Financial Planning for Professors

Scholar Financial Advising was founded because I believe there is a need for more financial services, specifically financial planning, tailored to the individual. Academia is a prime example of why tailored financial advice makes sense.

Universities and colleges are known as wonderful places to work. Usually stocked with benefits, flexible schedules, high quality of life, etc. However, the unique nature of the position makes it difficult for professors to find financial advice; especially financial advice that takes into account the unique nature of an academic career.

As a professor, I’ve felt the difficulty of dealing with professionals that don’t understand what a career in academia entails. There are intricacies involved in the finances of a professor. From the financial uncertainties of a pre-tenure position to lumpy overload pay and 403b/457 contributions, there are many considerations that may sound foreign to someone who hasn’t had the pleasure of sitting through multiple faculty meetings in one day.

Financial Considerations for Professors

Tenure and Risk

Tenure drastically changes the risk profile of the professor. As an assistant professor, job security is very low until the tenure review. During this time the priorities of the professor from a financial planning standpoint are focused on creating stable cash flows, building safety nets in both savings accounts, debt repayment, and investing.

However, once a successful tenure review has passed, the risk profile takes a massive shift. Now the professor has very strong job security, perhaps the strongest of any profession. This level of job security shifts the risk tolerance of the investment portfolio, regular budgeting, and cash flow needs.

Long Academic Careers

Employment turnover for academia is very low compared to other industries. This has a lot to do with tenure, but also the lifestyle of an academic position and the ability to work on research and teaching options of (mostly) their own choosing. 

Long careers and in return large retirement accounts built over decades of savings are not the ideal setting for traditional financial advisors. Most advisors charge a percentage of assets under management (AUM fee model). In other words, a client gives discretionary authority of their retirement portfolio to an advisor and that advisor charges for example 1% to manage that money every year.

There are many issues with the AUM model, but one is particularly relevant to professors. If the client is still employed by the university, then in most cases, they cannot roll this money out of their retirement account into an account managed by the advisor. This leads to advisors not taking on professors as clients due to the lack of compensation.

Unfortunately, professors and college instructors with tied up retirement savings are then sought out by financial advisors who are paid a commission on the sale of financial products (i.e. insurance) or have to schedule an appointment with the representative assigned to the university account.

The commission based advisors do not charge an AUM fee but instead focus on selling the professor life insurance and annuities that are regularly riddled with conflicts of interest and high behind the scenes fees.

“To professors who end up in front of these (insurance) salespeople, I remind them that nothing is free and this representative is not legally obligated to work in your best interest. Combined with a commission for selling you a financial product, this is a conflict of interest that you cannot afford to entertain”

The advisors assigned to the university by the custodian (typically Fidelity, TIAA, or Vanguard) can be very helpful at helping pick which funds to invest in, but I’ve found these meetings to lack any substance outside of the basic asset allocation. These advisors are there to help answer questions about your retirement account, not to answer questions about your daughter’s 529 plan or come up with a debt repayment strategy.

Academic Consulting

Consulting and side projects are common in academia. This balancing act of scholarly work and industry work is usually well managed by the professor, but handling the financial decisions that change when cash flows from these side endeavours are irregular or become quite large is a task for the financial advisor. These cash flows change investment plans and opportunities, debt repayment schedules, monthly cash flow estimates, and retirement timelines. All topics and considerations that we specialize in here at Scholar Financial Advising.

Student Loans

Devising a debt repayment strategy is a common goals of many people looking for financial advice. With student loans becoming a larger part of American household debt, it is no surprise that professors tend to hold a lot of debt after so many years in school. This can be especially troublesome when these loans are unsubsidized loans from graduate school.

Lumpy Cash Flow

Whether you are teaching some extra courses, received a grant, or finally got reimbursed for that conference three months ago, academic cash flow can be anything but stable. It takes careful financial planning to make sure your accounts stay solvent, your bills continue to be paid, and your financial goals are met.

Made for Professors

With the problems inherent in traditional financial planning fee models and the unique nature of an academic career, I founded Scholar Financial Advising with the goal of providing financial planning to professors and all academics in a way that was fair and in the best interest of the client.

This is why we charge a flat fee for financial plans. There are no conflicts of interest arising from commissions or AUM models. I have a pure pay-for-advice approach to financial planning. We work in your best interest with plans tailored to your life both in and out of the classroom.

I invite you to learn more about our firm on the About page and hope that we have a chance to talk about your financial goals soon.

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Financial Planning Across the United States

While North Carolina is home to many academics and their families, we are a remote first firm offering virtual financial planning with tools and services for document sharing, video conferencing, and screen sharing. So whether you are in North Carolina, Florida, or California, the services we provide are the same. We’d love the chance to speak with you about your financial goals and the services we provide professors.

Our introductory meeting is a brief 20 minutes to find out what you are looking for in a financial advisor and answer any questions you may have about the services we provide. There is absolutely no charge.