Doctors: They’re discerning, demanding and immensely desirable as clients.
It’s not easy for an advisor to get in with this crowd of highly educated professionals, but the rewards of doing so are enticing. Their high and steady incomes make doctors reliably positioned to become affluent or high net worth, the two wealth segments often
Doctors can also be some of the most exciting clients for a financial advisor, given their often high intelligence levels and the perceived nobility of their profession.
“I love working with physicians,” said financial advisor Sam Davis, who counts doctors as around 60% of his client base. Davis is the
“There’s a lot of easier ways to make money than being a physician. They want to make the world better, and I love working with people that have a higher moral compass,” Davis said.
Below, FP presents a few tips shared by experts who specialize in financial planning for doctors on how advisors can better serve and win them as clients.
Pick up the right credentials
James “Jim” Dahle, the founder of the popular
Dahle is a doctor himself who practices emergency medicine at Jordan Valley Medical Center. He launched WCI several years ago to address a perceived dearth of good publicly available advice for doctors. Today, WCI is a Sandy, Utah-based media company that provides blog posts, podcasts, online forums, conferences and books to educate doctors on personal finance.
“The majority of people out there who call themselves advisors really aren’t,” Dahle said, calling them “salespeople masquerading as advisors.”
Among those he deems “real” advisors, the CFP is the most common credential that Dahle finds. “But seeing a CHFC for someone that came from the insurance side is meaningful. So is a CPA/PFS for someone coming from the accounting field. CFA might be
Davis obtained his own CFP “very early,” he said. “I think that’s super important, for any young adviser to
Young advisors can also
Help doctors resist FOMO urges
It takes a long, grueling effort to assume the privileges of a physician job in the U.S. There’s the initial four-year undergraduate degree, followed by in some cases relevant work experience to impress medical school admissions officers, and then medical school, which usually takes four years, and finally residency training, which
So the typical doctor, when they finally land their first job, is already in their late 20s or 30s and has likely seen peers achieve milestones and standards of living that they couldn’t afford in their lost decade of youth. “They have had to defer a lot of gratification,” Davis said.
The temptation can be strong to make up for lost time by overspending.
“All of a sudden their salary jumps up, but they also have a loan that doesn’t even default upon bankruptcy,” Davis said, referring to doctors’ student loans.
Advisors can add value by helping them delay a bit more gratification and stay focused on their big-picture goals, especially
Don’t lease that Mercedes
Advisors should focus on doctors’ priorities, not on projecting wealth to impress them, Davis said.
“Don’t feel like you have to go lease a Mercedes to feel successful,” he said. “Your goal is to teach these young physicians to live beneath their means. … So don’t go out selling like, Mercedes, when you’re trying to tell them, ‘Hey, look, we need to start tackling that $400,000 in student loans, as well as doing your 401(k).'”
He suggests embedding within the communities that doctors live in, and befriending them — taking them out to dinner or meeting them at events like a football game, and then following up.
“Every time I’m out [and] I meet somebody, I put it in my phone. And I connect with them on LinkedIn. ‘Hey, you want to grab coffee sometime?'” Davis said.
It’s taken as long as three years for some doctors who casually chatted with Davis in the past to become clients, he said. Doctors “don’t want to be sold,” he said. But happy doctors have often referred him new physician clients.
Reed Rinderknecht, a CFP and certified kingdom advisor who is a
“If you’re a physician, you’ve got basically everybody else in the community that wants either your time or your money, or both.”
His firm, which specializes partly in serving doctors, began with only a handful of doctor clients over three decades ago. Today it counts at least 600 physicians among its roughly 1,800 clients, he said.
“Back then, being one of the only fee-only advisors in the state, it was early for that … way of working with clients,” Rinderknecht said of his firm. The then-unique business model helped Foster Group stand out, and an early endorsement from the Iowa Medical Society provided it with an added boost of legitimacy. More recently, WCI
Foster Group has also partnered with the IMS to offer free informational personal finance workshops at different locations statewide and workshops in the IMS building, where they rented space in the back, Rinderknecht said. “We provided retirement workshops right there at the headquarters and just had really good turnouts and participation,” he said.
Foster Group advisors would offer a free one-hour follow-up consultation for IMS members, allowing interested doctors to try the business on for size.
In Rinderknecht’s experience, doctors don’t suffer fools. “They want information and they want it in a timely manner, and they don’t want to sugarcoat it or some alternative agenda,” he said.
Charge fair and transparent fees
Doctors also expect transparency in how advisors charge for their services.
“Giving good advice and charging a fair price will rapidly fill your practice” through word-of-mouth, Dahle said. “Good advice means not selling them products, especially products they don’t need.”
Dahle said he prefers fee-only advisors, especially when a doctor’s wealth has reached a certain level. “While a 1% AUM fee is probably fine for someone with a $700,000 portfolio, it’s frankly a rip-off for someone with a $5 million portfolio,” he said. “You’ll be better off in the long run just charging a nice, fair, transparent, flat fee and explaining it clearly on your website.”
So what does a “fair” flat fee look like in practice? Dahle believes a “four-figure amount” for financial planning and investment management is competitive for the typical doctor. It’s fine to charge $5,000 or $10,000 annually, but not $25,000, he said. “We don’t want to feel like we’re getting ripped off.”
Understand their biggest needs, deliver info efficiently
Dahle said physician-specific issues where advisors can add value include disability insurance — “not necessarily selling it, but knowing the ins and outs of it” — as well as keeping up to date with the latest programs that could help optimize their repayment of student loans or reduce their loan debt, such as
Other physician-specific service areas include discussing “multiple retirement accounts including defined benefit/cash balance plans,” as well as tax-efficient investing, tax planning and
Davis said another important consideration is knowing how to plan differently between doctors who have 1099 income versus those on a W-2 who are employees.
More doctors are part of large health care employers like hospitals today than in the past, when many were independent business owners, Rinderknecht said. “Their choices have not been quite as flexible as they were in the past about who they get to work with, and what they get to work on.”
As a result, doctors labor under not only more debt than in the past, but also thinner margins, he said. His firm tries to provide them information “as efficiently as possible.”
“They’re having to work harder and harder to keep their incomes. So what that means is, their free time has gone down.”