Physicians, especially the wealthier and more successful ones, attract many professionals, including wealth managers. They can be very profitable for the professionals who help them address their often-extensive financial needs. In a survey of 277 wealthy physicians, we determined whom they rely on most to make financial decisions.
Who Are The Wealthy Physicians
We define wealthy physicians as being in private practice and having $2 million or more in investable assets managed on a discretionary basis. Half of those surveyed had a net worth of between $5 and $10 million (Exhibit 1). Thirty percent had a net worth between $10 and $20 million, with the remaining 15% having a net worth greater than $20 million.
A critical differentiator among physicians is the source of their wealth. There is a significant difference between the physicians who derived their affluence from their practice and those with their practice and outside business interests (Exhibit 2). These different business interests include direct investments in real estate investments and small companies. The physicians with additional business interests are considerably wealthier than those with such interests. Remember, to be included in the research, all the physicians had $2 million or more in investment portfolios.
Primary Source and Type of Financial Information
Financial information concerns personal finances, often overlapping their practices and other business interests. Wealthy physicians use multiple sources of financial information (Exhibit 3). However, accountants are the most widely used primary source. About 10% of those surveyed rely most on other physicians or wealth managers. A small percentage has patients whom they deem insightful. About 6% depend on other professionals for financial information, while 3.6% rely on other sources, from books to the Internet.
There is a significant difference between wealthy physicians whose practices are their source of wealth and those with outside business interests (Exhibit 4). For physicians with outside business interests, accountants are their primary source of financial information. In contrast, accountants are still the most often cited source of financial information for physicians whose practice alone generates their affluence, but many use other sources.
The dominating position of accountants for wealthy physicians with outside business interests is because of those other business interests. These outside interests all business decisions and have tax implications, leading them to rely heavily on their accountants.
With accountants seen by wealthy physicians as the primary source of financial advisors, it is no surprise that half of them say tax advice is their most significant interest. A fifth of the wealthy physicians identify investment advice as being central. Fewer wealthy physicians focused on asset protection, estate, and exit planning, which makes sense as these three services tend to be more situational.
Considering the source of wealth, the most significant difference is when it comes to investment advice (Exhibit 6). A higher percentage of physicians who make their money mainly from their practices are interested in investment advice. While the numbers are low, relatively more physicians with business interests are interested in estate and exit planning, which is partly a function of age and level of wealth.
Implications For Wealth Managers
Wealthy physicians most often cite accountants as their primary source of financial information. This is much more the case for the more affluent physicians with outside business interests. The reason for this is the central role taxes play in their financial lives.
Wealth managers looking to grow their client bases with wealthy physicians must consider developing strategic alliances with accountants who specialize in working with the medical community. Processes, such as Everyone Wins, can prove very effective in identifying the best accountants to partner with and determining the economic glue that will result in a steady stream of wealthy physician clients for wealth management expertise. There are also checklists wealth managers can use with accountants to accelerate getting wealth physician referrals.
Referrals from physician clients can be highly effective for less affluent physicians. To leverage these opportunities, wealth managers must help their physician clients identify their peers who would be good clients and empower them by providing narratives that will communicate the wealth manager's value. Although these narratives are best when customized, using per-set impactful templates works well.
Wealth managers who discuss tax issues with wealthy physicians have a competitive advantage. Even when investments are a significant interest, tax implications can be a major deciding factor. For example, wealth managers who can provide investment solutions where taxes are mitigated or eliminated tend to build their practices substantially with all varieties of the wealthy.
Jerry D. Prince is the director of Integrated Academy, part of Integrated Partners, a leading financial advisor firm. Russ Alan Prince is a strategist for family offices and the ultra-wealthy. He has co-authored 70 books in the field, including Making Smart Decisions: How Ultra-Wealthy Families Get Superior Wealth Planning Results.