What are we to make of "get rich quick" schemes by self-proclaimed financial experts? Their ads show up in magazines such as Money and Wealth, as well as "think magazines" from National Review to The New Republic to REASON.
The way these ads tell it, you can make a fast, easy $100,000 in 90 days…or $25,000 in 25 days…or $2,000 an hour. What's the secret? You can find out if you fork over a small sum of money—$10 seems to be the going rate for get-rich-quick secrets. Why bother investing your hard-earned money in stocks, bonds, or precious metals when you can make this kind of return on a mere $10?
Of course, pretty soon you'll have to worry more about the IRS. So naturally there are plenty of schemes also for hiding your new-found wealth in secret offshore bank accounts (earning as high as 36%!) and secret foreign trusts.
Okay, so nobody who reads REASON is so naive or gullible, right? Still, as the financial columnist, I thought it would be interesting to respond to some of these ads and report on the results.
For my first $10 "investment" I was sent a 140-page booklet describing a dozen business opportunities sure to produce speedy wealth—"honest to goodness." I turned to pages 24–26 to check out the one promising $25,000 in only 25 days.
The secret? Publishing and distributing coupon books through charities and churches. "There is absolutely no selling. The group members give the coupons away free and even are paid to do it! Groups reportedly jump at this deal." Would-be millionaires hear the story of Jack, who made only $4,000 his first month, working 80 hours a week! But then he hired a few salesmen ("independent contractors") and made a net profit of $25,000.
Unfortunately, this promoter reveals only the skimpiest details. You have to sell your idea to local merchants, who have to pay for the advertising booklets—but he fails to tell you how much to charge merchants. Maybe he doesn't know.
And so it goes with the other roads to riches described here: a move-in welcoming business, a collection agency, selling gambling information, writing a get-rich-quick book, investing in real estate with "nothing down," etc. The eager seeker of wealth gets only the barest of details.
Granted, there is big money to be made in starting your own business. As I pointed out in my November 1986 column, very few rich people got that way by investing. But making an enterprise work in today's competitive and uncertain environment is not easy. Stories of overnight success abound; the real question is, are they repeatable by second-comers? Often they are not.
Many of these ads only play on your curiosity, and you have to pay up front before you become disillusioned. Another type of get-rich-quick ad I checked out is at least more honest, revealing exactly what the deal is.
This one claims you can make $2,000 an hour by contacting heirs to forgotten, unclaimed money in bank accounts, stocks, and insurance policies. According to the ad (and imitators are already making the same pitch), lost money amounts to $25 billion in the United States. And for…$10 you will be sent a book that shows you how to obtain lists of individuals or heirs who have not claimed their property. Then all you have to do is track down the rightful owners and take your commission.
I figure thousands of people have already purchased this booklet, and a lot of them are going around trying to find missing people. I called the Florida Unclaimed Property Division and was told that they have been swamped with calls. It costs $59 to obtain a missing property list, which contains about 25,000 names in Florida. But guess what? Florida just passed a law requiring you to have a private investigator's license before you can claim any missing property on behalf of someone else. I wonder how many other states are imposing similar restrictions.
The "get rich quick" schemes may only cost you $10 each, but others could be far more expensive—they could get you into trouble with the IRS. For instance, I sent away for a "free" promotional piece on offshore banking. The authors imply that tax laws can be ignored as easily as the 55-mile-an-hour speed law. Another offers to set up "contractual trusts" in the Bahamas—for $2,800 plus an annual maintenance fee. My advice is to stay clear of "secret" foreign trusts or other questionable deals. They can only get you into trouble.
Now I'm not strictly opposed to magazines running these lowbrow "get rich quick" ads. I got started in the financial business 10 years ago by responding to an enticing ad, "Lazy Man's Way to Riches," by Joe Karbo. Joe revealed the secrets of the mail-order business, and it eventually made me financially independent.
But the other side of REASON's laissez-faire coin is caveat emptor. Don't conclude that just because you see an ad in a high-class magazine, the offer is legitimate. REASON, for example, shouldn't have to be Good Housekeeping or the Federal Trade Commission. If you do want a healthy dose of skepticism, I strongly recommend the newsletter INVESTigate (P.O. Box 2606, Winter Park, FL 32790, $48). Each issue looks in some detail at specific investment schemes and their backers.
Don't act under a false sense of security. Let the buver beware!
Mark Skousen, author of 10 books on economics and finance, is the editor of Forecasts & Strategies.