Financial Education Services ( FES) belongs to the “new order” of Ponzi/Pyramid Schemes where there is a comical distinction between a legal and an illegal Ponzi/Pyramid Scheme. Under the guise of offering a product, “legal” pyramid schemes like FES, operate, getting money from recruits.
FES, a Multilevel Marketing company operating in the credit/insurance niche, was founded by Parimal Naik and Mike Toloff in 2004. This company seeks to provide everyone with the best credit and insurance products but it is a bad investment choice for prospective investors.
Unlike the basic pyramid scheme, FES does have a range of products it markets. It also uses these products as its source of investment revenue. However, there is nothing unique about FES’ products. Nothing separates FES’ business offering from that of its competitors. In an already saturated insurance niche, investors would find it hard to convince people to stake in FES.
Although there is an attempt to deemphasize this, FES actually thrives on affiliate recruitment. Investors, upon research, would that nonaffiliate subscriptions is very much lower than affiliate held subscriptions. This is a major feature of pyramid schemes.
Also, FES does not disclose the percentage of income that comes from sales of its products. The only verifiable source of income for FES is funded from new investors which are being continually funneled upwards to high-ranking affiliates.
Further, there is an apparent pressure to reinvest and to recruit new investors. FES’ business model reflects this. FES’ runs a 9 tiered ranking system. To move up the ranks, an investor has to recruit a high number of investors. That investor also has to maintain a high sales quota. At a time when the public is very skeptical about about MLM companies, FES’ sales quota and recruitment requirements make it almost impossible to really earn much.
Also, FES incentivizes recruitments and sales through a number of bonuses and commissions: direct commissions, customer acquisition bonuses, and residual commissions. These bonuses and commissions are mostly enjoyed by a few high-ranking investors who can manage a high sales quota and a high number of recruits.
Essentially, any company that relies solely on affiliate recruitment, and that has a high number of affiliate subscription when compared to nonaffiliate subscription is a Ponzi or a Pyramid scheme. Ponzi/Pyramid schemes are illegal. Any attempt at creating a new template for “legal” Ponzi/pyramid schemes should be frowned at.
FES might not necessarily crumble when recruitment stalls but it still remains a bad investment opportunity. Data gathered by the Federal Trade Commission reveals that 73% to 99% of people who invest in MLM companies lose money.
Also, there is a low income potential at MLM companies. The hard work investors put into sales and recruitment does not complement the very low income that accrues to investors. It would be better to pursue other money making avenues.