When Suze Orman gained popularity several years ago, it was very refreshing to me to see a new face and hear an unconventional voice coming from the financial services industry.  

In the still heavily male-dominated financial industry, I have been especially pleased to see a woman's advice accepted and taken seriously by people of all ages and in all stages of life, regardless of whether they have a lot of wealth or only a little. 

I admire Suze's wonderful ability to break down complicated products and cut through industry jargon. 

However, I think investors need to be wary of the information and advice she dispenses—and the example she sets.

What's To Like About Suze

While Suze is a licensed insurance salesperson, she has been openly critical of complicated, expensive insurance products. She has warned consumers about the high commissions and high costs built into variable universal life insurance products. She has advocated substituting low-cost term insurance and has reminded her readers and listeners that "insurance is not an investment." 

This unusually candid commentary is especially welcome coming from somebody who could profit from selling expensive products but who chooses not to do so because she believes those products are seldom in the best interests of consumers. (I share that belief, by the way.) 

When markets are down, Suze encourages people to continue adding to their retirement funds, even when it doesn't feel comfortable.

In easy-to-follow language, she shows how to make a written plan to pay off debts. As virtually everybody in the financial services business knows, people who follow written plans are much more likely to be successful than those who don't.  

For all this and more, I encourage my clients to read Suze. But I advise them to avoid acting on her investment advice. 

What's Not To Like About Suze

Suze has made some bad investment calls, especially in the past 18 months, and I don't know why. Perhaps she is under pressure to become a guru. Or it's possible that, like many people, she isn't always able to muster the wisdom, courage and discipline to stick to her own stated beliefs. 

Here's an example: Suze used to advocate buying and holding only index funds, although not with the same degree of diversification that we recommend. Then in June 2008, she was interviewed by Eric Schurenberg, who was then a "Money" magazine editor.

Introducing the interview, Schurenberg said of Suze: "She possesses an encyclopedic command of financial planning and her advice is always clear and generally unimpeachable."

Despite that glowing description, I think many people who took her advice last summer would find it very impeachable.

In the interview, Suze told Schurenberg that even though all the evidence indicated index funds outperform 80 percent of managed funds, "Today I think you have to be more active." She recommended exchange-traded funds specializing in emerging markets, U.S. oil and metals & mining. 

And what happened to investors who took those recommendations? From the time of her interview in June 2008, these sectors went down 44 percent, 71 percent and 71 percent, respectively, through the end of the year. Certainly this was not a favorable period for investing, but her previously recommended funds, the Vanguard 500 Index and Total Stock Market Index, dropped 28 percent and 29 percent, respectively, in that same time frame. 

Of course anyone who recommends specific investments will be wrong from time to time. But abandoning a pair of relatively conservative index funds in order to chase volatile sectors with recent hot performance is not remotely close to what I would call prudent advice.  

Suze On Bonds

Here's a second example: In the same interview, Suze said: "You should invest in bonds only when interest rates are going down." 

Now that is a very interesting piece of advice, on a par with "Invest only in stocks that are making money." 

I am surprised that a journalist as supposedly savvy as Schurenberg let that comment slip by without any follow-up, as if it were the most natural point of view in the world.

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