As the world faces down an existential crisis, it’s clear as ever that our doctors are essential. Our best and brightest are on the frontlines working selflessly to fight COVID-19, risking their lives to help others. They’re idealistic by nature, but that idealism is more bug than feature once they’re tasked with managing their wealth. The financial services industry is full of sharks and many specifically prey on physicians, according to Dr. Jim Dahle.
That’s why Dr. Dahle, a practicing emergency physician, started the White Coat Investor — he wanted “to help doctors to stop doing dumb stuff with their money.” He’d watched classmates and colleagues enter the workforce, start earning six figures while six figures in debt, and make the kind of decisions that could doom them years down the road. So, he tried to step in and illuminate the obscure world of finance for his undereducated (at least when it comes to money) cohort.
These days, Dr. Dahle has a widely read blog, a popular podcast, and an Amazon bestselling book, The White Coat Investor. We spoke with Dahle about the ways in which high-earning, high-debt consumers like doctors are underserved by the current financial landscape.
Unifimoney: What spurred you to start White Coat Investor?
Dr. Jim Dahle: I had been doing the same work online for years before I actually started the blog, but I’d just been doing it on internet forums. And I kind of got sick of typing the same thing into the internet over and over again. So, my idea was: I’ll start a blog, answer these common questions, and just put a link to the blog post that answers the question when people ask. So, that was part of it: just pure labor-saving.
And at the time, in 2011, I had this crazy idea that it would be fun to get some passive income. For some stupid reason, I thought blogging was passive [laughs]. So, those were the two motivations: to help doctors to stop doing dumb stuff with their money, because I realized nobody was teaching this to doctors in Med School or Dental School or Residency or anything. And the other one was a business. It was a business from day one. I put ads on the site the first week and tried to make money. I didn’t make any money for a few years, but I was trying. So, those were really the two motivations: to do well while doing good.
Unifimoney: So much of the White Coat Investor blog and podcast is about translating the overly obscured language of finance into an understandable language. Why is it important for you to break down that barrier to entry for doctors?
Dahle: I think some of the more interesting developments in the world is when two bodies of knowledge intersect: when biology and chemistry come together or literature and physics or whatever. So, it’s not that anything I say or write is particularly new to anybody, but it’s the intersection of medicine — and particularly, the personal life of a physician — with finance. Being able to bring those two fields together has been a great service to many doctors that are just completely mystified by it.
Despite being intelligent people in one field, it doesn’t necessarily translate over to either financial knowledge — just the sheer nuts and bolts of understanding it — or the discipline you need to be successful financially. And so, it’s really fascinating sometimes to see people that are so smart doing such dumb things with their money.
It’s a pleasure to serve people who really are very impressive, good people who are some of the most idealistic people I’ve ever met in my life. They’re truly the people out there trying to save the world and the planet and then to watch the financial-services industry take advantage of that really gets under my skin. I hate seeing it. But forewarned is forearmed and that’s what I try to do with them.
Unifimoney: In what particular ways are banks doing an inadequate job of serving doctors and other high-earning/high-debt professionals?
Dahle: Well, I mean, a bank exists to make money. That’s what it’s there for. And so, of course, they start going, ‘Who should we try to serve?’ Well, people with money, people with high incomes. Doctors have a high income but, in a lot of ways, the reason why is similar to an athlete or an artist: it’s due to some special talent or knowledge that they have, not actually because of their acumen in managing finances or running a business. By the time a small businessman makes a doctor-equivalent income, they’ve been managing money and their business for years and years and they’re good at it.
A doctor comes out of residency where he basically disappeared into a training pipeline for a decade or a decade and a half, comes out with zero finance or business experience or knowledge and makes the same kind of money. Now, at the time, they usually have a negative net worth, because they owe $200 or $300 or $400 thousand in student loans, but they have that same high income. And so, they really have no training whatsoever to interact with financial professionals. Whether it’s a realtor or a mortgage lender or an insurance agent or a financial advisor or a banker or whatever it is, it’s just a totally foreign language to them.
So, by translating that for them and helping them to understand it in terms that they can easily grasp, it helps them to stop making those dumb mistakes and allows them to become more secure financially. Now, they can concentrate on their own health, their own wellness, their families, and, most importantly, their patients. I’m convinced that doctors with their financial ducks in a row are actually better doctors.
Unifimoney: Are there specific ways you’ve seen banks or financial advisors prey on doctors?
Dahle: It’s kind of the same way they prey on everybody, but it’s just bigger dollar amounts that it happens at. For instance, almost every doctor has been approached by somebody trying to sell them whole life insurance, which is the wrong financial product for 99% of them. Just being a doctor is not a reason that you should buy whole life insurance; it’s generally a crummy investment and overly expensive insurance. You’re generally far better off buying term life insurance if you have a life insurance need and investing the rest of your money in more traditional investments like stocks, bonds, and real estate. But almost every doctor I know has been pitched full life insurance by an insurance agent and, shoot, probably a third of them bought it. So, that’s a common example.
Another common one is mistaking an agent or a mutual-fund salesman — a broker if you will — for a financial advisor. You can call yourself a financial advisor with just about any sort of background if you want — there’s not really a legal definition of what it is — but this concept of somebody that’s actually a fiduciary and acts like a fiduciary to you is one that a lot of doctors don’t quite understand. It’s helpful to teach them that a fiduciary is basically somebody who follows the Hippocratic Oath. We all understand the Hippocratic Oath — put the patient first and do the right thing even if it’s not the right thing for your pocketbook. This idea that that doesn’t exist in all other professions is a new one to most doctors. Until somebody points that out, they don’t realize that that insurance agent is not giving them the best advice that they need to receive.
The other problem is doctors themselves and the pressure they put on each other, that their patients put on them, and that their family members put on them. There’s this idea that you come out of residency and you’re now a rich doctor. But the truth of the matter is, your net worth might be minus-$300,000; you’re one of the poorest people on the planet. And yet, there’s this expectation to spend, spend, spend. Before you know it, you’ve got a big fat mortgage on a big fat doctor house and a big old car payment on a Tesla or an Audi and you haven’t actually built any wealth yet. So, despite that high income, a lot of doctors actually never build wealth. If you survey doctors in their 60s and just ask them, ‘What’s your net worth? Everything you own minus everything you owe,’ you will see that 11–12% of them have a net worth under half a million dollars. And that’s after a 30-year career where you might have made $6 million, and you’ve got less than half a million dollars left. That’s your house, your bank accounts, your retirement, everything. And so, there’s a certain relatively small percentage of doctors that just never really build any wealth at all because they spend it all.
That’s a big thing too: for doctors to hear that it’s okay to live frugally. You really do need to put something away. To actually put some numbers to it and say, ‘Here’s how you need to live if you actually want to build wealth when you’re making $150,000 or $250,000 or $350,000.’ Just those nuts and bolts of personal finance that hopefully everybody else picked up somewhere along the way that nobody ever taught doctors.
Unifimoney: Our whole theory is that Big Banks are not gonna have some Come-to-Jesus moment and fix themselves from within, so it’s going to take some outside disruption. However, we’ve noticed a lot of the neobanks popping up have ignored high-earning professionals. We’ve made a point to go after customers like the White Coat Investor reader that are valuable but that the banks have forgotten about. If you were designing a service specifically for your readers, what would be some of the features that would be most important for them?
Dahle: A few things. First, the usual good customer service, an easy-to-use website, your ATM fees reimbursed. You know, the usual stuff you’re getting in most free bank accounts these days. But more specifically, the ability to earn some interest is big. With most checking accounts out there, you’re basically earning nothing. A lot of doctors would be more than willing to leave tens of thousands of dollars if not more in there if you can just get something closer to what you can get with a high-yield savings account. So some sort of interest that you can actually earn on your checking.
And the second one is the ability to transfer money easily. You might be paying off $10,000 a month in loans or you might be investing $10,000 or $20,000 a month. You need to be able to make those transfers back and forth. And if they put limitations on that, then it’s not really a functional account for a high-earner.
Unifimoney: Some of our users are young doctors. What’s the starter-pack piece of advice you’d give to them?
Dahle: I think the most important thing is to become financially literate early in your career. With how compound interest works both on your debt and on your investments, if you can get things right from the beginning, it’ll make the difference of millions of dollars over the course of your career.
And so, the best advice I can give to a young doc is to live like a resident for 2–5 years after they finish their residency. Basically, just keep living like the average American. I’m not asking them to go rewash their ziplock bags and reuse their paper towels. I’m just asking them to live like the average American while earning like a doctor for 2–5 years. If they do that, they can wipe out their student loans, save up a down payment for their dream home, build an emergency fund, and max out their retirement accounts and catch up with their college roommates as far as their retirement nest eggs go. After that, I recommend they save 20% of their income for retirement. And if they do that, they will build wealth and have a wonderful career and a wonderful financial life. It’s really not that complicated when you already have a high income.
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