When it comes to serving physicians, advisors might prefer a young physician over an old one. Think of a child prodigy like TV’s Doogie Howser rather than St. Elsewhere’s aging Donald Westphall.

Traditional wealth managers have long sought physicians as clients because doctors can meet asset-based minimums and likely grow their wealth over time. As competition increases, more advisors are prospecting for doctors even when they are still in residency, the hands-on training period following medical school. But doctors in residency typically have lower incomes, fewer assets and high levels of school debt.

For that reason, a growing contingent of wealth managers offer advice on retainer and hourly revenue models—advisors like Daniel Wrenne, the principal of Lexington, Ky.-based Wrenne Financial Planning, who is making inroads with medical students and doctors still in residency. “Doctors typically have zero ability with money,” Wrenne says. “When you combine that with the fact that around 80% of them carry student loan debt, and that they hit their peak earning period in their mid-to-late 30s, they can get behind the eight ball on their finances.”

Wrenne argues that an advisor can improve doctors’ outcomes in retirement and other areas of planning by giving them access to financial advice at a younger age.

Young doctors, however, come with a laundry list of challenges for financial planners, says Andrew Mohrmann of St. Louis-based Modern Dollar Planning. “Being a physician is almost like being an athlete: Income is higher than most people’s, but it is compressed into a smaller period of time,” Mohrmann says. “It makes for more complicated planning. Someone who comes out of school as an engineer, their lifetime earning graph is a lot smoother and more level. They won’t have the urgency that a physician has.”

Years of education don’t necessarily mean that a doctor is highly paid or financially literate, says Evan Welch, a partner with Antaeus Wealth Advisors, a Boxborough, Mass.-based wealth management firm. “Doctors have very little financial knowledge as a rule,” Welch says. “They go through more than a decade of education and training, get out of residency and go from making $50,000 to making $400,000. At that point, they need some answers.”

Welch, himself from a multi-generational family of physicians, says that young doctors aren’t living within their means, they’re not receiving tax-planning help, they’re failing to adequately insure themselves, and they’re often taking financial advice from other doctors rather than seeking the assistance of a financial professional.

Enticed by visions of six-figure salaries, many young doctors aren’t balancing their accounts, says Mohrmann. “There’s a tendency to think, ‘I’m a doctor, I deserve to treat myself,’ and it’s easy to fall into the overspending trap.”

Because residency can last well into a client’s 30s, doctors often make their first major financial decisions before their incomes increase. In fact, most doctors choose to purchase their first home during their residency, and lenders may ply them with “physician loans” –high-interest financing to cover large down payments—in anticipation of the doctors’ higher future salaries. 

Andrew McFadden, a fee-only planner and principal of Panoramic Financial Advice, says he encourages doctors to think analytically about their purchases. “I try to push them into seeing what they can get on a 15-year mortgage, and I encourage them not to buy anything larger than two-times their annual salary,” McFadden says. “Then we talk about cars, insurance and retirement. It’s crucial to start these conversations in residency when they are the most vulnerable, to talk before they go out and spend, because it saves them a lot of pain in the long run.”

Before issues like home purchases and retirement plans are considered, physicians often seek assistance with managing their student debt. After a minimum of eight years in school, four years of an undergraduate education, plus another four in a professional medical school, doctors can rack up hundreds of thousands of dollars in student debt.

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