posted on December 1st 2016 in Fort Worth CFP Team Posts with 0 Comments /

Ever so often, a SPAM email makes it through my email filters. Ever have one with a subject so absurd you can’t help but click?  *sigh*  It happened to me…

For a little background, I’m the kind of guy other financial advisors call a nerd. Even my home office looks like a NASA mission control with screens and charts and all kinds of excitement! I’m surely a practitioner first and foremost, but theory has always fascinated me as well. Despite never actually “going back to school,” I’ve managed to collect a year’s worth of work toward a Ph.D. related to financial economics. Why? Because it’s fun; I have no desire to move to academia, but I just love to learn and pride myself on staying relevant.  Which brings me to why I clicked. Because I want to learn the strategy offered? No, for pure entertainment.

You see, I have binders upon binders full of academic papers on my bookshelf, and boxes more in my closet. Seems like in all this reading, at some point, surely I wouldn’t have missed someone winning a Nobel Prize for an income strategy! I mean, those things aren’t exactly a big secret, right?

But folks, have I got news for you! Apparently it only takes three minutes per week and returns an average of 40% a year! There was even a “classified” study from a well-known Wall Street brokerage that “proves” their claims! How inconvenient, the proof is classified.  Oddly enough, the Nobel Prize was not mentioned in the pitch at all just in its title.  Was anything else revealed? Only that the strategy used options.

Well that narrows it down easily, since the only Nobel Prize related to options I can think of was for the development of a formula for the valuation of stock options. Trouble is, it’s a partial differential equation, not a strategy. The “Black-Scholes” options pricing model is to options traders what an anatomy book is to a med student complicated, but mandatory.

What’s my point? They threw around a lot of things that sound “smart,” like the names of billionaires, famous investors, a big name firm notorious for being secretive, and of course, the Nobel Prize. Yet none of this had anything real to back it up. Just claims.

People always ask me, “How can they do things like that?” Well first off, he’s just a guy who says he is a “former trader.” He’s not licensed, and most certainly not a fiduciary!  So, who has a right to check in on him unless he does something illegal? He doesn’t have to prove anything as far as returns; he’s not even managing your money. He’s technically not giving investment advice! Yes, you read that right. He’s not officially representing himself as an advisor. He’s selling a subscription to his newsletter that’s all. He’s selling information, not advice. If that’s confusing to you, don’t feel bad. It is confusing. I’d go so far as to call it a loophole.

But that’s how SPAM works. The sender doesn’t need to make you a client for life, he just needs to get your $50-200 upfront and hopefully get you on annual auto-renew so you forget the amount is coming out again in a year. It really is that easy. Most people see ads like this and say “well, if it’s only three minutes a week, I can do that… and if it’s a scam, no big deal, it’s just $50.” Well, it is a scam. But most people don’t know that even after getting the newsletter in their email inbox for the first time. Why? Because in a moment of interest they spent $50. By the time the first newsletter arrives, life has gone on and that newsletter ends up in getting pushed down inbox with everything else, maybe to be glanced at now and then and never truly put to the test.

There you have it, the business model explained:  

  • Make outrageous claims that appeal to people’s greed. Litter in some terms or names that sound smart or sophisticated.
  • Set a low entry point. He said it was a total value of $600 upfront. This attracts people who are less serious about it. If the cost was very high, you would attract people who would be more likely to take it very seriously! You don’t want the serious-minded people; they are more of a liability! This leads right into the next point…
  • Hope people never really read it. If they read it, hope they never get around to putting it to the test. The newsletter becomes entertainment, and in one year, it gets renewed for a large portion of subscribers.

The last piece of advice I will give you is to pay no attention to where the email came from or what website you saw it on. Why? Because they often either have no control of the ads being run, or they are careful to add a disclaimer that says something like “this is a third-party offer/advertisement, and the opinions expressed are those of the advertiser and not our opinions.” Essentially, “they paid us to put this here, we don’t endorse this.” The email I got came from a website I actually consider reputable, but they didn’t endorse the content.

In summary, understand how something makes money before you throw any amount at it. The best at any profession don’t work for nothing. But there is always a scam waiting for anyone who is looking to get around that most basic rule of economics.

about the author: WorthPointe Wealth Management Team

WorthPointe is a fee only financial planning firm with offices in Austin, San Diego and Dallas / Fort Worth. Our advisors are credentialed, experienced and owners. Worthpointe provides advanced financial planning, investment consulting, tax planning, asset protection and insurance, estate planning, or charitable giving support.

Our team of CERTIFIED FINANCIAL PLANNER professionals has been quoted or published in The Wall Street Journal, San Diego Union Tribune, Financial Planning, Smart Money, Financial Advisor, Boomer Market Advisor, MSN Money, Wealth and Retirement Planner,, Bloomberg Wealth Manager, Del Mar Times, Money Magazine, and much much more.

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