As a trained medical specialist you know that seeking professional help with critical health needs is always advisable. So, when planning for your near and long-term personal and professional financial health, you should also seriously consider seeking the advice of a trained professional – a chartered financial planner.
What Sort of Investor Are You?
Before starting your search for a financial planner, you first need to take stock of yourself to determine what sort of an investor you are. This honest, candid assessment and understanding of your “inner-investor” can help guide your strategies for financial planning and wealth management.
The most important factor in determining your own natural investor personality is your penchant for balancing risk and reward.
Since equity stocks are, by their nature, the investment vehicle with the highest potential for risk (and thus the highest potential for reward, relative to amount invested) a simple exercise to help you determine your risk-reward tolerance is to identify your “investor profile” using stocks as a measuring guide.
Assuming your financial portfolio will include a range of investments, e.g., stocks, bonds, insurance, real estate, etc. – identify your own “investor type” by selecting the percentage of your total portfolio you would feel comfortable with dedicated to equity stocks:
80%-100% Stock Investments ………………. Aggressive Investor
60%-80% Stock Investments ………………… Growth-oriented investor
40%-60% Stock Investments …………………. Balanced investor
20%-40% Stock Investments …………………. Income-oriented investor
0%-20% Stock Investments ……………………High income-oriented investor
Although these are very broad classifications, picking your “type” will prove insightful to you and your financial planner as you determine your investment portfolio mix.
Goals + Values = Strategy
Everybody has different needs, dreams, and life goals. And each of us values certain aspects of life over others. Establishing your short, near, and long-term goals – and identifying your life values – will be critical in driving how your financial plan is developed and managed.
Your goals may include financial independence by your 50th birthday or fully-funded college accounts for your children. Your values may range from enjoying a prosperous lifestyle, respect from your peers and community, to leaving a lasting legacy in the form of a charity or foundation.
One way to help you identify your personal values and financial goals is to rank how important to you the following financial objectives are, with “1” being the highest :
____ Capital Appreciation
____ Capital Preservation
____ Income Generation
____ Low Volatility
____ Liquidity
Once you understand your risk-reward tolerance and know your broad financial goals it’s time to find a chartered financial planner to help you set your course and put your money to work
Selecting a Planner
When you find and select the right planner, you will be establishing a long-term relationship that will continue for years, if not decades to come. So, the decision is an important one and you should understand as much as possible about each potential planner’s business before choosing the one consultant who offers the best fit for you.
When hiring a financial planner, you should know exactly what services you need, what services the planner can deliver, and any limitations on what that person can recommend. It’s important to realize that some financial planners also represent financial services businesses and are paid to promote and sell their products.
You also need to understand and agree on what services you’re paying for, what they cost, and how the planner gets paid. Financial planners charge for their services in different ways. Some charge either a fixed fee or an hourly fee for the time it takes to develop a financial plan, but don’t sell investment products. Some are paid by commissions on the products they sell. Still others use a combination of fees and commissions.
The kinds of services financial planners offer can vary widely. Some planners assess every aspect of your financial life—including saving, investments, insurance, taxes, retirement, and estate planning—and help you develop a detailed strategy and financial plan for meeting all your financial goals. Other professionals call themselves financial planners, but they may only be able to recommend that you invest in a narrow range of products, sometimes including products that aren’t securities.
Unlike physicians and other medical professionals, the financial planning profession is not nearly as regulated, nor is it monitored by a range of stringent licensing boards and multiple professional organizations.
Some financial planners are investment advisors, but not all investment advisors are financial planners. Some will have credentials like CFP® (Certified Financial Planner) certification or CFA (Chartered Financial Analyst). Find out what organization issued the credential, and then verify that this planner earned the credential and remains in good standing with the certifying organization.
If the advisor you’re considering claims to be a CFP® certificant, visit the website of the Certified Financial Planner Board of Standards http://www.cfp-board.org/index.html to confirm this is true. You can also call the Board at (888) 237-6275 to research potential disciplinary information about the professional.
Financial planners who give investment advice to their clients must also register with the SEC or the appropriate state securities regulator. For more information about investment advisers, read the SEC’s helpful Q&A at http://www.sec.gov/investor/pubs/invadvisers.htm
Setting a Plan and Getting Results
A competent financial planner will analyze and assess every aspect of your financial life—your savings, investments, insurance, taxes, cash-flow requirements, retirement, and estate planning—and help you develop a detailed strategy and actionable plan for meeting your financial goals within the context of your life values and objectives.
When preparing for your first planning session with your financial consultant, here’s a short checklist of items you’ll want to have close at hand:
• List of assets and liabilities
• Expected income (W-2, income tax returns)
• School loans
• Life insurance and disability insurance policies
• Brokerage and investment statements; (R.E., etc.)
• Retirement plan documents (401[k] or IRA)
• Wills and trusts agreements
• Employee benefits summary
A good financial planner will take into account all of your goals and help you craft a financial plan that reaches from the present deep into your retirement – and beyond.
Many financial consultants identify the following four phases of a sound financial plan based upon the sequencing and achievement of these four core goals —
• Risk Management
• Wealth Accumulation
• Wealth Preservation
• Distribution (Estate planning)
But ultimately, you and your planner have a single goal – to set a course that achieves financial security for you and the other important people in your life, now, tomorrow and into the future.
The financial plan that supports this objective will be a living document, revisited frequently to be fine-tuned and adapted to your ever-changing world and circumstances.
As a specialist physician on the threshold of a potentially lucrative career, setting and sticking with a plan that meets your needs, fits your lifestyle, and delivers the long-term results you require is an essential element of your personal and professional development.
About the Author:
Wesley Millican is the Founder and CEO of CareerPhysician Advisors L.P., one of the Nation’s leading providers of comprehensive career and business education resources to residents, fellows, and training program directors. For over nine years he has dedicated the CareerPhysician delivery models into being a premier leader in physician career management and education. In addition to CareerPhysician, he is the Founder and CEO of MillicanSolutions, Inc., the Nation’s only executive search and consulting firm focused exclusively on strategic leadership initiatives for children’s hospitals.