When it comes to financial planning, there are factors that set doctors apart from the average salaried individuals. They have to tackle different financial challenges arising out of uncertain events such as legal suits and due to their long working hours, they barely have time to concentrate on managing their money.
In fact, a recent US study found that saving enough for retirement tops the list of doctors’ financial concerns but almost 40% consider themselves behind the curve on their savings.
Let us look at the major challenges faced by doctors cited by advisors who deal with them.
Delayed financial planning
While most individuals begin managing their finances typically by the age of 25, doctors tend to do it comparatively later in life. Suresh Sadagopan of Ladder7 Financial Advisories believes, “Doctors begin their financial journey only after completing college, medical school, internships and so on. In fact, they receive real cash inflows majorly at the age of 40-42 after paying off the student loan and other costs.”
Although doctors begin investment management later in life, this particular ‘client segment’ have a perpetual income source. Suresh adds, “You rarely come across a doctor who is unemployed or not practicing. The fact that there is no age barrier in practicing this profession indicates that income is perpetual. IFAs should take advantage of this situation by staying in constant touch with such clients even if it is for a SIP of a small amount during their initial days of investments.”
Conviction in real-estate
Real estate has been a popular investment vehicle for medical professionals. In fact, many doctors have parked their entire savings only in real estate properties. Vishal Dhawan of Plan Ahead Wealth Advisors says, “Doctors tend to have a significant real estate bias as they have witnessed multiple people in their peer group using real estate as an asset class to grow their wealth.”
Very often it is difficult to convince such clients to switch to other assets. Sharing how he deals with such clients, Vishal says, “Asset allocation is essential for every portfolio. We recommend doctors to diversify their portfolio into other asset classes like equity and debt as dependence on a single asset class makes the portfolio very risky. At times, to support out recommendation, we showcase an investment return comparison chart of real-estate and financial assets like equity and debt to gain their confidence.”
Successful doctors are always pressed for time, leaving them with low exposure to financial concepts. Many advisors believe, having no relative exposure to finance, doctors have trust issues when it comes to someone else managing their money.
Faced with such a situation, advisors need to first impart knowledge of various asset classes through basic training/workshop programs to doctors. Once they are fully aware of the pros and cons of various asset classes, advisors can make investment recommendations to them.
Servicing a doctor is different from servicing typical clients. Owing to the hectic schedule of doctors, advisors find it difficult to connect with them. Advisors need to make adjustments according to the doctor’s schedule. Also, since they face a time crunch, the investment reporting needs to be conducted in a very short and concise manner. Advisors catering to such clients need to be prepared for working at odd hours due to the hectic schedule of doctors.
Now that you know what differentiates doctors from your other clients, here are a few suggestions on financial planning for doctors.
- You should advice medical professionals to buy professional indemnity cover which protects them against any litigation due to errors or negligence in their practice.
- Apart from professional indemnity cover, doctors also need life and health insurance policies
- Diversify their portfolio across asset classes
- Advise clients not to pile up debt and repay loan as early as possible
- Ensure that they follow your financial plan