BBC 2 screened an excellent documentary last night, looking at the people who attend wealth creation seminars with the aim of becoming a millionaire or ‘financially free’.
Leaving aside the entertainment value of the programme, I felt sorry for a lot of the people featured who were being sold easy answers to becoming rich.
I felt particularly sorry for the lady who had spent her entire £50,000 inheritance on wealth creation seminars and recently been made bankrupt as a result of her addiction to that industry.
Unlike professional financial advice, the wealth creation industry (which includes property investment mentors and stock market trading coaches) is unregulated. This leaves it open to any individual to make any claim without any real consumer protection.
Watching the show last night, three things became apparent.
Firstly, the wealth creation industry appears to rely on a lot of pseudo-science to create the belief that the Universe will reward certain behaviours with wealth.
One subject of the documentary, a lady called Janice, was shown getting up early each morning to undertake a series of bizarre exercise and chants in front of the mirror. Whilst having the right mindset to become richer is clearly important (if that is your goal), it requires a combination of attitude and action to get results; probably a lot more of the latter.
Secondly, everyone featured appeared to be in massive debt. This was either mentioned explicitly or apparent from some of the figures cited.
There was the couple from New Romney with a £4.5m property portfolio generating rental income of £36,000 a year. Based on that rental yield, they either offer the cheapest rent in England or neglected to mention several millions of mortgage debt on the portfolio.
Finally, everything people were shown doing was incredibly high risk. There was little mention of the importance of diversification.
Historically wealth creation ‘gurus’ focused on making money from residential property investment. They liked the idea that you could use other people’s money to finance your own wealth. This seemed to work very well in a rising property market, but several property investment seminar companies went bust when the market started to fall.
The latest trend seems to be wealth creation through stock market trading; something that even the professionals struggle to get right consistently.
Yet any wealth creation strategy devoted solely to a single investment asset class is ultra high risk. The inherent lack of diversification means maximum downside when the asset class falls in value.
There are no short cuts to getting rich quickly.
People spending large amounts of money on dubious ‘advice’ and guidance from wealth creation gurus are more likely to see their net wealth heading into negative territory.
The only people who get rich from wealth creation seminars are those peddling the seminars.
Photo credit: Flickr/colordancefrulight
