Transition to Practice
Where do I start?
How about the same place you started your journey in medicine over 12 years ago-EDUCATION! If you're like most, you simply haven't had the time or energy to be educated about money. You have worked so hard and your income now reflects that, but you just don't know what to do with it. What do you do? MOST physicians make their financial decisions based upon that insurance guy they met years ago, something they read in a magazine, what a colleague said or even what their crazy uncle Bill told them to do. Is that the right way to go? Or would you prefer to be properly educated by an advisor with a unique understanding and keen knowledge as to the problems, concerns and frustrations that you face? Please visit our Education Center to begin your financial journey.
Where should I go for education?
This is a big one! We'll start with where you shouldn't go...online. Unless it's here of course. Let's put it this way. If I woke up tomorrow and just wasn't feeling too hot, and I told a physician I went to WebMD and figured it all out, what kind of reaction would I get? We have the same reaction about money! The internet is littered with myths and misinformation about many things, including money.
One example is a popular site for MD's in which random bloggers are making suggestions to the medical community at large, as to what they should be doing with their money. How many MD's are there in the U.S.? Are all of their financial situations identical? Of course not! Sources like these can be dangerous.
Be leery of most media sources and other peoples opinions. They have no clue as to your unique financial situation and we've never met two people with the same financial plan.
You are uncommon in that you are in the top 2% income earners and you education should come from a source that truly understands how to manage YOUR wealth, not the other 98%s.
When should I start planning?
Yesterday and here's why: our experience in working exclusively with the medical community is that, if you are like most, you will transition to practice and not come up for air for about 3-5 years. You may be focused on signing your contract, relocating, studying for boards and building a successful practice. Financial planning seems to always take a back seat. This costs you 3-5 years of building up a cash reserve, growing your retirement plan, or even paying off your student loan debt.
This delay could cost you millions of dollars over your career! So, even if the "basics" are the only thing you do at the start, it will serve you very well over time.
Should I work with a Planner?
Maybe, maybe not. While the financial planning community does a good job at leading the public to think planning is some complex and sophisticated process, it's really not. If you understand the essentials of a sound financial plan you could do it yourself. You could! However, the question really is do you have the time, energy and resources to go at it alone? Most physicians in training say, "I barely have enough time to sleep or enough energy to get to the gym!" This is why most residents and fellows, who want to begin planning, engage the services of a trusted financial professional.
How do I find the right Planner for me?
Unfortunately, most anyone in the financial industry these days can refer to themselves as a "financial planner." It's much like how the "Dr." title is thrown around. I know I won't be going to Dr. Phil or the "Top Dentist" in town to get my knee scoped or irregular heart beat under control! Here are four good questions to ask when engaging the services of a financial professional:
1) "Are you a Fiduciary?" Financial Advisors held to a Fiduciary standard are required by law to put their clients' interests first. This may seem like common sense. However, it's important to ask your advisor "Are you held to do fiduciary standard if I work with you?"
2) "What are your qualifications?" Ask what licenses and credentials they have. Some just have the bare minimum, while others become masters at their craft. For example, getting a CFP® designation (Certified Financial Planner). In the financial planning community, this is the equivalent to a MD or DO earning board certification in their respective specialty.
3) "Who are your clients?" Some Financial Advisors are only comfortable working with professionals who earn a specified amount of money. Others will take them big, take them small, take them all. It's important that the advisor you choose to work with truly understands the unique problems, concerns, and frustrations that physicians face, as well as having proven solutions.
4) "How are you compensated?" Financial Advisors can be compensated in several ways: through fees, commissions, or a combination of both. There is no right or wrong way. Rather it's more important that you understand and mutually agree upon compensation before beginning the process.
I have a contract offer. Should I have it reviewed?
Generally this is a good idea! However, IT SHOULD BE DONE BY AN ATTORNEY, NOT A PLANNER! We mention this because we are aware of financial planning firms that "hook" new physicians by stating they have the knowledge and ability to do this for you, too. Don't do it! Remember that an employment contract is a legal document and should only be reviewed by a legal professional. After all, if a patient needed to have his/her knee replaced, he/she should have the procedure done by an Orthopaedic Surgeon, not an accountant, right? We suggest either seeking counsel directly or working with a financial firm that has an attorney on staff, or retainer, so that you have the right set of eyes looking at the paperwork and providing you feedback.
How do I enroll in my employers benefits package?
In most cases, an employed physician is automatically enrolled with benefits such as group disability and life insurance. The benefits will vary from employer to employer, but enrolling isn't difficult. The retirement plan options can be a little more challenging to navigate depending on the complexity of the plan and/or the number of retirement fund choices it provides. Working with a planner could be helpful in this scenario primarily so that you are educated as to what's available and also getting you enrolled in the correct fund(s) based upon your suitability (risk tolerance, time horizon, etc).
I have disability & life insurance through my employer. Is that enough?
Policies provided through the employer are free to the employee 99% of the time, and you're automatically enrolled. The question of 'is that enough' is an individual decision based on how much of your income you want to protect. Most physicians we talk with tell us that they want ALL of their income protected (we strongly recommend this). If so, additional coverage will be required.
I have a cheap disability policy I bought during residency. Is it time for an upgrade?
Yes! Many new physicians purchase disability policies during training, which is a good idea. However, most seek this protection in an inexpensive manner due to cash flow constraints. No two disability policies are the same and much like all insurances, you get what you pay for. When you are making the transition to practice and experiencing that huge jump in your income, a second party review should be the minimum you should do. Just make sure you do so with a Financial Advisor who is not captive to one insurance company as you will likely get a very biased opinion.