How can I find the right financial advisor?

Published December 14, 2023

Key Takeaways

Before you hire a financial advisor, determine what kind of help you need—whether you'd like assistance creating a budget or advice about retirement investing options—and find someone who has the necessary experience and education to handle your situation.
Clarify costs with the advisor and estimate how much you will pay in fees, other expenses, and commissions each year.
If you already have a financial advisor, specific questions about your investments can help evaluate their effectiveness based on how easily they can answer. As well, if your returns/profits are not beating or matching the average market rate, then you may want to find someone else.

Financial planning and money management isn’t taught in medical schools, meaning physicians may often feel lost when it comes to things like planning for big purchases, investing, and saving for retirement. This is where a financial advisor can step in.

Whether you’ve already hired an advisor or are interested in how they can help, here are some ways to evaluate how effective someone may be at helping you manage your money.

What kind of financial help do you need?

Some people need help determining a solid financial plan. They want to know how much to invest in which accounts, what insurance to purchase, and what steps they need to take before making large purchases.

Some may want more hands-on assistance. They prefer that someone else completely manages and invests money on their behalf. Some just want help with specific tasks. They may hire an accountant to help with taxes, an independent broker for insurance purposes, a lawyer for estate planning, or a finance professional to assist them with their investments.

Financial planners can do all of the above, and more. So before making a decision about a specific professional, first determine what kind of help you need.

They are appropriately qualified

As a doctor with a salary that is much higher than the average American, you are an attractive target for financial advisors and other professionals who desire your business. Before hiring anyone, do your due diligence.

"You shouldn’t hire someone just because they seem nice, or they know your colleague, or they sponsored a fancy lunch at a medical conference you attended."

— Lisha Taylor, MD, MPH

Check in on the potential advisor’s educational background—what makes them certified to manage your money? Unlike physicians, it can take just a few weekend courses and passing one or two tests to be “trained” to handle money.

The term financial advisor is broad and can refer to all types of financial professionals, from tax accountants to investment brokers. Make sure the person you hire is qualified and experienced in the area you desire.

Make sure he or she is also a fiduciary, meaning they are obligated to do what is in your best interest, and that they have designated certifications like CFP (certified financial planner) or CFA (chartered financial analyst).

They can manage physician-specific needs

Advisors see many clients from a variety of professions, but doctors are different. We have higher student loan burdens, spend more time in training, and may have significant and sudden income changes. We have access to multiple qualified accounts, such as a 401K, 403b, 401a, 457b, HSA, (backdoor) Roth IRA, and so on.

We also have other investment options, from buying a practice, to investing in a surgical center, to real estate syndications (this is when a group of investors jointly purchase a large real estate property).

Many physicians also have side gigs, work locum tenens, or have other sources of income that allow them to open additional tax-advantaged accounts.

"Having an advisor who is aware of all of these options and can help you understand the pros and cons of each one is critical."

— Lisha Taylor, MD, MPH

They personalize their service

It’s not enough to know what investment options are available to you as a physician, a good financial advisor must also be able to determine what is best for you and your circumstances, specifically, and what isn’t. Just because one doctor is investing money through one account, does not mean that you should follow suit. Perhaps you would be better suited doing something else? Find an advisor who takes the time to get to know you and your needs.

A good advisor asks about your financial goals and helps you reach them in the most efficient way. They will ask the right questions in order to tailor a plan for helping you reach these goals by your desired timeline. (These questions include, What age do you want to retire? What large expenses do you have? Do you plan to pay for your kids’ college? Do you have certain debt like student loans that you need to pay off?)

They have a transparent pay structure

There are many different fee structures in financial services. Some professionals charge a transparent, flat fee (which is ideal), but many more are “fee based.” This means they charge a flat fee in addition to earning money from things like commissions and investment products. While that may seem fine initially, it may bias that person’s advice. If one investment makes the investor $5,000 and the other makes him $0, which one do you think he will suggest to you?

"Even people with the best of intentions can be swayed by misaligned incentives. Identify any conflicts of interest your advisor may have and clarify how they are paid."

— Lisha Taylor, MD, MPH

It’s also important to know what you are paying for. If you don’t know how much you are paying for their professional advice, you may be paying more than you realize.

While some advisors charge a flat fee per hour or per year, many others charge an “assets under management” (AUM) fee. This means the amount the advisor gets is based on the total value of your money they are managing. Usually this fee is around 1%, but it could be much higher.

While 1% may not seem like much, the average portfolio may only increase by 5% to 7% per year, and that 1% could amount to 15% or 20% of your total annual profits. Determine what you are paying your financial advisor and decide if that fee is worth it to you. A good advisor with a high fee may not be benefiting you as much as you think, especially if they are taking a large chunk of your profits.

"As a general rule of thumb, expect to pay about four figures per year, so $1,000 to $9,999, for a good financial advisor."

— Lisha Taylor, MD, MPH

Your profits are in line with the market

Many physicians assume that if the person they hire is nice and they are willing to meet a few times a year (and they haven’t lost all their money!) then they must be a good financial advisor. This isn’t true, and you need to be able to evaluate your advisor’s work. To do this, you can ask your advisor the following questions:

How much money do I have invested?
What is the amount we invested this year?
What is my money invested in?
What is my asset allocation (ie, the percentage of stocks vs bonds)?
What made you choose that investment allocation for me over something else?
What was my yearly return or profit on this investment?
How does my yearly return compare to the “market”—the total stock market index fund?
How did my yearly return compare to the target-date retirement fund at my job (which is oftentimes the default investing option)?

Any good advisor should be able to easily answer these questions. If your returns/profits are not beating or matching the average market returns, or the default investing option at your job, then you may want to find someone else.

What this means for you

Be cautious and selective when hiring financial help. First, you must determine what kind of help you need, then you can pick someone with the proper education and qualifications to handle your unique situation. A good advisor for you will also have experience working with doctors, and they can tailor advice to help meet specific goals. Once you find someone who does that, be clear on how they get paid and the amount you may have to pay them each year. Lastly, be sure to evaluate their progress annually and ensure they are managing your money well.