Sample Evaluation

Can WealthPlus be classified as a
“Recruiting MLM*,” or Product-based Pyramid Scheme?

Consumer Awareness Institute

When one examines the compensation plan of WealthPlus (a fictitious MLM), one finds all five red flags of a “recruiting MLM*,” or product-based pyramid scheme. When these 5 red flags are all present, available data lead to the conclusion that the loss rate (counting ALL participants and subtracting minimal expenses) approximates 99.9% - far worse than the average 90% loss rate of clearly illegal 8-ball (1-2-4-8) no-product pyramid schemes. In other words, of all participants who sign up for such recruiting MLM programs, approximately 99.9% can be expected to lose money – especially if purchases from the company to qualify for commissions and advancement in the scheme are subtracted as a business expense! See the statistics in the chart "Which Does the Greater Harm?" Though WealthPlus is not on our list of recruiting MLMs, we nonetheless find the "5 Red Flags" in its compensation plan which, taken together, has been found to result in such abysmal loss rates.

 

How does WealthPlus stack up against the "5 Red Flags" of a recruiting MLM, or product-based pyramid scheme   

YES

NO

1.Recruitment of participants is unlimited in an endless chain of empowered and motivated recruiters recruiting recruiters.

X

 

2. Advancement in a hierarchy of multiple levels of participants is achieved by recruitment, rather than by appointment.  

X

 

3. Significant requirements that participants "pay to play" the game via product purchases. Thus, new recruits are the primary customers. 

X

 

4. MLM company pays commissions and/or bonuses to at least 5 levels of participants, creating great "leverage" at the top. 

X

 

5. Most of the payout goes to the upline, rather than to the person selling products, creating excessive incentive to recruit and inadequate incentive to sell products (except to new recruits) – and an extreme concentration of income at the top of a hierarchy (pyramid) of participants.

X

 

Again, it is important to note that where the "5 Red Flags" are found in an MLM compensation plan, the participant loss rate is approximately 99.9%. In other words, approximately 99.9% of  participants can expect to lose money! 

For the full report on the five red flags of a recruiting MLM, or product-based pyramid scheme, and related reports, read the reports listed on our page of consumer guides – and/or read other reports on research related to MLM or network marketing.  You may also find information on legal and regulatory issues related to MLM or network marketing on our page on law enforcemen t and MLM or network marketing. For a more complete listing of pages on our web site go to the home page of our site – www.mlm-thetruth.com. Or if you just want to be entertained, go to our page on MLM humor and satire – including some great cartoons.

* A recruiting MLM is an MLM with a compensation system that rewards recruitment more than actual sales of products to persons outside the network of participants. So significant income is unlikely without recruitment of a large downline.

 

PLEASE HELP!  I believe this site presents information about MLM/network marketing that is as close to the truth as can be found. It can save you much time, money, and grief, as it has done for many others. And since law enforcement has essentially looked the other way on this type of consumer abuse, it is left to informed consumers to inform and warn their friends and relatives about the potential losses they could suffer from participation in a “recruiting MLM.” So please print and distribute at least 5 copies of the answer cards to those you care about – and ask each of them to share answer cards with 5 people, and each of them with 5 more, etc., etc.  . . .  In this way, you can influence many people for good – through an endless chain of truth-telling.  Check out these handy answer cards (8 to choose from) that you can print and distribute now –  as well as carry with you for those awkward moments when you are recruited by a well-meaning friend or relative. For more information, click on the appropriate links above.