Setting up money management practice as part time MD

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am
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Joined: Sun Sep 30, 2007 9:55 am

Setting up money management practice as part time MD

Post by am »

Is this even reasonable for a doc interested in finance? Working mostly with medical trainees and other attending physicians? Practice building through lectures at local medical schools, residencies, etc. What credentials if any are needed? Seems like a fellow physician would garner more trust than some finance guy off the street, especially if he had some credentials and good reputation.
livesoft
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Re: Setting up money management practice as part time MD

Post by livesoft »

One needs to be a very good people person which lots of face-to-face skills and also a good phone voice. It doesn't hurt to have played sports in college or to have been a fighter pilot.
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Andyrunner
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Re: Setting up money management practice as part time MD

Post by Andyrunner »

As someone who works in a large clinic with doctors and medical researchers...YES PLEASE!

Ok seriously, I think you have a nitch as you are right...most MDs would have more trust in another MD rather than a finance person (same works with HR, supply chain, accounting, etc). I know some hospitals/clinics employ their own finance advisor staff or have a general contract with a financial company. So that might be a hurdle you will need to overcome.
staythecourse
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Re: Setting up money management practice as part time MD

Post by staythecourse »

I'm a physician as well. I have thought about doing some free lectures for residents in the area in the future. My suggestion, is email the chief residents for each program near you offering a free lecture/ lecture series. They may be more inclined to listen to you vs. a 10 yr. attending who either thinks they know everything or is afraid of finding out they have messed up the last 10 yrs.

Good luck.
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Topic Author
am
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Re: Setting up money management practice as part time MD

Post by am »

Is there some short course where I could learn the fine details of doing this, like charging fees, contracts, legal obligations, etc? Is there some credential or license that I would need to manage money?
livesoft
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Re: Setting up money management practice as part time MD

Post by livesoft »

Here is what one physician did: Slomo: http://www.nytimes.com/2014/04/01/opinion/slomo.html
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MN Finance
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Re: Setting up money management practice as part time MD

Post by MN Finance »

You need to clarify what the business activities will be in order to determine how you get started. Then it depends on state regulation. If you are giving advice (which I'll call fee only) and getting paid, it differs significantly from managing money on a discretionary basis and taking a percentage of assets as your revenue. Either way you can Google "setting up an RIA in [your state]."
nonnie
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Re: Setting up money management practice as part time MD

Post by nonnie »

am wrote:Is this even reasonable for a doc interested in finance? Working mostly with medical trainees and other attending physicians? Practice building through lectures at local medical schools, residencies, etc. What credentials if any are needed? Seems like a fellow physician would garner more trust than some finance guy off the street, especially if he had some credentials and good reputation.
Perhaps you could check with fellow Boglehead, EmergDoc. Check out his website here:

http://whitecoatinvestor.com

http://www.bogleheads.org/forum/memberl ... file&u=735
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tfb
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Re: Setting up money management practice as part time MD

Post by tfb »

nonnie wrote:
am wrote:Is this even reasonable for a doc interested in finance? Working mostly with medical trainees and other attending physicians? Practice building through lectures at local medical schools, residencies, etc. What credentials if any are needed? Seems like a fellow physician would garner more trust than some finance guy off the street, especially if he had some credentials and good reputation.
Perhaps you could check with fellow Boglehead, EmergDoc. Check out his website here:

http://whitecoatinvestor.com

http://www.bogleheads.org/forum/memberl ... file&u=735
Or Sotirios Keros (Neurosphere).

http://www.bogleheads.org/blog/author/neurosphere/
http://stkplanning.com/biography/
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neurosphere
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Re: Setting up money management practice as part time MD

Post by neurosphere »

am wrote:Is this even reasonable for a doc interested in finance? Working mostly with medical trainees and other attending physicians? Practice building through lectures at local medical schools, residencies, etc. What credentials if any are needed? Seems like a fellow physician would garner more trust than some finance guy off the street, especially if he had some credentials and good reputation.
Hi am. The answer to your question relies a lot on the definition of the word "reasonable". :D

After many years of considering it, I recently went through the process of setting up my own RIA and charging for financial advice. I had been giving financial advice to colleagues for 10+ years, purely as a hobby. I found I was spending 10-15 hours a week meeting with MDs and others helping them with finances (all for free). As I advanced in my career as an MD I increasingly discovered who fellow MDs were turning to for paid advice, and I was predictably appalled. It's unethical (if not illegal) the types of advice that's considered "mainstream" for physicians, and how much they pay for it (without realizing it of course).

So now I'm a full-time doc with a part time financial planning business. Eventually I want to flip that around to full-time planning and part-time or volunteer doc. I LOVE my patients, and the absolute highlight of my job is the sleepless weeks that I'm on service, rounding in the hospital with my residents and medical students. But I want to be able to practice medicine on my own terms, and as a hospital/university employee, I don't get that luxury. The financial/RVU pressures are huge, and are causing me ethical dilemmas. So financial planning is my possible "out" which can hopefully provide me a salary, and then I can hopefully find an (admittedly unlikely) position as a part-time paid or volunteer MD.

Financial planning is a TON of fun (if I ignore for a moment the realities of needing to find clients and pay for my expenses) and I feel very useful. It's actually a lot like medicine in my mind because I can use my knowledge to really help people have a better life. It sounds hokey, but I really feel that way. I think just about every long-time poster here at Bogleheads feels that way, or else why would we spend our free time helping strangers?

But financial planning as a good money maker? It certainly is not. I can discuss the details with you later if you wish, but it's a lot of work to find and retain clients, and they don't come from the sources you think. I've given talks to hundreds of residents and they have been well received (in fact, I have residency programs now calling ME to see if I have time to come and give a talk), but it doesn't drive business. Of course, I'm my own worst enemy, because my talks are filled with "cost matters" and "every dollar you give to an advisor is a dollar you don't have for yourself" and "every one of you in this room is smart enough to manage your own finances", "read these books", "go to Bogleheads for questions", etc. I get a lot of people hanging around to ask questions, or sending me emails with a "quick question if you don't mind" etc, but few who are willing to pay for hourly advice, even with the discounted hourly rates I give to all residents and fellows. In fact, 90% of my clients are non-MDs. Honestly, I know for a fact that I've driven more total paid business to EmergeDoc, Mike Piper, Bogleheads, or TFB, by promoting their books and websites than I've gotten personally over the past year. :D

My business plan, with reasonable predictions about growth, suggests that if I stay part time it will take me 5 years to recoup my startup costs and then overcome my annual expenses and make it viable side job. If I switch to full time and lose my MD salary, it will take me at LEAST that same amount of time to make back my current salary, and then 3-5 more years to make up lost the lost MD salary from the initial years. And that's taking into account that I'm one of the least well compensated specialties in the hospital. There are nurse practitioners, younger than I, working 3 day workweeks and making more than my salary. This is not an exaggeration. I know because I have one as a client. :) The point is, even with a relatively low bar for what I consider a successful business, it's going to be very tough.

Now, I say all this based on hourly planning, which I do exclusively. The math gets much easier with AUM, but then your level of commitment has to be higher. Choosing a custodian initially will be hard, because many have minimums for assets before they will accept you. So the low-min or no-min custodians you might start with have higher brokerage fees and other fees which are not ideal for clients, so you'll have to hold your nose and recommend one of these custodians until your assets grow and you can move your clients elsewhere. But you can often count your personal assets towards the minimums, so if you have 10 million dollars of your own you want to move to Schwab or Fidelity, you are good to go. :D But even though AUM is likely much more lucrative, your commitment has to be higher, as I mentioned. I think it would be very hard to have an AUM-based practice doing part time. But I'm not sure, I don't do traditional AUM. What I've offered instead for the past year is offer FREE (yes free) investment management services to anyone who buys 6 hours of planning from me. So once they cross that 6 hour threshold, I manage their portfolio, regardless of the size, for 12 months. The client has to decide to make my suggested transactions themselves, or give me agent authorization to make the trades for them. So in a sense, this is fixed-fee asset management. I think it's a great deal, but I don't thing my current or prospective clients realize it's a great deal. All they know is that they wrote me a check for (for example) $2000, and that check seemed VERY expensive to them. But the financial planning part is the real work. Once the portfolio is set up, the asset management part is almost trivial. Rebalancing bands rarely get triggered, new money is easy to deploy (it's already spelled out in the plan), etc.

Some other random points. I have found that most clients don't mind that they have never met me. Some don't even care to Skype, telephone is ok. In fact, I have offered to meet many clients or potential clients at their office or home (no fee) and they usually decline. My clients are 45 years old and younger (mostly in their 30s; I'm 42). I guess the millenials are much more comfortable with remote assistance. In fact, they much prefer email to telephone. It really helps that I'm a relatively fast typist! So for now I've cancelled my plans to rent/share any kind of office or other meeting place. If clients want an advisor with a fancy office and fancy car, they can go elsewhere. In fact, we don't own any car. :wink:

Anyway, I'm just rambling on about my situation in hopes that it gives you a couple of nuggets to think about. I'm happy to answer any additional questions.

Neurosphere
Topic Author
am
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Re: Setting up money management practice as part time MD

Post by am »

Thank you for your input neurosphere! Sounds like I should stick with my day job :D. Was hoping that this type of business could be a nice transition away from medicine into something I may enjoy doing more. Seems like the boglehead philosophy does not translate into dollars for an advisor. Do not think I could sell loaded funds, insurance products and other junk to make money and continue running this type of business.

What exams if any do you have to take and how tough were they to become an RIA? Are any other credentials necessary to be competitive and have some credibility? What else did you have to do to start the business? Any courses or books to learn the fine details and legal requirements?

I remember when I was a resident, we had a finance guy come for lunch and lecture. He signed up most of the physicians in the department. Does not seem like this has been the case for you. Is this because of the boglehead message you give? Have you found being a physician has helped you? Thanks again.
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neurosphere
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Re: Setting up money management practice as part time MD

Post by neurosphere »

am wrote:Thank you for your input neurosphere! Sounds like I should stick with my day job :D. Was hoping that this type of business could be a nice transition away from medicine into something I may enjoy doing more. Seems like the boglehead philosophy does not translate into dollars for an advisor. Do not think I could sell loaded funds, insurance products and other junk to make money and continue running this type of business.

What exams if any do you have to take and how tough were they to become an RIA? Are any other credentials necessary to be competitive and have some credibility? What else did you have to do to start the business? Any courses or books to learn the fine details and legal requirements?

I remember when I was a resident, we had a finance guy come for lunch and lecture. He signed up most of the physicians in the department. Does not seem like this has been the case for you. Is this because of the boglehead message you give? Have you found being a physician has helped you? Thanks again.
Sorry, for whatever reason I am just now seeing this post which was directed at me. So here are some answers, 5 months later. :?

In terms of exams/tests to be an RIA, the basic requirement is passing the "series 65". This is not a "hard" test for anyone with basic knowledge of finances, but it's a test which will require some studying. It's mostly a test on regulations and definitions. I think I bought a review book and studied for about 20-40 hours and passed with some room to spare. Each state has somewhat different requirements, and there is no one resource I found which helped me learn the "fine details and legal requirements". Actually, there are several firms out there which can be hired which can get you up and running fairly quickly (i.e. "RIA in a Box", or "RIA compliance consultants") which actually sometimes have quite comprehensive free information on their websites about what it takes to get started.

I'm considering being a CFP, but I'm disillusioned with that organization somewhat. In part because the last several CFPs I've interacted with have been decidedly NOT good advisors and definitely did not have the best interests of their clients in mind. So what good did those "CFP" letters do for their clients? But I'm also aware that those credentials might be helpful for business, so...am thinking about it.

As to your question about why it seems I've had a hard time signing clients after presentations to residents, I think there are several reasons. First, yes, my talks are riddled with Boglehead principles like "cost matter" (including advisor costs), and that everyone should learn for themselves. I think people honestly want to try to read the 5-6 books I suggest prior to deciding if they want an advisor. Maybe it's taking them a long time to get through the books. :D Also, the hourly or upfront or fixed fee structure is a hard sell. Even after an extensive example on the pitfalls of commission-based advisors, I still get comments such as "but the last guy said that the [insurance company or mutual funds] paid for his services and that it doesn't cost me anything!" :oops: Finally, I'm a very very bad salesperson and self-promoter. I just can't get up there and "rah rah rah" myself and my skills and toot my own horn and do all the things that those "other guys" do to get business. Maybe I'll get better at it, but my personality is to just "present the data" and not "sell" it. Of course, I can't discount that there is something else about me personally or about my presentation which are a turn-off or is otherwise discouraging clients.

You also asked if being a physician has helped. I'm not sure, because I can't do the controlled study where I am NOT a physician to compare. But I state in my talks that my background as a physician should not sway anyone one way or another about my competence or my message. That they should look objectively at the data/information, and not the messenger. Perhaps I am my own worse enemy? :D

My current plan is to slowly transition away from medicine and into financial planning. By next summer I'll be 50/50 medicine/advising and hope to transition within a year or two after that to 20/80 (my own glide path! heh heh), with the 20% medicine hopefully being all volunteer. We'll see how that works out. I'll keep everyone posted!

Neurosphere
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