Get-Rich-Quick Schemes
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Hi everyone! I’m the assistant managing editor at Rep., and I am working on a story regarding the impact of
financial self-help programs on current or prospective clients for financial advisors. Would anyone be willing to talk to me regarding his/her experience with this? Have you lost any clients because they believe they can do it better themselves? I’d appreciate any insight. Thanks!
My only experience has been 2 clients who loaned substantial money to local business people. Both lost over 100k. 1 was for a franchised restaurant and another was a telecommunication startup. Its funny how you can show people a long history of succesful returns in a mutual fund and their skeptical, but ask for 100k check to start a restaurant…and HELL YES…where do we sign.
It seems like a lot of potential clients are being sent the message that they can handle their finances without any professional expertise.
Can you clarify editor28 - are you talking about the typical, everyday ‘you can invest yourself’ discount brokerage type of thing, or are you talking about actual ‘get rich quick’ schemes? Two quite different animals, in my opinion.
Sure. I recently attended the Wealth Expo at the Javitz Center, and sat in on some of the seminars. Many seem legit…many don’t. Either way, when I say “get-rich-quick,” I’m referring to a number of different situations: 1.)The power of positive thinking (i.e. “The Secret”), 2.) shelling out thousands for a DIY computer program that will help you invest without help, and 3.) “Investment Opportunities” that seem completely outlandish but manage to find investors.
Why do you think so many men and woman are spending money without any knowledge?
A good friend has a client that invested about 15K (plus 10K of "seed money") in one of those day trading systems. My friend picked up this client about 6 months into his "venture". When he asked him how it was going, his response was "not good". Of the original 25K that he started with (15K went into the "system", the other 10 as capital), he was down to just under $2K. And you know what he says? "I'm just starting to catch on to this. If I just hit a couple good trades I'll make my money back." Yeah, right. I didn't think people really did this stuff. But there ya go. Oh yeah, this was this guy's only cash he had (other than his retirement).Sure. I recently attended the Wealth Expo at the Javitz Center, and sat in on some of the seminars. Many seem legit…many don’t. Either way, when I say “get-rich-quick,” I’m referring to a number of different situations: 1.)The power of positive thinking (i.e. “The Secret”), 2.) shelling out thousands for a DIY computer program that will help you invest without help, and 3.) “Investment Opportunities” that seem completely outlandish but manage to find investors.
Why do you think so many men and woman are spending money without any knowledge?
Go to the Eite Trader forum and read up on prop trading. You’ll get more fodder than you can use in a lifetime for such a story.
[quote=Gaddock]Go to the Eite Trader forum and read up on prop trading. You’ll get more fodder than you can use in a lifetime for such a story.[/quote]
Took the words outta my mouth Gad. IMO there’s nothing wrong with prop-trading although you have to be careful of the “bad” firms.
Software programs like WizeTrade are a completely different story, you WILL NOT make any money with that crap, paying $10k for indicators you can setup for free on quotetracker is just incredibly dumb. But PT Barnum was no idiot and they continue to stick around even branching out into Forex…whole 'nother can of worms.
The way I look at it, in most cases, the market is the gold rush of 1849 and the prop shops are the brothels and hardware stores.
Who made the money? NOTHING against the prop shops as we are all big boys and 100% responsible for our own choices and actions BUT holy smoke there are some doosey outlandish peices crap being sold to the fools who don't want to do their own panning.[quote=Gaddock]The way I look at it, in most cases, the market is the gold rush of 1849 and the prop shops are the brothels and hardware stores.
Who made the money? NOTHING against the prop shops as we are all big boys and 100% responsible for our own choices and actions BUT holy smoke there are some doosey outlandish peices crap being sold to the fools who don't want to do their own panning. [/quote]Agreed, for every good prop firm there are 100 bad ones who are only out to line their own pockets with low-reward strategies that just generate high commish for the owners.
I dunno where to begin here. My father-in-law got into the investment game in the last few years after a settlement from a family member. In addition to a crook broker at a major wire house firm and a “can do” attitude he decided to control his fate with Fidelity or Scwab I believe. Long story short, he ends up losing 4% of his portfolio on his own last year (a much better year than today’s!). He then shares with me his retirement plan (I hate people who tell rather than ask) and I had to kindly inform him it was a no-go based on his situation (expenditures, savings etc). He ignores my advice and low and behold two things occur shortly after: He gets let go after years with his company and is left to dry with today’s market condition.
Brutal. At least I can help his daughter (my wife).Investools is another firm. They are great marketers, but I am told their clients fall ways hort on expectations.
Simply, put, you cannot cut corners.I just got home from a “seminar” that one of my clients asked me to go to.
If an agent can convince a property owner to attach a covenant to their property that states all sellers of that property for the nest 99 years must pay 100 basis point conveyance, the agent will keep 10bps, and the owner of the covenant 50bps. The rest goes to the company with the patent pending for this process and they supposedly give some to charity. Anyone can become an agent with no cash investment. They can recruit a down-line, though the presenters didn't use that line, and will be paid a percentage of all transfers that the down-line sells. Two of the three presenters were respected attorneys. They claim that there is nothing illegal and nothing to risk. I'm a believer that if it sounds too good to be true it probably is. Has anyone ever heard of this?So I hear about this Freedom Investment Club group - ficinvestors.com - nutshell version: based in Canada. Thought about doing things like prospectuses, filings with the SEC, but decided against it since “it just takes too long and they need to be able to do things quickly”. With your membership, you have “access” to all kinds of things, discount programs, etc., as well as the opportunity to invest in their “deals”. Went on and on about people working at Subway in Alberta or Calgary I forget which, wherever it is by the tar sands/oil fields (that were profiled on 60 Minutes) making $50,000/year, in other words, everyone’s getting rich. They put developments together, buy land/build condos/whatever, sell, profit. Advertised annual returns of 28%, spoke about all their profits in uranium (averaged over 150%). Somehow I missed the math on that. How do you make 150% in uranium and average 28%? Doesn’t that mean you lost a whole boatload of dough? Oh, they didn’t talk about it.
It was just like a cult following. 500 people in the room. Presenter used standard “training”/sales techniques, end price for “membership” $999 that night and that night only, please don’t rush the stage (where they had the Kelly girls signing folks up). Seriously, I would say about 300 people signed up. Tell me I didn’t feel like a clown!
Oh, and you get a “financial plan” for only $1,500, it’s a discounted rate because of your membership. One guy, doing personalized plans for their (they said) 5,000 members?
Homey don’t think so!
The issue that is leading to get-rich-quick is really not all that new. First add desperate people to the bowl, add in just one past bad ‘securities’ investment past experience to turn them off to traditonal investments, add a pinch of ground up greed, water, then get the mixers spinning and you have a fresh batch of dough to mold. Now we have had a lot of get rich quick schemes in our region. The new pitch is ‘this is not a get rich quick scheme’ you have to put in a lot of sweat equity, and a few thousand to buy our program of course. What have I seen: One client took $50k to trade options part time, lost all $50k and came back to me, told me they know it works… I did not take them back as a client. At what point of losing their $50k did they realize it ‘worked?’ Sure, options work, but novice traders using options, that is a disaster waiting to happen. Another client in more of an entreprenuer mode lost over $200k investing about $10k monthly into a business. Nothing get rich quick about it, but they thought they would get rich quick. Real estate in IRA’s so clients can get their free money! Those are tax nightmares just waiting to blow up with UBI violations. Multi level marketing appeals to countless people who really don’t want to work, again, not so much get rich quick, but get rich EASY.
I posted this in the Lounge, but it also fits here. The prospects coming to me asking about Iraqi Dinar are expecting to get rich quick. I try to give them perspective, but the get rich quick draw is strong for them. I have been trying to find legitimate research reports on the topic. I know AGE had a report back in 2006, but I have not found anything else. If you know of something please cite a reference. By the way I don’t recommend this to my clients.
A few months ago I had a walk-in client state that he would like to put together a financial plan for "Between $500,00 and $1 mil" I told him I'd love to but where is the money coming from? He said a friend is giving it to him within a month or so. I said, "Who's this friend, I'd love to meet them." He said "It's a she, and she lives in Iran." I asked, "How did you meet this friend?" He says, "She emailed me on the internet, I've never met her." I said, "Frank.. if you had a billion dollars, would you email a random person and give them a million dollars?" He said "No." I haven't seen him since but I swear to you he was dead serious and the look of devastation that swept over his face was sad to see when he realized there was no money coming. As stupid as it may seem... people actually do fall for the Nigerian Prince email story and its variations.
A good friend has a client that invested about 15K (plus 10K of "seed money") in one of those day trading systems. My friend picked up this client about 6 months into his "venture". When he asked him how it was going, his response was "not good". Of the original 25K that he started with (15K went into the "system", the other 10 as capital), he was down to just under $2K. And you know what he says? "I'm just starting to catch on to this. If I just hit a couple good trades I'll make my money back." Yeah, right. I didn't think people really did this stuff. But there ya go. Oh yeah, this was this guy's only cash he had (other than his retirement).[/quote] "If I just get a couple more blackjacks, I get my money back..."[quote=editor28]Sure. I recently attended the Wealth Expo at the Javitz Center, and sat in on some of the seminars. Many seem legit…many don’t. Either way, when I say “get-rich-quick,” I’m referring to a number of different situations: 1.)The power of positive thinking (i.e. “The Secret”), 2.) shelling out thousands for a DIY computer program that will help you invest without help, and 3.) “Investment Opportunities” that seem completely outlandish but manage to find investors.
Why do you think so many men and woman are spending money without any knowledge?