This article originally appeared on CitywireUSA.com by Alex Rosenberg.
Some 20 years ago, Carolyn McClanahan was a physician with a question about her boyfriend.
‘In 1996, my now-husband, who was my boyfriend at the time, had inherited some money from his parents that I helped him invest,’ she says. ‘We invested and we thought we were brilliant because we did well – but of course, everybody did well in the mid-1990s to 2000.’
The question came in 2000, after these bountiful years of buoyant markets.
‘He was an engineer, and he didn’t want to go back to being an engineer. He wanted to be a photographer and a track coach,’ she says. ‘And I’m like, “Well, I don’t really want to take care of you financially, so we need to figure out if this money is enough for you to give up your big earnings.”’
McClanahan remembers trying to find a financial planner who could help them answer that question – only to learn that ‘they were all salespeople.’
The journey to answering her own question would lead the Jacksonville, Florida-based McClanahan to not only make a stark career transition but also to transform her voice into one of the most vibrant and urgent in the wealth management industry.
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Back to School
When she told a friend who worked on Wall Street of her predicament, the friend suggested that she either find a CFP certificant or embark on the coursework herself. McClanahan took it up between her medical duties.
After starting her studies in 2000, she opened up her own shop in 2004 and quit her job as an emergency physician a year later.
In 2007, with her own experience fresh in her mind, she switched to a flat-fee model. (The hourly model was a no-go: ‘I talk too much, and I don’t want clients to have a clock ticking in their heads.’)
McClanahan says flat fees accomplish that far better than AUM fees. ‘By charging for the work that you’re doing – which is comprehensive planning, of which investment management is a part – it changes that conversation from investment performance to client values and goals.’
‘Our legacy is to teach other advisors about how to provide comprehensive planning and investment management for a flat fee. Plus, our team supports my other pursuits of educating other advisory firms and the public about the intersections of health and personal finance.’
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It shouldn’t be surprising that McClahanan’s unusual professional background allows her to access unique insights into the world of financial planning.
‘To me, being a doctor is actually pretty darn close to being a financial planner – except that you’re taking care of people’s money, instead of their health,’ she says.
As an advocate of the professionalization of financial planning, she says that switching to hourly or flat fees is a ‘big step’ in the right direction – particularly if it’s a step away from commissions. However, she says that it’s around the other component, ‘the standardization of training,’ where the planning profession ‘still has a long way to go.’
Even after the rigors of medical school, doctors still have to do residencies before they can practice. Not only does financial planning lack the same credentialing bodies, but in the past decade, the CFP Board has reduced and even softened their experience requirements for prospective certificants.
‘In financial planning, there should be a three-year residency,’ McClanahan says. Ideally, ‘you don’t become Board-certified until you have a number of years under your belt with a dedicated training program that has a distinct curriculum.’
‘We need better standardization – and a better duty of care to the client.’
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Beyond the Wallet
McClanahan didn’t enter the planning profession with the intention of bringing her medical knowledge to bear on the field. But as she started working with clients, she soon realized that her experience was remarkably relevant.
‘If you have somebody who is 150 pounds overweight and has diabetes and they smoke, you’re going to plan very differently for that person than for the healthy marathon runner whose family all lived into their 90s,’ she says. ‘So it’s important for advisors to take health into account when helping people plan for their lives.’
‘The first problem that advisors run into is that a lot of them are just uncomfortable talking about health,’ she says. ‘But if you look at all the surveys of what clients worry about in retirement, healthcare costs are huge. So you don’t have to be a doctor, but you do need to know how to communicate. You have to say: “How do you take care of your health?” And you have to understand what their illnesses are. Because it varies. As it is, advisors plan like everybody’s healthy and they’re going to live to 100, and that’s just not the right way to do it.’
McClanahan is taking it upon herself to teach advisors these lessons through her columns for popular publications, her frequent industry conference appearances, and even a forthcoming book.
Read the full article on CitywireUSA.com.