How to select a financial planner who supports you

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Many physicians choose to manage their finances on their own, although they would benefit from working with a financial planner. So why are doctors reluctant to hire a professional counselor?

An important factor is the lack of confidence or worry that they will take advantage of. Another concern is hiring a counselor who may not have the appropriate training, knowledge and experience. It is even more difficult to determine if an advisor has your best interests at heart.

So what can you do to find a financial advisor who offers the same level of care and dedication that you provide to your patients?

If you’re wondering where to start, here are some tips.

Does an advisor have to be a fiduciary?

First of all, what is a trustee? By definition, a fiduciary financial planner is required to put the best interests of the client first, always, based on rigorous standards set by the SEC. Advisors who are not Trustees are only held to a lower “standard of suitability”. Being a financial advisor doesn’t have to be a fiduciary, but hiring a fiduciary advisor is the right choice.

Let’s see why, by examining the non-trust financial advisers employed by insurance companies. These advisers earn large commissions for the sale of the company’s products, especially proprietary products. So, are they selling what’s best for the customer or the product that earns the highest commission? Trustees do not face this challenge – they should have the best interests of the client at heart.

The bottom line is that there is no reason to go with a non-fiduciary advisor, who can just sell you what is good enough, rather than going with a fiduciary.

Designations and training

Unlike medicine, there is no training, experience, experience, or certification required that qualifies someone to provide financial advice. One way to assess an advisor’s education and experience is to know their professional designation.

The gold standard for financial planning is the CERTIFIED FINANCIAL PLANNER â„¢ designation. Other strong designations are the Personal Finance Specialist (PFS), which is awarded to CPAs, and the Chartered Financial Analyst (CFA). Other certifications probably require a lower level of knowledge and are not authoritative. Even more, beware of advisers without any designation.

Investment strategy

Most well-trained financial planners follow the academic principles of portfolio construction of the CFP program. However, strategies may differ from company to company. For example:

  • Illiquid investments: Some investments, such as private equity and real estate syndication, will be stuck for a period of time, often years. In addition, these products often carry large commissions, but hidden or vague. Make sure you are comfortable with this advice before you accept it.

  • Amount of exchanges: Studies have shown that the more trading is done in portfolios, the more likely it is that it will underperform the market, making it worse for you. Find out if a potential advisor’s trading philosophy matches yours.

Understanding Compensation Models: Commissions vs. Fees

Different methods of compensation for planners can be confusing, especially what it means to be paid only in relation to not paying only. First, let’s say you hire a trustee. Next, let’s take a closer look at the pros and cons of each type of compensation.

Fee-only fiduciary advisers

Paid-only fiduciary advisors only accept compensation directly from clients, never from other sources, such as disability or term life insurance providers. When paid advisers recommend such products, they should refer them to an insurance agency.

The most common fee-only financial advisor structure is to charge a percentage of assets under management, commonly referred to as AUM. This puts the advisor on the same side of the table as the client: if the financial advisor’s fees increase with your account balance, you both win when the value of your portfolio increases.

Other less common paid compensation methods include a one-time commitment fee, hourly scheduling fees, and monthly or annual (or subscription) fees.

Upside down : There is no temptation to direct customers to products for which they will receive commissions.

Inconvenience: Clients cannot receive all of their financial planning services, such as term life and disability insurance, from one financial advisor.

Fees and commissions Trustees

Unlike fee-only advisers, some fiduciary advisers offer clients insurance products such as term life and disability insurance, presenting them with the best options for their financial needs. The advisor receives a small commission from an insurance company when purchasing their product.

Upside down : The advisor offers insurance products that a fee-based advisor does not, allowing a client to receive all of these products from a single financial trustee.

Inconvenience: This can present a challenge for an advisor who can benefit from selling one product over another based on receiving a commission. Commissions paid on term life and disability insurance are modest compared to other insurance products often charged to physicians, such as cash value life insurance and annuities.

Find a full scope of practice

Many financial advisers limit their practice to investing the client’s portfolio. Instead, look for a financial planner who provides a full set of services, including:

  • Tax and estate planning and implementation

  • Portfolio construction and management, including employer pension plan assets

  • Insurance planning including life, disability and property / accident

  • Assistance in choosing social benefits for each membership period

  • Mortgage and Debt Analysis, Including Student Loans

Some big red flags to watch out for

When interviewing a financial planner, ask for clarification on exactly what services you will get, who will provide those services, and the types of solutions they typically recommend for various life situations. In particular, watch out for those big red flags.

Bait and Switch Advisors: Confirm exactly who you will be working with. While a senior advisor can lead the initial meeting, some companies may pose as a less experienced junior advisor.

Life insurance as a panacea: Life insurance is designed to meet the needs of dependents in the event of the breadwinner’s death, not as a magic pill. Be aware of insurance companies that offer life insurance for every financial planning scenario, including saving for retirement in place of your employer’s plan or financing your child’s education in place of an account 529.

Does my financial advisor need experience with physician clients?

You don’t necessarily need a financial advisor whose practice is limited to physicians. On the other hand, you want an advisor who is experienced with the unique planning needs of physicians. When interviewing potential counselors, ask them how many doctors they work with.

How to start your search for a trustee

You can start by using the “Find an Advisor” tool on the CFP Board, National Association of Personal Financial Advisors (NAPFA), or XY Planning Network websites. Then narrow your list down to two or three candidates. The CFP Board of Standards has a list of suggested interview questions.

Just as finding the right doctor can be difficult for patients, finding a well-trained and diligent fiduciary financial planner can also be a challenge. But identifying the right advisor for you and your family can make all the difference in reaching your financial goals.

The above article is intended for informational purposes only. Please consult a legal or tax professional regarding your situation.

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About Dr Joel Greenwald

Joel S. Greenwald, MD, graduated from Albert Einstein College of Medicine in the Bronx, New York, Joel completed his residency in internal medicine at the University of Minnesota.

He practiced internal medicine in the Twin Cities for 11 years before switching to financial planning for physicians, starting in 1998.

Joel’s wife is a radiation oncologist, which makes him all too familiar with the stresses of medical practice.

Knowing firsthand the challenges of practicing medicine, Joel’s passion is to make the lives of physicians easier by helping them ease their financial worries.

Connect with him on LinkedIn or on his website.



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