Table of contents:
- 1 Earn money passively by building a “downline”
- 1.1 Network Marketing vs. illegal pyramid system
- 1.2 How does a pyramid system work?
- 1.3 Why are pyramid schemes illegal?
- 1.4 Which Red Flags should you pay attention to in these MLM systems?
- 1.5 Sensible product at a reasonable price?
- 1.6 Unrealistic profit promises
- 1.7 Demand for high investments to get started
- 1.8 Including the personal environment
- 1.9 The presentation of the products
- 1.10 Network Marketing and Trading?
- 1.11 How does MLM Trading work?
- 1.12 What does the product look like now?
- 1.13 Access to returns only
- 1.14 The optimization of the downline
- 1.15 MLM System as “Network Organizer
- 1.16 MLM structures with signalling services
- 1.17 The image of the successful entrepreneur
- 1.18 Magnificent “motivation events
- 1.19 MLM & Trading – so what is behind it?
- 1.20 Pulse Empire
- 1.21 The marketing revolution in trading?
- 1.22 The power event for prospective entrepreneurs and millionaires
- 1.23 Head office in Cyprus
- 1.24 iMarketsLive
- 1.25 Trading made easy?
- 1.26 The iMarketsLive packages
- 1.27 Conclusion of this article about MLM in trading
Network Marketing offers companies the possibility of alternative product distribution. With this concept, acquired customers usually become independent salespeople, who then market the product to other potential customers. Since the respective product is usually passed on to family or acquaintances, this system is often referred to as recommendation marketing. It is therefore primarily about finding new salespeople who will market the advertised product further.
Earn money passively by building a “downline”
If these newly acquired salespeople then succeed in selling the advertised products, then one earns quasi passively. The sellers who are included in the system in this way are also called “downline”. This generates commissions on several levels – hence the name Multi Level Marketing. A downline consists of several different levels, which is why it is often called a level system. Depending on which level you are on, your passive income increases accordingly. The persons who were recruited directly and immediately are on the first downline. If the salesmen in the first line recruit further persons, these are then assigned to the second line and so on.
Network Marketing vs. illegal pyramid system
However, the focus is often not on the actual product, but only on mobilising new salespeople. And this is exactly what a big problem lies behind. This structure often resembles the illegal pyramid system. Because even with a pyramid system, the main purpose is to convince other people to join the system and thus your own downline.
How does a pyramid system work?
In order to enter the system, the new sellers have to pay a certain amount of money, which then goes directly to the people who are above it. As soon as the new distributor has recruited four or five other people, for example, he will get his money back and make a profit if necessary.
Why are pyramid schemes illegal?
Pyramid schemes are illegal because without a product it is not a real business. In addition, these systems that have been set up will sooner or later collapse because an exponentially growing number of new people would be needed. As a consequence, these systems collapse relatively quickly and a large number of people lose their working capital. So what distinguishes network marketing from a pyramid system is in principle a real product.
Which Red Flags should you pay attention to in these MLM systems?
But also in Network Marketing there are some anti-personnel mines and red flags that should be watched out for.
Sensible product at a reasonable price?
First and foremost, of course, there is the question of whether the product itself makes sense and the price is comprehensible. Products in less reputable services usually do not have any particular benefit, as they are not the focus of attention.
Since the aim is simply to gather as many business partners as possible in one’s own downline, the product will of course quickly move into the background.
Unrealistic profit promises
Network marketing structures, in which very unrealistic profit promises are made at the beginning, are usually very suspicious. Because it has been proven that only a fraction of the people in these systems really earn a lot of money.
Demand for high investments to get started
If, in addition to the initial profit promises, extraordinarily high initial investments are then demanded as an entry condition, then all the alarm bells should ring. Because in serious business there is no reason to set the bar so high for entry.
Including the personal environment
In addition, the personal social environment should often be included in the business and advertised. However, this results in a further problem. Since network marketing is mostly done by warm acquisition, this means on the one hand that the products have to be presented to the own friends and family members. And on the other hand, it means that the degree of difficulty increases significantly as soon as family and friends are served, as one is now dependent on cold acquisition.
The presentation of the products
Another indication that should be taken into account is the way the products are presented.
Are the products given special characteristics which are excessive, unrealistic and unproven?
By definition, this is also prohibited by law, since no claims may be made that have not been previously proven.
Network Marketing and Trading?
But what does all this have to do with trading? Well, in an age in which social networks are becoming increasingly relevant, new developments are emerging in this area as well, in order to seemingly make a quick buck. In addition to network marketing business models where a physical product is at the centre of attention, there are already several models where this is not the case.
After MLM systems, especially in the last two years, increasingly used the hype of the crypto-currency scene for themselves and built their business model on it, it now seems that trading is moving more and more into the focus of these systems. But what exactly does the product look like that is to be marketed?
How does MLM Trading work?
Of course there are different approaches of MLM services to the business field of trading. One model, which seems to be very popular at the moment, works in such a way that experienced brokers/traders are referred to the clients. So clients pay money which is passed on to experienced brokers in the next step. This broker is then responsible for investments and trades on the stock exchange, where the customer’s money is to be used and increased profitably – without doing anything. This broker then serves as a “product”, which is to be passed on to the future downline.
What does the product look like now?
As already mentioned above, it is of course not possible to make a flat rate at this point. However, we have done some research and found out that some products offered by different network marketing structures follow a similar scheme. In the following presentation, the wheel was not reinvented. The presented marketing strategy is used in a similar form in many other MLM industries. At the end of the blog article we will briefly discuss two well-known MLM business models, each of which uses two different approaches to build a network. The risks and inconsistencies that are apparent in their business models will also be pointed out.
Let us now start with the approach of the first method. The procedure can be described roughly as follows: At the beginning, a product often has to be selected from several different price ranges, whereby even the product in the lowest price segment is usually in the four-digit range. Depending on the product selected, a capital commitment must then be taken into account, which can last up to one year.
Access to returns only
During this time the invested money cannot be recovered directly. A return on the invested sum is then promised, which varies depending on the product purchased. Often, the targeted monthly returns are in the range of 5-8 percent on the paid-in investment. These are paid out monthly and can then be paid out or reinvested to increase future income.
Such high returns are explained as follows: By supervised and manual trading of different traders in the stock market these figures should be able to be realized. The traders work with the help of chart analyses, market research and media signals.
The optimization of the downline
However, a large part of the income – the part that can supposedly make you a millionaire – takes place elsewhere. And this is in the development of a downline, as can be assumed. The bigger and longer the downline (i.e. the more people were convinced to invest their capital in the MLM system), the more profit is said to be made.
MLM System as “Network Organizer
What is interesting, however, is that the brokers, who are supposed to increase the deposited money of the customers, belong to another company. The MLM structure merely serves as a mediating authority. Therefore, they call themselves “network organizers” and not financial service providers, which can also be attributed to legal reasons. Not everyone is allowed to impersonate a financial service provider legally and without further ado. For this reason there is a separation at this point, but this is not always communicated so strictly to the prospective distributors.
As can be seen, trading is not really the main focus of these network systems. Instead, the focus is on attracting new customers to the distribution system, generating new direct sales and thereby profitably increasing the own downline.
MLM structures with signalling services
In addition, those network marketing models that advertise with signal services have also experienced a hype. Interested parties are usually invited to a Whatsapp (the Telegram app is also popular, as it is generally more anonymous) group in which certain trading signals are communicated at regular intervals. However, these signals are also anything but reliable. Experience has shown that the signals by no means offer a profit guarantee and are often very faulty. As a result, they naturally carry an extremely high risk, which should not be underestimated. But even in this system it is not so much about trading as such, but rather about network building.
The image of the successful entrepreneur
To this end, appropriate educational materials are often made available and large “motivation events” are organised. In these events, a picture is often created that is intended to make the customer believe that he can become a millionaire in just a few months with this system. A video report by STRG_F shows how such an event can take place. You can find the video further down in this article.
Magnificent “motivation events
A common feature that many of these events share, however, is the conscious display of materialistic goods in combination with the business model. Intensive visual aids are used to captivate the prospective salesmen and prepare them for the upcoming marketing activities. At the end of the show, it is usually made clear that in order to be successful at the beginning, an investment is always necessary. To do this, a new salesperson who wants to enter the system usually has to make a relatively high initial investment, which is often in the higher four-figure range. However, this is largely minimized and taken for granted. If the event speakers are right, the investment is usually recovered after the first weeks.
MLM & Trading – so what is behind it?
Now the question arises whether an entry into such systems is justified or rather can be advised against. Now there are quite serious Network Marketing distributors, where a useful product is in the focus. In such cases MLM can be compared with the way a franchise company works. Then the complete business concept can be passed on to people who do not have a product of their own to market, but would still like to be independent.
With MLM in trading, however, in our opinion things are a little different. Because success in the financial market, like everything else, requires very hard work. This work cannot simply be replaced by a signal program. Basically, it can always be traced back to the fact that this type of network marketing is not really about trading. Because trading requires an intensive occupation with the topic for years. Unfortunately, however, it is very often and especially in the social media presented as the key to quick wealth. Especially younger people, who do not yet have the right feeling for it and often question it less, fall into the target group of network marketers.
As mentioned before, we will now take a closer look at two network marketing models that deal with the topic of trading and resell products in this area to their distributors.
Pulse Empire is a relatively new MLM model that has attracted a lot of attention, especially in the German-speaking world. The video reportage of STRG_F has taken a closer look at it and provides some interesting perspectives. We have integrated the video directly below this chapter for you.
The marketing revolution in trading?
If you register on the website, you then have the opportunity to choose between various “Pulse Funds”. These “Pulse Funds” are investment packages, there are “Starter”, “Advanced” and “Pro”, whereby the price for the starter package is already just under 1,000 euros, and of course there are no limits to the price. There is no access to the investments for at least 6 months, with “smaller” sums under 10,000 Euro it is even 9 months or even 12. So funds are acquired, which in the next step are managed by professional traders. Thereby monthly returns of 5-8 percent should be achieved. From a purely technical point of view, this is of course far from reality. In addition, it must be considered that a part of the investment goes directly into the upline as commission payment.
The power event for prospective entrepreneurs and millionaires
Even though the website does not initially promise any direct returns, a completely different wind is blowing at the “Power Event” organised by the company. As you can also see from the report, a completely different picture is created at these events. The company is advertised as a complete revolution in marketing, but nothing is really declared to be trading. Rather, the focus is on motivating prospective salespeople to acquire new customers. In addition, very intensive visualizations are constantly used to create the impression with the viewers that this business model is a very simple way to get rich. There is talk of being able to earn huge amounts of money in the shortest possible time. However, if the speakers and managers are asked where the considerable sums are to come from and how high the risk is, they do not make any statement on this.
Head office in Cyprus
It is also striking that Pulse Empire is not regulated by any financial market authority (FMA, BaFin) with regard to its trading activities. Since it is also kept secret which company the mysterious professional traders work for, the question arises as to whether they even exist.
If you also take a look at the website’s imprint, which does not conform to the law, you will find out that the company is based in Cyprus.
IMarketsLive or also known as IML was the first company to position itself in the trading sector with an MLM sales structure. Until today it is one of the most well-known networks in this area and is also considered controversial. IML was founded in 2013 and is more precisely in the field of day trading. Similar to Pulse Empire, financial freedom and wealth is advertised here as well.
Trading made easy?
The products are designed to help lay people to make profits with day trading. For this purpose, information products and training courses are offered, so that trading can be learned in a short period of time. In addition, signals from supposed professional traders are also made available. The services are then bundled into a monthly subscription. There is no guarantee whatsoever that the signals will work, so in principle you are completely responsible for whether or not you earn money as a result.
And yet the impression is often given that it is possible to earn a lot of money without having to invest the corresponding work and effort. And of course it is basically possible to earn a lot of money by trading. But as our readers certainly know, one can of course also lose a lot of money.
The iMarketsLive packages
Let’s take a closer look at the products offered by the Network Marketing Service IML. Basically there are two different products to choose between:
- Platinum Package (entry costs of 170 Euro, plus monthly costs of 130 Euro)
- IML Platinum Plus Package (entry costs of 210 euros, plus monthly costs of 165 euros)
As already mentioned at the beginning, the packages will mainly include online training courses on day trading and signal services. Whether these are really worth the money is questionable. From now on, the fixed monthly costs have to be recouped every month in order to be able to make a profit afterwards. And in the end you will still be left alone with trading, no responsibility for the trades made will be taken.
Conclusion of this article about MLM in trading
After being known for many years mainly for products in the dietary supplements, food and cosmetics industries, Network Marketing has now also advanced into the field of trading.
Sometimes it is not easy to make a clear distinction between a legal MLM system and a pyramid system. Global digitalisation makes it more difficult to check companies across the board for their legal basis for action.
MLM distributors in particular, in combination with virtual products such as foreign exchange or other derivative trading models, should therefore be viewed with the utmost care.
In many cases, trading is only a facade, while in the background, only paid-in sums are redistributed and traded as commissions until the system finally collapses. Often these are hidden pyramid schemes, which are disguised by intensive marketing campaigns and pretended trading promises (which are unrealistic).