facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast blog search brokercheck brokercheck

Financial Planning Tips for Time-Crunched Physicians

Kenny Brown, Jr., MBA
SENIOR VICE PRESIDENT, CHIEF OPERATING OFFICER, AMERITRUST INVESTMENT ADVISORS, INC. & AMERITRUST CORPORATION

Physicians are required to diagnose and treat a wide variety of complex health issues in addition to helping care for their families, but it puts time constraints on an important aspect of their lives: financial planning.

Given their workload, it should not be surprising that many physicians overlook the importance of financial planning. A study by the American Medical Association found that about 20% of physicians work between 61 and 80 hours per week, while another two thirds work between 40 and 69 hours. 

Financial planning also becomes necessary because new residents and attending physicians take on significant debt during the course of their education and training. The median education debt for medical school graduates in 2019 was $200,000, according to research by the Association of American Medical Colleges. In comparison, in its highly regarded annual survey, U.S. News reported that in 2019 college graduates had on average $30,062 in student loans.

Yet from the moment they start practicing medicine, physicians and other healthcare practitioners are actively courted by the financial industry because of the significant earnings potential of their profession. In 2021, the average annual salary for primary care physicians was around $242,000 and for specialists it was about $344,000, according to Medscape’s 2021 Physician Compensation Report.

Most people, including doctors and physicians, lack the necessary training or knowledge to create a customized, long-term financial plan to protect and grow their wealth. That leaves them susceptible to being influenced by investment “experts” who are eager to sell them financial products or services (and earn fat commissions).

When working with physicians, I agree with our president of AmeriTrust, Harvie Roe, who takes a page from the medical profession’s Hippocratic Oath: “First, do no harm.” Harvie and I believe our role is about protecting and growing our clients’ wealth. We care for their financial well being just like they care for the health of their patients.

When building your wealth, you need to have a firm idea of what the future will look like. In his best-selling book “7 Habits of Highly Effective People,” renowned author/consultant Stephen Covey wrote, “Begin with the end in mind.” But to do that you need a game plan. Here’s how you start:

1.) Trust lies at the heart of financial planning

Trust lies at the heart of the doctor-patient relationship. Your patients are not healthcare experts. They usually don’t know what ails them and they trust you to provide the right level of care.

The same logic applies to the financial advisor-client relationship. When choosing a financial advisor, physicians should only work with professionals they trust. They need to feel confident that their advisor will be transparent and honest in the advice they provide. A relationship based on trust allows physicians to feel comfortable asking questions, as well as providing insight into their financial needs and goals.

 2.) Only work with a fiduciary

Choosing a wealth management partner is one of the most important financial decisions a physician will make. That’s why it is critical that physicians understand the difference between a fiduciary and a non-fiduciary advisor.

Fiduciary advisors are legally required to always act in the best interest of their clients. The advisor must evaluate a variety of factors – such as the riskiness of the investment, reasonableness of fees and any potential for conflicts of interest – when providing financial advice.

Fiduciaries are compensated by a fee for their services and unlike non-fiduciaries, do not receive a commission on investments purchased on behalf of clients. Those commissions open the door to potential conflicts of interests because the advisor may recommend, for example, a mutual fund with expensive front-end fees (and receive a commission from the sale) when similar, less expensive options are available.

3.) Plan your work and work your (financial) plan

A customized, actionable financial plan provides you the roadmap to achieve your short-term, medium-term and long-term financial goals. Unfortunately, most people do not have a plan in place. Research by Gallup found that only 30% of Americans have a long-term financial plan that outlines in detail their investment and savings goals.

A viable financial plan includes a wide variety of factors, including cash flow management, debt reduction (critical for physicians), insurance coverage, income tax management, retirement planning and, where applicable, education savings for your children. The plan helps you achieve and maintain the lifestyle you want for you and your family. 

 4.) Do not procrastinate – start now

 Albert Einstein famously said, “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” That quote is important because the sooner you start following a financial plan – and achieving savings and investing goals – the sooner your wealth will grow through the wonder of compounding on your investments.

A proven advisor can start you on your journey and help you stay on track with your plan. They can also help you navigate changes in your life – or the financial markets – that may require adjustments to the plan.

When compared to the practice of medicine, financial planning is not complicated. But it only takes a few missteps to derail a physician’s current financial situation.

If you are a physician or healthcare professional and could benefit from financial planning or simply need advice on related wealth management strategies, please contact me or any one of our professionals at 918-610-8080. We are ready to help.