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    10 money mistakes physicians must avoid


    Traditional, face-to-face financial planning is changing, too. Many advisers still charge a percentage of customer assets for their services or an hourly rate, but some offer a flat-fee retainer. A frank discussion about services rendered by advisers is critical, experts say, because often there is a disconnect between advisers and their clients over what services are actually needed.


    3  Pay attention to financial statements

    Another common mistake physicians make is not monitoring account statements after they’ve begun a relationship with a financial adviser, says Harold Evensky, CFP, chairman of Evensky & Katz, an advisory firm in Coral Gables, Florida, with a large physician clientele. 

    “They glance at them and put them away and it’s not until sometime later they discover things are going on they didn’t sign on for,” such as frequent stock trading or getting into riskier investments without authorization, he says. 

    Being specific about what type of trading authorization is being granted and then monitoring progress is a must. “It might not rise to the level of outright fraud, but it [can be] inappropriate. Bottom line, physicians need to pay attention on an ongoing basis to what’s happening with their money,” he says.

    Monthly statements should list individual trades during the period, and an overall snapshot of current holdings, with the mix held between stocks and bonds, advisers say. Checking that balance can alert investors to a need to rebalance the risk in their portfolios if the adviser hasn’t already flagged it.


    4  Stay away from complicated products

    In an effort to avoid taxes or protect assets in case of lawsuits, many doctors tie up their wealth for long periods of time in investments that are difficult to liquidate quickly. But such investments are often expensive and not in doctors’ best interests, says Marguerita M. Cheng, CFP, chief executive of Gaithersburg, Maryland-based Blue Ocean Global Wealth.

    “I see a lot of physicians in general being pulled into illiquid investments without understanding the totality of their situations,” Cheng says. She cites cash-value life insurance, which offers an investment component in addition to a death benefit, and is frequently pitched as a tax-advantaged savings tool.

    But term insurance, which is generally cheaper, should be used first to make sure a family’s needs are covered in the event of premature death. Only then should they consider additional products with an investment component, she says. 

    “Younger physicians clearly don’t have to cover all their life insurance need with cash-value,” she says. 


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