As a doctor, you probably already know that you are among the highest-earning professionals in the country, yet you may also face unique financial challenges that make managing your wealth far more complex than, say, for lawyers or engineers.
From student loans and tax burdens to preserving assets and retirement planning, your financial life can easily end up being as demanding as your medical career. That’s why working with a qualified financial advisor for doctors, like a certified financial planner (CFP®), can be so helpful.
The Case for a Holistic Financial Advisor For Doctors
1. Financial Planning can be Complex and Time-Consuming
Doctors are trained more to diagnose and treat patients, and less to manage complex finances. Navigating the ever-evolving landscape of tax codes, investment strategies, and risk management tools is likely not your strong suit.
Financial planning involves many moving parts: taxes, estate law, insurance, investments, debt, and budgeting. Without professional guidance, you could easily make costly mistakes or miss out on beneficial strategies.
2. Doctors Have Limited Time to Research Financial Matters
Our guess is that you work long, demanding hours, leaving you little time or mental energy to explore and implement a personalized financial strategy. A trusted advisor could handle this research for you and help you put together a customized plan, so you can focus on other priorities.
3. Missing Out on Opportunities
If, as a doctor, you lack a clear investment plan, you may either avoid investing altogether or invest haphazardly, missing potentially lucrative opportunities. An experienced advisor could offer you choices to make your portfolio diversified, tax-efficient, and aligned with your goals and risk tolerance.
4. Avoiding Unnecessary Risks
Doctors can be particularly vulnerable to lawsuits, and without proper planning, your assets could be exposed. A financial advisor can help you implement strategies to better defend your assets using legal structures such as trusts, insurance, and business incorporation.
5. Building Trust and a Long-Term Relationship
At Iron Point Financial, we believe that a good financial advisor takes a holistic, fiduciary approach by understanding your personal and professional goals, family dynamics, and career path. Over time, this relationship can strengthen trust and empower better decision-making, no matter your life stage.
Financial Advisor For Doctors: Four Key Stages To Consider Reviewing Your Financial Situation
No matter your career, you will have to navigate various seasons in life. That’s why being prepared earlier rather than later can be such a blessing when it comes to financial planning: you can get ahead of some of those big life changes.
Taking the time to review your financial status and plan with a CFP® is a bit like doing a preventative health checkup: it could help you avoid costly problems down the road.
Stage 1: New Graduate or Early-Career Doctor
As a new physician, you will likely finish your training burdened with six-figure student loans, while simultaneously and suddenly earning a high income. This transition is a financial turning point that could make or break you. At this juncture, a financial advisor can help you with:
- Student loan repayment strategies: These include income-driven plans and refinancing, which may help you reduce your college debt quicker.
- Cash flow and budgeting: Knowing what you are spending your money on and that you’re spending it wisely could help keep you on a solid financial track.
- Buying or leasing a car: Depending on your situation, one may be preferable, financially speaking, over the other. (For instance, if you were on a short-term residency in one city, but you knew you were going to another part of the country afterwards, a lease could make more sense for you.)
- Planning for a first home purchase: Buying a home is a big financial step. You could have more confidence in such an expensive investment if you went into it with a solid financial plan.
- Starting an investment portfolio: Even if you don’t have much to invest in the beginning, it can be beneficial to start early, to make the most of compound interest over time.
- Establishing an emergency fund: You never know what might pop up around life’s next corner. Having a financial cushion could help you manage unexpected changes if and when they come.
Stage 2: Established Doctor
At this stage, as a doctor, you are usually earning even more, and likely starting to think long-term. Your financial needs can evolve from basic management of your funds to the optimization and defense of your assets. Some primary areas an advisor could benefit you include:
- Income tax payment management and advanced tax planning: When you have more income, you are responsible for paying more taxes. A financial advisor for doctors could educate you on ways to avoid paying unnecessary taxes.
- Tax return preparation: Tax prep continues to grow increasingly more complex each year. When you have a trusted relationship with a CFP®, it can make doing your taxes less worrisome.
- Wealth-building investment strategies: As you put more money into savings and assets, making sound investments may allow you to live a little freer.
- Will and estate planning: While most people don’t like to think about death, it is inevitable. Working with a CFP® could help you make sure your family is covered if the worst were to happen.
- Creditor-proofing assets in case of lawsuits: Unfortunately, as a doctor, you have a high likelihood of being sued. We would strongly recommend that you have adequate insurance coverage and protect your assets accordingly.
- Cash flow analysis (spending vs. saving): As your bank account increases, you most likely want to be sure that your spending does not outstrip your saving. That way, you are more likely to have what you need, both now and in the future.
Stage 3: Private Practice Owner
If you are a doctor running a private practice, you have dual roles as physician and business owner. In other words, your financial complexity increases significantly. A financial advisor with expertise in business finance can provide you with:
- Guidance on incorporating or forming trusts for tax and legal defense: Trusts have many uses, including estate tax planning, asset protection, and control over asset distribution.
- Education and financial planning for children: We believe it is wise to plan for your children’s futures as well as yours.
- Cash flow forecasting with an eye on future retirement: This involves looking into how much you might need for retirement and what your expenses might be in that season of life.
- Life and disability insurance review: We suggest you carry out a regular review of this type to see if you need to make any changes.
- Business-related financial planning: As mentioned above, most doctors are not trained to be skilled businesspeople. This is why we recommend you develop a good relationship with a CFP®.
- Assessing and managing reasonable business and personal debt: We recommend that you find out how much debt you can handle based on your financial capacity.
Stage 4: Pre-Retirement and Retirement
As you near the end of your medical career, your priorities might shift toward wealth preservation, planning for a sustainable retirement income, and charitable giving. A financial advisor can help with:
- Creating a retirement income strategy: Doing this can set you up with some passive or semi-passive income sources for you to live off of in retirement.
- Retirement tax planning: This could include assessing Required Minimum Distributions, Roth conversions, and Health Savings Account (HSA) usage.
- Updating or finalizing wills and estate plans: Doing this can make difficult times easier: making your desires and final plans known in advance can create clarity for those you love.
- Charitable giving strategies: Charitable giving can come into play when you are reviewing your will. You may find satisfaction in sharing your wealth with people and causes you feel passionate about.
- Use of trusts for legacy planning: Trusts allow you to have your estate managed according to your wishes both while you are alive and after you pass. That way, your wealth can benefit others, possibly for generations.
- Securing assets for heirs and beneficiaries: Just as you likely pay for asset protection now, you may also want to safeguard your assets after you are gone, on behalf of those you love.
Ready To Start Your Journey With A Skilled Financial Advisor For Doctors?
Allow us to walk that road with you. At Iron Point Financial, we have skilled CFPs® and knowledgeable Retirement Income Certified Professionals (RICP®s) whose first priority is to get to know you as a person, not just as a customer. They will spend all the time necessary to learn about your goals, aspirations, and passions.
Why not schedule an appointment today to meet with one such Iron Point Financial CFP® or RICP®? Let us help you manage your financial health both now and for many years to come.
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Iron Point Financial is here to empower you to secure a brighter tomorrow. We operate physical offices in Grove City, PA and Greenville, PA.
We primarily serve residents of Pennsylvania, Ohio, West Virginia and Florida but we also have security registrations for 22 other states across the continental USA.
Further Reading
Disclosures
General Disclosures
The views stated are not necessarily the opinion of Cetera and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein.
Due to volatility within the markets mentioned, opinions are subject to change without notice.
Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed.
Past performance does not guarantee future results.
Cetera Advisor Networks LLC, exclusively provides investment products and services through its representatives.
Although Cetera does not provide tax or legal advice, or supervise tax, accounting or legal services, Cetera representatives may offer these services through their independent outside business.
This information is not intended as tax or legal advice.
Tax-Specific Disclosures
For a comprehensive review of your personal situation, always consult with a tax or legal advisor.
Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.
All investing involves risk, including the possible loss of principal.
There is no assurance that any investment strategy will be successful.
Trusts-Specific Disclosures
The use of trusts involves a complex web of tax rules and regulations.
You should consider the counsel of an experienced estate planning professional before implementing such strategies.
