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Why Physicians Make Big Financial Mistakes….and Should They be “Firing Their Financial Advisor”?

I am not a financial advisor, so please do not make any financial decisions based on anything I write. However, I am a physician who retired early after achieving financial independence and many readers have reached out to know more about this.  In the latter half of this article I also review a popular new online financial literacy course geared for physicians from the “White Coat Investor”  “Fire Your Financial Advisor”

Probably like you, I remember having an investment firm invited to speak at our residency program. They discussed the benefits of own occupation disability and offered a discount to residents wanting to sign up with their firm. I also remember them talking about managing portfolios. I opted to sign up for the disability coverage and continued with this for a few years until I had adequate coverage through my attending job. At this time, I canceled the plan. I never did use them to manage my money.

I since found out that this same group speaks to many residency programs/hospitals in the surrounding area. Makes me wonder, how did they get this monopoly of a captive audience of fledgling physicians?  Is there some incentive to the programs for allowing them to speak to their residents?  I don’t know the answer to that.  Regardless, it makes me nervous that many physicians aren’t getting good/fair advice relating to finance.

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Why are we talking about finances again? Its important to everyone, and it doesn’t get enough attention with physicians who are more focused on patient care and family time with little left for anything else. With medical student loans, yet also high income potential, every physician should care about finance.

My goal in discussing these topics is NOT to have physicians leave medicine early by retiring early. However, a benefit of financial success is the ability to have control over your time- and I have found time to be the most precious commodity after a health scare read more here

You may be hearing about the massive rally going on in the stock market and wondering if you are missing out. You may have worries about student loans and whether you should agree to a “doctor loan” when buying your first home.

There are so many financial topics that are specific to physicians but, yet as a group, we do not have the training or interest in managing our own finances to allow us to pay off our loans, fund our kid’s college education, or book the vacation that provides the life experience with our families that we value so much.

Most of us don’t have time to learn in depth analysis of stocks or to research different real estate investment opportunities. Unless you have a specific interest in this, I wouldn’t recommend it.

However, as high income earners,  we make big mistakes by leaving an enormous amount of money on the table by not having a basic understanding of retirement savings plans, and the importance of a financial plan for your family.  It is dry, and sometimes painful, to get a better understanding of these things but I promise its worth it.

You may be investing in CME conferences for your career, reading new journal articles, and paying for an “Uptodate” subscription every year. These are all good things to continue advance knowledge in your medical career. Just don’t forget to invest in yourself and family too.

I wish I could say I was able to retire based on my physician income alone. Its just not true. Unless I had completely maxed out all retirement vehicles early (including while a resident), minimized loans (both student and mortgage), lived modestly, and invested in the stock market, it just wouldn’t be possible. However, your income as a physician puts you in a place where you should absolutely be able to retire when you want to if you make prudent financial decisions.

Take the time to make a financial plan. Read a few books or take a course. It will be worth so much to you over the years and well worth your time investment. Its not fun, but crucial. And no one in medicine will tell you to do this.
End of rant.

In full and complete disclosure, I was approached by the creator of the “White Coat Investor” to give feedback and take his new online course to see if this was something I thought would appeal to my readers. If you end up buying the course through my link, I will get a small portion of the cost for the course (without any additional cost to you- the price is the same regardless).  You can take as long as 7 days to determine if you find it worthwhile, refund is available if not.  WCI “Fire Your Financial Advisor” Course

 

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I am definitely not running this website as a principle means to make money. This is a hobby for me, but it does have administrative costs. So, if you are going to buy the course for the same price anyway and my review/link helped you decide to do it, I feel it is a win for us both.

All that being said, I did the course. Here is my honest feedback:

1. It is boring, and dry. (Perhaps mostly just a function of the material itself, but some variation in how the information is presented would be nice).

2. It is incredibly useful for physicians.

It deals specifically with topics that are unique and pertinent to physicians. If you have tried to read about finance and found books incredibly boring, or if you don’t know where to find all the important information for physicians in one place, it is likely a good fit. Its all done on videos that you can start and stop when you want. I don’t recommend doing more than a few hours at a time as you will start to lose focus.

Some topics (many more available) with their own video segments that I found to have very good coverage that you might also be interested in:

  • What an advisor can do for you
  • What to look for in an advisor
  • Disability Insurance
  • Physician Mortgage Loans
  • Refinancing During Residency
  • Paying off Debt Quickly
  • How Much You Need to Retire
  • Investing in a Taxable Account
  • 529 Plans
  • The Backdoor Roth IRA
  • Stocks, Bonds, and Mutual Funds
  • Why You Need a Will

This course is perfect for people who don’t have time or desire to hang out on investing sites/forums or read tons of books on investing. Can you find all of the information somewhere else (perhaps even free) or other websites/books/lectures? Yes, but you would have to spend an enormous amount of time to track all the information down and compile it. If you want the information highly geared to physicians and spoon fed through videos, this may be a great tool to help you build wealth. The impact over many years can be incredible vs. staying in a static situation where you are doing nothing for your finances.

In the end, my recommendation is to do something. Buy a finance book, hire a financial advisor (after at least understanding the basics of how their fees are collected), write up a financial plan, or lastly buy this course if it fits your learning style. You need to at least know what you don’t know.

This course is expensive at $499. However, if you think about the yearly amount you would pay to an advisor or the amount over the years that you could accumulate by having a better understanding of personal finance, the cost is pretty nominal. In addition, if you are like me, you may be more likely to actually do (and finish the course) since you invested some real money into it. It gives you motivation to complete it as you don’t want to waste that money! Lastly, you can get a refund within 7 days if you don’t find it useful.  I would suggest doing 2 hours every weekend for a month.  If you commit to that you will have a huge improvement over where you are today.

If you are interested here is the link to check it out:

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White Coat Investor: “Fire Your Financial Advisor” Online Course

By the way, I think financial advisors are generally good people. I even have a close family member who is one, and their expertise cannot be replaced with a single course. The title is a little provocative and misleading because you very well may still benefit from using a financial advisor, but you should know how to pick one and determine how they can best help you. You will get advice on this in the course too, and it may save you a lot in the long run. Ultimately, even if you use an advisor you should have a basic understanding of how things work so that you aren’t taken advantage of by a small minority of bad ones (especially those trying to sell you whole life insurance policies)!

I hope you don’t mind me telling you about this course, but I truly do feel it could be very beneficial to many physicians- especially those in medical school, residency, or 5-10 years into their career. And to answer whether you should be getting into the stock market, the answer is yes! But don’t do it blindly. Whether that is through a 401K, taxable brokerage account, 529 for your kids, etc. depends on your financial situation but you should be making your money work for you instead of relying solely on your paycheck.

If anyone else has tried the course, help our other readers out and let us know what you thought in comments below!

 

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9 thoughts on “Why Physicians Make Big Financial Mistakes….and Should They be “Firing Their Financial Advisor”?”

  1. I recently fired my financial advisor after extensive reading including the White Coat Investor. While the info can be dry, was certainly very helpful.

    1. Agree, Doc G and I think most of us would rather be doing something else but a little bit of time invested is worth so much in the long run.

  2. I will definitely be signing up in the future! I’ve become very interested in the topic and have begun looking into other resources to begin planning once I match. Thanks for sharing! Seems like the week for financial advice haha I posted about it too last week.

  3. To respond to this section: “Makes me wonder, how did they get this monopoly of a captive audience of fledgling physicians? Is there some incentive to the programs for allowing them to speak to their residents? I don’t know the answer to that.” Some companies, most notably Northwest Mutual and Larson, have very lucrative, sophisticated programs for getting to doctors in training before they graduate. There will also be some regional and local firms that have a program to do the same in a centralized locality. I have yet to learn of a program that does not make a push to sell overly expensive, commission-based products, although I believe a few are starting to pop up. I believe there are almost certainly incentives for the director of the program to allow these groups in, whether via a long-term relationship that is ignorant of what is actually being done or some other means.

    This was an excellent post. Even if you plan to use a fee-only FA, the more you know, the more you will get out of the relationship.

    1. Appreciate your comment! Helpful information and kind of what I suspected. It is nice to hear from both sides of the equation. Thank you for weighing in.

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