Truth and LuLaRich: Helping Our Kids Get Started FinanciallySubmitted by Latitudes Financial Strategies on October 4th, 2021
If you subscribe to Amazon Prime Video, I commend to you a documentary called LuLaRich. It’s the true story of a fast-talking, positive thinking, and greedy married couple who created a multi-level marketing company called LuLaRoe; it sells inexpensively made dresses to stay-at-home moms to use as inventory so that they could then sell them to their friends and families at a profit: thus creating their own work from home business. The documentary gives the company’s founders plenty of time to defend themselves and tell their side of the story while it also tells the story of these moms who often borrowed five to ten thousand dollars to buy an inventory of shoddy clothes and run “their own business from home.” Only, as the documentary explains, the moms found it almost impossible to make any money buying and selling dresses, their real chance at earnings came from recruiting other people who wanted to become wealthy and buy more inventory. It was, as you might have guessed, a pyramid scheme, the money to buy inventory was gobbled up by the parent company to meet lavish expenses. The people who were early into the company did do well, compared to the people who joined later in the company’s history. The documentary explains how the company cared little for product quality, didn’t take returns, and blamed the moms, called “retailers,” if they were stuck with a garage full of product that couldn’t be sold.
I’m telling you about this because I was so struck by the heartless founders of the company and their willingness to tell their retailers that they “just weren’t working hard enough,” instead of offering actual support. The documentary told the stories of women who wanted to contribute to their family’s well-being by founding their own business, only to often lose everything, including their marriages, because of the impossible business model they had invested in. It was a heartless tale of desperate people taking advantage of innocent and even more desperate people, under the name of capitalism (I’m a proud capitalist, but fraud is not good business- it is simply fraud).
If you have grown kids, then you know, it’s hard for families to make it right now and there seems to be an ever increasing “gambling” mentality in people who are trying to break out of the hopelessness that seems to go with the getting started economically in America right now. Many of the good, dependable jobs have gone offshore, leaving a void that “motivational experts” disguised as businesspeople are taking advantage of. I think it is despicable.
In a parallel universe on Wall Street, we are observing that same fear as young investors use their phone apps to trade in rumor stocks and in make believe currency. With much of America’s industrial base shipped overseas and with the crush of student debt, it is difficult for a young American family to break out of poverty (or at least being in what we used to call the lower middle class) and they are succumbing to get rich quick schemes and long shot odds, feeling that they have nowhere to turn. One of the reviews of the Amazon documentary in a New York magazine described the husband a founding partner of Lu La Roe as a “Pink and blustery man who emits snake oil.” And it’s sad to see people like this out there taking advantage of our kids’ generation, just as there have always been fast talking con-men.
In our world, right now, truth itself is under assault, leaving room for self-help type gurus to spin lies without consequence and if you invest in anything, whether it is a financial asset or a small business, truth is required to make a good business decision. Positive thinking and optimism are good things to have on hand, but so are actual balance sheets, corporate accountability, and honesty.
My reason for telling you this is twofold: when it comes to investing, we believe in just that, investing, and not speculation. Secondly, we want you to become more aware of your estate plans. There’s a sadness over me when it comes to issues like this and the least we can do is try to help by investing properly for the long haul and by doing what we can to benefit our heirs. I worry for my grandkids.
Let’s start with the investment part, to me, when you buy shares of something tangible, something that has a value that can be determined by looking at something other than a share price, you are investing. When you buy something that has no intrinsic value and is only priced on the possibility that a greater fool may give you more money for it, you are speculating. Whether it is a multi-level marketing scheme, meme stock, or a lottery ticket, gambling is not investing, and I think it is my duty to point out the difference, no matter how compelling the reasons are to “take a shot” and try to hit a homerun on a speculative opportunity. Over time, in good investments, value is realized, over time Ponzi Schemes and bubbles burst leaving the last ones in holding the bag. In most of these cases, the ones left with huge losses will be the ones who can least afford it.
When it comes to estate planning, none of us are getting any younger and it’s a good idea to review your beneficiaries and your estate plan. My generation has most of its net worth tied up in the value of their homes and our retirement accounts. Our kids and grandkids are going to need every advantage that we can give them and setting up a good estate plan is our duty as good stewards. (While most of us trust our kids and their judgement, some of us have a child or two who are terrible with money and I’ve written a blog about what you can do to help them, click here to read it.)
Passing on our money in the most loving and tax efficient manner possible is not just a good thing to do, it is our obligation. It’s not pleasant to think about our own death, but we are only here for a while and taking the time to properly fill out a few forms and possibly have an estate planning attorney involved will give you a peaceful feeling that you have done everything that you can for your heirs. I’m here to help if you’d like to discuss.