Suze Orman Says This Is the Type of Financial Advisor You Should Have (And What They Should Do With Your Money)
Written by
Karen Doyle
Edited by
Zuri Anderson
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Suze Orman is a self-made personal finance expert, bestselling author and podcast host who became a stockbroker after she was taken advantage of by one. Orman gives advice on a lot of different financial situations, but one she is passionate about is knowing whether you need a financial advisor — and how to find a good one.
Here’s what Suze Orman says about the type of financial advisor you should have, and what they should do with your money.
Pay a Percentage of Assets Under Management
On a recent episode of “The Suze Orman Show,” a viewer emailed to ask if an annual fee of 0.09% as too much for a financial advisor to charge. Orman noted that this is a common way for advisors to get paid, and it’s also motivating for the advisor.
“There are many people out there known as registered investment advisors that charge a percentage of money under management,” said Orman. “Let’s just say you gave a registered investment advisor $100,000. If they are being paid 0.09% on the $100,000, fine. If they take that $100,000 to $300,000, now they’re making more money. They’re being paid 0.09% on $300,000.
“But if they take that $100,000 to $50,000, now they’re only being paid 0.09% on $50,000. So, you make money, they make more money. You lose money, they make less money. I like how that works.”
Note that a fee of 0.09%, or 9 basis points, is very low, and the person asking the question probably meant 0.9%, or 90 basis points. More on this below.
They Should Be Investing in Individual Stocks
Orman goes on to specify that a registered investment advisor who is charging a percentage of assets under management should be investing your money in individual stocks, not mutual funds or ETFs.
“(They) should only be investing in individual stocks for you, not putting you into mutual funds where there are heavy expense ratios because then you’re paying double, or they’re charging you commissions or loads on mutual funds”, she said.
How To Find a Good Financial Advisor
Once you’ve decided you want to work with a financial advisor, the next step is to find the right one.
A good way to start is by asking trusted friends and family members. A personal recommendation from someone the advisor works with is better than all the advertising in the world. Collect a few names from people you know, and add in a Google search if you have to.
Once you’ve narrowed the field to a few, look them up on BrokerCheck. This tool is from the Financial Industry Regulatory Authority, which regulates financial advisors. This tool will give you the advisor’s employment history, registrations, and regulatory actions.
When you have two or three names that look like good candidates, give them a call. Ask for an introductory meeting to discuss your situation. This can be a phone call, video conference or in-person meeting.
When you meet, pay attention to how the advisor talks and listens to you. They should ask questions about your goals and objectives — what you want your money to do for you. They should ask about how much investing experience you have and how much risk you feel comfortable taking on.
When they talk to you, they should explain what they do and how they do it in terms that you can understand. When the meeting ends, you should know what kinds of investments they would put you in, how often you should expect to hear from them, and, maybe most importantly, how much they charge.
In the example from Suze Orman’s show, the viewer asked about a fee of 0.09%, which may be incorrect. Most RIAs will charge in the neighborhood of 1%, so it’s likely the person asking this question actually meant 90 basis points, or 0.9%. Investors with larger portfolios — say, over $1 million — may pay a smaller percentage, but ask if the advisor uses a sliding scale.
Finding the right financial advisor is a good way to take some of the work of managing your money off your plate, but it’s still important for you to stay involved. Make sure you understand how your investments are being managed, ask questions and meet with your advisor regularly.
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