Written by: Rachelle Vanderzanden
Financial services is an industry dominated by men. Less than one in four advisors are women, and there is a 35% pay gap for financial managers. Yet I entered this field, because I saw an opportunity to take control of my career. In financial advising, I may be limited by the number of hours that I am able to work with a young family (something a lot of women experience), but I have no ceiling and I control my career and more importantly, my business. I work with clients on my terms and get to focus on helping those clients in whatever ways that I can. More and more, I am coming to realize that with my female clients, part of what I can do is be open and honest about how our gender affects our finances.
Gender Inequality in Medicine
At Finity Group, many of our clients are physicians and the medical professions are no stranger to gender inequity. So let me ask you all one question: Do you think your gender affects how much you’re paid? We all know that a gender pay gap exists (or at least I hope we do). For many men, I think they might answer that question, “No.” And for many women, the answer is, “Of course it does.”
Did you know that for physicians, it is worse than for many other professions (71 cents on the dollar to be exact)? The craziest part is that it’s not getting any better. Last year a colleague forwarded a CNN article to me that was my first introduction to the pay divide in medicine, and recently Time Magazine published another article on the same topic. The gender pay gap for physicians is about 30 percent, and both articles found that in 2018 and 2019, this pay gap got bigger rather than smaller. Women may be half of the medical school graduates in the United States now, but when compensation is not equal, medicine still feels like a man’s world. How do we go beyond being frustrated and angry and attempt to fix it?
How Do We Fix It?
Short answer: I have no idea.
Long answer: We still have to try!
In training, residents and fellows are all paid by a very structured and transparent compensation package. Some GME departments even publish this information online. The problem starts when you go out and get that first “big kid” job. Compensation is generally very secretive, and every contract is negotiated on an individual basis (academic institutions being much more structured than private practices). I cannot stress enough how important it is to negotiate those first contracts. You are setting the tone for how you expect to be compensated throughout your career. If you are not sure what to ask for or how to ask for it, enlist the help of a financial advisor or contract review attorney.
Beyond the initial contract negotiation, renegotiate whenever you can. I’ve had male colleagues ask for larger raises at review time or when a contract was up. Why did I not do that myself? If you find that you spend more time on necessary administrative tasks than your male colleagues and they see more patients resulting in more RVUs, maybe you make less production-based compensation and can argue for a larger fixed base pay or bonuses. Think of all the ways that you provide value and talk about it.
Let’s not violate any non-disclosure agreements here, but we should all talk more openly about what and how we are paid. Gender is not the only thing that can affect our pay. Race plays a huge part as well, whether we admit it or not, so let’s put it all out there. Not just in anonymous surveys, but in our places of work. Talk about this with prospective employers. If they have an open book policy regarding compensation, then it becomes much more problematic for them if they are unfairly discriminating. Honestly, I don’t think most employers intentionally pay women (or persons of color) less than white men. Whether it is intentional or not, most of them do, or there wouldn’t be such huge discrepancies. If we force employers to look this problem in the eye, maybe they will do more about it.
Last but not least, educate yourself. Knowledge is power. Find salary data specific to your specialty and your region. Read. When you feel more confident with your finances in general, talking about your salary and compensation will come more naturally. Don’t let money be something that you put on the back burner and assume it will take care of itself. Honestly, you’ll probably do okay, but just okay is not what we are aiming for here. We want equitable compensation and acknowledgement that our work provides just as much value as a man’s.
The Power of Advice
In an effort to put your best foot forward, have a team on your side: an accountant, an attorney, and a financial planner. Talk openly with these professionals about your current compensation and your goals. Experienced contract review attorneys can give you a good sense of how your contract looks in comparison to others. Accountants, financial advisors, and tax professionals are very well acquainted with the income of clients. Obviously, they can’t tell you the details of others’ finances, but they might be able to tell you if they think you’re underpaid. If you don’t ask, they will not tell you. Have a financial advisor on your side to talk openly about your compensation, help prioritize what you do with that income, and help achieve your long-term goals. Ultimately, what you do with your money might matter more than how much you make. But we all want to be treated fairly, so who’s with me?
timeshare for more than a couple of years after purchasing it. After the initial enjoyment has worn off, most people are stuck trying to get out of it and end up losing most of the money they “invested.”
I have seen doctors invest in bars, restaurants, or other businesses their family members or friends have started. Most have shut down or have not returned any money to the initial investors.
I have seen doctors invest in start-up medical device companies, an oil exploration company, a rock band, a brewery, a winery, a developer of tiny houses. Most of them fizzled out and went out of business. Some are still around but yet to be profitable. I even know someone who sponsored an aspiring competitive video game player in exchange for 10% of his future earnings. Last I heard those earnings are zero, but there is still hope!
If I get free beer, count me in!
I have seen doctors invest in houses to flip. Some are profitable, others are not. The average is probably no gain on investment. It is difficult to make money flipping houses in the current market unless you have experience and access to materials at wholesale costs.
Before making an investment that isn’t available to the public, ask yourself: if the investment opportunity is so great, then why is someone sharing it with you? Why aren’t they investing their own money?
The Problem with Doctors as Investors
It is also well-known that doctors make pretty good incomes. So if your family members or friends want to start a business and need some initial start-up cash, guess who the first person they call is going to be? It can be hard, but sometimes you have to say no. If you say yes, assume you are not getting that money back.
Having the ability to earn a good income enables you to make some dumb investments and still end up alright. But that doesn’t mean it’s a good idea.
Doctors are very smart individuals, which gives them overconfidence in their abilities to evaluate an investment opportunity. Doctors are trained in medicine. Med school and residency don’t teach you how to review a business plan, cash-flow statement, balance sheet, profit/loss statement, pro-forma estimate, SWOT analysis, etc. If you don’t know what all of those things are, let alone know how to read them, proceed very cautiously when considering an investment opportunity.
VC Mentality without the VC Money
Venture Capitalists (that’s what VC stands for) will make similar investments, knowing they will likely lose all of their money on 90% of the investments they make. They’ll take $1 million and invest $100k in ten different ventures. Nine of those ventures will fail and likely return little to no money. However, one of the investments will be successful and hopefully deliver more than $1 million in return.
It takes a lot of money to play that game and you must be very thorough with your business analysis just to have a 10% batting average. This is their full-time job, so they take it seriously.
Some doctors will casually throw $50,000 at an investment as if they are a shark on Shark Tank. Mark Cuban has a net worth of close to $4 billion dollars, which is close to $4 billion more than most doctors. By owning the Dallas Mavericks NBA franchise, he also is likely able to pay himself upwards of $10 million a year if he wants. On top of that, he earns $50k per episode on Shark Tank. So investing $50,000 in a business that may or may not work is literally pocket change for him. It’s the equivalent of you betting a buddy five dollars on a round of golf. If you lose, oh well.
But $50,000 for a doctor is more than a trivial sum of money! That is a year’s worth of retirement savings for some. Or two years of in-state college for your child (or one year of private college tuition).
Some Good Investments Doctors Make
Some of the better investments I see doctors make that aren’t available to the general public usually revolve around the doctor’s practice. Investing in yourself and your career success is the best investment you can make.
Doctors who own a profitable practice are often better off financially than employed physicians. Although it has become more difficult in recent years to have a lucrative practice in medicine.
Owning the office building that your practice leases is often a sound investment. If you own the building that your business leases, you will always have a tenant (hint – it’s you). You can ensure the rent payments your business pays is enough to cover the mortgage payment. Now, the building could have issues that require costly repairs and maintenance, so it’s not a risk-free investment.
Many doctors who invest in surgery centers are pleased with their investment. Most surgery centers have an artificially low share price to incentive doctors to invest and send their patients there. It’s not uncommon for a doctor to quickly recoup their initial investment and start realizing profits.
Boring Doctors with “Normal” Investments
If you don’t own your practice, can’t invest in a surgery center because you’re not a surgeon, or don’t want to pretend like you’re a venture capitalist, that’s OK! Plenty of doctors who stick with plain vanilla investments are able to reach their financial goals. There is nothing wrong with a portfolio of mutual funds and ETF’s. In fact, doctors who primarily stick with plain vanilla investments are more likely to reach their goals than the doctor who is constantly searching for the unique investment that could hit a home run.
Financial success isn’t about picking the perfect investment. The key to reaching your financial goals is to develop a strategy and persistently direct a portion of each paycheck towards your financial goals. If you do that over the duration of your career, you may not end up a billionaire like Mark Cuban, but you are more likely to be pleased with the end result.
Any investment has potential for loss, including total loss of principal. Being diversified does not protect against potential for loss. Consult with your financial advisor before engaging in any investment.