What Suze Orman Really Thinks of Financial Advisors

If you could peek at Suze Orman’s personal portfolio, here’s some of what you’d see: Big positions embracing about a dozen cannabis companies. “I believe that in the future, this will be a tremendous investment,” the personal finance expert tells ThinkAdvisor in an interview, in which she reveals more about her investments and serves up a candid critique of financial advisors.

Seventeen years a stockbroker at Merrill Lynch, Prudential Bache and head of her own firm before morphing into a household name as a global personal finance expert, Orman, 67, is pumped up about digital advice but largely thumbs-down on financial advisors. Many fail to serve clients’ needs, especially those of women, she argues. Why? Because FAs have their own “horrific relationship[s] with money.”

Orman is famed for demystifying investing. Her focus is largely on paying down credit card debt and dollar-cost-averaging — “the secret sauce to making money,” as she calls it. She hosted “The Suze Orman Show” on CNBC for 13 years and is the author of nine consecutive New York Times bestsellers.

In the interview, the Chicago native talks about her experiences as a wirehouse advisor — including selling annuities — beginning in 1980, and later, heading her own Suze Orman Financial Group. Also: Why she left Merrill Lynch for Prudential Bache and why she sued Merrill — not in that order and not for the same reason.

Orman semi-retired two years ago to a Florida condo and a private island in the Bahamas. But that doesn’t mean she exited the spotlight. Her newest book is a revised, updated edition of “Women & Money” (Spiegel & Grau, Sept. 2018), which features a reworked “Financial Empowerment Plan” and a “Bonus Section: Investing on Your Own.”

(Related: The Annuity 99% of Clients Should Avoid (and One That’s Better))

Booked for about 15 motivational speaking engagements in 2019, Orman resumes her “Women and Money” podcast in January. In one recent week, she turned down offers to star in three different TV shows.

In the interview, she offers guidance to both younger investors and pre-retirees, and stresses the type of effective advice FAs should provide clients, especially how they can help during a correction, such as the current one.

ThinkAdvisor recently interviewed Orman, speaking from her home in the Bahamas, where she and wife Kathy “KT” Travis land big fish — wahoos — from their Boston Whaler.

Here are highlights of our conversation:

THINKADVISOR: Do you take your own financial advice?

SUZE ORMAN: You bet I do!

What’s in your personal portfolio?

To this day, about 95% of it is still in municipal bonds. When interest rates were a lot higher, I could lock up 5-1/2% tax free. Because I’m a Florida resident, I was able to diversify throughout the U.S. and not have to pay state income tax [anywhere] on these bonds, making them federal and state income tax-free.

What else do you invest in?

In my growth position and my pension account, I have probably $5 million or $10 million in individual stocks. I recently invested a serious sum of money in about 12 cannabis companies across the board because I believe that in the future, this will be a tremendous investment. I have a considerable amount in Amazon and [other] stocks [in that sector], which I still love to this day. I still have Netflix. I have a variety of stocks across the board — quite a few of them, probably about 100.

Isn’t it risky to invest that much in individual equities?

If I lost all of that money, it wouldn’t affect my life on any level. So for me, it’s not a risk. And this is something I don’t plan to touch for 10, 15, 20 years. These aren’t stocks that I plan to trade. Some of them I’ve watched go from $20 to $50 in a month and back down to $20. But I didn’t buy them to go from $20 to $50. I bought them to go to $200 or $300 or $500. Amazon, for instance, I didn’t buy at $20 to sell at $50. You don’t buy a great, great stock to just double your money. You buy it to create tremendous wealth for yourself.

“The financial services industry makes investing seem more complicated than it is (in the hope that you will hire an advisor),” you write. Please elaborate.

Watch CNBC. Do you understand the little tickers they have going by, like in a foreign language? Nobody even uses ticker tapes any more. People are afraid that investing is too complicated. I’m talking about the majority of investors. They’re saying to an advisor: “Besides my 401(k) or Roth IRA, can you invest $5,000 a year for me?” So, at that point, they would be buying an index fund.

Wouldn’t an advisor be of help, then?

They don’t need a stockbroker to buy an index fund or an exchange-traded index fund. All they need to do is pay off their debt; put extra money toward the mortgage on their home, if they’re going to stay there; and dollar-cost-average every month into an S&P 500 index fund — maybe an international one. In the majority of cases, over time, their returns will be equally as great as if a manager is managing their money.

You write that women don’t have a healthy relationship with money. What can financial advisors do to help?

Most financial advisors also have a horrific relationship with money, in my opinion. I’m almost willing to bet that the majority of advisors telling you to do A, B, C and D haven’t themselves done A, B, C and D. Therefore, it’s very difficult for them to talk to women in a way they can understand and relate to about money when they don’t even talk to themselves that way.

But how can advisors better serve women?

Most financial advisors don’t want to make you independent of them. When I was a financial advisor with my own company, my job was to make clients as financially independent of me as possible and develop their own ability to manage their money. Even when I worked for Merrill Lynch and, especially, for Prudential Bache, I never sold a mutual fund.

Really!

If someone wanted to buy one, I gave them an application for Charles Schwab and said, “Either open an account with Schwab and buy no-load mutual funds, or open an account at Vanguard and buy a Standard & Poor’s 500 index fund. You’re not going to be paying me to sell you a loaded mutual fund when you can buy one without paying a commission.

Do you ever give financial advice to your personal friends?

Yes. About three weeks ago, I was talking with a friend who had a lot of money in Apple and Netflix. I told her that those stocks have had tremendous gains and that, because they’re not in her retirement accounts, “Why don’t you sell them? You can sell them all without paying a penny in taxes.” [She had made no income and was in the 0% capital gains tax bracket.] So she sold everything.

What did she do with the proceeds?

Now that everything has gone down considerably, I told her, “You might want to buy back in now.” That’s the type of advice you want a financial advisor to be able to give — not “How much money do you have, and therefore you should buy [such and such].” Rather, “What are your needs in your life? What do you own? What do you owe? [etc.]

In “Women & Money,” you state that “retirement planning is the most devilish of financial goals.” What’s devilish?

You have a good angel on one shoulder and the devil on the other. The angel is the fear of getting older. It’s the reality of life. The devil is the one saying, “You’re never going to get older. Don’t worry. It’s fine. Just go for it. You’re never going to get divorced or lose your job.” It’s the hope-for-the-best-and-plan-for-the-best scenario versus hope for the best and plan for the worst.

I interviewed writer-director Travis Shakespeare about his upcoming film on FIRE — “Financial Independence, Retire Early.” He said the movement more accurately should be called “No Longer Need Mandatory Work to Survive.” You’ve said that you “hate” the idea of FIRE.” Then you wrote that you’re “so on the same page” with the FIRE principle of “stopping work that you don’t like … and finding work that … fulfills you.” What’s your bottom-line take?

Originally people told me FIRE was: Make all the money you possibly can and at 28 or 29, retire and never work again as long as you live. I thought that was the most ridiculous thing I’ve ever heard in my life, and still do.

The idea is that FIRE walkers need to save 50% to 70% of their current salary for about 10 to 15 years and invest 25 times their annual expenses so that they can retire one day in their chosen lifestyle.

How do you do that! How big is your salary that after taxes you can save [so much]! How are they sending their kids to school [etc.]? None of it makes sense to me. I don’t know anybody who can save 70% of what they’re making when they’re 28 years old. [Followers] are literally burning up with FIRE: If they were making more than 4% in dividends with their investing in the past month or two, [I’m sure] they’re now seriously eating into their principal. So I really don’t know what [the movement] is talking about. But more power to them! Not my problem.