INTRODUCTION
Pyramid selling is a marketing system which involves enticing others into the scheme and training them to do likewise who in turn train others. Network marketing is a similar system of selling but the difference between the two is that with legitimate network marketing companies, products are being sold. It is important to know the difference between the two and not be pressured into joining something which you feel uncomfortable with.
Pyramid Scheme doing the rounds in New Zealand
A pyramid scheme targeting Pacific Islanders has been doing the rounds in South Auckland. A few people who are also Tongan have been promoting the schemes which has seen people part with sums ranging from $300-$1500.
The scheme is some kind of gifting program where each person sends a gift to those higher up in the chain.
Promises have been made to would be participants about the large sums of money they can make in the scheme but this is dependent on them recruiting others into the scheme and convincing them to invest money into it. They then must do likewise in order to make money and so on.
Somewhere during this chain the money trail stops as fewer people get involved while others drop out. The scheme relies on a large number to join in order to make it work. In the end the only person who makes any money from it all is the originator of the scheme.
Some people who had been a participant in one scheme had left to create their own and have persuaded others to join them telling them “Come over to my one, this is a whole lot better.”
“If something is too good to be true it most probably is.”
So what are the tell tale signs of a pyramid scheme?
There are some keywords to look out for with the main ones being recruit, network marketing, upline, downline, gifting program.
The one question which should be asked of those promoting the scheme is, “What products are being sold?”
Any marketing scheme which requires its members to recruit others in order to make money without any products being sold is almost certainly a pyramid scheme which is illegal in New Zealand and other countries.
Legitimate companies such as Amway, Melaleuca, Herbalife, Kleeneze (UK) all sell products as do a heap of other companies which involve recruiting others but even so, the tactics employed by these companies can be downright pushy that people who are not suited to this type of selling get talked into joining the scheme without any hope of ever making any money. There are some pyramid schemes which masquerade as network marketing companies so you need to be on the ball.
What can people do to protect themselves?
The most obvious one is to take financial advice and this does not need to cost an arm and a leg. Get free legal advice at the citizens advice bureau. You can also go to your bank and just ask for their advice. Of course the people who are promoting these schemes don’t want you to do that but it is your money they are after and they do not want you to expose their scheme.
It is those who can least afford it who are taken in by these schemes; the thought of a financially free life with little or no effort. Promoters of these schemes are selling a dream; who says, “Dreams are free?”
The bottom line to all this is that these schemes are illegal in most countries so if you could get into trouble if you are a participant.
TO SUMMARISE
Certain types of people are attracted by pyramid schemes; the desperate, the greedy, the ignorant, and the financially illiterate. Therefore it is important to get financial education and to take advice from well informed people. My blog www.robertastewart.com has lots of information of a financial nature.
Here is an ebook with some of my thoughts on personal finance; you can grab a copy here.
https://payhip.com/b/frA7 (Financial steps)
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