There is an assumption that doctors are, by definition, wealthy.
But there are levels of wealth among doctors, and there are differences between doctors based on their wealth level. These differences are on display when considering how doctors invest, and how they employ financial advisors who work with them.
Spectrem’s Professional Series of studies looks at investors from specific occupations such as physicians, accountants and lawyers. These reports, which include qualitative responses as well as quantitative answers from physicians, compare investors from these specific occupations to investors in all other occupations to see how they differ in terms of attitudes towards investing and their own wealth.
The study also compares doctors to each other based on their wealth level, and that comparison reveals a great deal that advisors should consider when working with physician clients.
“We regularly segment our research between Millionaires, with a net worth under $5 million, and the Ultra High Net Worth investor, with a net worth up to $25 million,’’ said Spectrem president George H. Walper Jr. “In our research on doctors we found numerous occasions where the Millionaire doctors and the UHNW doctors differ in their investment considerations. Some of those differences are large and significant to advisors.”
For instance, Millionaire doctors are more likely to believe their financial situation has improved over the past year, and they may believe the last Presidential election had a role in that improvement. Seventy-one percent of Millionaire doctors said their financial situation has improved compared to just 54 percent of UHNW doctors, and 57 percent of Millionaire doctors said the election causes them to anticipate better investment returns, while only 38 percent of UHNW doctors agree.
Doctors do not report unduly high concern levels about financial issues, but the Millionaire doctors certainly have greater concerns than the UHNW doctors. For instance, 26 percent of Millionaire doctors are concerned about being able to retire when they want to, and 22 percent are worried either they or their spouse will be forced into retirement before they are ready. These levels are higher than the concern levels of UHNW doctors and should be a consideration for advisors who are working with doctors who are not yet overly wealthy.
The Spectrem study also shows how doctors determine their investments based on their wealth level. Ninety-six percent of UHNW investors consider the risk level of their investments before investing, where only 79 percent of Millionaire investors do so. In fact, the UHNW doctors have a higher level of interest in all investment selection factors than do Millionaire doctors, which perhaps means the UHNW investors are going to be more precise in their investment selections and require a bit more research and information before making a decision.
Advisors should also be aware of how doctors choose the investors they work with based on their wealth level. Asked to select the most important factor in selecting a new advisor, 40 percent of UHNW investors said the honesty and trustworthiness of the investor was most important, while 28 percent said the investment track record of the advisor was the most important factor. Advisors can clearly use these different opinions to know what to promote with different segments of doctors in looking for new clients.
“The most important thing is that I trust him to hear my goals and help focus on these, and trust that he would not rip me off,’’ said one Millionaire doctor in the study. “Performance and help in growing my assets is important. Finally, I appreciate an all-service advisor that can offer me a variety of services.”
There is one other difference between Millionaires and the UHNW investors that is stark and unique to doctors. Seventy-two percent of Millionaire doctors believe advisor fees are too high, while only 47 percent of UHNW doctors feel so. That 25 percent difference is unusually high between the two wealth segments, and indicates that fees matter to doctors, who probably hear about their own fees from patients on occasion.
Top Takeaways for Advisors
A client’s net worth is one of the first information pieces an advisor gets from a client investor, and when the investor is a physician, this information is vital. Doctors are very precise in their investment decisions, and will want their advisor to treat those decisions the same way.
The physicians in the Millionaire segment are possibly going to be younger and still establishing their practices, or may still be paying off loans from their education. This needs to be considered when working with the less wealthy physicians as well.
©2017 Spectrem Group