (see here). Only work with advisors who have a low, transparent advising fee structure and prioritize low cost funds.

1. “FINRA 2024 Industry Snapshot” FINRA, Dec. 13, 2024