One of our readers recently asked us a question about a multi-level marketing company called World Financial Group. It is a network marketing company which sells financial products such as life insurance and mutual funds. After doing a little research, we decided to write a streetonomic review of World Financial Group (WFG).
Finding information about how World Financial Group works is rather difficult, which we see as an early red flag. The WFG website is full of miniature sales pitches aimed at potential new recruits but there isn't much detail. We are assuming that their goal is to be as vague as possible so that the only way to get information is to see an agent, and receive a full sales pitch.
It took a little more web surfing, but we were able to find a copy of the a brochure called WFG The New Standard, and copies of the WFG System Manual, and the WFG Leadership Manual. We also managed to find a slide show version of the WFG Business Presentation, and a video of the WFG Napkin Presentation.
The WFG system manual, refers to answering too many questions as the 'scenario of disaster'. They tell their associates to 'focus on selling the dream'. Giving detailed information or answering difficult questions will lead to failure. This explains why the website was so vague..... they didn't want it to be a disaster zone!
For some additional background we also researched what others have said online in their reviews of WFG. The data used for this review was not supplied directly by World Financial Group, so we apologise if it is incorrect or out of date. If you are interested in joining WFG or just want to know more about them, then we hope that you find this review useful.
What does World Financial Group do?
World Financial Group is a network marketing company, which focuses on financial dreams and offers to ' teach basic financial concepts to everyday people'. In reality associates make commission from selling financial planning services. The services are summarised into three areas:
Like all financial planners, WFG associates need to obtain the proper licensing before they can legally sell these products to customers. This will involve some study and exams. Before you join WFG ask yourself ' Do I want to become a financial planner?'. If you are expecting long term success with World Financial Group, then a career change to financial planning is part of the process.
If you'd rather not be licensed or find the exams a hurdle, then we believe WFG will still allow you to join as an unlicensed associate, and sell on a referral basis. This means that you will prospect for new customers, but someone in your team with a license will have to handle the final sale of any financial products (we assume they would also take a share of the sales commission). It is important to understand that not taking the exams will seriously limit your earnings ability with WFG
If you are genuinely interested in becoming a financial planner, then we suggest that you look at other options along with WFG. If possible speak to financial planners from other companies to see if they describe the industry the same way WFG does.
How Does the WFG Business Work
Rather than use a standard business model, WFG has chosen to promote themselves using a Multi-level marketing structure. We believe it is very difficult to make money with MLM. Based on our research so far, World Financial Group has not changed our opinion about MLM. Like most network marketing companies, WFG places a huge focus on recruiting new members. Very little attention is given to selling their services or attracting new retail customers.
If you join WFG, then you will be encouraged to get yourself off to a 'fast start'. To do this you will need to introduce 3 new recruits, and sit in on 3 training sales within the first 30 days of becoming a WFG associate. We notice that there is no focus on finding customers, it’s all about recruiting new members to the MLM. To us, this is a red flag!
If you achieve your fast start challenge, then you will be a part of the '3 - 3 - 30 club'. The fast start process is very important in World Financial Group. In the WFG systems manual, fast starting new recruits is one of the 7 keys to success and is referred to as 'the big push'. It's part of the MLM mentality of 'the more the merrier'. The bigger your team is, the more residuals you'll earn, so keep recruiting
The sales presentation will make you believe that all you need to do to be successful, is find three new recruits, then help them to 'duplicate' the process and find their own recruits. This duplication will lead to your team going into auto pilot. Recruiting and fast starting is essential to your World Financial Group success. The systems manual says 'FOCUS ON 3-3-30, YOUR DREAMS CAN COME TRUE'. Once again there is no focus on actual financial planning
If you find three recruits, and they each find three recruits, then you'll have 12 associates in your WFG team, and will earn residual income from any sales from your entire team. But it doesn't end there you can go more than two layers deep. By the time your team is 4 layers deep, you will have 120 associates in your network, all earning residual income for you...Your team might look like the one in the diagram below:
Why Does WFG Really Focus So Much on Recruiting?
Bringing in new recruits is how they make money
Part of the process of becoming a new recruit, is completing an online financial needs analysis. Once this is complete, you are offered a complimentary financial plan - this means they won't charge you an upfront fee for preparing the recommendations. Your sponsor, or a licensed agent in their team, will show you all the insurance and investment products you personally need to secure your financial future. They will earn commission on any products new recruits sign up for.
The WFG systems manual states 'WFG associates are not required to purchase any products, goods, services, inventory, marketing plan or property of any kind, or pay any consideration in exchange for becoming or remaining an independent contractor of WFG'.
This is where WFG stands apart from other MLM systems in that they do not force their associates to buy product to 'remain active'. Buying product might not be compulsory. The WFG presentation however, explains that to be successful, new recruits need to be 'coachable + willing to follow a proven platfrom'. In other words, they need to do what they're told by their upline
New associates are told that in order to succeed, they need to duplicate the system, and follow exactly what their up line did. This includes buying their own WFG products. Unlike other financial products in the market, these come with the added bonus of unlocking all your financial dreams...
The manual says 'Aim at Recruits; Hit Sales'. Buying products is not compulsory for new associates. Selling products to new recruits is part of the WFG process.
If they don't keep recruiting, they risk their business dying
In the WFG systems manual, they will tell associates that they need to focus on recruiting and 'fast starting' their recruits, because it helps grow the network. There is more to it than this though. You need to keep recruiting to replace people who drop out.
MLMs have very high rates of attrition. It is common for over 50% of members to quit every year. This means that your downline of 120, is likely to drop to less than 60 after 12 months, unless you can recruit fast enough to replace those who quit.
Once you reach leadership levels and become what they call a sales marketing director or 'SMD', the business starts to look a little different. If we look at the WFG leadership Manual, we see the real motivation for the fast track recruiting.
The leadership manual says associates 'must consistently and continuously bring new people into the business'. They also tell their leaders that 'a leg isn't a leg until it's four deep', and 'an associate isn't an associate until they've recruited someone'. This is quite a contrast to the 'get three friends and let the business grow' story the new recruits are told.
The leaders refer to this aggressive recruitment as 'tap-rooting'. Essentially they believe that once you've recruited others, you are less likely to quit the business. Furthermore they want you to recruit within 3 days of joining the company, because after that there is a risk that you'll lose enthusiasm, or perhaps learn that the system isn't what you thought it would be.
World Financial Group expects a large number of associates to quit. In their leadership manual they refer to this as the 'Law of Averages' claiming that 'there are a lot more starters than finishers'. They go on to tell SMDs to expect high drop out ratios and that very few people will become SMDs.
The dictionary defines the Law of Averages as - a statistical principle formulated by Jakob Bernoulli to show a more or less predictable ratio between the number of random trials of an event and its occurrences.
So this 'Law of Averages' is based entirely on people who have previously joined WFG. World Financial Group is admitting that their system has a track record of high drop out rates...
WFG is a system where people will often quit. So to build your team you need to work extra hard to find people who won't quit. Finding good recruits is like a lottery system, WFG will prospect anyone and everyone, that way they might get a few people who stay in the system. The image below is a table from the leadership manual, which illustrates their expectations for recruitment and retention:
They tell us that to get the business going we only need 3 SMDs beneath us. But if only 25% of prospects (who attend a presentation and follow up meeting) become associates, then we have to have follow up meetings with 12 prospects to get three associates.. But then only 25% of associates will become licensed or registered so we'd really need 12 associates to get 3 licensed / registered associates in our team. This means we'd need to have follow up meetings with 48 prospects
It gets worse after that because only 1 in 50 associates is expected to become a SMD. So to get one SMD in our team, we need 50 licensed associates which means 200 associates and 800 prospects. That's right the leaders are told to expect to have follow up meetings with 800 people to find one SMD. So finding 3 SMDs means having follow up meetings with 2,400 people. All of a sudden finding 3 people for your team just got a lot harder!
Even if you know 2,400 people, then this still won't be enough because they are basing their expectations on prospects who have made it all the way through a presentation and a follow up meeting. They are not counting all the people you prospect which are simply not interested or the ones who agree to see the presentation but decide not to proceed to a follow up meeting.
Remember these figures were formulated from previous results of WFG associates who know how to sell the dream and avoid the scenario of disaster that comes with answering too many questions. Even if you duplicate the system and parrot the scripts perfectly, you can still expect 3 out of 4 people who make it to a follow-up meeting, to decline to join WFG
World Financial Group claims that you'll need to focus on high numbers to 'overcome the negatives inherent in the law of averages'. Could it be at all possible that the negatives are inherent in their own system? After all, this is how they created their version of the ‘law of averages’.
On the WFG website, they proudly state that they now have 50,000 licensed associates. This sounds like a good number but if we look at the WFG opportunity page, we see that in 2014, WFG signed up 120,000 new associates. The total number of licensed associates in the entire company is less than half the number of people who joined in a single year. This supports our expectation that most of the people who join WFG don't become licensed. Furthermore, a large portion quit withing a short time of joining. Does this sound like a system which is making financial dreams come true?
What's Wrong with using the Multi-Level Marketing model?
Multi-Level Marketing is a motivational system designed to sell dreams. If you join, (and buy their products), then a world of financial freedom will be opened to you. The problem is that there is so much focus on the dreams, that nobody bothered to promote the products and services.
Like all MLM opportunities, you will only make money in WFG if you sell products. Running mass recruitment seminars and dangling carrots of wealth, is not going to earn them any money. Therefore they make buying their products part of the process. You need to follow their example and buy the products yourself.
MLM is designed to make you a customer. They are not interested in making you a business owner or creating your pathway to financial freedom. They want to sell their products and earn profits.
The biggest problem with MLM is a lack of organic demand. Customers aren't coming because they want the product. They are buying the product because they want to be part of the MLM opportunity.
When agents buy their own WFG products, part of what they spend is paid as a commission to the people who sponsored them. Your upline might tell you that they are trying to educate and train you but in reality they want you to join so they can get a percentage of the money you spend in the system.
WFG proudly state that they are 'committed to identifying innovative ways to push more compensation to the field'. These 'creative ways' involve charging higher fees on the products so that when you pay for your insurance or savings plan, your sponsor and upline can get a bigger portion of your money. This makes the products more expensive to you, and higher fees will reduce the financial performance of any investment.
We are ethically opposed to MLM, which is part of why we are indignantly negative toward it. If you watch the WFG Napkin presentation, you'll see that it starts with a reference to the Robert Kiyosaki book Rich Dad Poor Dad. This book is a favourite within the network marketing world
The presenter goes on to show the 4 cash flow quadrants. He alleges that by joining WFG you become a 'business owner'. This is not true, at best it's an honest misinterpretation, at worst an intentional misrepresentation.
As a WFG associate, your agreement refers to you as a contractor or representative of the company. This is very similar to having a real job known as a sales representative. Even if you did own your business, you would be in the 'self employed' quadrant, not the business owner because the income is not passive.
The standard MLM formula continues with an explanation of why 'you don't have to be a sales person', this system will 'teach you how to be financially free' and you 'should tell everyone you know to also join'. There are no sales quotas, but if you don't sell, you don't earn.
One of the interesting points in the presentation is where he claimed that WFG 'created jobs in the community'.... wait I thought it was creating business owners who didn't need jobs.. I'm not sure business owner means what he thinks it means.
Is WFG an Illegal Pyramid Scam
Even though MLMs such as WFG closely resemble pyramid schemes, they are not illegal. To the best of our understanding, the reason dates back to a case of Amway vs FTC 1979. It was settled that Amway was not a pyramid scheme because of the wording in their agreements. This does not mean that MLMs don’t operate like pyramid schemes, it just means that they have rules against it. Whether or not they enforce these rules is questionable.
Now other MLMs just follow the same formula to remain legal. They make rules telling consultants to make retail sales etc. Unfortunately none of these rules are monitored or enforced. That has lead many to believe that WFG is a scam, as shown in the video below:
What Will WFG Teach You About Money
One of the benefits of joining WFG, is that they say they will teach you basic financial concepts. We managed to find a copy of the WFG money makeover, which explains their ‘6 steps to financial independence’. We’ll go through each of the steps below:
Step 1 - Debt Management
Personal debts such as credit cards can lead to financial hardship. As the debt mounts up, so does the monthly interest, and it’s very easy to fall into a debt trap. The post we looked at suggested a couple of ideas for managing this. One was to make extra repayments, another was to ‘snowball’ your debts. While these are both valid ideas, it’s nothing new. In fact both were included in a post we wrote about tips for repaying credit cards.
Step 2 - Emergency Fund
This is exactly what the name suggests. WFG will ‘teach’ you that it’s a good idea to have some funds put aside for unexpected expenses. The best way to build an emergency fund, is slowly. Put aside small amounts on a regular basis, and it will hopefully build up over time.
Step 3 - Cash Flow
Here they suggest a way to improve your cash flows, is to increase your earnings. They advise to start a business or get a ‘gig’ job on the side. While earning more cash is great, if it were that simple, everyone would do it. Starting a side business or taking on a gig, will take time and money, and there’s no guarantee that they will be successful. We think a better way to improve cash flows is to try and reduce your spending. Look for opportunities to save money.
Step 4 - Proper Protection
By this they mean life insurance. This includes income protection and other types of related cover. Put simply they are telling us that it’s important to have insurances that will help you financially in the event that you unable to earn an income due to illness or injury.
Step 5 - Build Wealth
This is similar to savings in that you need to put aside as much as you can as often as possible. However unlike savings, these funds are invested for the long term. You might choose a simple index fund, or try and invest directly in shares of your choice or even property. The important thing is to choose an amount you can afford to set aside and then keep it invested for as long as possible. No matter what style of investing you prefer, you will do better if you keep at it for longer.
Step 6 - Estate Preservation
This is just another way of saying ‘get a will’. If you have assets that you want passed on to your family after your time is up, then you should get yourself a will. It makes sense for you to do this so that you can decide who gets what. It might solve some problems which we often see when relatives end up arguing over how an estate should be handled.
While there is nothing wrong with this information, there’s also nothing new about it. You could easily learn all this and more for free on the internet. WFG is not offering any unique education.
Should I Join World Financial Group?
Unless you already want to become a financial planner, there is absolutely no reason to consider joining World Financial Group. If you do want to get into financial planning then this is a way to do so, but should not be the only opportunity you look at.
WFG focuses on people who are 'new to the industry' and tell you that there is 'no experience in financial services necessary'. They are proud that many recruits are 'first generation Americans'. They use these as selling points, but we see them as red flags.
They don't want people who have financial services experience because they are more likely to know how the industry works. This makes them less likely to believe that this is a miracle key to financial freedom. They will also have a better understanding of products so maybe they won't like the ones which WFG asks them to buy as part of the sign up process.
First generation Americans, or immigrants, are less likely to have previously owned investments or insurance in America. This means they too are more likely to accept the expensive high commission products without questioning whether they are the right choice or not.
World Financial Group will tell you that because of their 'team' MLM structure there is no competition. This is completely untrue. There are 1,000s of other companies selling financial planning products. Every one of them is your competition. To make things worse, every WFG associate who is not directly below you in the system is also your competition. Every time they find a new prospect, that's one more person who you will never be in your team.
If you want to be a financial planner, then get the education and start applying for a normal job. If there are no jobs available, then maybe give WFG a shot because the one thing they do have going is that they will give you a chance. Make sure that you have a system for finding your own customers and selling financial products. At the end of the day sales is the only way you will make money in WFG (or with most commission based financial planning roles)
It is also important to remember that this is a sales job. We found a review by an existing WFG member, where she admits that after almost 4 years in WFG she’s not suited for it. She explains that to be successful in WFG, you need to be a ‘hustler’.
Being a hustler means seeing everyone you meet as a potential recruit. You need to find a way to turn every relationship you have, into a potential lead for your downline. Not everyone is comfortable trying to sell and recruit their friends and family members.
Even if you are willing to sell to your warm market, you should be careful because trying to recruit your friends can damage your friendship.
What are your thoughts? Have you joined WFG or thinking of joining? We'd love you hear from you in the comments section below. You can join disqus or comment as a guest
For more posts like this, look at our list of mlm reviews.