Do you need a money person or financial advisor? Or can you manage your wealth yourself? It seems really daunting at first. So what do you think? This is exactly the question that we answer in Episode #18 of the Finance Flash Go! podcast!
I think this a question on a lot of people’s minds, especially as they transition to and are a young attending physician.
My answer is pretty simple, you do not need a financial advisor to manage your money as a physician. How can I say this so boldly, because I went from financially clueless to managing my own finances within a few months. I am not special, if I can do it, so can you. It’s largely about mindset, you have learned so many more difficult things than the basics of investing your money. You can do it!
With that said though, I am not opposed to someone paying a fair price for good advice from a financial advisor
But you do have to be able to generally tell good advice from bad advice as well as what a fair price is for this to work. So, education is a must, regardless. Honestly, by the time you are educated enough to tell this difference, you are also educated enough to manage your own finances.
Regardless, let’s review some things to know about financial advisors in case you decide to use one
You should interview the advisor and don’t take it easy on him or her. This person is managing your money, the money that you earned after spending countless hours studying, not sleeping, and helping patients. Don’t throw it away.
You will want to ask how they make their money. If they tell you that you don’t pay them or you don’t understand their answer, run away. This means that you pay them through commissions they make from selling you bad investments.
If they tell you they get a percentage of what you make, it’s worth learning more and perhaps negotiating a bit. A usual fee is 1% of assets under management. This means that they get 1% of your total investments with them. At least with this model, your goals are aligned, if you do well, they do well. But once your portfolio gets greater in value, are they really working harder to deserve to get paid more?
The best fee structure is a flat fee service where you pay a flat fee for the work that your advisor does. There are those out there who do this so look for them or contact me for a recommendation.
Ask your potential advisor what their investment strategy is
Do they think they can beat the market by actively managing your money. There is an 80% chance that they cannot do this while this strategy will cost you money in taxes and fees. They should be proponents of or at least open to managing your money with passive low cost, broadly diversified index funds.
Also make sure that you like them. If you get a bad feeling, don’t go with them. It’s not worth it.
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What financial topics would you like to hear about in the Finance Flash Go! podcast? Let us know in the comments below!