The New York Times recently featured an article in which financial advisers discussed their experiences counseling doctors and lawyers. Doctors were portrayed as exhibiting three traits that hinder their investment plans. First, they have to make great sacrifices when they are young and going through medical school and residency. When they become doctors, they naturally wish to live a lifestyle that matches their salary. Second, doctors are busy; the demands of their profession take up the bulk of their time. Third, their intelligence and mastery of a complex field leads them to view investing as a simpler, easier practice than medicine. These three traits can lead them to make a bet on “the next big thing” or act on tips they receive about companies in which to invest. But making large investments without a great deal of detail often makes for an unhappy outcome.
On the positive side, many financial advisers commend doctors for their tendency to buy disability insurance and fund their retirement accounts. But even then, doctors are often in need of tax advice to maximize their investment gains.
Like doctors, high-earning lawyers tend to be intelligent, devoted to their work, and diligent about contributing to retirement accounts. Financial advisers point out that lawyers may have a tendency to over-delegate work to their advisers to the point they lack the involvement and oversight an investor should have. In addition, many lawyers may place too much reliance on retirement or deferred compensation plans offered by their firm.
Although not discussed in the article, a final problem doctors and lawyers may face is simply finding a competent and trustworthy financial adviser. Given their salaries, doctors and lawyers are often courted by financial advisers, but the best-connected or most personable advisers may not be the most suitable.