NOTE TO THOSE RESEARCHING JOBS, CAREERS, MLMs
(multi-level marketing organizations, direct sellers, network
marketers, viral marketers, consumer direct marketers, dual
marketers, etc.) ,
SCAMS, FRAUDS, OR PYRAMID SCHEMES:
If you stumbled onto this site during your research,
you might as well read it in its entirety. Many of
the points apply to you as well. At a bare minimum read this
page and my article "ALL
YOU NEED TO KNOW ABOUT MLM: IS MLM A SCAM?".
There is plenty of reason to be wary of any company utilizing
DISCLAIMER # MILLION:
The decision to pursue employment with
any financial services company is yours and yours alone. The
guidelines below represent my opinions, which you may discount
as you please and which should under no circumstances be construed
as taking the place of an attorney's legal advice. It's up
to you to do your own research and make your own decisions.
is a summary of what you can do to avoid being a victim of a scammer.
reputable companies hire for a single position, expect the employee
to remain in that capacity or advance only minimally (you shouldn't
encroach on your superior's job!), and pay in line with the employee's
education and experience. It would
be nice if a job hunter inexperienced in
the financial services industry could find an employer/savior who
would recognize vague characteristics like his "potential,
ambition, motivation, drive, persistence," etc. (instead of
simply his education/experience) and train him straight up to management,
but it isn't realistic for the vast majority by far. Not
everyone within an organization can be a "manager," and
each person who cannot advance because the oversaturated job market
is unable to handle any more of his product will eventually drop
out, threatening collapse of the pyramid.
you should be suspicious of any call out of the blue claiming
that you look like a great fit for an exciting new job opportunity.
It's likely a rep who found your resume on a job search site and
is being offered incentives by his firm to recruit (review the "Training"
page). To avoid resume-miners, use the job search site's option
to keep your contact information private so that the only people
contacting you will be doing so in response to your query about
their specific open position.
ads can still be deceiving. Even if the company offers benefits,
you may still find yourself paying for them 100%!
Beware job representations and ads that include these
phrases and characteristics:
recruiting for "Financial consultants, finance
management trainees/associates, financial services sales professionals,
financial executives, investment executives, financial planners,
investment advisors, financial advisors, branch managers,
etc. -- Will Train, New Grads Welcome, Six-Figure (or
Unlimited) Income Potential." If the compensation
advertised for the target market's education and experience
sounds to good to be true, it usually is. The six-figure hook
needn't be blatant; it may simply offer an income that is unusual
for the target market sought and save the "hook" for
the interview or even employment stage.
Advancement Opportunities / Upward Mobility."
experience requirements, such as "self-starter,
has potential, ambition, motivation, drive, persistence, trainable,
coachable, etc." If the firm isn't seeking
experienced reps with multiple years in the industry, ask yourself
While it may seem to indicate a commitment to training and promoting
you, it may also indicate that recruiting is focused on inexperienced
and unsophisticated targets, and avoidance of experienced personnel
who might see through a scam.
opportunity for advancement," "become a branch manager."
If everybody's target position is a single class of positions,
watch out. A branch manager position may be a legitimate job
as a full-time employee, or it may be a business opportunity
(independent contractor -- NOT an employee). Review the difference
in the "Independent
Contractor" section of this site.
your own boss, set your own hours (flexible work schedule),
work from home." See above.
telemarketing." It may be legit, but it may be
a clever way of saying that the marketing program will not involve
cold-calling -- you'll be marketing to your "warm market"
of friends and family. News Flash: If you're calling to sell
them something, it's still telemarketing. Review the "Prospecting"
section of this site.
Great, then what DOES the position entail?! I guarantee it isn't
Position is usually full commission.
plus commission." Might be legit, but "salary"
(base) may be a draw (loan against your future earnings)
that you'll have to repay. Draw + commission is essentially
full commission, and is NOT a FULL-TIME EMPLOYEE position. If
you see "salary", keep in mind that salaries are paid
to employees, not independent contractors, and it may be advertising
deceptively and misclassifying employees.
salary range indicated.
If the firm is unwilling to advertise a salary range, they may
be avoiding litigation based on false advertising. Chances are
the only salary range you'll ever hear will be verbal, and you'll
never achieve it. Might as well avoid these.
If they quote a figure such as "$50,000/year first-year
management income", that is NOT what you will be earning
when you start, it is for a manager class that you must attain
first, and few people may even make that class.
commensurate with experience." Might be a full-time
employee position, or might be a full-commission independent
contractor position masquerading as one.
training." Are they providing a real salary, or
is the salary a draw? (Draw + commission is full commission.)
such as trips to exotic places. Scammers often
hold out trips to exotic locales as rewards for sales goals,
but these trips are often group excursions to sales
conferences, paid for by the reps - plus the
reps will pay taxes on these!
sense of urgency in an ad, as if it is a limited
opportunity that cannot be missed. Trust me, unless the law
catches up, the opportunity WILL be here tomorrow!
indicating explosive or aggressive expansion in
your area. The firm may legitimately expanding, or it may simply
be churning through recruits because the market is already hypersaturated.
same company that advertises for new recruits every single month,
year after year. The
Consumerist quotes Rhonda Abrams of USA Today as summing
it up well: "I
view most MLM programs as thinly-disguised schemes
to find customers, not build businesses."
They may mine college campus career fairs in particular. The
firm may explain away continual hiring as due to growth, but
you should take care. There is always the possibility that they're
lying about growth and are just replacing those reps that drop
interested in the position? KEEP
THE ORIGINAL AD, because there's one more:
positions or business opportunity positions listed in "Employment"
sections of newspapers or other job search media. Commission-only
and independent contractor positions should be confined to the
SALES and BUSINESS OPPORTUNITY sections, since they are not
hiring actual employees. Scammers often deliberately
advertise under the guise that the job is a stable position
as an employee. Report ads that
misrepresent business opportunities as legitimate jobs to the
medium where you found them! If a scammer can't
recruit, his scam will be forced to end! You
may also need the original ad in the event you need to sue for
false advertising and misrepresentation, particularly if the
company advertises the position as a full time employee
position with a salary in an income range that you
normally wouldn't qualify for. Base + commission
usually means draw + commission, which is A FULL COMMISSION
POSITION with NO SALARY. Be aware that if
they advertise a salary, you should most likely be classified
as an employee and not an independent contractor anyway!
THE INTERVIEW & PRE-EMPLOYMENT PROCESS
possible, try to get everything below addressed over the phone so
you don't waste your time at an interview for a job you really don't
want. If you find yourself serious about the opportunity, GET
EVERYTHING YOU CAN IN WRITING! If it isn't in writing,
do NOT consider it in making your decision to accept the job.
are a few things to learn about as quickly as possible:
EMPLOYMENT STATUS. Might as well start here first:
Will you be an employee or independent contractor?
reputable firms will hire you as an employee. Some scammers may
not be direct in your first interview about your status and what
it entails; if they don't offer this information, ASK. If you're
told you'll be an independent contractor (IC) or direct seller,
take great care and be sure you understand and are prepared for
the costs you will incur, which may include but are not confined
& professional licenses, bonding.
dental, unemployment, worker's compensation and life insurances;
401(k) & pension plans. Some scammers intimate that benefits
are provided but later inform you that although they are provided,
you will pay every cent! Additionally, they may be contingent
upon sales goals that few reps (if any) meet.
(Errors & Omissions) insurance.
show booths & seminars.
(income, self-employment). Note that prizes, awards, & gifts
are taxable if you are classified by the IRS as a direct seller.
space, furniture, equipment, and maintenance.
and phone bills.
literature and printing.
expenses. (Yes, you assume liability as an IC!)
direct seller is similar to an independent contractor
for tax purposes; both are considered self-employed. Different
regulatory agencies determine your classification, not your "employer"
-- even if you agreed to such an employment relationship in your
Contractor" section of this site!
PAY. If you're to be considered an employee,
you are probably safe. If you're to be considered an independent
contractor, forget the old adage about not asking about pay
at your first interview! You need to know what sort of income
to expect. If the firm tries early on to sell an inexperienced
new grad a "six-figure income" or one you normally wouldn't
qualify for, BEWARE (and probably RUN).
the pay full commission or base + commission? If it's
full commission, be prepared for the risks. If there is a base,
find out what it is. It should be standard. If the firm tries
to tell you that the base is built around what you previously
earned, RUN. Make sure you understand whether the base is a
salary paid by the firm or a draw against
your own future commissions (loan).
for the firm's published sales targets and
figures for first-year, second-year, and even five-year median
net rep incomes and determine if you can reasonably
make do on that. The figure should NOT simply be an average
of all reps' incomes that year, because a top-weighted compensation
plan rewards those at the tiny top a vast deal more than those
at the huge bottom and will seriously throw off the average.
A first-year median net rep income figure will be the MEDIAN
(not average) income the first-year rep NETTED (not grossed),
and so on for the other years. Published
sales targets are important because they may be only $12,000/year
gross for an average rep while the firm verbally promotes
average incomes of $50K/year (likely much more). If the published
version says $12k, it's a good bet that that's what you'll expect,
and that's gross before your expenses are taken out of it. Remember,
the firm is not likely to lie on official literature, since
this literature is often their defense in court. Past average
net income figures are important because you need to see what
an average rep (not just the top earners) really made over time.
Take these documents home and file them; you may need them later
if you're hitting the published sales targets and still aren't
earning the income you've been led to expect (much less that
magical income figure they promoted).
what the firm intends to do to help you reach published sales
targets. Will it be providing qualified leads? If you're
told you will be using "friends and family" as your
"practice leads", BEWARE! If you are required to turn
over your own leads ("friends and family") as necessary
to your employment, BEWARE! Review the section on "Prospecting."
Will it aid reps in running trade shows to generate leads? Does
it advertise? Will the firm permit you to advertise locally
and approve and print a campaign you suggest for your own use?
Will it permit you to hold seminars for prospective clients?
Keep in mind that all materials must be approved by
the compliance department lest you and the firm eat a big fine.
LICENSING & TRAINING. You will need the securities
and insurance licenses at a minimum to survive financially.
If they advise you to "learn the basics" first before
earning an insurance license, BEWARE. If the firm advertises free
training, make sure that training is really free and not masked
as costs of licensing or criminal background checks. If
the firm asks you to pay anything up front, beware --
even if the firm promises to reimburse you upon completion
of some goal. Most reputable firms will pay up front
any expenses associated with hiring you. You may ask the firm
to sponsor you for free while you self-study. If the
firm does expect you to pay for licensing, check FINRA's
rates for licenses you need and don't overpay. If the training
is to cost you, take care to examine how this training has benefited
their current work force. The training can't be worth
much if the turnover is high. (More on this in #B4, Turnover.)
Make sure you know how long to expect to complete an unpaid training
program and subsequent licensing and whether you can survive financially
during that time. Don't accept an answer of "it all depends
on you"; ask how long reps average in completing the program
and getting licensed. That figure should include reps who failed
the tests and dropped out.
TURNOVER. Get in writing how many reps
actually achieved their goals during the previous years and have
thus stayed a year or more versus how many quit. Listen for excuses
such as "it's a tough business that few excel at." That's
rubbish. You and the other recruits
supposedly heard all the risks and are prepared, so there's no
reason to fail. Liars will lie, but you need
this figure in front of you in the event you need to sue over
that lie. There isn't a lot more you can do to protect yourself
on this one during the interview process.
5. COMPANY REPUTATION. Homework time. Do not
rely on what the firm represents to you. Many reps are "captive"
to the firm and have severe restrictions on them during their
tenure, so leaving won't be easy. Since your failure at this firm
could leave you broke and even heavily in debt, it is to your
great advantage to know how it conducts its business, both with
consumers and employees.
Your Company" section of the "Links and Resources"
page for some good ways to research your company's reputation.
EMPLOYMENT CONTRACT. They're generally standard,
but if you can get all points you are concerned about outlined
in a custom contract, it's much better for you. Otherwise, realize
that the contract is usually pretty one-sided and note the following:
employment status should be included
in the contract; be sure it matches up with all you were told
verbally. You're agreeing to it!
on a base and/or commission, your base and commission
percentages should be stated in the contract. The base's
status as salary or a draw (loan) should be
upfront fees (licensing,
training, background check, etc.) and who is paying for them
should be covered. If you are to be reimbursed contingent on
some goal, check to see if that goal is included, and ask what
percentage of reps actually reach that goal. Also check for
any clause stating that you'll be expected to repay training/education
fees or the like if you leave the firm.
your contract includes a non-compete agreement (or
non-solicitation agreement), carefully inspect
it to see if you are guaranteed the commission trails on your
sales if you leave. If the firm is to require you do your own
marketing ("Friends & Family 100 List" included),
you will find those leads and make those sales, and
you're entitled to those trails for that year or whatnot
after you leave. Be sure you understand whether it's you or
the firm who will be cultivating leads and decide what's acceptable.
for an arbitration or mediation clause
as well. By agreeing to mediation or arbitration, you may be
giving up the right to pursue the matter through the courts,
which may severely impact your chances at recovery. Read the
fine print! More info on mediation/arbitration is here.
sure you get a copy of the contract and that everything written
matches up with what you were told verbally! If it doesn't, show
yourself the door.
TURNOVER (AGAIN). Watch the turnover and burnout rate.
They are invariably very high at scammer firms. Don't automatically
fall into the trap of assuming the reps who leave "just couldn't
hack it." Remember, they learned "all" of the pitfalls
during interviews/orientation just like you and were prepared,
so why should they fail? Chances are you're no better than they
are, so don't get arrogant. Find out why they left from them,
not their supervisors. Get phone numbers and keep up with EVERYONE.
You just might need those numbers if you can't afford to sue alone.
2. PAY (AGAIN). You saved the literature, right?
If you're hitting your sales targets and still earning well below
what was represented to you, ask your manager about the discrepancy
and how it can be "cured." If you notice him skimping
on aiding you in favor of focusing energies on new recruits, BEWARE.
Don't share commissions with your manager -- he'll be compensated
in overrides. And if payday passes and you've still not received
your commission check for that month, call the company's payroll
department and find out why. You may just find your commissions
didn't make it to you because your manager took them for his own.
Be sure to ask payroll to check to see if your clients have been
wrongfully attributed to your manager. That correction should
be made immediately, and your manager should be reported for fraud.
If your manager continues to dispute it, you'll need to get affidavits
from your clients indicating to whom they believed the commissions
were going (particularly if they are friends and family who believe
you were to benefit), and sue.
HOURS WORKED. If the company trains you and exerts
control over your means of production, then they may be misclassifying
you as an independent contractor when you should in fact be an
employee, with all the benefits that entails. So keep
detailed records of all hours worked in case you later
need to demonstrate those hours to the IRS or a court.
LEAVING THE FIRM.
you plan to leave the firm based on anything you read on this website,
please do NOT shove a printout of it in their face on the way out
of the door or link to it in your final email or letter. I do not
need their harrassment. If you feel helped, just pay it forward.)
this point, if you did all you were supposed to do and are still
forced to leave the firm due to a lack of income, you might as well
go right on to the next section, "Prosecution
& Legislation." You've been defrauded, and it's time
to fight back.