Ryan Inman is a fee-only financial advisor who works exclusively with physicians and he teaches how to pick a financial advisor. How did he end up in the physician niche? He understands us. His wife is a pediatric pulmonologist and part of why he understands the struggle so well is that they’ve been together since college. He graduated from the University of San Diego and has two masters, one in business administration and another in Accounting and financial management. He manages Physician Wealth Services, which does financial planning for physicians, and he has his own podcast where he answers physician specific financial questions, called the Financial Residency and manages with Physician Finance Facebook group.
We discuss how to find a financial advisor and answer questions like, what is a fiduciary, who should I buy life and disability insurance from, is picking stocks and timing the market possible with enough research, what services should a financial advisor provide and what is the most common financial mistake he sees physicians make.
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Ryan Inman is a fee only financial advisor who works exclusively with physicians. How did he end up in this niche? Well, he gets us. His wife is a pediatric pulmonologist and part of why he understands our struggle so well is that they’ve been together since the beginning of college. He graduated from the University of San Diego and his two masters, one in Business Administration and another in accounting and financial management. He manages physician wealth services, which does financial planning for physicians, even has his own podcast where he answers physician specific financial questions called the financial residency. So if you’re looking to take a deeper dive, find him there. He also manages the physician finance Facebook group. In this episode, we discuss how to find a financial advisor and make sure that they’re working in your best interest. He answers questions like what is a fiduciary? Who should I buy life and Disability Insurance from is picking stocks and timing the market possible with enough research What services should a financial advisor provide? And finally, we end with what is the most common financial mistake he sees physician make warning. He’s a bit of a killjoy here.
Welcome to the physicians guide to doctoring A Practical Guide for practicing physicians. Dr. Bradley Block interviews experts in and out of medicine to find out everything we should have been learning while we were memorizing kreb cycle. The ideas expressed on this podcast are those of the interviewer and interviewee and do not represent those of their respective employers.
And now, here’s Dr. Bradley Block.
Ryan Inman, thanks so much for being on the show today.
Hey, thanks for having me. I’m really excited to be here.
So you’re a fee only financial advisor so today we’re going to help people decide how to choose their financial advisor if there are many making their first foray into attending ship. They don’t feel comfortable managing their money. They want they want some expert assistance. And you know, before the show we were talking about Dr. Google, right. So our patients will look up their symptoms, try to figure out their diagnosis, and think that they can match our expertise given medical school and residency and all their user experience. And I find that there are a lot of financial bloggers out there that have this as their side hustle. And they think that they can match a professional financial advisors input. So today, we’re going to take the time to really explain why there’s a lot of value in a financial advisor and then how to pick one so you chose a fee only model. So there’s an assets under management model, which is if I have a million dollars in the bank, and they take 1% of it as their annual fee, then I would think, right, they’re trying to make me more money because the more money I have, the more money they make. Right? But that’s not the model that you chose. Why did you choose a fee only model?
Yeah. So let me let me back up real quick. And I joke By the way, just so everyone’s clear all the time with my wife of that I’m in a Web MD something and prove her wrong, which never ends up working. But I threaten and it loses every time. But so the the there’s a fee only model and a fee based model. And they’re the difference. I mean, it sounds super similar. Everyone gets a confused even when they’re trying to recommend a fee only advisor they say yeah, work with a fee based advisor. So I think we should probably start their fee based advisors, which NAPFA did a study then said basically, night over 97% of anyone who calls himself an advisor or a planner is fee based. And what that means it’s not only can they charge, like let’s say a financial planning fee to do work, whether it’s a one time fee, or An ongoing fee doesn’t matter. But they can also sell products. And then with products you’re going to earn either Commission’s or some kind of like let’s say kickback from either whatever you’re selling typically insurance, but also it could be investments and a lot of the big brokerage houses. So I’m going to say like the Merrill Lynch’s the Morgan Stanley’s Edward Jones is Raymond James. Those guys, they’re all fee based advisors. And it doesn’t mean that they’re bad people. It just means that their compensation structure is bad. Because their compensation structure the way that they bring home money for their family to eat, is essentially selling you products, some products you need. Most products you don’t, the investments that they can actually give to you are with those big brokerage houses are actually coming from essentially like their headquarters, their head office. So at Merrill Lynch, it’s coming from New York, they say, hey, you can all of our advisors, you can only put your clients into these X number of funds. And that’s all you have to choose from you couldn’t go off and try to buy individual stocks or do other things like they’re really kind of handcuffed. Because from a compliance standpoint, they need to make sure that their 20,000 advisors are doing the right thing. So that’s what fee based advising isn’t. Just because they work for a big brokerage doesn’t mean again, that they’re bad. It just is a different form, even if you don’t work for a big brokerage house. And I could have started off my own firm and done fee based planning, which again, because more than 97% of all advisors are fee based. All you can imagine that anyone out there most often are going to be fee based. They’re selling products. And the reason why I chose not to go that route, is because I don’t want to have any conflicts of interest with my clients. I want them to know that they’re coming to me for my experience in my advice, and they should be able to trust that that’s what they’re paying me for not, huh Brian told me that, you know, I should buy this disability policy that he’s selling me Is he telling me that because he makes more money? Or is he telling me that because it’s the right thing for me. So I wanted to eliminate as many conflicts of interest as I possibly could. And that is really I mean, we’re fee based is fee only is they can actually charge assets under management just like the fee based people. Or, you know, you can charge a variety of ways a flat fee ways the way that we charge. But I chose that because it was I think allows me to sleep better at night knowing that I’m giving great advice for a fair price. And even though I make less money by not selling products, it allows me to remain a fiduciary as well as allow clients to know that I really don’t have any conflicts of interest. We
just use the big word fiduciary. Oh, okay. What is a fiduciary?
It’s someone that is legally responsible to act in your best interest. And who wouldn’t want that? Like, I’m not gonna go to the doctor and let’s say like, I know you’re an EMT, but let’s say you’re just paid by time writing prescriptions, which I know there’s some out there that are that way. But let’s say that you’re the only way you were compensated by is by writing more prescriptions I go to you, you’re likely to give me a prescription, because that’s the way you’re paid. Why would I want to go to someone like that versus someone who can actually assess the situation, look, labs and everything. Maybe if you just exercised and weren’t overweight, maybe you don’t need this prescription to lower your blood pressure, whatever it is. And so I just I look at it as you know, this, this fee only fee based thing is is is very black and white to me, and I want to make sure that I’m on the side of conflict free. And not is Ryan, tell me this? Because he makes more money.
So is it possible to be fee based and be a fiduciary?
Yes, it’s just a lot more rare. So how,
yeah, how would someone even go about doing that? Because if they can’t really objectively, offer that well if they’re not able to offer them a variety of products tomorrow Because they’re stuck with what’s in their firm, how can they really say that they’re acting in their clients best interest?
Well, it’s hard when you’re at a big brokerage. But let’s say you’re a small independent shop, and you can actually sell insurance from principal and guardian and massmutual. And you’re an independent agent, you’re not technically tied to one that you sell all. I still think you can claim that you’re a fiduciary in that in that perspective, but it better be in writing. So similar to like the Hippocratic oath, I sign a fiduciary oath with every client, and it sounds like common sense, like, Oh, yeah, just put it in writing. We’re good. Most advisors do not put anything in writing like that. But the fiduciary piece is just really important to me. So we do, but that doesn’t mean you know that if someone was fee based, they couldn’t do that. It’s just really rare, to be honest.
And then how do you prove that someone is or isn’t a fiduciary? Right? They sign that piece of paper, can’t they? How does that restrict them from? I mean, at some point you have to go selling your product. This aren’t right for you.
Yeah, you have to go off some trust. And I mean, if they’re not acting like a visionary and they put it in writing, like they’re legally held to this and you’ve got it in writing, if they don’t act in that, then you obviously have a case to kind of build against them if they weren’t acting in your best interest. And there was a lot of hype several years ago around advisors being forced to be fiduciaries. I mean, this is so bad that in my industry, we’re having to create laws to tell people like you need to be good and kind and respectful to other people and be fiduciaries and put their best interests ahead of your own. Unfortunately, that literally was only in retirement accounts. And it was essentially saying like, you can’t sell these crap products in someone’s IRA, but then you could take your fiduciary head off and put on I am a horrible person had and go sell them this terrible annuity or whatever it is, in basically a non retirement account, and the entire industry freaked out because it would have crushed all of their their other advisors that were basically selling These products into retirement accounts. It’s kind of unfortunate,
I think, Well, I think when it comes down to it any industry can’t regulate itself. Right. I think you always need to have outside regulators. I think so of medicine as well. I think the current system doesn’t work. But I think I think that’s true in any profession, that that we all like to think that we can regulate ourselves. But in reality, you really need some outside perspective to keep everybody in line. So so I really don’t. Yeah, I don’t think that’s specific to your field.
Yeah. But But back to the original thing with the assets under management model, right. So there’s the a un model, as it’s referred, sometimes a ua assets under advisement. advisors can charge on that and what that means, I guess I should say is that the AU M or assets under management is accounts that we would actually manage from our firm like at, let’s say, TD Ameritrade where we do where we custody, clients funds, the assets under advisement would be, let’s say you have a work sponsored plan like a 401. k. And I’m going to give you recommendations on that and then charge for my recommendations on that. And people, other advisors do that all the time. I mean, some advisors are even charging on 529, which is ridiculous. Their advisors charging on 529. That’s, that is just a terrible, terrible advisor, to be honest.
Well, I think in New York State, we have two options for 529. Do you want to be aggressively invested or not so aggressively invested? I, if I remember correctly, when I set up my son’s accounts. So if someone’s billing me for that, then you’d better be a pretty small bill.
Well, unfortunately, it’s not it’s usually that same one or one and a half or 2% that they’re charging. On top of that. I mean, I’ve had we actually have had people come to us and being charged one and a half percent on 150,005 29. And didn’t really realize it because they actually build the assets under management but build for the advisement On top now they have to give you a breakdown of invoice of what they’ve built. But most people don’t actually open their mail and look at it or they know Oh, that’s just my bill from my advisor and they rip it up or they don’t see or sometimes they just stick it in like a, you know, their financial planning vaults or software like a Google Drive. And most people don’t look at it. And that’s why the assets under management model, they’ve one of the reasons I should say that the industry is so for it and is built around it is really rallied around it is because most people don’t actually know what they’re paying their advisor. And it’s because it comes out of your investments and doesn’t come out of your actual bank account, which I think is ridiculous, because you’re not seeing the money. Leave your bank account. You don’t have the pain if the money’s coming out of your retirement account or your IRA that you’re not touching for 25 more years, and you’re not really paying attention to it because most people honestly don’t. You have no idea what you’re paying your advisor They know that and that’s why they in our business assets under management is the sticky business. When you manage money for a client, it’s hard for them to move and change advisors and change everything over to do it themselves. And you actually are going to probably make more money because they’ll stay longer, because they don’t realize what you’re paying them.
Well, very tricky, very tricky.
And that this is like the the real basics. I mean, it gets real complicated real fast when they’re selling products that have real, real crazy compensation structures or just really tough to understand whole life, variable life annuities, you start getting into those things and like the compensation structure is through the roof. If you were just sold, let’s say a million dollar, whole life policy. Let’s make it real easy. 35 year old female, you’re probably your advisors probably gonna make 12 to $15,000 commission right then in there, and then they’re probably going to make let’s call it an average of 5% Trail. So five percent of the premium you’re paying every year is going to that to that advisor or that insurance agent for selling that policy. So what I don’t know if you’ve actually seen or been exposed to it, but most planners will actually try to target residents or new attendings and say, Hey, we’ll give you all the planning for free. They’re like, Well, great, this is awesome. Well, one no one does anything for free. But to the Here comes the pitch for well just buy this disability insurance and buy this term policy that we’re ultimately going to pitch in a year or two to convert it to whole life so we make a huge Commission on the back end, but they’re gonna make Commission’s on the Disability Insurance, which you likely need, but they’re gonna make commission probably 2500 to 30 $500 just on that one policy. So of course, they’ll do the planning quote, unquote, for free, because they sell you one policy and they make 30 $500. And very, very little work, maybe an hour of FaceTime.
So do you sell life insurance and Disability Insurance
Not at all. No, that’s what makes me fee only is I don’t earn any kickbacks or commissions or anything from anyone anywhere I don’t. If I give you the name of my accountant who I think is a great guy and love sending him business, he can’t buy me a Starbucks cup of coffee, even though I’m his client, because I sent him a client. He can’t even buy me a cup of coffee. It’s that black and white.
Like, we have the star clause, right. In medicine, we have the star clause where you are not allowed to make money off of sending someone to like if I if I refer someone to a pulmonologist, I can’t make money off of that referral. That’s illegal. It’s the same thing with you.
Very Yeah, it’s very much the same thing with me. Except for those fee based planners that greater than 97% of all planners or advisors are fee based, right? So when you go to an advisor and they say, hey, I’ve got this really great accountant or this really cool estate planning attorney you’re gonna love them. Well, that estate planning attorney, maybe it’s just a they bought me a beer. More than likely it’s like Hey, here’s $500 for referring that client over a finder’s fee,
right? finders fees occur all the time in all sorts of business models.
Yeah. And it’s it’s hard to find out, they don’t have to be like, hey, just so you know, I’m referring you this really great guy. He’s gonna pay me $500 for this referral, they said that you’d be like, Huh, wait a second, like, why are you referring that guy to me? Is it because you make money? Like he’s, you’ve already pre arranged this or is he really the best for my needs? And that’s the biggest, biggest piece between fi only and fee based, is that giant middle part? That’s a big ball a conflict of interest. And that’s what I want to avoid. So is that what makes someone a fiduciary? If they don’t have those conflicts, or can you have those conflicts and still be considered a fiduciary? Oh, man, you’re getting some gray areas because like, I it personally, in my opinion, I don’t think you could be a fiduciary to someone and get paid on the back end somehow and not disclose it. But if you fully disclose Everything in theory, probably, but I mean, this is, this is so far, Greg. So I’m such a nerd. I’m like, I’m black and white, like you either do this or you don’t. But I want people out there. And they’re, they’re thinking, well, I’ve signed this fiduciary, with this individual, like they are acting Now I know that they’re acting on my behalf. And what you’re saying is a very difficult conversation to have, oh, I need life insurance. I need disability insurance, can you? Can you recommend anyone? Then you have to say, do you make any money off of sending me to that person? Like now you’re basically saying to your financial advisor, I don’t trust you. Right. And that’s, that’s a very difficult conversation to have. I think you’re asking more disclosure, like, hey, how did how do you benefit from this? And their answer should be, you pay me for my advice and my experience, I benefit by helping you. I don’t make any extra money. That’s, that should be it. And I hope everyone asked that question. Because we will see the inverse, the more people that asked that question, the more people will switch to fi only because they will lose a lot of business a lot. Because once most people start asking that question like, how do I actually pay you? Like, what am I paying you? And how is it calculated? And do you make money from any other sources? Like on my behalf? Or is it just coming from me? And the answer should be the only money I make is coming from you, the client. And if it’s not, your advisors, fee based and they have conflicts of interest, again, doesn’t make them bad people. It just means that their compensation structure is faulty.
And I think that’s a good point. You say they’re not bad people, because I
I just, I have friends that are fee based advisors, and they won’t ever switch because they have a giant book of insurance business that pays them six figures a year and if they decide to go fi only they take A $200,000 pay cut. Well, I mean that who would want to do
that? But I would also think that these individuals genuinely think that they’re doing the right thing for their clients. Well, totally hidden. I don’t think they’d be able to sleep at night, but at the same time, and I’m not saying that they’re villains
said, You’re giving people a lot of credit. Some people are like, I’ve got to eat, I need to put food on the table. How can I make the most money possible? I didn’t finish the statement yet.
interrupted Al Capone. I thought he was the good guy of his story. Right? He was bringing fun to the masses. It was, you know, clearly, to what end to what what means that he used to get it there. But he was providing prostitution and alcohol and gambling and entertainment to these people that had no other sources of entertainment. He was a good guy, and that’s how he slept every night. Because he was the star of his show. He was the good guy in his story. He wasn’t the villain. Nobody’s developing their story. So You know, I think these these people don’t genuinely believe that they’re doing the wrong thing and they’re pulling the wool over their clients eyes. I think they’re probably all believing that they’re that they’re doing the right thing for them. We’re not comparing to them to Al Capone, but you see.
But you know, we all tell ourselves little white lies about everything. As much as we don’t think we do. Right? I’m I can’t lose weight. It’s so hard for me to lose weight. Because I’m so busy. I work too many hours. And I promise you someone out there works more than I do and is losing weight. That’s just mindset. And in this case, they might be telling themselves like I’m doing the right thing. I’m putting food on my family’s table and like, I’m not hurting anyone they would they would have needed this disability policy anyway, of course, I think is that that is the most important policy that you should buy. buy, buy it from an independent third party that has no other vested interest other than to help you and to give you the best thing possible and quoted out at many different sources. And that advisor might be able to do that, but then realize that this is the person you’re trusting with all of your financial data, and that you hope that they’re telling you the right thing and doing the right thing. And it’s just a lot of gray area that gets introduced. And that’s the best case scenario. Assuming that they’re a good person,
assuming that they’re a good person, yeah.
Know how much negative press my industry gets, right? They say no bad presses, you know, no, lol press is good press. But I don’t know. I just personally, I can’t do it. I can’t sell products. Even I could literally make like four or five times more. I can’t do it, though. I love the idea that people are coming to me for my expertise and for my opinion, and being able to help them and I can do that in a conflict free way.
You help them get their financial house in order. Exactly. Yeah. All right. So in a similar vein, let’s talk about asset management. So now the the physician has their Assets being managed either by someone who’s fee based fee only assets under management. But active management versus passive management. Let’s talk about that. Which, which do you typically recommend? Like are you telling people to buy apple and sell Google and buy 3d stocks? Because, you know, there are radiologists and they’re they’re seeing all that 3d printing is doing and or are you telling them buy the whole market?
So do you know Jim Cramer is and he’s on CNBC and he gives you like advice to buy this hot stock and sell this
Oh, yeah, he’s a caricature of a human being He’s like, Well, you know, right like, like he’s a radio host that you can see cuz he’s on TV because he’s got all those sounds and everything yeah,
yeah. If someone doesn’t know he is here you go, sell sell, sell, buy, buy buy, right. He’s like buy buy buy buy this sell, sell, sell sell this like it’s it’s a game to him, right? It’s he’s, he’s going through and he’s producing entertainment. While That’s active management. Basically, he’s essentially saying, this stock is going to outperform the market as a whole, which is their benchmark, okay? And he’s saying, hey, Apple is going to do these amazing things, it’s going to come out with the iPhone 400, because we’re probably at that at this point. And it’s going to blow everything out of the water, and it’s going to outperform the market and we think it’s going to do 20%. Right. Whereas the market, you know, we’re ballpark and it’s going to do 8%. Well, that that’s, that’s their belief. They think that one stock or several stocks are going to do better than whatever benchmark they’re going to put it against. And typically people think of it as the Dow, which is only 30 stocks, but let’s look at is like maybe even the s&p 500 right, which is the 500 biggest companies and they’re trying to beat that benchmark. And that’s, that’s called active management. And there’s mutual funds out there that spend millions and millions and millions of dollars on research and staffing and just all sorts of stuff to try to Figure out how to beat the market. Some people are really good at it. Think Warren Buffett, okay, that guy is amazing. How many Warren Buffett’s are there in the world? Well, obviously, there’s one. But there’s a few people that are like him. But he’s very, very rare. Whereas you have thousands and 10s of thousands of these mutual fund companies out there trying to be basically the Warren Buffett’s of the world and trying to beat the market. And there is Nobel Prize winning research that shows that they are incorrect. And the longer you go out in time, the more likely the majority of them are going to be wrong. You go I think the numbers are you go out 10 years, and almost nine out of 10 of those mutual fund companies are 90 out of 100 are not going to beat the market as a whole their benchmark. If you go out like 15 years, it’s like 95% of them aren’t going to beat the market. So Do I go, I go on to the passive investment management style, which is, let’s buy the market, let’s own the market as cheapest possible be as highly diverse as possible because now instead of owning, let’s say those five stocks that we mentioned before, whatever it was, I’m going to own 3000 or 3600 stocks, I’m gonna own the whole US stock market. So if Apple does really well, great, I own it. If Microsoft does really bad bummer, I own it, but I’m not concentrated at 8% or 10% of my whole net worth or my whole accounts. I own maybe 1%. It’s all based on market cap. So I’m in that passive camp because I can tell you, I’m not smart enough to be in that 5% that is going to beat the market over that 15 year period, or it’s less than that I being kind this point. But, you know, I’m not Warren Buffett. If I was, I probably wouldn’t be doing what I’m doing and I’d probably be relaxing in Hawaii on the beach. And not doing planning if I was. So I
don’t even know how that’s mathematically possible, I would think half would beat the market and half wouldn’t beat the market. Because if you have like a random smattering of stocks, some of them are going to be more successful than the market. And some of them are going to be less successful. How is it that only 5% of them end up beating the market?
I mean, trading, they’re sitting here and they’re trying to buy and sell some, I mean, some of those like firms and the the big quants that they get really close that ASIC and they’re trading in milliseconds, right? That’s their whole algorithm is based on that there’s somewhat, you know, other funds that are, well, we’re going to do a more buy and hold approach. And you know, we’ll rebalance infrequently, but they’re still trying to actively beat it. There’s a long, short funds, there’s all sorts of different funds out there that are doing things and they’re transacting all the time. And it’s just the way that the results lie. And they’ve done studies on this like crazy. And again, it’s like Nobel Prize winning research and it just shows up They can’t outperform the market as a whole. Got it? I guess, try to join that 5%. And, and not only are you like hoping that your advisor does it, that’s one advisor, some most financial planners who are part of these big, you know, mutual fund companies, they’re buying 810 15 or 20 different people hoping that some of these guys are right. Oh, these guys by all large cap growth or whatever. Like they’re hoping that some of these do well, the more you add to it, have one advisor had a 5% chance, what is 15 advisors gonna do? Like the the percentage goes down so much, it’s crazy. And then you’re overpaying because because they think they’re going to beat the market, they’re going to charge a ton of money, and that that is in the form of an expense ratio, which most people have no idea what they’re paying in that expense ratio. But that’s to keep the lights on at the mutual fund company but also pay their their analysts and their portfolio managers And water in the water cooler, pays everything right? It’s all wrapped in. But because they think that they’re providing more value, they charge a lot more money. And it’s anywhere from one I think the industry average like one and a half percent at that point. So if you’re paying your advisor 1% to manage your money, and you’re paying someone else one or one and a half percent to beat the market, you have to add a real basis basically make two and a half percent to just break even. And that is mind blowing to me.
I guess if if they were passively just picking stocks and then holding that and you and you bought, say half the market instead of the whole market, then there’s a 50% chance that you’re going to beat the market and official percent chance that you wouldn’t buy Sure. Active active management that really buying at the wrong time and selling at the wrong time. Because there’s no way to predict right, which is your whole argument. There’s no way to predict when the right time is without insider trading information. It’s illegal. There’s no way to Know when to do that. So the active portion of it is really the self defeating portion.
Yeah. And then how do you decide like when you have new money, right, you work right now you make money every month, you got to put money in into the markets every month you’re doing it likely in your retirement account, if you’re not doing it elsewhere. How do you know when to buy what to buy and what to do without trying to time the market? So if you dollar cost averaging, which just means you’re buying the same amount, or close to the same amount every month, how then in your case, if you picked half the stocks out there, and you were trying to buy that, like, how would you pick? Well, I got to pick this one versus that one. And keep in mind, like it’s $8 or $10 to trade every time. Like that gets really expensive if you’re putting thousand bucks in and you’ve got to buy a ton of these, which is why these ETFs came out and with passive investing, you can buy, let’s say the total stock market 3600 Let’s use Vanguard everyone pretty much knows Vanguard, you know, their total stock market. They’re charging like point 05 percent in an expense ratio. So when I said that the other ones that are trying to beat the market are charging 1.5% and you’ve got Vanguard at point oh 4.03. That’s a ridiculous savings like 99% cheaper, but you buy that one fund, and now you own 3600. So there’s no trading costs of trying to figure it out. And if you’re not a custodian, let’s say TD Ameritrade that doesn’t allow you to trade Vanguard for free, seven bucks, but or you could just choose like State Street or I shares and those are on the ETF for the no transaction fee list, and then it’s free. It’s free to trade. So now you’re, you’re investing in 3600 you know, stocks, and you know, it’s free to trade inside it and you’re paying point oh 4% it’s pretty hard to ignore what the other side’s doing when you have to pay that much money for them to do it. So I probably should say like, really quick like disclaimer like, I I’m not telling you to go buy this. This is like we’re just talking hypothetical general in nature like, this is not suitable for everyone to put all your money into this. I’m not saying that. Just want to make sure like we’re very clear
the disclosure will be at the end of the episode, or the not the disclosure. The disclaimer will be at the end of the episode. So full disclosure about my my background, my financial situation, we actually have some money with a company that has a fee based on assets under management. And they are actively trading. And we have meetings with them. And they were referred to us by a family member who’s in the financial industry. Right? So seemingly, they know that these people do well and have done well, that we have these meetings they get we get these quarterly reports. They show us all the research that they’re doing. And what you’re telling me is that that is all like why would they Why would they do this? Like why Would these people do this for a living? And really, research shows that that passive investment is the way to go?
Well, I mean, some people just think that they’re part of that 5%, or that 3%, or whatever that number ends up being that they can beat the market. And maybe they can, and maybe you picked the best advisor out there, that does all this research and knows what’s going on. And it happens to be in that 3% that over the next 15 years, they’re gonna beat the market, and hands down and you’re gonna make more money, great, like awesome, you chose correctly. Or we look at it as Do you think you chose in that, let’s say 3%, or in that 97%, that can’t beat the market and you were better off not paying all those expensive fees, and going to them because likely, you’re probably only getting Investment Management help. Maybe I’m wrong, but either way doesn’t matter. And now you’ve saved that you can actually turn around and invest more of that money and you’re writing that now. 97% you’re gonna know like, Hey, I’m gonna beat 95 97% of the other funds out there for very little effort. It’s pretty much no brainer to me in terms of that. And, I mean, again, much smarter people than myself. I’ve written Nobel Prize winning research around it.
All right. I’m gonna let that sink in for a little bit. So, yeah, I just know. And I know so many people that do things the way that I do, right, like, well, how did you find your financial advisor? Well, he’s my dad’s financial advisor, and he seems like a totally nice guy. And he took me out for dinner, and he seems really knowledgeable, and he’s been doing really well with my dad’s money. So I’ve just realized that everything that just came out of my mouth was extremely sexist because everyone in that interaction was male. But that aside, I just know so many people that find their and keep their financial advisors That way and it sounds like you’re
saying what are what are the one that I got hold up. It was good for Dr. Barnes It was good enough for me. Exactly. Well, I qualification that blows my mind. But hey, I mean, he could be there your she could be your great adviser and be able to help you walk through cash flow and budgeting and other investments and your insurances and your employer benefits and just the behavioral side of money, they could be doing all these great things to earn that fee and more. And maybe they’re awesome and can pick stocks on top of it. But the likelihood the probability of that happening is low.
I would imagine that those 3% or 5%, that do beat the market, because your example was Warren Buffett. Warren Buffett doesn’t just buy stock, I’m pretty sure he buys stock in a company that he then takes over and actively manage this. So he’s not actively managing when the you know what stocks to buy in. and sell and when he’s actively managing the company in the stock that he bought, or at least, or at least, has significant influence in, in things like that. So
is a lot more communication with people in a lot higher powers than any of us listening or talking to. Right I mean, he’s, he’s been around a long time, not calling him old but he is old. And he knows the ways and he he moves billions of dollars around to acquire companies that he thinks he can add value to, in some way shape or form, that he can add value to those or that have a significant moat around them. Coca Cola everyone knows what a you know, a soda is a Coke is most people call it Coke, even if they’re drinking Pepsi. It’s kind of ridiculous, right? So he invests in high quality companies like that, that either have that value or he can provide that value. None of us are putting a billion dollars into anything when we’re investing 500 or 1000 or to thousand dollars at a time. It’s very, very different.
So you mentioned that there are other services that a financial advisor should be providing or can be providing. At that one company, they, you know, they’ve advised us on matters but we really don’t come to them with you know, I, you know, we, my wife and I make most of the financial or make all the financial decisions, they just happen to have a bit of our money that they’re managing. Okay, so what else should we be asking them or what are put another way? What else? Would a financial advisor provide? What other services? Yeah,
well, one, I mean, just to recap on this, you should know what you’re paying them. I’m not saying you I’m just saying anyone listening you should know what you pay your advisor and be able to look at and go Am I getting the value out of this relationship? Yes or no. Your advisor should be looking at your whole financial picture. Whole it like very holistically I mean, literally all the way down to like your car insurance. Have they looked in analyzed? are you protecting your income completely through disability through term insurance, they’re selling you whole life insurance, you need to just part with that advisor go find someone else, because they’re taking you to the cleaners. That type of policy is like, good for 2% or less of the population, that it’s sold to the other 98% who shouldn’t be buying it, unfortunately. But we should be looking at, like I said, your employer benefits, they should be able to tell you like, Hey, this is how much is you know, using your 401k? This is how you should be managing the 401k. But also like, what are your other benefits? Oh, you have long term disability of short term disability, like, Hey, you should be taking some of the term coverage because it’s a half a million bucks, and it only cost you $4 a paycheck. Hey, make sure you’re taking the legal services because you should be getting estate planning done. But you don’t know what that is, oh, well, how about this come in, and we’ll act as like a pair of planner or paralegal. And we’re going to ask you all the questions you need to know in order to go and make the best decision and optimize your time with a true estate planning attorney. And having that discussion with you. You should be understanding all of your insurances, and honestly not being sold by that person, what the insurances are, but they should be doing a full review of everything, making sure that you have it, making sure you have umbrella coverage, as your car insurance adequate and up to speed. Most residents, they’re just trying to get by and it’s survival. totally get it. My wife and I were there. It’s literally survival. But when you finish and you’re you know, making like what you really should be worth honestly, you’ve most times forget to actually increase your auto coverage. And if you got umbrella, they’re gonna force you to get something. But usually it’s not enough. Are you doing cash flow planning the first five, maybe 10 years out of your training, investment returns don’t matter as much. And I’m going to say that because you don’t have a lot of money to invest. So make sure that you understand where your money’s going, how is it coming in and how’s it going out and I did a show The dreaded B word, and that’s for budgeting. And most people don’t like budgeting and I think traditional budgeting just doesn’t account for like life’s goals and what you’re trying to accomplish. But you need to know from, let’s say, a cash flow planning standpoint, which is like today, looking forward, what do you think you’re going to spend? it you need to know those things. And your advisors should be right there helping you. We do monthly cash flow reporting, like literally every month, we send clients, a report that we’ve hand built that says, here’s what you thought you we thought you’d spend, here’s what you actually spent and here’s what you saved. And did you save enough? Yes or no? Yes. Cool. We already know where we’re putting it. No. How would you make some changes next month to make sure you get back on track? If you’re not having those conversations with the advisor? Something’s wrong. They’re not really advising. They’re just a money manager, pretending to be an advisor.
How does one go about finding is there like a list of all of you guys somewhere is there
They’re a club you all hang out at where we can meet you like, how do we because you’re really your industry is very based on sales, right? Like that’s, that’s what you were getting out earlier is that, like, the entire financial industry is based on selling the concept that this is all very opaque, and they can actively manage your money better than the market. So they’re selling that concept. They’re selling a black box to you saying I’m smarter than you in this, which by the way is totally fine. You’re in, you’re an expert, you know, you’re, you’re an EMT Doc, right, you’re you’re an expert in your field. You’re not supposed to be an expert in mind. But my industry throws it in your face and says, You don’t know what we do. We’re not going to tell you what we do, but we’re going to charge you a bunch of money just to do this one little thing. So it comes down honestly,
but you’ve been doing an excellent job selling. Wi Fi only is the way to go. So how how do I find someone? It’s tough. I mean, it really is tough.
I was looking for like a website or something,
right? Generally we all have websites, right? But you’ve got to look at it. As you know, there’s 100,000 planners out there and less than 3%. So there’s less than 3000 planners out there that are fee only. And then out of those, most of them specialize in something, right? Like I only work with physicians, I don’t work with dentists or attorneys or anything like I only work with physicians, and I happen to be married to one. That’s what I do. If I if you were an attorney that came to me I go find your referral through maybe a, you know, just a connection or community or something that maybe I have like the the FPA NAPFA, xy planning network. There’s a couple like big networks that we can all belong and become members of, but those are still not, I mean, those are great places to start. But then once you find a fee only person, like find someone that deals in your situation. all day every day, I don’t want to go to an EMT doc when my stomach hurts, like, that’s not the right thing. So like, why would I go to a planner who specializes in working with everybody when there’s someone out there that as an attorney, I want to go to the person who knows in and out what I do all day every day, and sees my situation for 10 hours
a day. And just so our listeners know, if you do type into Google fee only financial planner for physicians, that top listing is the white coat investor, who is an emergency department physician and not a financial adviser. The third one is Ryan in the gentlemen we’re speaking to right now. So if you aren’t going to use Google to find your fee, only financial advisor, you’ll end up with this guy right here. So it seems like Google for this particular question is spot on.
Yeah, I mean, they they know what people search for. They know what people need, and when you put something in, hopefully you’re getting a good results. So happy to know I come up in that. But yeah, I just I would go to someone who literally specializes in what you do all day every day. And to find someone, I feel like sometimes like a unicorn, because I’m not targeting physicians because I think they’re wealthy. Honestly, they’re not. Most of them are income statement rich and balance sheet poor. And that’s why I’ve advised on like four times as much student debt, as I have in manage my money that I manage, just happens that way, you know, in back to the advisor, what they should be doing, they should know a whole lot more about student debt than you do. Even though you took out the loans and all the paperwork like they should know, the ins and outs of all the repayment options and all the things that go with student debt.
And we had a couple shows ago was with the physician philosopher, and one of the things that he goes into is that we just touched the surface of the different repayments. And for and that’s, that’s very complicated. It’s very opaque. So, and that’s, you know, pay repayment of debt for physicians is such a huge issue. So if your financial advisor doesn’t know about the ins and outs of repayment options for physician loans, and then they either they learn about it, or you find someone who does,
yeah, we’re actually teaching them. One of my side projects is a company called loan buddy. And it’s software Actually, that’s targeted for advisors. And it allows them to understand and analyze their clients student debt, without really having to be a nerd at it. And so allows them to get all the information they need, plug it into my software, and then do it and I think we’re at, I don’t know, close to $200 million of debt analyzed on that platform already. So I’m helping advisors learn how to do this, like it’s that big of a problem. I hate student debt. I hate how hard it is. It’s, it’s I mean, it’s it’s very frustrating. Our average client is almost 300,000 in debt. Don’t care what the AMA puts out at 180,000 it’s wrong. Like everyone that we see is our average is literally it’s like 298 it’s it’s a lot of money. And it’s it’s frustrating. And I see people delaying getting married, delaying having kids. There’s, they feel horrible that they’re walking around with this amount of debt. I mean, it’s it’s sad. It’s frustrating like we were there. We were fortunate that my wife was able to essentially live at home, have in state tuition, did all the right stuff. And you know, we were able to squash her debt really fast. But, you know, we had a lot going for us. She had tons of scholarships for undergrad. Again, she lived at home, she took out the least amount of loans possible. Like we were fortunate that you know, when she finished, it was just under 180,000 in total, but not everyone’s that lucky.
It’s just usually what I tried to do in medical school, which is I tried to marry a doctor. That’s why I went to medical school. It just
didn’t work out for me. My wife and I actually met when we were 18. Like freshman year college, so I got in really early before anything better.
You know, man, I, I’m going to be married to a doctor and then then the debt hit you find out what it really what it really means.
It’s funny when when we were dating in college like her, her dad was pushing her to be a doctor, my wife’s extremely smart, like, perfect score on sh T and AC T, like, she’s brilliant. I’m totally cool saying it publicly, privately, whatever. Like, she’s way smarter than I am. But because dad wanted her to become a doctor, she was really pushing back and then all of a sudden, it was like, you know, I think I’m gonna become a doctor. I was like, Oh, it’s about time. Okay. She goes, don’t worry. It’s just four years of med school and three years of residency and I’m like, Wait, is that sounds like a lot? It sounds like a lot honey. Like you sure you want to do that? Because Yeah, yeah, let’s do it. Like, alright, I support you. And, and then it was, you know, as residency is starting to wind down. It’s like, by the way, I kind of want to do three more years of pediatric pulmonary like that fellowship. And I’m like, oh, Okay, let’s do it.
So this is never gonna
end. I’m like, Yeah, I mean, sometimes it felt that way. But, you know, that’s why when, when he came out, I mean, she only took like, 120 some thousand. But, you know, making those income driven repayments where it’s based on your actual income and poverty line and family size and all that, you know, we weren’t even covering the interest on it. So interest accrued, and it was not 180, about almost $180,000 when it was all said and done. And we opted to not go for public service, loan forgiveness and to just pay it down. But some options for people or Public Service Loan Forgiveness is the best. And some like us, it wasn’t, so we refinanced and paid it off.
So we’re running short on time right now. So I just wanted to give you the opportunity to give just one piece of advice. I mean, this has been chock full of great, great information and great advice, but when you take physicians on as clients, either they’ve never had a financial advisor Before where they’ve had a financial adviser that’s been giving them advice that you wouldn’t agree with. What’s just one common mistake that you see that you that you want all physicians to be aware of lifestyle inflation,
seriously, like, you delay gratification, we were there, I totally get it. Like you’re putting all these things off, you don’t make a ton of money, you finally are out, you’re finally making great money. And you’re like, well, I deserve this. And you go buy the Tesla in the big house. And you might forget that you have student debt that’s coming due. And you’re, you know, you’re off the income driven repayment plan. And maybe you need to whether you’re still going to be on the standard plan and going for PSLF or you refinance, whatever it is like that payments coming to you. We’ll have to calculate that out into your spending. But most time it’s while I’ve been waiting, I now need a new car. I’ve been driving the same car for 12 years and it barely works. And it’s a safety concern. Well, it makes sense, but you don’t need it necessarily in the Tesla The new Doctor $1.25 million home whatever it is, get a starter home, you deserve it. I agree. But don’t let your lifestyle inflate like crazy. And I look at it as give yourself a 50% raise. And if everyone just gave them a 50% raise, which by the way, anyone in the corporate world would freak out if they got a 50% raise. But if you just gave yourself a 50% raise, and then you actually saved the rest, whether that was to pay down debt aggressively, or to actually increase your savings or 401 Ks and IRAs and taxable accounts, whatever it may be in your situation or paying off consumer debt because you racked up some credit card debt while going around for interviews at the end. Like if you can do that, you will be on your way to financial success. Unfortunately, I see a lot of the opposite.
Where were you when I finished residency my two two of my best friends both orthopedic surgeons, both can be To me to give up my trans-am, which I loved. Yes, I was driving a trans-am awesome. And get an Infiniti coupe, which was totally not my style. And the worst part about it was I, I was living in Manhattan, commuting to Long Island and for you live in San Diego, so it’s not the same, I get it. But there is surfing on Long Island. And I couldn’t there are no surf racks for an infinity coupe. That was the worst part about it. And yes, I was spending a lot more money on a car that I then I needed to well, and then I had to find parking for it in living in Manhattan. So I needed I needed you cry, and I needed you. And you weren’t there.
I’m so sorry. I’m here now. I’m here. I’m here to help.
And I appreciate that. Well, Liz, this has been extremely informative. And you know, for all those people that have someone else managing their money right now, even if they’re trying to Do it themselves. This is you asked a lot of a lot of excellent questions. And it sounds like even one meeting with a financial advisor like you would be extraordinarily informative, and probably a huge wake up call for for the physicians out there. So really I appreciate you taking the time and letting us know all know what we should be doing with our first phone call tomorrow.
I appreciate it. Thanks so much for having me on.
That was Dr. Bradley Block at the physicians guide to doctoring. He can be found at physicians guide to doctoring comm or wherever you get your podcasts. If you have a question for previous guests or have an idea for a future episode, send a comment on the web page. Also, please be sure to leave a five star review on your preferred podcast platform. We’ll see you next time on the physicians guide to doctoring.
This interview should not be considered personalized financial advice and we will not be held liable for the use of any information contained within this interview. It is your responsibility to verify anything you’ve heard using other trusted and reputable resources.
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