Why doctors don’t get rich
Posted April 17, 2009on:
“Physicians have a significantly low propensity to accumulate substantial wealth.” – Thomas Stanley, author of The Millionaire Next Door
How come doctors fail to get rich? I’ve identified six reasons based on observations working with my physician clients.
A late start
By the time doctors finish medical school and residency they’re typically in their middle or late thirties. Many have families to feed, and substantial student loans to pay off. It will be years before they can even start accumulating wealth.
It is increasingly challenging to practice medicine. With the Medicare Trust Fund slated to go bust in 2019, the Center for Medicare and Medicare Service (CMS) is increasingly resorting to cutting physician reimbursements and implementing bundled payments.
Society expects a doctor to live like a doctor, dress like a doctor, and drive like a doctor. Meeting social expectations can be quite expensive.
Time and energy
A doctor can’t be just a doctor any more. He and she also has to deal with ever increasing regulatory mandates, paperwork requirements by capricious insurance companies. The demand on their time is mind-boggling. A typical doctor works a ten- to twelve-hour day. After work and family, they simply don’t have time and energy left to do proper financial planning.
Doctors are smart. They’re highly trained in their area of expertise. But that doesn’t translate into understanding about finance. Because they are smart, it’s easy for them to think they can easily master the field of finance as well. They can’t.
Lack of trust and delegation
Many doctors don’t trust financial advisors working for major Wall Street banks. They have the good instinct to realize that their interests are not aligned. Not knowing there are independent advisors out there who observe a strict fiduciary standard, they tend to do everything by themselves.
How to overcome these obstacles?
Awareness is the first step. Do-it-yourself is certainly an option, if you have the time to get really good at all things finance. Otherwise, find a conflict-free fiduciary expert to delegate your financial affairs to. In finding such an advisor, there are six questions you must ask:
1. Is this advisor independent? Is he affiliated or employed by big Wall Street insurance and brokerage firms that have their own agendas? You can do an advisor search on the SEC website to find this information.
2. What is his compensation structure? If he is not fee-only, where does he get his commissions and kickbacks from? Would that compromise his advice to you? This information can also be found on the SEC website.
3. Is he more interested in getting to know you or selling your financial products? You will get a sense in the first meeting.
4. Does he have clients who are doctors in your net worth category? Is he familiar with issues and challenges facing doctors? All you need to do is ask him for a few references, preferably doctors.
5. Does he have a team of experts working collaboratively to help you solve problems? Nobody can be an expert in investment, tax planning, asset protection and estate planning all by themselves. Be dubious of those who claim they are.
6. Does he work with you in a consultative manner?
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