If you’re reading this article, chances are you’ve been either approached to buy a World Financial Group (WFG) product or to start working for WFG as a financial advisor.
You might be curious but may also be wondering: Is World Financial Group a scam?
You’ve probably heard whispers about this from other friends or colleagues warning you that WFG is a scam, which I believe is a common occurrence.
In the finance industry where I had worked for over a decade, World Financial Group doesn’t get a lot of respect amongst its peers. But as of 2019, WFG has over 42,000 associates working for them. In 2018, WFG paid out over $792 million in commission to its associates.
Say what you want about the company, but there’s no denying that it is a huge global force and one that requires close examination. Let’s go over this World Financial Group (WFG) review to see if it is a scam or legit.
MLM Financial Planning
- The marketing and sales system is probably effective as WFG has solid sales numbers, and you’ll get training on their tactics.
- Multi-level-marketing (MLM) strategy is seen as a pyramid scheme to many and can be difficult to overcome when trying to close sales.
- High pressure to recruit other associates to work under you
- Very difficult to make a lot of money using an MLM strategy with only a small fraction of members finding long-term success.
- You could become a social outcast if you are too aggressive in selling to your family and friends.
- As a consumer, you will only have access to a small handful of products, and there could be a conflict of interest as the WFG associate might try to sell you a high commission product.
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What is World Financial Group?
WFG is a company that sells financial planning services. The company sells savings, insurance, and retirement products through its associates, who usually have to pass a licensing exam for the country they live in.
The company was launched in 2001 by an insurance company called Aegon. In 2008, another insurance company, Transamerica, purchased WFG from Aegon. The company operates in Canada, the U.S, and Puerto Rico.
Is WFG a Scheme or Scam?
I wanted to answer this question right off the bat. In the literal sense of the word, no, World Financial Group is not a scam. The company will not take your money as a customer and give you nothing in return. That’s what a pyramid scheme is, and WFG is not that.
If you join the company as an agent, you will have the chance to earn an income and need to be licensed in order to directly sell any of these products. WFG is approved and regulated by the financial governing bodies of the countries that it operates in.
However, where many people are turned off of WFG and wonder if it is a scam, is due to its sales tactics in acquiring customers, and multi-level marketing (MLM) methods of hiring agents to work for them.
How Does WFG Hire Associates?
WFG employs a Multi-Level-Marketing (MLM) business model for its associates. The way it works is after you get hired onto WFG and pass all the licensing exams, you’ll have to recruit new associates.
After you join WFG, you’ll be encouraged to get off to a “fast start,” where you are supposed to recruit 3 new members and sit in on 3 training sales within the first 30 days of the company.
This aggressive approach to recruiting new members sets off alarm bells in my head. Getting these new recruits and associates is another type of sales tactics.
Any products that those associates either buy themselves, or sell to other people you’ll get a percentage of the commissions. A lot of WFG’s sales come from it’s associates themselves. It’s a classic MLM business model, and one that should be a huge red flag in choosing to work for WFG.Caption to the image above: Source: WFG website. Their own website shows the multi-level shape of their business model.
How Much Money Can You Earn at WFG?
You will only receive money as a commission if you sell something at WFG, or if those associates you recruit under you buy or sell WFG products.
Even ignoring all the negative connotations that come with MLM companies, I’ll give you an example of why WFG is not a great place to work. Let’s take a look at the WFG contract levels, which is the amount of commissions you can earn for say something like life insurance.
If you can have a contract level of 100%, you will earn 100% of the first-year commissions on top of what your commission structure is.
When I first started out as a life insurance broker, I had an 80% contract level to start, and it increased to 140% near the end of it.
According to a previous year’s compensation report that I found (which I can’t link to due to copyright claims by WFG), a WFG Associate contract level is a measly 36%, a Senior Marketing Director contract level is only 64%, and a Senior Marketing Director has a contract level of 28%.
Note that this may not be up-to-date information, as the report was a few years old, but I believe it should give a ballpark estimation. I’ve also had some WFG people reach out to me directly and the contract levels they have mentioned seem pretty in line with those numbers.
There are other better and more reputable brokerages out there. If you are willing to get licensed, they can also train you and support you better than WFG, and give you a larger payout.
How Does WFG Get Its Customers?
WFG relies on its associates in two ways to get customers. Firstly, any of the products the associates themselves purchase, essentially turn them into the customers.
All those new associates will be immersed in WFG products and culture, and probably end up buying products themselves. Then, they are forced to aggressively try to get more associates, spreading the WFG product line and sales almost like a virus as it multiplies down the levels.
As an associate, you’re expected to make a list of all your friends and family and approach them to sell your financial products, or to recruit them as an associate for WFG.
But that is typical of MLM companies, and I don’t want to knock WFG specifically. They aren’t doing anything illegal, but I just think it’s a terrible business model for both customers and associates, and there are so many better products and options out there. But it obviously works, as WFG has a tonne of sales. If anything this just shows the power of “warm” leads and buying from people that you know and trust.
As a former sales guy, I think that WFG must have an extremely effective pitch for new members because it is obviously working and getting results. But as an investor or insurance purchaser, I would never hire a WFG associate.
I get it though, investing and insurance can be intimidating, if you’ve never worked with numbers or cared about it before, the whole process can be daunting. But put some time in, learn how to start investing, and take control of your own finances.
If you need to hire an advisor, try to find a properly trained fee-based one, and one that won’t just try to charge you an annual fee on your investments and never speak to you again.
Is WFG a Legitimate Company for Customers?
Yes, WFG is a legitimate company. If you purchase an insurance or investment product from them, you will receive the product.
However, there is a limited number of companies that WFG is associated with, so your product selection will be limited to those companies.
Also, you may be pressured into purchasing expensive products that may not be the best for you, such as permanent life insurance or segregated funds, but will earn the associate selling it a big commission.
Often, the associate you are dealing with may not have very much experience also, and will likely try to recruit you to become an associate also.
As a former life insurance agent and financial advisor, I can understand the success of WFG. The secret to WFG is its method of using what we call in the industry as “warm” leads. You’re much more likely to buy or trust someone that you know. Multi-level marketing relies on this, and you’ll see it applied to many different businesses, the most successful one probably being Amway.
Should You Become a WFG Associate?
In my opinion, it is very difficult to make money with this business model. Yes, there are some success stories, and in its marketing materials, there will be descriptions of people getting rich at WFG. However, it will be a very tiny fraction of the overall recruits.
Sure, if you’re willing to hustle your butt off, contact all your friends and family, and aggressively pursue new sales prospects then yes, you might be able to find success with WFG. But if you’re this much of a go-getter, why would you stick with a company like WFG?
You’ll also risk damage to your reputation, and maybe even your personal relationships. WFG almost has the same negative stigma as Amway does. You could become known as the “pyramid scheme” person behind your back and to be avoided in social situations.
Why I Hate MLMs
I’ve been pitched multiple MLM ideas over the years, ranging from smoothie drinks, painting business, Amway, and many more. Here are some of the reasons I hate MLMs
- MLM pitches are annoying and misleading, and always sell the same kind of story: recruit 3 other people, and they will recruit 3 more, then you’ll have hundreds of people working for you, all while making money on whatever they sell!
- If someone I know pitches me an MLM business idea, it makes me think less of the person and want to avoid them in the future.
- While selling something like smoothie drinks is relatively harmless, having this business model for something so vital as investment products could have a direct harmful impact on customers by not having properly trained advisors that have your best interests at heart.
- It’s very difficult to climb to the top of a MLM company and actually start making really good money.
- Any business model that places more of an emphasis on recruiting new members rather than customer needs in order to make money is one to be cautious of.
World Financial Group Alternatives
Instead of working at WFG, you can get licensed on your own to sell investment and insurance products, and start working for an insurance or investment brokerage.
I mentioned before that I worked for an insurance broker in Canada that had way higher commission payouts than WFG has. You won’t have to worry about the bad reputation that WFG seems to have among some consumers. You will also get trained up at these brokerages.
As a consumer, there are countless other options for you other than WFG:
If you’d like to become a do-it-yourself (DIY) investor, sign up for an online broker and learn how to invest on your own. Here are my top picks on the best trading platforms in Canada.
If you need a little bit of advice, you can look at my top picks for the best robo-advisors in Canada.
For Canadian life insurance, I would recommend PolicyMe. They’ve recently created their own products and offer them at very competitive rates. Check out PolicyMe’s website for some free quotes.
Another life insurance option for Canadians is PolicyAdvisor. You can compare 20 different insurers very quickly and get the best rates. Check out PolicyAdvisor’s website for a quick comparison of 20 companies.
Finding an Advisor
If you must use an advisor, try to find a fee-based advisor that is not incentivized to push you towards a certain product. They can help you with both investments and insurance. Do a search for “fee-based financial advisor” in your area. Try to find one with a Certified Financial Planning (CFP) designation.
While WFG may not be a scam, I would never work or buy any products from them, nor would I recommend any of my friends or family to either. I believe there are so many other better options, in terms of choosing a career or buying financial products.