Suze Orman: Follow Her Example – Not Her Advice!

“…We place a lot of “stock” in the so-called “experts” and financial celebrities…. Unfortunately what they do and what they say are of two opposing philosophies.”
– Wealthicity.com

actions-vs-wordsActions Speak Louder Than Words

It seems that the best advice can be learned not from listening to financial corporations and so-called experts, but by watching what they DO.

Banks put billions of dollars into “BOLI” – bank-owned permanent life insurance  – while advising their customers to put their money into savings accounts and CD’s earning next to nothing. In a recent video from the Palm Beach Letter, a finance insider confessed that many financial gurus and professionals have none of their own dollars in the stock market.

In Suze Orman’s case, there is also a distinct gap between what she advises and the actions she takes – a gap is so wide that one blogger stated she must hate the financial advice she doles out through books and TV!

Today, we’ll see how Suze Orman’s advice lines up with her actions on Investing, Entrepreneurship and Life Insurance.

Suze’s Advice on Investing in Stock Market Ups and Downs

In October of 2008, when the stock market was halfway down its disastrous slide, a 50-year-old woman asked Suze for advice.  Stressed out by the unpredictability of the market, she had moved ALL of the money in her retirement accounts from the stock market to cash accounts.

“I sold everything in January, I couldn’t take it, my stomach was in knots,” said the woman. She expressed that she wanted to put her money somewhere “safe” and didn’t know how to tell if it was a good time to get back into the market.

Orman confessed that “we don’t know if the markets are going up or down from here” and that “the hardest thing in life is to time a stock market,” but didn’t hesitate to launch into her typical pro-stock pitch. She urged her guest to get back into the market right away, recommending that she re-invest every dollar she had pulled back into the stock market over the following 12 months. (Ironically, though the woman had already saved many thousands by doing just the opposite!)

“The biggest mistake you will make is if you stop contributing to the stock market,” asserted Suze, while the screen below her emphasized the words in bold letters.

Suze-orman-stock-market-advice

However, just one month later, Orman told a New York Times journalist where she has her OWN money invested….  safe, slow-growing, couldn’t lose-it-if-you-tried municipal bonds! In Orman’s words:

“I buy zero-coupon municipal bonds, and all the bonds I buy are triple-A-rated and insured so that even if the city goes under, I get my money. I take a little lower interest rate to make sure my bonds are 100 percent safe and sound.” 

When the reporter asked if she played the stock market at all, Suze dropped this bomb:

“I have a million dollars in the stock market, because if I lose a million dollars, I don’t personally care.”

Why doesn’t she care? Because at the time, her assets were estimated at about $25 million, plus another $7 million in real estate. 1 million out of 32 million equals about 3%. So Suze is only willing to subject 3% of her assets to the roller-coaster ride of the stock market which she pushes so freely on her audience, who CAN’T afford to lose it!

But even Orman’s assertion that losing a million dollars is POSSIBLE ought to send chills down the spines of every Suze Orman follower.

Suze recommends putting YOUR money at risk and out of your control, but she practices the opposite, ONLY putting what she can easily afford to lose in the stock market.

Suze Orman on Starting a Business

In her 20’s, the waitress who would one day become a wildly successful financial author borrowed $50,000 to start her own restaurant. (Unfortunately, she gave the money to a Merrill Lynch broker who gambled big with it and lost it all before she could even secure a lease on the right property. She subsequently became a broker herself, and after learning how badly she had been taken, she sued her former broker – and won.)

Suze never did open that dream restaurant, but we think she’s done pretty well as an entrepreneur! She hosts the Suze Orman show on CNBC and Sirius, and has produced six popular PBS specials as well. She’s received two Emmys, is a contributing editor to O: The Oprah Magazine. Seven consecutive books have been NY Times best-sellers, and she has made Time’s list of the 100 most influential people – twice.

However, she is less than encouraging to other women entrepreneurs. In another article on Oprah.com,  Suze advises readers that they should NOT start their own business if it means using their own assets such as retirement funds, home equity, or their emergency money. Oh, and they also MUST have have “impeccable credit” and an additional “twelve months operating expenses” on top of their other assets and in addition to their emergency fund before they can even THINK about starting a business!

We appreciate that there is risk involved in starting a business, and that many entrepreneurs fail to save enough, but Suze’s advice is nearly impossible for many to follow, serving only to keep them trapped in jobs.

Marketing and mindset coach Kate Beeder took exception to Orman’s discouraging advice for would-be business owners, posting this protest on Facebook:

“Too old to live your dream???? I recently read an article where Suze Orman advised a woman in her 40’s to not leave her corporate job and go for her entrepreneurial dream. Suze said if the woman was in her 20’s it would be ok, but at this point, she would probably go through the 8 months of savings she had put aside and her 401K. She said that because the woman was in her 40’s she was too old to take this kind of risk. This advice seems to be coming from a place of fear – not power. This made me so mad. Thank goodness I didn’t listen to her!!!!”

Suze is a successful, creative and strategic entrepreneur who has been willing to take risks and push boundaries, but again, what she does and what she recommends are two different things.

As a woman of influence AND as a financial “expert,” why doesn’t Suzi encourage entrepreneurship to help people take control of their own income?

Suze Orman’s Advice on Life Insurance

Suze has stated many times to NEVER buy permanent insurance, and has harshly criticized (and often given misleading information) on whole life policies. She seems unaware of how they can be structured to grow cash value much faster and even more safely than banks and other highly liquid alternatives. Suze even goes so far to state that if a financial advisor tries to sell whole life, universal life, or any permanent insurance, that you should work with a DIFFERENT financial advisor.

So imagine our shock when we learned that the product that Suze specialized in when she was an advisor and was known as a financial expert on was… Single Premium Whole Life!

Single Premium Whole Life was not only the topic of Suze’s first radio interview, it was the product that inspired Suze to develop her first retirement seminars, which she gave tirelessly for years to companies such as Pacific Gas & Electric.

Did she change her mind and “recant” her former recommendations of whole life? It doesn’t appear that way, as in early 2009, a revealing interview with Success.com told this story:

“I started to specialize in an investment called single premium whole life,” Orman says. “I loved it!” She describes the product as a legal tax loophole that allowed people to invest with minimal risk and high returns. “It was one of the greatest investments around.”

Orman opened her own firm in 1987 and used her mastery of single premium whole life to help her new PG&E retirees. “It was the most brilliant thing I’ve ever done, and I made a fortune. And the people made a fortune,” she says.

(Note: Single Premium Whole Life, or SPWL, is a particular kind of whole life that is appropriate in certain situations, but not for those wishing to build and borrow against their cash value. We’ll do a post on SPWL soon.)

Why the dramatic change in advice? We can only guess. Perhaps she is uninformed, as are the great majority of financial advisors, how to structure or utilize a high-cash value life insurance policy that is not a MEC.

Or perhaps… the fact that Orman’s income now comes from books, products, sponsors and affiliates has led her to dramatically change her financial advice.

When questioned why she would endorse new cars (depreciating assets) in a commercial for General Motors,  Suze retorts bluntly, “I’m not in this for charity. This is a business, and anybody who thinks that it’s not a business is an idiot.”

Now riding the more popular “buy term and invest the difference” wave, Orman has business relationships  with Ameritrade (apparently Suze is their most effective promoter), and SelectQuote, “America’s #1 Independent Term Life Sales Agency,” whose banner ad with Suze’s endorsement is prominently displayed on Suze’s blog.  Since SelectQuote does not sell Single Premium Whole Life, they would certainly not partner with Orman if she still recommended the products she used to sell to her clients.

Do What Suze Does (Not What She Says!)

We’re not out to personally attack Suze Orman, and there is much to admire in her no-nonsense financial advice that encourages people to live beneath their means, update their wills, avoid unnecessary fees, and put people before money. However, she is representative of the big problem in the “financial entertainment” industry – her advice is generic, typical, flawed, and exactly what her financial corporate sponsors WANT her to say.

Suze has even been a spokesperson for the FDIC during the credit crisis when Americans were feeling a little panicky about where they could put their money safely. What’s she going to do – tell her millions of fans that Wall Street is a fool’s game and banks aren’t safe,  encouraging a flurry of panicked withdrawals? No, you’ve got to support the status quo if you want airtime on major networks.

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Looking for Financial Advice You Can Trust?

Some of our clients tell us they chose our firm because of Kim Butler’s personal experience with the products she recommends. As she confirmed in an interview with the Palm Beach Letter, Kim owns 29 whole life insurance policies. If you want the honest opinion of someone who practices what they preach, we invite you to contact us  with the particulars of your situation or to learn about our favorite solutions for cash, growth and income.

6 thoughts on “Suze Orman: Follow Her Example – Not Her Advice!”

  1. Would like few specific ideas regarding smart places to invest money. Would like to practice the notion of making my money work for me”
    Any one have advice for me?

    1. Hi Julia,
      You can find a lot of information on this blog, and we would especially recommend downloading our complimentary Prosperity Accelerator Pack. The ebook included, Financial Planning Has Failed, describes some of our favorite investment and saving vehicles. I hope that helps!

      We also encourage you to contact us directly for further information on anything you find in the book or on this website. If you like the idea of saving and investing where your money does not “roller coaster ride” along with the market, we can help!

  2. Reluctant Poster

    Apparently the results of Ms. Orman’s advice to the woman who sold out of the markets has escaped you. If the woman did exactly what Suze said and re-invested the entire amount in a standard, broad index of the market (like the S&P 500) between October, 2008 and October, 2009, she has made far more money on that choice today than anything you or Ms. Orman suggest or have done as an alternative, and certainly not SPWL. It’s not even close–a gain of approx. 143% in 7 years in present, hard assets (not future death benefit). SPWL has its appropriate place in planning, but that’s not an example you want to use.

    1. Thanks Reluctant Poster,

      We agree that whole life has a place in personal economies, but should never be someone’s entire “investment” strategy. We consider a great investment to be something that can achieve consistent double-digit returns without risking principle, which disqualifies both whole life and the stock market as an “investment” we would recommend. (I’m using quotation marks because we don’t classify whole life as an investment, though we often recommend it as an alternate place to store cash in many situations, with much better long-term results than money-market funds, CDs, etc.)

      There are few investments that can beat a great bull run of the market, although very few people have accurate crystal balls and will manage to time the market correctly. Many investors are like the woman in the video who feel they must sell to eliminate the sleepless nights. (See Dalbar.com for “real” market vs. ideal market returns, and don’t forget to adjust returns for taxes and fees.)

      In this article, our focus is more on the fascinating fact that financial celebrities often do not follow their own advice. Our own prosperity economics investment philosophy involves protecting assets rather than subjecting our dollars to unknown risks. The results will be largely predictable and reliable and will often – but not always – beat a bull market run.

    1. Lol, I doubt it’s too late! But definitely some strategies aren’t a fit for everyone, for a variety of reasons. But a lot of people assume that something like whole life is something you have to start young, and that’s not true. See our post on Too Old for Life Insurance?

      You might also be interested in our books (see menu above) – Live Your Life Insurance gives a good idea about strategies that work at different ages. Our other books are not life insurance focused, but you might get something out of Busting the Retirement Lies, it really helps you re-think life and work and finances from a new perspective!

      Thanks for your comment, see our contact page if there is something specific we might be able to help you with.

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