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Sunday, 31 October 2010

The yearn for financial independence

Have you heard from Robert Kiyosaki, the author of Rich Dad Poor Dad?

"Have you heard from Robert Kiyosaki, the author of Rich Dad Poor Dad?.." I heard this many times and this has ALWAYS been the starting line to introduce some MLM (Multi-level marketing), land banking or other 'alternative' paths to financial independence quickly. I get to hear this again just a few days ago. My wife's friend offer to share with us, over breakfast, a business scheme that will bring us to financial Independence in 2-5 years. Her only prerequisite for participants who want to benefit from this business is to sacrifice several hours a week. My alarm bell went off immediately when she mention 2-5 years and rang even louder at the weekly effort required to succeed in the business. Anyway, it didn't take long before she got to the point, being a sales agent for Amway... and of course, nothing fruitful emerge at the end. Anyway, it seems to me that my wife had an affinity with acquaintances, friends or colleagues dealing with MLM business. Recently, while accompanying my wife to meet up with her piano blog reader on a premise for some discussion (she thought it has to do with piano or music in general) that turn out to be a presentation on e-spring water filter system, which also happen to be another product from, yes Amway again.

As far as MLM's business structure is concerned (quoted from wiki):

"Multi-level marketing (MLM) is a marketing strategy in which the sales force is compensated not only for sales they personally generate, but also for the sales of others they recruit, creating a downline of distributors and a hierarchy of multiple levels of compensation. "

Coupled with their products (few are wildly popular items), it seems to me that out of many who tried, probably a much smaller percentage will ever make it big. But the success of the latter is sufficient to entice people to try. Thus I am absolutely puzzled how one can generate sufficient sales (personal effort or combined downstream effort) to get enough commission to attain financial independence in 2-5 years.

Why not insurance or property?

If one has the sheer mental grit to persevere in such a low hit rate sales environment such as MLM, won't it be more rewarding to try being an insurance or property agent? It is almost no brainer Singaporeans are generally under insured (just taking an inaccurate empirical consensus amongst my friends), they want the payout when things happen but dreaded the costly premiums (especially the riders) that are 'wasted' if they don't claim. As for property, whether downgrading or upgrading, agents get to earn commission from each transaction.

Looking for a short cut

There is a common trait I observed amongst all of them who tried MLM, not only do they want success (financial independence), they want it safe and they want it fast. Working and saving is too slow. Venturing out to do business is too risky. Although it is simple logic that risks are inversely proportional to returns, many continue to believe logic-defying novelties. Take land banking for example, one of my wife's colleague got into this (yes, I also wonder why my wife got so many such lobangs). He's a sales agent from Walton International, a company involved in land-banking. The objective of land-banking is to purchase raw land and hold them until its profitable to sell. It is again sold as a low risk high return venture as raw land is cheap and once selected for development, the returns is huge. However, the problem here is how much do the investor know about the land they are buying? How do they assess their potential? How sure are they sure that they are getting a good deal? Even in land scarce Singapore and Hong Kong, there are reserve land to last many years.

The slow way to success

As the saying goes, anything that sounds too good to be true probably is. Unless we are extreme lucky to strike lottery, most of us either have to trade skill or time for money and ultimately hard work pays off. The more enterprising ones can take on more risk to venture into business and reap enviable rewards if they succeed. Lazy or risk-adverse people like me will prefer to reap what others sow by buying bits and pieces of listed businesses and make our money work harder. But whichever way we choose, it really takes much longer than 2-5 years to achieve financial independence, and I'm perfectly fine with delayed gratification.