What Professional Designation Should Physicians Look For?

When it comes to seeking out financial advice, it’s important to understand that there are a variety of flavors to choose from.  A financial professional designation may maintain expertise in very specific areas of finance, others keep it more broad. So what do you need as a physician? The truth is, there is no single correct answer. For example, if you’re a private practice physician, you may need a financial professional that has expertise in business finance. Conversely, if you are a W-2 employee, you may want to seek out someone with expertise in personal finance.

There are dozens, if not more, designations out there. Only a few, however, have real value. Let’s go over a few of the most established ones to help you choose which is best for you. These are the CFPⓇ, the CPA, the CFA, the CLU, and the JD.

CERTIFIED FINANCIAL PLANNER™, or CFPⓇ

(Full disclosure, I’m a CFPⓇ)

The CERTIFIED FINANCIAL PLANNER™ professional designation is widely accepted as the standard for financial professionals providing comprehensive financial planning. What exactly is financial planning then? Financial planning coordinates the areas of budgeting, investments, insurance, employee benefits, taxation, and estate planning together to achieve your short and long-term financial goals in each of these areas. Do you want to retire one day? A financial planner will help you determine how much income you’ll need to safely retire and what you need to do today to get there.

There’s an analogy that has become cliche among financial planners, but true none the less that financial planners are like quarterbacks. The analogy works because planners often will coordinate with other financial professionals who have a much more focused area of expertise. For example, when a client asks about passing on assets to their heirs, a planner will put it in motion by explaining the various paths they could go down. They could retitle their accounts to include the heirs, they could draft a will, or they could set up a revocable living trust. All viable options, but when the best option for the client is determined, let’s say setting up trust, they then hand off the ball to an estate attorney who executes the documentation. The same goes with taxes. Most financial planners don’t file tax returns, but they do help to strategize tax efficient strategies and pass the ball to an enrolled agent or tax accountant.

A W-2 employed physician would likely benefit the most from a CFPⓇ because their needs fall into those broader areas of financial planning. Not to say that W-2 employed physicians don’t have specific needs too. They do, especially in their early years. High student loan debt, greater exposure to liability, and the need for protection from disability or death need to be addressed. These are all things a CFP is trained in and can assist physicians with.

CERTIFIED PUBLIC ACCOUNTANT, or CPA

The CPA professional designation can take on many specialties but are primarily financial auditors for corporations. They are well trained in business finance and often will work as consultants to businesses regarding their accounting and tax preparation. A subset of accountants specialize in taxation, both business and personal.

Some CPAs will start as such and make their way into financial planning, and others will start as financial planners and then obtain the CPA designation to attract a certain type of client, usually business owners or the ultra high net worth (Often one in the same). Within wealth management, there is a service model call “family office services”. This is a highly involved service model where a team of financial professionals handle one’s financial needs from investing their assets to paying their bills. While family office services involve many disciplines, there tends to be an accounting centric approach.

For private practice physicians who need help bridging the gap between their business and personal finance, you’d be well served by a CPA who works in wealth management. If you have an acute need for bookkeeping or complex tax situations, a CPA who specializes in that need will be the best fit.

CHARTERED FINANCIAL ANALYST, or CFA

CFA is a professional designation for experts in securities analysis. Most CFAs are fund managers or analysts and you will likely never deal directly with one. The way it has traditionally worked is that CFAs are the ones pulling the levers behind the scenes for a fund company while financial advisors are on the retail side selling the fund.

Similar to financial planner/CPAs, some financial planners will obtain the CFA charter. These are financial planners who gravitate more toward the investment advice discipline. They will likely run their entire portfolio management service in-house rather than outsourcing it like many financial planners do. The advantage to this is they can provide a more customized portfolio to fit your needs.

If you’re a physician who wants a more customized portfolio with higher complexity than a typical 60/40 stock/bond blend (or whatever allocation best fits you), I’d seek out a financial planner who is also a CFA charterholder. Keep in mind though, that running a portfolio service in-house is highly time consuming and the other areas of financial planning may not be as well represented.

CHARTERED LIFE UNDERWRITER AND JURIS DOCTORATE

The other areas of financial planning that often will have a specialist involved are in the areas of insurance and estate planning. While many financial advisors are also licensed insurance brokers or agents, the growing trend is to work with insurance specialists. On the flip side, many insurance specialists will put themselves out there as financial planners. Be careful with this because the only form of compensation for insurance is through commissions, so there is a high conflict of interest. Yes, the same conflict of interest exists for financial advisors who sell investment products for a commission, but the industry is going away from this. You’re best bet when working with an insurance broker or agent is to work with a CLU. Having this designation shows a level of commitment to the profession as opposed to a salesman with little training. Maybe it’s just the CFPⓇ in me, but I’d recommend limiting the scope of working with a CLU to insurance in coordination with a comprehensive financial planner.

Finally with estate planning, anyone who wants professional help in setting up a will, trust, power of attorney, or other legal directives will need to do so through a licensed attorney. Financial advisors will often give high level advice regarding the options you have, but actually drafting the documents is something that needs to be done by an attorney. These documents need to be written with the correct legal language and financial advisors don’t have the training for it.

If you’re a physician with a DIY attitude towards finance, this may be the only area you end up seeking a professional for. Even then, there are DIY resources online that help you to customize pre-built templates, so it doesn’t have to be too expensive to do.

So what do you think? Does this help clarify which professional designation to look for and how to coordinate working with various professionals in their discipline?