Doctors, Here are 10 Questions to Ask Your Prospective Financial Advisor

Want to start building your investments and planning for retirement? Have no idea where to start the conversation about your personal finances? Well, you’re not alone!

Foreign welcome back to more money minutes for doctors today we’ll be talking about questions doctors should ask their financial advisors catherine bestness here you know you may be like a lot of doctors and so many of them don’t even know where to start when it comes to seeking help with their finances and of course many times doctors go to their colleagues for

Recommendations but you know what your situation could be entirely different from your colleagues so how can you trust the recommendation or how can you trust the advisor and today we’re going to be talking about questions you should be asking your financial advisor before you engage them now if you have other questions you want to ask us or if there’s something

You’d like us to cover in a future video please reach out to us because we’ll do the videos and the podcast and you can do that by reaching out to us at info also i would consider it a special personal favor if you would like subscribe and follow us on social media because what that does is it raises up in the rankings and that means more

Doctors will get this information that i think can make their future a lot more bright at least financially all right so let’s get started so let’s say you’ve found the name of an advisor somebody you want to check out you’ve set up a first meeting here’s some thoughts you can do and some questions you can ask on how to determine if this is the right financial

Advisor for you so here’s a list of questions you can ask in your first meeting number one do they have a fiduciary duty towards you now let me give you a little bit of a background because this is going to be we’re going to be talking about that throughout today one of the dirty secrets in our industry is that financial services are a lot like manufacturers

So if you think of really big name companies you see their names on ads you see them on billboards you see them on the tv frankly they are really manufacturers they are manufacturing financial services products and then they need sales people to actually sell these products this is very similar to the auto industry every chevy every ford they’re manufactured

In detroit and then they have dealerships throughout the country and sales people in those dealerships to be able to sell the fords the chevys or whatever brand is your specialty now how does this come into play in the background on whether or not you’re a fiduciary keep in mind that a fiduciary is a very special advisor it’s a lot like being an attorney or a

Trustee if you have a fiduciary duty you must do what’s in your clients best interests at all times you cannot make recommendations that are only in your interest now this is crucial because it can be really hard to tell on the surface if your advisor has a fiduciary duty or not i mentioned the manufacturing because very frequently if the your advisor is working

With a company that manufactures financial products they are not going to have a fiduciary duty or they’re not going to have it in all interactions with you now to make it even more complicated i have actually seen some advisors lie and tell their clients they have a fiduciary duty when they do not yes i know it’s really ugly so if they’re a fiduciary they have

To recommend what’s in their i’m sorry not what’s in the advisor’s best interest but what’s in the client’s best interest now what if they’re not a fiduciary if they’re just a salesman as if they were a chevy salesman then they must recommend a product that’s suitable now that’s a big difference between a suitable product and a fiduciary duty the standard of care

For fiduciary duty is much much much higher and in fact in the industry most of those big product manufacturers did not want their advisors to have a fiduciary duty because they knew it was going to be more liability for them down the road they much preferred a lower standard of care that of which is just suitable now this is a very big issue to me for because

If you’ve been listening to my podcast you know that ethics is my background it’s my life it’s my passion so it’s i think being a fiduciary is the best way to do business because when you’re doing what’s in your clients best interest they’re going to be the happiest obviously and you keep your clients happy you keep your clients so that’s my whole business model

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Now how to find out if they are affiliated with a company or are they a salesperson or do they have this fiduciary duty so next question you want to ask is are they affiliated with any company that creates financial products now this could be an insurance company it might be an investment company it could be an investment banker and um i don’t want to name names

Here on the on the podcast and on my video blogs uh but if you’ve got questions about the companies that you’re working with reach out to me and we can talk about that so let me give you an example i’m thinking of an insurance company i’m going to call them a really big because they are a really big insurance company they created a disability insurance product

That frankly is quite substandard it’s substandard in a lot of ways and they labeled it this is a product just for doctors well guess what doctors don’t know they think it’s a product for them they think it’s going to be fantastic and in fact it was an overly expensive and a sub standard product but they knew they could sell it to doctors who didn’t know what

Was really going on so you have to be very very careful with these kind of products that’s why if we’re making uh making a recommendation on a particular product a we’ve done a lot of due diligence in the background and b we lay out numerous different options so the client can always choose what’s in their best interest now how do this become such a big deal for

Me many years ago yes back in the dark ages i was legal counsel to one of the largest mutual fund companies board of directors in the country it was in the top ten they were huge and they had what in the industry we call a captive sales force this particular their advisors could only sell products that they recommended today the sim company is still around the

Stone business they can sell a few products outside but by and large they want to sell their own company’s products because it’s more profitable for them so i was a young attorney and i go into my boss it was the general counsel i go i’ve got this fantastic idea i think we should take our mutual funds and take them out to all the other broker dealers in the world

We could be having merrill lynch we could be having this company we could be having that company they could all be selling our mutual funds and he looks at me with this very sad tired expression as if i was the most stupid attorney on the block and he says you know that’s never going to work and the reason they’re not going to work is because our mutual funds are

Substandard they have very high internal fees they’re extremely expensive and their returns are quite low no one else is going to buy them outside of our reps that are required to sell them it was a huge huge wake-up call to me to see what really really goes on so how does this play out for you what you want is an objective independent advisor an advisor that’s

Free to recommend whatever investments whatever insurance products they think is in your best interest not ones that are limited to a particular company so if you’re dealing with an insurance agent you might ask if their insurance are they insurance agent are they captive that’s kind of code where we can pretty much only sell you know what our company manufactures

Maybe a few other things but mostly our own companies products or or are they independent you definitely want an independent one and ask them what kind of due diligence they do on the products that they’re recommending for you which takes me down to the next question how are you paid now once again like car dealerships you know how car dealerships can get this

Bad reputation for being pushy sales people they’re totally on commissions or they’re largely owned commissions many advisors are also on commissions particularly when they’re working in this captive environment because if they’re just commission based they want to get that commission and move on now i personally believe that when you’ve got a high level of ethics

You’re acting in a fiduciary duty you’re going to do exactly the opposite you’re going to recommend what’s in the best interest of clients uh you’re not going to be swayed by commissions and bonuses and those kinds of things and you’ll always be doing something that’s in the client’s best interest now next question to ask what kind of services do you provide i

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Have found as you probably know if you’ve been listening that doctor’s situation is incredibly complex and we work with over 500 doctors from hawaii to cape cod we even have one doctor in new zealand today and the situation is so complex i think it’s important for you to be looking at an advisor that does comprehensive financial planning number one they also do tax

Efficient investing and number three they use an evidenced based approach and on top of all of this for most of our clients they need to be very skilled in doing student debt plans in other words what you want is an advisor that’s going to pull everything together in your financial life simplify it and make sure that you’re on the right path towards your goals

Now i will find that there are a lot of advisors out there that just focus on maybe one or two things there’s a couple of firms that just do life and di just for doctors they don’t do investments they don’t do any of the concierge work the retirement planning college planning etc and that can make it hard for a doctor because then you are put in the position of

Having to coordinate all your different experts all your different consultants and they may be giving you conflicting advice i think it’s better to have everything pulled together into one roof we call this a concierge service and i was just looking at our checklist today that we go over with clients there’s at least 10 different areas that we review with every

Single client to make sure that they’re all coordinated and moving ahead all right next question what is their investment philosophy now if you’ve listened to some of our previous podcasts you know there’s three main types of investment philosophy and one is this traditional approach in the industry we call it active management it’s really stock picking market

Timing that was i think of it as old-fashioned it’s been around the longest obviously number two which came out in the late 60s early 70s is index investing which is using mutual funds that mirror and index and the final is an approach that we think is best is the evidence-based investing and that uses nobel prize winning strategies to increase the returns of

The portfolio now active or stock picking is really attractive to some doctors doesn’t like something that can go into the doctor’s lounge and go guess what i just made a killing on tesla or bitcoins or whatever it is but unfortunately because we follow the evidence the studies show that it doesn’t work in the long run yes in any particular year stock picking may

Outperform evidence base but not over the long haul i do like index investing better and we do sometimes use index funds um they’re a lot cheaper than doing an active portfolio management however you’re going to be getting uh average returns over time we are true true believers in evidence-based investing and i think i did a podcast on this a time back and when you

Think about it it’s how doctors have been practicing medicine for decades you follow the science and that’s what we do with financial science so if you may have a financial advisor that’s talking they’ve got some secret sauce on how they pick their stocks or maybe they’re creating some special alternative investments i would run those things like i said you can get

Lucky every now and again but in general they are not going to keep up with doing an evidence-based approach and it’s far far riskier i’ve seen a lot of doctors lose a lot of money maybe even all of their investments when they’re doing that kind of approach be careful all right next question are you a solitary advisor or do you have a team behind you now some of

The background your finances are so complicated i think it takes an entire team to bring you up to speed on all the areas that you need let’s talk about some of them there’s investing you’re going to need somebody who’s a specialist in investing somebody who’s a specialist in in types of insurance life and di for sure maybe even property casualty somebody who knows

About taxes because you’re in a high tax bracket today and you’re going to be in a high tax bracket when you retire somebody who’s also experienced with estate planning reviewing your contracts debt plans a lot of our clients have got huge debts for medical school need to review your benefits at work and of course we want to be able to do college planning retirement

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Planning and other goal planning not to mention cash flow so you can see those are just some of the areas that we that we work with and i think it’s best to have all those coordinated with a single advisor kind of heading up that team so it all flows together nice and neat and it saves you time and money that’s what you want with your financial advisor now i do

Have some people we’ll see all this white hair and they go catherine when are you retiring personally i’m not planning to retire but that is something you should be asking your advisor what happens if something happens to you what happens to our my money um in my situation as i said i have a great team as a that’s a backup and i also have a de facto partner who’s

In place to take care of things um okay so run over by the bus all right next question where do you get your new clients this is very very important question because it’s going to tell you a little insight about the firm if they’re doing direct mailings uh internet searches ads those kind of situations they’re all indicators that they may have a great marketing

Department but they may not have happy satisfied doctors all right next question how many doctors do you serve you know if they’re telling you they work with six doctors or seven or eight or whatever maybe even 20 i’m like uh do they really have that expertise that you need i will tell you when we work with over 500 doctors there’s very few things that we haven’t

Seen before uh so you want a firm that’s very experienced so make sure your new firm is working with hundreds of doctors and that they’ve been at it for a while so that they’ve seen everything next question have you ever been sued by a client or have you ever been fined by regulators i can think of one firm specializes in working with doctors they didn’t take

Their fiduciary duty very seriously and they were recently hit with a class action lawsuit from their doctors for selling inappropriate unsuitable investments and i was very familiar with those investments i was very familiar with the firm and i knew that they were recommending things that were in the advisor’s best interests not the doctor’s best interest so

You can find out a little bit more about your own financial advisor by going to the finra website and looking them up make sure you check out your advisor all right so in conclusion when you get your answers to these questions you’re going to start getting a feel for whether or not this is the right advisor for you for you and you can always feel free to ask them

For references and then call them up and talk to those doctors about their experiences so i personally believe that you want a financial partner somebody who’s both a coach and a consultant not a salesperson somebody who shares your values and is really in it for the long haul you know i’ve will often tell clients if we don’t get invited to weddings and bar mitzvahs

And baptisms and graduations i don’t feel like we’re really doing our job because i really want to become part of these clients families is a very trusted friend and a consultant i don’t see myself as a salesperson i see myself as the ultimate problem solver and my job is just to help you get to financial independence as quickly and as safely as you possibly can

Get there now if you’d like to ask us any questions about what we’ve gone over today or if you’d like some more details feel free to reach out as you know our email address is info at so in closing once again follow us on social media as i mentioned before that really helps improve our ratings so we get in the hands of more doctors who

Need this information and if you found this helpful i hope you forwarded on to some of your colleagues in the meantime please send us questions and topics for future issues of our podcast i love to do that because you know i have a passion for helping doctors and make sure that their financial life is a lot brighter finally you can reach out to us directly for a

Second opinion on your financial health by emailing us at info please take care of yourself and prosper

Transcribed from video
Doctors, Here are 10 Questions to Ask Your Prospective Financial Advisor By MD Financial