Virtually all personal-service professions have moved toward specialization — and rightly so. Their clients have different needs and goals; and, to serve them effectively, these differences must be acknowledged and addressed with specificity.
People with heart conditions seek out cardiologists. People with tax needs seek out tax accountants. People building houses seek out residential architects. What happened with financial advice, where people think that it’s OK to get advice from someone who has little experience dealing with someone like them? And worse, how can an ethically trained financial advisor feel comfortable providing generic advice to someone who needs specialized advice?
Understanding that every individual is unique, are physicians as a profession meaningfully different in terms of their financial advisory needs? The answer is yes. Here are the major differences, along with general rules for how they should be addressed.
1. Accumulation Period
Certain professions defy the norms of a 40-year progression along a steadily rising earnings trajectory followed by a pre-retirement period of decline. Physicians are different, primarily because they require so much training that their peak earning years are usually delayed, shortening the length of time in which they can meaningfully accumulate wealth. For some physicians, this phenomenon is intensified if they specialize, requiring even more education. Perhaps this is why, according to one survey, physicians have an expected retirement age of 65, two years greater than the average American. Financial advice for physicians, including goal setting and asset allocation, must account for this important distinction.
2. Earnings Fragility
Financial planning for physicians must also account for their relative dependence on their minds, memory and, in most cases, physical abilities. This combination creates specialized needs not only for retirement planning but also planning for potential disabilities, other impairments, or even the phenomenon of “burnout.” These needs can be addressed through targeted planning tools and techniques such as disability insurance; life insurance; and retirement, business and exit planning.
3. Continuing Education
Many professions require continuing education, but perhaps none requires more than the medical profession. To the extent that continuing education is funded personally, the manner and tax consequences of that funding become paramount. The Tax Cuts and Jobs Act cut back on the ability to claim some, but not all, tax benefits associated with education expenses.