Common Physician Financial Planning Mistakes

Rethinking your relationship with financial advisors could save you seven figures over the course of your career.

By David B. Mandell, JD, MBA, and Jason M. O’Dell, MS, CWM

In our experience, fewer than 5% of physicians are advised properly by a comprehensive professional financial team. The typical specialty physician endures nearly 25 000 hours of training in his or her profession. However, he or she generally receives a grand total of zero hours of training in business or financial matters related to the business of being a doctor. Doctors learn how to interact with specialists in other areas of medicine, but they receive no training in evaluating financial advisors whose advice and experience will be the backbone of their financial plan for their entire careers. Doctors lack the spare time and training to do their own planning, so it is no wonder that most are ill-served by their professional advisors.

There are common flaws, detailed in this article, that we see in many physician-advisor relationships. We hope that this article can help you avoid these pitfalls.


Flaw No. 1: Outgrowing Your Advisor

The first mistake the overwhelming majority of physicians make in the financial, legal, or tax aspect of their careers is remaining with a professional advisor, or sticking with a financial plan, even after the physician’s financial situation has changed.

Most doctors choose an advisor when they are in residency or fellowship, or when they begin to make money or start a family. The doctors may need some life or disability insurance, a will, and someone to prepare and file tax returns. Working long hours without financial training or the means by which to evaluate an advisor, doctors typically do what other busy people do and take the path of least resistance. They use the advisor the older residents use, they find someone their local medical society recommends, or they hire a friend or family member.

This approach serves a purpose when there are bigger challenges at hand, such as 20-hour work days and finding a job. Your life is so hectic, you just need to get it done fast. The advisor you choose at this point simply has to be decent and cheap, and that may be good enough. As with a trip to an emergency room, a top-trained specialist may be unnecessary if all you need are a few basic stitches.

The initial choice of advisor is usually not problematic, but remaining with those same advisors who handled your early planning for the rest of your career may have devastating long-term consequences.

Some doctors adhere to the adage, “If it ain’t broke, don’t fix it.” But how do you know it ain’t broke if you don’t get a second opinion?

Every day we meet physicians who remained with advisors when clearly the doctor and his or her financial situation outgrew the expertise of the advisor. See Ned the Retina Specialist on the next page for a real-life example.

The idea that you can outgrow an advisor in the medical arena might seem obvious to you. For example, you would no longer send your child to a pediatrician when the child becomes an adult. Yet, for some inexplicable reason, many surgeons continue to use advisors whose expertise no longer fits their needs.

Ask yourself this: How did you choose the professional advisors you work with today? How many other professionals did you interview prior to choosing one? Have you periodically interviewed others as your needs have changed?

Flaw No. 2: Failing To Utilize Specialists in Tax, Law, and Finance

If you need a stent put into your aortic valve, you would not go to a general practitioner. Moreover, you would not consult specialists outside of cardiology. In fact, you would not even settle with seeing a general cardiologist. You would seek the help only of an interventional cardiologist to handle this procedure. Medicine is a highly specialized discipline. If you have a specific issue, you seek out a physician properly trained and experienced in that particular field.

Ned the Retina Specialist

Ned, a retina specialist living in Nevada, contacted us after reading one of our books. Although his income was more than $1 million per year and he was part of an extremely successful practice, he used the same New York–based lawyer he had retained during residency to create wills. Not only was this attorney not licensed in Nevada, but he was advising Ned in areas that were clearly beyond his expertise. The attorney was certainly a nice gentleman and perhaps competent with basic planning for someone with minimal tax or estate planning concerns, but he had no concept of advanced techniques that a physician making more than $1 million per year should consider. He had no knowledge of nonqualified plans, asset protection planning, or other fairly routine financial planning that can be implemented for high-income physicians.

Although this attorney may have been an acceptable choice for Ned when he was a resident, it was a disservice to the client-surgeon at this point to continue to use this attorney as a primary advisor. Doctors advise patients to get a second opinion before opting for surgery or chemotherapy, yet they do not get their own financial second opinion before agreeing to pay annually hundreds of thousands of dollars in taxes. Ned’s desire to not hurt his attorney’s feelings had potentially cost him more than $1 million during the course of his career.

Financial planning is not different in terms of specialization. Utilizing a specialist to assist you with health concerns seems obvious. However, our experience has shown that, in the areas of law, taxation, and finance, doctors fail to seek the advice of specialists.

To illustrate, consider the area of taxation and tax planning. The ever-changing US tax law is among the most complex sets of rules created by a society. The lengthy and confusing Internal Revenue Code is only the beginning. IRS revenue rulings, private letter rulings, tax memoranda, announcements, circulars, and tax court and federal court cases make the field difficult to navigate. The quantity of information is so vast that many law libraries devote an entire floor to tax materials. No single person can possibly be an expert in all areas of tax law.

Nevertheless, each physician typically relies on a single certified public accountant (CPA) to serve as his or her tax advisor in all areas of taxation. The taxation issues that require guidance typically include retirement planning, income structuring (salary vs. bonus), payroll tax, corporate structure (whether to be an S or C corporation), compensation (whether to implement a deferred compensation plan), estate tax planning, taxation on sales of real estate, individual tax returns, corporate tax returns, and buying or selling of the practice. These issues all fall within the scope of taxation, but each exists as a discrete subspecialty with its own unique knowledge base. Worse, we have seen many physicians use a tax advisor for areas outside of taxation altogether, such as asset protection or investing.

To avoid this problem, it is best to utilize a firm that offers value-added subspecialty knowledge. The key factor for success here is to make sure that your CPA and the outside firm work together for your benefit. If additional expertise can be instituted for your planning, and your CPA understands that the outside firm is not trying to take you as an accounting client—that is, the outside firm is not in competition—then you can benefit significantly.

Do not be nervous about engaging outside experts to work with your own advisors to ensure that you are getting the best, most current advice.


Physicians need to take their own advice. You encourage your patients to seek second opinions and to seek appropriate specialists to address their complex medical needs. Your financial needs are similarly complex, and getting a second opinion and utilizing specialized advisors is critical to your long-term financial well-being. n

For a free hard copy of For Doctors Only: A Guide to Working Less & Building More, call 1-877-656-4362. Or visit and enter promotional code NEWRET08 for a free e-book download of For Doctors Only or the shorter For Doctors Only Highlights for your Kindle or iPad.

David B. Mandell, JD, MBA
• principal, OJM Group; author, For Doctors Only: A Guide to Working Less & Building More
• 1-877-656-4362;

Jason M. O’Dell, MS, CWM
• principal, OJM Group


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About New Retina MD

New Retina MD delivers cutting-edge content to retina specialists in their first 15 years of practice. Each issue provides fresh insight from younger physicians plus established mentors on clinical and nonclinical issues affecting ophthalmologists in the earlier stages of their careers. NRMD features surgical pearls, clinical research endeavors, practice management, medical reimbursement and policy, continuing educational requirements, financial planning, innovations, and more.