Dear Helaine: Personal finance has been very straightforward for my husband and me so far. We simply cut our expenditures (such as eating out) whenever possible and have that money available for therapies for our twin children, who have both been diagnosed with autism. So when an acquaintance talked about a financial services company and the amount of money I could earn if I signed up, I was intrigued.
It's like an Amway for financial products. Its main product is universal life insurance. I did some research, and it looks like if you have an acumen for selling universal life insurance products and signing up others to do so, you might actually make a lot of money. But I am not sure people will actually benefit from the products I would be asked to sell. If that's the case, I could not sleep at night. What do you suggest? -- To Sell or Not to Sell
Dear Sell: Autism places a huge financial stress on families. But signing on with a multilevel marketing company -- which is what this is -- in hopes of increasing your household income is likely to make things worse, not better. The reason is how MLMs work. The major earnings come not from hawking the product, but from signing up other people to do so. A recruit will then forever pay a percentage of their earnings to their recruiter (as long as that person remains with the organization) and further up the line.
This is not exactly an easy task, and most don't do well at it. According to a report issued by the Federal Trade Commission in 2011, 99 percent of people who sign up with multilevel marketing companies will ultimately lose money. Another survey, this one from the website Magnify Money, found the typical recruit earned less than 70 cents an hour -- and that was before expenses were factored in.
And that's not all. Almost all MLMs suggest that you get your start by turning your friends and family into a customer base, as well as possible future recruits. This is the sort of behavior that's bound to strain your close relationships even when you love what you are selling.
That brings me to my second point. You are quite right to be wary of universal life insurance. For the uninitiated, that's life insurance that also offers an investment component. The problem? Term life insurance -- life insurance that offers protection for a set number of years -- is significantly less costly. The vast majority of people would be better off signing up for a term policy and investing their money in low-cost index funds.
Thanks to this combination -- the business model and the need to sell something you don't believe in -- you'll definitely sleep better at night if you give this opportunity a pass.
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