Q. I feel like I need a financial adviser, but they’re so expensive. How can I avoid being ripped off?

A. I have spent many years helping doctors who wish to be their own financial planner and investment manager to write and follow a financial plan. Given the plethora of resources online and in your local library, it is entirely possible to do this yourself. This approach has certain advantages, not the least of which is saving thousands of dollars in advisory fees every year—savings that can be either spent on luxuries or profitably invested toward your financial goals.

Nevertheless, I estimate that 80 percent of doctors want and perhaps even need a good financial adviser and should not feel ashamed of meeting with one. The key is to make sure you are getting good advice at a fair price. Obviously, it can be tricky for someone who needs advice to determine the quality of the recommendations and service, but ensuring a fair price only requires basic math skills and a knowledge of the going rate for this service.

The rule of thumb is that high-quality financial advice costs a four-figure amount per year, ie, between $1,000 and $10,000. If you are paying more than $10,000 per year, you can almost surely get the same (or better) advice and service for less money. If you are paying less than $1,000 per year, you are unlikely to actually be receiving high-quality, personalized advice.

So What Am I Paying?

Unfortunately, the industry has placed several obstacles in the way of determining what you are actually paying. There are multiple compensation models, and the actual transfer of money to the adviser only rarely involves the obvious writing of a check. Often the method of compensation introduces conflicts of interest into the relationship. This is most evident when a commissioned salesperson of financial products is masquerading as a financial adviser. If you are not aware of how and how much you are paying your adviser, determine that immediately. If a review of your contract and account does not make this amount obvious, then the next question you should ask your adviser ought to be, “How do I pay you, and how much have I paid you in the last year?” Good advisers are not offended by this question. They know their value and want a good fit with clients willing to pay for that value.

A strong argument can be made to separate out financial planning from investment management and to pay for those two services separately. Investment management is an ongoing service you will need every month for many years that is most appropriately paid for with a flat annual fee or perhaps a reasonable fee based on a percentage of assets under management (AUM) of well under 1 percent per year. Either way, that fee should add up to a four-figure annual amount. If you are paying an AUM fee, do the math (amount of assets managed multiplied by the fee percentage) each year to ensure the fee is still reasonable. Financial planning, on the other hand, is more of an upfront/one-time activity with a fee of a few thousand dollars. You simply do not need a new financial plan each year. Perhaps it needs updating every few years, but there is no reason to pay for financial planning every single year for decades.

Finding Quality Advice

Once you know you are paying a fair price, you can turn your attention to the quality of the advice. You want your advice to come from an experienced fiduciary, fee-only adviser with a commitment to the profession. You want many of their clients to be dealing with the same financial issues you have: If you owe $300,000 in student loans, ask how many of their clients owe $300,000? If you earn $400,000 a year, how many of their clients have similar incomes? If you are a self-employed physician, how many of their clients are self-employed?

You also want your adviser to avoid methods of investment that have been shown in the academic literature to be less effective. These include stock picking, market timing, the use of actively managed mutual funds, and extreme combinations of investments. It is a good sign if your adviser is talking about keeping costs low, using index funds, and being prepared for any possible future outcome because no one can predict the future.

It can be worthwhile to seek out recommendations for advisers. However, rather than turning to colleagues who use an adviser, I would recommend you reach out to financially knowledgeable colleagues who do not use an adviser, as they are more capable of recognizing when an advisor is offering good advice at a fair price. Reputable websites may also provide lists of recommended advisers, but remember to do your own due diligence as well. You should read the required Securities and Exchange Commission disclosure document, titled “ADV2,” which can be found at www.adviserinfo.sec.gov/IAPD. Sections five, eight, and nine are particularly important. You should read the adviser’s website. You may even consider paying to have a background check done. But at a minimum, do an internet search of the adviser’s name and the firm name combined with terms like “scam,” “arrest,” and “review.” Online reviews may be worth looking at, but remember that they are no more accurate for advisers than they are for doctors and are often just as unfair.

If you need financial advice and assistance, do not avoid hiring the help you need just because it costs money and requires a bit of effort. The price is likely well worth paying, and the due diligence can be done quickly and easily. Just ensure you get good advice at a fair price to speed you along your way to financial stability.