Suze Orman lends money to gold mines. That’s one exceptional way the famed personal finance expert invests her eight-figure wealth, as she tells ThinkAdvisor in an interview. The former financial advisor, whose Suze Orman Media Inc. is itself a veritable gold mine, also revealed a few other surprises.
For instance, though taking jabs at “bad actors,” she sang the praises of financial advisors — ones who have clients’ best interest at heart, especially in helping them to a secure retirement.
In her new book, “The Ultimate Retirement Guide for 50+” (Hay House-Feb. 25 2020), the bestselling author gives her blessing, for the most part, when it comes to hiring an FA: “You’re allowed to move over to the passenger’s seat and have someone else drive.” Also: An advisor is “a wonderful insurance policy if cognitive decline becomes an issue.”
In the interview, Orman, 68, discloses that even she, who was a broker for 17 years, has an FA. She also provides enticing highlights of what’s in her portfolio of 100-150 individual equities.
Further, she discusses how she realizes sizable profits from lending money to gold mines in need of capital and opines about various types of annuities.
Before becoming a “one-woman financial advice powerhouse,” as USA Today dubbed her, Orman was a broker at Merrill Lynch and Prudential, then helmed her own firm, Suze Orman Financial Group.
For the last three years, the host of CNBC’s “The Suze Orman Show,” which aired for 13 seasons, has been semi-retired, residing with wife KT Travis on a private island in the Bahamas. Florida is Orman’s official residence.
The two-time Emmy winner hosts the long-running podcast “Women & Money” and stars in the “Ultimate Retirement Guide” PBS TV special, premiering Feb. 29. An “Ultimate Retirement” audio book, a whopping 12 hours and 30 minutes long (“I go off-script and tell stories”), is upcoming.
ThinkAdvisor recently interviewed Orman, speaking by phone from the Bahamas. All was not upbeat: She forecasts a major stock market downturn at the time of the presidential election in November. “I hope I’m 100% wrong,” she says. “But I will forever hope for the best and prepare for the worst.”
Here are highlights of our conversation:
THINKADVISOR: What do you think of the SEC’s Regulation Best Interest, requiring advisors to disclose conflicts of interest in writing?
I don’t mind if financial advisors have a conflict of interest such as making a commission on something they sell or being paid a percentage of what they sold you. That’s how some advisors work. What I have a problem with is if they’re making money off a horrific investment that they’re even telling the client about.
“I’m 100% supportive” of having a financial advisor if you don’t want to take total responsibility for investing decisions [in retirement]. … Even if you’re capable of handling everything on your own…you’re allowed to move over to the passenger’s seat and have someone else drive,” you write. So are you encouraging readers to hire FAs?
Yes. But you have to know that the advisor is good, the questions to ask, if they’re an investment advisor or charging commissions and what kinds of investments they’re selling you.
“The single most important qualification” for an advisor is that they “must be a fiduciary,” you write. Are you suggesting that investors hire only advisors who are fiduciaries?
No. The problem is that the majority of people have no idea about the advisor they’re doing business with. That’s scary. They should at least have someone who has the best interest of their clients at hand. [Being a fiduciary] is one check-off on a checklist.
Reg BI uses fiduciary language, like “best interest,” even though it doesn’t require FAs to be fiduciaries. Is that misleading?
Regardless of what regulations and rules there are, there will always be advisors who don’t act in the best interest of their clients. Many people write to me: “I just retired, and my financial advisor told me that, rather than investing, the best thing I can do is put my money in a life insurance policy that will give me tax-free income for the rest of my life and growth at the same time.”
And how do you respond?
“That advisor is giving you the worst financial advice I’ve ever heard in my life. I’m begging you not to do it.”
On the other hand, an advisor “can be a wonderful insurance policy that can protect you if cognitive decline becomes an issue,” you write. Please elaborate.
When I would visit my mother [since deceased] in an independent living facility, I’d see older people being taken advantage of by their aides and women [exploited] by their younger boyfriends. They’d start to take over their money and spend it all on themselves. One very wealthy woman had a stroke at 80, at which point, her boyfriend, in his 70s, moved in with her.
And he took advantage of her?
If she didn’t have a financial advisor noticing that [large amounts of] money were [atypically] coming out of her account, the boyfriend would have taken her for everything she had. So the advisor made a few calls, and we were alerted. We put all her money into a trust and changed everything so she no longer had access to her money.
You yourself have worked with a financial advisor for 20 years now. What’s his role, and do you charge him with investing much of your wealth?
I have a significant amount of money with John. Because I have between 100 and 150 individual stocks, it’s very difficult for me to watch all of them when I’m out of the country, which is a lot of the time.
So have you given John discretion?
No. I give him instructions: “Here’s what I want you to do, and here’s how you are to do it.” He then calls me wherever I am and says, for instance, “You have a stock that just went up 40% in the past two weeks. What do you want to do?”
Any other reason for your having an FA?
It’s good for me to have somebody to talk to. Every once in a while, he’ll bring me an idea, and I’ll say either, “Nah, I don’t like it” or “OK, let’s do it” — and I’ll tell him what to buy.
Your book emphasizes the need for guaranteed income in retirement. What’s one good way to generate that?
Take a small portion of your money and buy an income annuity. I also like single-premium deferred annuities.
What’s your take on variable annuities?
In most cases, a variable annuity is one of the worst investments out there. But because the major companies have massive money to market them, so many people fall prey to them.