Managing Your Wealth as a New Attending Physician in Ontario
Ultimate Guide to Medical Billing for New Doctors in Ontario
Now that you’re a high-earning professional, you have to make some decisions around how you want to manage your personal finances and invest for your retirement.
As you may be aware, you have a few options. While DIY investing is the most cost-effective strategy for managing your finances, it isn’t for every doctor. If it’s not for you, you may be considering hiring a financial advisor. Below, we’ll cover both options and why you may choose one over another.
Should I Hire A Financial Advisor?
What is a financial advisor?
Before we cover in which scenarios it might make sense for you to hire a financial advisor, you should know that the terms “financial advisor” and “financial planner” are used broadly. There are many different designations, based on education and background. Some examples include: Certified Financial Planner, Personal Financial Planner and Registered Financial Planner.
Be sure to ask your financial advisor about their education and background, so you can determine whether someone has specialized training to help you achieve your financial goals.
What can a financial advisor help me with?
An advisor can work with you on a detailed financial plan, which involves:
- Assessing your current situation
- Working with you to set future goals and understand your needs
- Providing advice on the financial products that are right for you
- Managing and updating your investments periodically
Choosing the right advisor depends on what help you need. Since you are looking for financial planning advice as a medical professional, you should consider looking for an advisor with expertise in that area.
So…should I hire a financial advisor?
The value that can be added by advisors in investment management and financial planning really varies on the individual situation. It depends a lot on the sophistication of the investor, and the qualifications of the advisors, which can vary quite dramatically.
Here’s a rule of thumb: Paying for financial advice makes the most sense if you have a reasonably large amount of money. This is because informed advice becomes more cost-effective when the price is spread over a larger portfolio. Plus, the top advisors tend not to take small portfolios, so you’ll be accessing quality talent.
It also may make sense to work with an advisor if you have relatively complicated retirement, tax, or estate needs, and you don’t have a lot of investment knowledge and would rather spend your time on other things. For more advice on choosing a financial advisor, check out these helpful resources:
DIY Investing for Doctors
For those of you who want to learn how to invest on your own but don’t know where to start, here we’ve summarized a few easy, low-stress, DIY options recommended by investment expert John Heinzl, that combine both diversification and low costs.
- Balanced or Growth Mutual Fund
With all your investments in one fund, this keeps it really simple. A balanced or growth mutual fund will give you exposure to stocks and bonds all at once and be able to schedule a monthly investment plan. One of the most user-friendly fund providers is Tangerine, which offers three index funds with various stock-bond mixes depending on your risk tolerance.
- Balanced or Growth ETF
Exchange-traded funds (ETFs) usually have lower management expense ratios (MERs) than mutual funds. That said, you’ll pay a trading commission whenever you buy or sell an ETF. Many DIY investors prefer to build a portfolio of several ETFs. Still, you can accomplish the same thing by purchasing a single product, such as the iShares Balanced Income CorePortfolio Index ETF.
Based on your risk tolerance and your financial goals, automated investing services like WealthSimple or ModernAdvisor will create a portfolio of ETFs. After funding your account, they will look after the rest, including asset rebalancing.
This is also a very cost-effective option– WealthSimple, for instance, charges 0.5 percent annually on top of the ETFs’ MERs of about 0.2 percent, Basic financial planning advice may also be available, but be sure to read reviews before jumping in.
- Learn more about robo-advisers in this survey.
More About ETFs: How to Thrive by Doing Less (Not More)
Out of all the DIY investing options, balanced or growth ETFs is our best recommendation for investors like you with limited time and little additional mental bandwidth. ETFs combine the diversification of a managed fund, with the convenience of a direct share investment. And they are an easy, risk-reducing way to diversify across a broad range of assets. Most ETFs track a market index, allowing you to access an entire market’s performance in a single trade.
Because most ETFs track an index, their investment decisions can be automated without the need for highly paid human managers. For investors, that means lower management expense ratios, which means more money in your pocket. Plus, it means that compounding interests will better work in your favour.
As Dan Bortolotti wrote in Vanguard, iShares or BMO? A side-by-side comparison of the new all-in-one diversified ETF portfolios, three of Canada’s largest exchange-traded-fund providers have launched products that allow investors to own a complete portfolio with just one trade. Each includes a mix of global stocks and bonds, so anyone with a brokerage account can get vast diversification with minimal maintenance and rock-bottom costs.
- BMO ETF Portfolio
- IShares ETF Portfolio
- Vanguard ETF Portfolio
Note: We have no professional affiliation with BMO, IShares or Vanguard and are not receiving a commission for this recommendation.
A few more things to keep in mind about ETFs
All the Diversification You Need
While each one varies in specific holdings, all include both Canadian and non-Canadian bonds, plus an equity mix with one-quarter to one-third domestic stocks, with the remainder split between the US and overseas markets. Overall, they include thousands of stocks and bonds from around the world.
An Affordable Rate
Additionally, ETFs will be automatically rebalanced to maintain long-term targets, even as markets shift in different directions and at different rates, making them reasonably maintenance-free. Online robo-advisor services tend to charge about 0.50 percent for a more customized approach to rebalancing your investment in each ETF, to match your life stage and risk tolerance.
As for management fees, they can range from 0.18 percent to 0.22 percent. This is about 90% less than traditional balanced mutual funds. For context, the monthly management fee on a $100,000 portfolio is a little more than you’re paying for Netflix each month. Trading fees are usually around $9.95, but this can be lower depending on the security being traded, and the broker used. For example, Questrade offers free trading for ETFs.
While some die-hard DIY investors will attempt to convince you that buying the underlying holdings individually would enable you to reduce fees even further, realistically, this requires a fair amount of fiddling around in a spreadsheet.
As a newly graduated physician, your professional and personal life is doubtlessly growing busier and busier. Between maintaining your practice and making time for social and personal life, balanced or growth ETFs are a straightforward, low-maintenance investment option.
- Learn more about the expanding ETF universe and Canadian Couch Potato
- Explore the Physician Financial Group on Facebook: A place for Canadian physicians and their spouses to teach each other about saving, investing and more.
- 10 Mistakes First-time Investors Make by the Ontario Securities Commission (OSC)
- More useful articles from Rob Carrick – Personal Finance Columnist, Globe and Mail
Finally, to put everything together about Canadian Investing Taxes: Dividends, Interest, and Capital Gains
DISCLAIMER: The information contained in this learning material is for general educational purposes only and is not intended to provide specific professional medical, financial or legal advice, nor to constitute a “standard of care” for Canadian healthcare professionals. The use of MDBilling.ca’s learning resources is subject to the foregoing as well as the MDBilling.ca Terms of Service.