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Certified financial planner Michelle Neiswender discusses her article, “Why physicians should not be their own financial planner.” Michelle explains why physicians, despite being brilliant, often make costly financial mistakes when managing their own money. She argues that financial planning is a complex specialty (just like medicine) and that a doctor’s time is too valuable to be spent decoding tax rules or tracking stocks. Michelle highlights the unique tax challenges physicians face as high-income earners and how emotional bias (like fear during a market dip) can derail a financial plan. This discussion covers why delegating to a CFP is a wealth-building strategy and how it protects physicians from costly errors in investments, retirement planning, and insurance. Learn why the smartest doctors get a “second opinion” on their financial health.

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Transcript

Kevin Pho: Hi, and welcome to the show. Subscribe at KevinMD.com/podcast. Today we welcome Michelle Neiswender; she’s a certified financial planner. Today’s KevinMD article is “Why physicians should not be their own financial planner.” Michelle, welcome to the show.

Michelle Neiswender: Thank you for having me, Kevin.

Kevin Pho: All right, let’s start by briefly sharing your story. Then we will jump right into your KevinMD article.

Michelle Neiswender: Sure. I discovered financial planning as a career while I was going through my master’s program. I took a year off after I got my master’s degree, and then I went back to school so I could get my certified financial planning designation. Just last year, I decided I also wanted to become an enrolled agent so I could provide actual tax advice to my clients.

Kevin Pho: All right, and you wrote your KevinMD article, “Why physicians should not be their own financial planner.” It is a common theme on the show that sometimes financial information isn’t always intuitive for a lot of physicians. Now, for those who didn’t get a chance to read your article, tell us what it is about.

Michelle Neiswender: It is encouraging physicians to consider working with a certified financial planner, but specifically a fee-only planner. I know in the general community, there is a lot of distrust about working with financial advisors. They are afraid that they are going to get pushed into products that they truly don’t understand or that are expensive and not needed. But if you work with a fee-only certified financial planner, you are working with a fiduciary. That means that whenever they are providing advice for you, that bias for a commission is removed from the recommendations. I was just trying to figure out a way to encourage your audience to consider working with a financial planner and show the ways that it would benefit them.

Kevin Pho: And what proportion of financial planners that physicians are exposed to are fee-only?

Michelle Neiswender: I don’t know the statistics, but we are a very small crowd. There is an association called the National Association of Personal Financial Advisors. These advisors are transparent in saying they are going to be fee-only, which means that 100 percent of their income is coming directly from clients, not from any commission-based products or kickbacks.

Kevin Pho: So whenever physicians go to see a certified financial planner, it should be pretty obvious that they are fee-only. Is that correct?

Michelle Neiswender: That is not necessarily the case. That is where a lot of confusion comes from because you have fee-only, and then there is another term called fee-based. That fee-based term could mean that the financial planning and advising side of things is fee-only, but then they push products where they get a commission. That is why it is fee-based. To add complexity to something that is already very complex, the terminologies are very similar.

Kevin Pho: So they should specifically look for the verbiage “fee-only,” right?

Michelle Neiswender: Correct.

Kevin Pho: So in your article, you write that a lot of smart physicians try to manage their own money. When a new physician client comes to you after doing it themselves, what are some common or costly mistakes that you see that you need to fix?

Michelle Neiswender: Physicians like to do the research. They are filling all the big saving buckets. They are saving, but they are maybe not saving appropriately in the right type of buckets or diversifying outside of pre-tax retirement accounts. They may not be taking advantage of the 457(b) plans or knowing that perhaps when they are planning for that, they need a set maximum. If they are thinking about leaving an employer after a certain period of time, what are the distribution rules once they leave and separate from service? Do they have to take 100 percent of that distribution within a year? You can set up installment plans or successfully transfer this over into another 457(b) plan. Those are some of the pitfalls that they are not aware of.

Some clients that tend to come to me feel that they should be able to do it themselves. There is a little bit of guilt that they don’t know or have that knowledge. But this is a no-judgment zone. I am here to help educate and partner with my clients on their financial journey. That is one of the biggest things. I give them permission to tell me what their dreams, hopes, and expectations are, and then I find a way to help them reach that.

Kevin Pho: It is completely OK for physicians to admit they may not have the financial knowledge to manage their finances or wealth. Because they have spent all that time seeing patients and learning to become a doctor, they may not have the time, or more importantly, they may not have the interest to learn that additional part of their lives. That is why it is perfectly OK to outsource that or be in partnership with a certified financial planner.

Michelle Neiswender: Correct. And then there is also that trust barrier. They don’t know me, and all of a sudden there are some practices out there that require that you move all your assets over to the advisors almost immediately, and you haven’t built that relationship. I understand why someone would ask, “Why am I going to give you all my money when I might have been burnt in the past by someone else?” I don’t require that of my clients. I do have that service, so at some point, either in the beginning or later on once we build a relationship, they can delegate that to me if they don’t want to deal with it. However, it is not a requirement.

Kevin Pho: You talk about financial stress contributing to the larger crisis of physician burnout. Do you have any stories that you could share where financial stress can also contribute to physician burnout?

Michelle Neiswender: Of course. I have dealt with a lot of clients who are almost approaching burnout when they come to me. They have been filling all the right buckets, but they don’t know when it can end or when they can downshift and go to part-time, perhaps working two or three days a week.

When I do planning with my clients, Kevin, I am not just planning for the next five years. We are also stretching out into the future. If they have children, we are planning education. We are covering undergraduate or graduate school, or medical school if that is the desire. We are also looking into the future and asking, “What do you think you want to fund for a wedding?” We are planning those big-ticket items out in the future so that when I tell them they can reach financial independence or start downshifting by a certain timeframe, that relieves the pressure. Sometimes it is sooner than they think, but they didn’t have the tools or the guidance to see that.

Kevin Pho: Doctors are trained to be objective, but sometimes emotion is a key risk. In your experience, which emotion does more damage to a physician’s portfolio? Is it fear during a downturn or overconfidence during a bull market?

Michelle Neiswender: I want to say this depends on where they are in their life. If they are getting closer to retirement, obviously a downturn in the market is going to make them want to be more reactive to what is going on. By discussing with them what their concerns are and if their goals have changed in the short term, we can determine if we need to make some kind of adjustment to their plan. We are able to go through the logic of why we are doing what we are doing and whether or not a change is appropriate.

Then I get some clients that are chasing those highs or that new fantastic stock. Cryptocurrency was a big one, and it is just a matter of discussing with them how that is going to fit into their plan. In some cases, I have clients that have the wealth to play the market. We set a budget, and then they can go ahead and do it because it is not affecting their overall plan.

Kevin Pho: In terms of alternative investments like real estate, crypto startups, or IPOs, what do you find are the common themes that distract physicians from their long-term financial plan? Is there any specific one that you are encountering most often?

Michelle Neiswender: I have had several clients come to me wanting to chase passive income through rental properties. We budget in their plan what they are allowed to risk. I want to say maybe half the time I do not advise in detail about passive income and real estate. Half the time it works out, and the other half it does not. By figuring out what that balance is, they can put that financial risk out there knowing what the potential consequences are. That gives them the safety to take that risk.

Kevin Pho: Now, of course, there are some physicians who could manage their investments on their own. Tell us the type of questions they need to ask themselves to determine if they are the right fit to manage their investments and finances on their own.

Michelle Neiswender: My clients typically have an ongoing annual rebalance, and we also talk about our investment philosophy and what their goals are. So whether or not I invest my clients’ money in-house, they all get portfolio recommendations with specific funds on how to rebalance and invest on their own. That helps take that burden off.

I am a proponent of passive index funds when building out portfolios instead of chasing active funds that typically are more expensive. When you factor that in, the overall return isn’t that much more significant. Depending on their level of confidence in investing and willingness to stick with the philosophy that we follow here, I am perfectly OK with clients investing on their own.

Kevin Pho: Can you give an example of a “small mistake” for a high-earning physician that may snowball into a massive seven-figure loss over the span of a career? What is an example of something that could be overlooked that could lead to bigger consequences later on in the career?

Michelle Neiswender: There is a variable. I have some clients that don’t know or haven’t heard of a backdoor Roth. Another thing is your tax professional. I often recommend things to clients like donor-advised funds and how to use them to offset capital gains when we are rebalancing. Maybe their tax professional doesn’t understand how that works. I run into the backdoor Roth issue sometimes as well.

Kevin Pho: Explain what a backdoor Roth is for those who aren’t familiar.

Michelle Neiswender: Sure. Once you hit a certain income, you cannot directly contribute into a Roth IRA. What you have to do is make a non-deductible contribution into your traditional IRA. You wait a week or so, and then you convert it into a Roth. Because you are converting it so quickly, there is really no growth because it was cash. So it is like a zero-tax transfer into your Roth account. Although right now it is only $7,000 if you are under 50, or $8,000 a year, you slowly build at those things.

Another thing that some physicians miss involves their 401(k) plan. If they have a plan that has a non-Roth after-tax component to it, they can contribute more. They can max out their pre-tax contributions there, which is $23,500, but then they can contribute an additional amount. It also has to factor in what their match portion is, but let’s just say up to $20,000. The plan often allows them to do an in-plan Roth conversion. So you put that money in there, and now you are converting another potentially $20,000 into a Roth, building up this future tax-free pot of money. That is a big one that often gets missed.

Kevin Pho: Now, when looking for a certified financial planner, other than being fee-only, what are some other characteristics physicians should look for when researching financial planners?

Michelle Neiswender: Definitely go to the CFP website and look for a CFP. Sometimes I have discovered people claim they are CFPs, but when you look on the website, they are not listed there. Everyone is listed there as just a listing, like a phone book. You can pay for an enhanced listing if you want. If they are truly credentialed and allowed to practice as a CFP, they are going to be on that website.

Kevin Pho: We are talking to Michelle Neiswender. She is a certified financial planner, and today’s KevinMD article is “Why physicians should not be their own financial planner.” Michelle, let’s end with some take-home messages that you want to leave with the KevinMD audience.

Michelle Neiswender: Many physicians seek out second opinions when they are encountering a special problem or case issue, and so I think everyone should at least get a second opinion on their financial plan. Whether it is a long-term or a one-project thing, you should go out to and seek a fee-only certified financial planner to run your ideas by. You might be missing some crucial components to your overall plan that you just don’t know about.

Kevin Pho: Michelle, thank you so much for sharing your perspective and insight, and thanks again for coming on the show.

Michelle Neiswender: Thank you for having me, Kevin.