(Today’s guest post comes from my friend Ryan Inman of Physician Wealth Services. You may know him from his Financial Residency Podcast. There are two types of fee only financial advisors: Flat Fee and Assets Under Management. My preference is for the flat fee advisor, and Ryan is one of those. If you need to find a flat fee financial advisor, check out my new recommended flat fee advisor page and choose one of those advisors I have personally interviewed and recommend. They can’t stay on my list by paying me a fee, they can only stay there by being a good advisor to my readers.)
If there’s one thing almost all physicians have in common, it’s the constant inundation with solicitations from businesses who want to work with you. Whether it’s for life insurance, mortgages, practice management software – you name it, someone is trying to sell you something.
There’s nothing wrong with working with people you know and trust, and it’s certainly a great way to do business. But when it comes to finances and choosing a financial advisor, knowing who to trust and who you should work with is an entirely different ballgame.
For years, physicians have relied on personal recommendations and word of mouth from friends and family in order to choose a financial advisor to manage their portfolio. But today I want to encourage you to consider managing your money in a way which isn’t as common – with a fee only financial advisor.
Have you ever considered using the services of a fee only financial advisor? Do you know the difference between a fee only and other types of financial planner? Don’t worry, most people don’t realize there is one, but I want to encourage you to look at the differences between the two.
What is a Fee Only Financial Advisor?
A financial advisor should be a fiduciary, which means, they are a professional financial advisor who has legal responsibility to dispense sound financial advice based on your best interest as the client. Beware: Not all certified financial planners are fiduciaries.
Unfortunately, almost all advisors out there will be fee based, which means that have the ability to earn commissions among other fees. They will earn money from selling you products rather than a flat fee or an hourly fee based on the advice they give. If this is the case, what goal do you think a fee based advisor is working towards?
This isn’t to say all financial advisors are greedy and only want to earn money off of you. It’s to tell you there’s more room for bias and a natural conflict of interest if they are earning a commission off your portfolio and the products they’re selling you.
A fee only advisor addresses your financial plan and money management in a completely different way. The approach is focused on the overall health of your finances – whether it relates to budgeting, student loan payoff, or retirement planning.
The majority of fee only advisors are fiduciaries (not all though!) and will only be paid on the fees you agree to up front in the signed client agreement. There aren’t any commissions on products involved in the process, because this type of advisor doesn’t sell any type of product. The advisor should be paid based on a flat-fee structure and not on the commission from a retirement account or insurance product.
A fee only advisor looks beyond the size of your portfolio. They’re someone who sees all of your assets including your debts, and advises you based on what’s in your best interest.
What Services are Offered by a Fee Only Financial Advisor?
Most people associate financial planners with asset management, so if a fee only advisor isn’t involved in selling a product then what exactly do they do?
For starters, fee only advisors will want to take time to understand your finances on a personal level. After initial conversations, they can begin to recommend investment products for your portfolio. Since they aren’t selling the product themselves, then you can expect to be given an unbiased opinion which works with your goals.
Fee only advisors can also help you create a budget – one that is personalized to work for you and your family. Even though you’re a physician and most likely earning a six-figure income, it doesn’t mean you shouldn’t pay attention to what’s coming in and out of your expenses each month. A fee only advisor can sit down with you to map out a budget which aligns with your short-term and long-term financial goals.
Budgeting isn’t only about making sure you’re not overspending on fancy lattes each week. It also involves advising on banking, cash flow management, even using automatic bill pay to simplify your expenses. Whatever it takes to help make a budget work for you is one of the many ways a fee only advisor can assist you.
As physicians or if you’re married to a physician, you’re probably all too familiar with the burden of student loans. It’s not uncommon to see six-figures in loan debt – and that’s not even including the credit cards you had to live off of during residency. A fee only advisor will look at the debt you currently carry and establish a repayment plan which makes the most since. Believe it or not, there are multiple options when it comes to student loan repayment and you can be advised based on the pros and cons of each option. You can also check out free options like LoanBuddy that will show you the correct repayment option for your student debt.
The advice on retirement, asset management, budgeting, and debt repayment all lead to one singular goal: for you to achieve your short-term and long-term financial dreams. A fee only advisor helps you identify the steps it will take so you can realize your goals – even if you can’t quite identify everything you want to accomplish yet.
Qualities to Consider
By working with a fee only fiduciary, you should expect to work with someone who can be trusted, who remains loyal to your interests, and offers you honest, neutral advice. Not only are these traits we should hope to have with everyone we ever do business with, but fiduciaries are obligated to work this way.
You should also look for someone who is very transparent with their fees. Fee only advisors should use a flat rate and are up front with the fees. No one likes to be surprised when it comes to paying a bill, so make sure you’re working with someone who has provided you with their rate structure up front.
You should also expect to work with a fee only advisor who isn’t concerned about how large or small your portfolio is. Anyone, no matter the size of their accounts, should expect to be treated fairly and without any prejudices.
You can rest assured that a fee only advisor will focus on how best to service your account. They’ll focus on making sure you can achieve your goals, no matter how much debt you currently carry or how little you have invested.
The advisor that you are choosing to work with should specialize in working with physicians. 100% of their clients should be physicians, not just a majority. Also look into WHY they are working with physicians specifically. Is it because they have some personal connection into the inner workings of a physician family or is it because they figured physicians are wealthy and could use the help.
Choosing to Work with a Fee Only Advisor
Is fee only financial advising a different way of thinking? It absolutely is. It’s a complete departure from the traditional approach to money management.
But it’s not just different for the sake of being different. Fee only advising has been designed to focus on the individual and their entire financial picture, not the size of their portfolio. If you think you could benefit from this type of financial management, then I encourage you to start a conversation with a fee only advisor today. You’ll quickly see how you can benefit by working with someone who’s only focused on your financial goals.
(Go to my Recommended Flat Fee Financial Advisor Page, read their application forms, and find the right advisor for you. It’s that easy.)