The following is a MarketWave Alert from Len Clements. Len has graciously allowed me to post his complete alerts here for the benefit of our readers.
Hello all,
If I ever kept a record book on such matters, the number of requests for my "opinion" on Numis Network might be a contender for the #1 spot, at least this year for sure. So, even though I’ve had to take my "watchdog" hat off the last few months (in lieu of my "distributor hat"), and after spending the last few weeks actually trying to get my facts straight before commenting publicly (I hate the taste of foot), for what it’s worth, here’s my take on Numis…
I participated in a public, but not well publicized, debate call with the Numis leadership a couple of weeks ago. You can hear the call HERE. Also on the call were Shannon Denniston, Troy Dooley and attorneys Spencer Reese and Kevin Thompson. I think Numis cofounder Jake Kevorkian and his team won some major credibility points by just agreeing to this call. They represented themselves and their company admirably. They also made a great case for why the coins themselves are a legitimate, viable product. As an avid baseball card collector I can vouch for the fact that, although they are arguably an "investment" (I could have made a nice living buying and selling cards in the early 90s, before the bubblegum bubble burst around ’95), I collect them simply because a Nolan Ryan rookie card, or a 1957 Hank Aaron error card, are just cool to own. I can easily see how folks might feel the same way about silver coins.
So no, Numis is not the same thing as all the gold & silver deals that have been shut down in the past (American Gold Eagle, Gold Unlimited, etc.). They are not simply selling an alternative form of American currency (like selling a Susan B. Anthony dollar for $1.00), nor are they selling vouchers in lieu of coins.
These coins can be purchased individually, so although a nice convenience, it’s just a convenience.
The coin collecting part of Numis I actually like. The M.L.M. part, though, is almost entirely based on selling these overpriced $325 Fast Track Kits (which over $200 in bonuses are paid out from). The legality of Numis ultimately rests on the motive for buying these kits. Are thousands of people buying it right now because they actually want it, and would have purchased it anyway even if there were no income opportunity, or are they buying these kits because they are part of the $495 package to be an Executive distributor?
Here’s a question that was never asked on the call, which I’d still love to get some feedback on: When the Executive package went up from $299 to $495 last month, and bonuses were also raised, what was added to the Exec. package to account for this supposed 66% increase in value? Was the Fast Track Collector’s Kit included in the $299 Exec. package?
There’s also been a lot of chatter online about the fact that over 30 million 2009 Silver Eagles were minted, almost 7 million 2010s have already been minted (and will likely end the year at around 20 million), thus something can’t be of great collector value if it is not rare. But in Numis’s defense, it’s the highest possible MS70 rating1, meaning the coin is virtually flawless, even under a microscope, that causes a coin to go from it’s silver content value (in this case around $20) to the $99 value, or what ever it is for that particular coin. There’s also such things to consider as whether or not it is a "first strike", meaning one of the first coins for a new mintage to come off the line (supposedly the die that’s used by the mint wares down over time), and which grading service came up with the MS70 grade (there are several such services with varying degrees of credibility). After having read up on this pretty extensively I’ve come to the conclusion Numis is not at all being misleading in anything they’re presenting. The numismatic grading industry is! For example, this "first strike" or "early release" BS. Besides the fact the dies are often changed throughout the year, a coin is either MS70 or it isn’t. It’s either flawless, or it’s not (perhaps due to a worn die). Nonetheless, Numis is using ANACS, widely considered to be one of only four "A" rated grading services. I think that’s grading them on a curve.
Numis is also extremely vulnerable to SEC ire when it comes to claims of "increasing value" or anything that would suggest their product (gold and silver coins) are a good "investment". This has contributed to the demise of gold & silver coin deals in the past. Numis corporate did a great job of defending the corporate position on this, and they do appear to be proactively trying to educate their reps in this area. But it’s not what comes out of corporate that they need to be concerned about. State and federal regulators go by what’s actually happening in the field, not what is suppose to happen. And so far, it doesn’t look good. The "investment" angle is being employed by numerous Numis reps. Just Google Numis plus "[great, good, best] investment". There are many websites already in gross violation of this policy. Numis is going to have to have one of the largest and most active Distributor Compliance offices in the industry. But let’s give them the benefit of the doubt for now and see what they do. A great test will be to check in 90 days from now and see how many of those hundreds of websites are still making the same claims.
Numis’s response to this was that they were in no different a position that any dietary supplement company who is prohibited from making disease treatment claims. I disagree. Precious metals, especially bullion coins, are commonly marketed as investments and as a great hedge against inflation. I understand that Numis is selling numismatic (collector) coins, not just bullion coins, but the collectible is still composed of something well known, and well marketed, as a great investment. So the analogy with supplements is flawed in that supplements don’t contain, for example, penicillin or Acetaminophen (Tylenol). If they did they would have a substantially greater challenge keeping their reps from making antibiotic and anti-pain claims. The product Numis is selling is composed of gold and silver, which is by its very nature considered an "investment".
As a collector (trading cards now, coins and stamps in the past) I like the overall concept of Numis. However, some products and services, no matter how valuable, just don’t lend themselves well to an MLM opportunity. Travel, for example. There’s simply no money from the actual travel left to create any real income opportunity in the comp plan (around 3-5% of the actual cost of travel goes into the plan), so such deals compensate by adding a several hundred dollar "training package", or "travel booking website". Both of which are entirely distributor-centric, and thus ultimately gets the company in legal trouble. Same with the old long distance service MLMs. The service itself injected literally pennies into the pay plan (typically you got less than 1% of an average $25 monthly phone bill). So, they added several hundred dollar "training" packages, and paid $100-$250 "coding bonuses" from those packages. Numis now has the same challenge. The coins themselves have very little margin, and add little to the plan. So to compensate they came up with a $325 "Fast Track Collector’s Kit" that appears to have a net cost of around $120 (assuming Numis is getting the best coin prices and quantity discounts on the cases). That’s how they can afford the total payout of around $200 (on average, it could be more).
All legal issues aside, when the primary source of income in the MLM plan is a one time occurrence (the $325 kit) this also does not lend itself well to long term residual income. That usually involves making a sale once and that sale generating income for months, years, or for life. Like selling a "potion" or a "lotion", using it up, and then reordering it. For these Collector Kit related bonuses to continue there must be an ongoing, never ending flow of new, first time customers (distributors?). It’s kind of like selling a water purifier or any other type of non-consumable hard goods – which is why virtually all MLM companies that have sold such products have migrated to the ol’ "pills and potions" (NSA, Nikken, etc.). Yes, I know $6.00 from each monthly coin sale is paid from the binary plan. But again, that can only be because Numis is buying them at the low end of that price channel and selling them on the high end (giving them every benefit of the doubt in that none of that ongoing six bucks is also coming from the one time Collector Kit purchase, or worse, the high margin $75 distributor entry fee or the higher margin $119 annual web access fee). But, again, you can also access the low end of that pricing channel (just check eBay) right now, without having to pay anything to Numis.
On a completely different front, there’s also the issue of non-exclusivity. Unlike "potions" that have their unique nanopolyxanphytosaccharides (or what ever), or "lotions" that have their proprietary puppy placenta proteins (or what ever), a 2010 MS70 Silver Eagle is a 2010 MS70 Silver Eagle. That is, if Numis does make this work there’s inevitably going to be numerous Numis knockoffs. What’s going to happen when there are several M.L.M. companies all competing for the same limited supply of Numismatic coins? My guess? The coins will become even more deemphasized within the pay plan in lieu of the high margin "collector kits", membership fees and training. And as more and more companies compete on that level – and more and more of them overprice their kits, fees and training to support an even higher pay out – they’ll all start popping up on regulatory radar screens again. But I’m prophesying. It’s just a theory.
Will Numis reign in their numerous renegade reps who inevitably will and are making investment claims? Will anyone of any actual legal authority ever question the value of the $325 Collector’s Kit to a non-participant in the income opportunity, and the motive for purchasing it among those who are participants? What will be their conclusion?
These are subjective questions. For now, they are a matter of opinion. You’ve got mine. Now we’ll have to wait until someone who’s opinion actually counts decides to buzz in.
Time will tell. It always does. It just takes its time.
Len Clements
Founder & CEO
MarketWave, Inc.
1. Such coins are graded MS60 to MS70, with only MS60 and MS61 being considered poor grades. Based on several online definitions, MS62 to MS70 appear to represent degrees of good.
This is the most objective review of Numis I’ve read yet.
And even it is massively telling that this opportunity will not survive.
I couldn’t agree more, Gregory, Ty and Len!
Having been through an FTC shutdown of a company where I was a six-figure earner 6 years ago, it is not an experience I would wish up on anyone.
The leaders with the big lists will just move on to their next hot deal, thousands of other distributors will get hurt, and the industry reputation will suffer.
That is, of course, if the leaders don’t get fined! The FTC fined the two top leaders $1 MILLION and $500,000 in the company I was in that got shut down. I was one of the top 50 earners and we were told they were coming after us too. It didn’t happen but there were a few stressful months. 🙁
I have been prospected numerous times for Numis- the claims are rampant. I always ask “How many REAL customers are you getting?” No one has yet answered that question. They don’t even want to hear the question because they are so caught up in the ‘money.’
There is a class action lawsuit going on right now against Efusjon, with a primary focus being ‘customer acquistion’.
So if the FTC or AGs don’t go after Numis, it is quite possible that distributors who finally wake up will go after them.
Excellent, excellent article (review). Although I’ve come to expect nothing less from Len – a truly trusted pro in our industry.
Thank you for drawing people’s attention to the ‘kit’ solution to low margins, which so many companies turn to as a remedy for low margin products. So many folks need to be shown this so that they really ‘get it’.
Best to you,
Scott
At first glance it made sense – invest in assets, but what tipped me off was the high buy in and the big pay off for the buy in.
I don’t know anything about coin collecting, but they say that they will mint AS MANY COINS AS THERE IS DEMAND FOR – again calling into question the collecting value.
The lowest buy in is $75 and that does not include any product – that only gives you the right to purchase products. The MLM facet of it is well laid out and in the article and the conclusion that it is not a solid MLM is a good conclusion.
These coins and bullion can be purchased on websites, one of which i found that also guarantees buy back at market price. I think that would be a better way to go.
As with all MLM’s there is padding to cover commissions, but the Fast Track pack here is really on the border of ‘get paid to recruit’. Again, well done and thanks for taking the time to write it.
Numis is a really good idea but it doesn’t follow with anything that Tim Sales would stand for. I wonder what he has to say about this company.
Hi Len,
Great to finally read something of yours again. I read “Inside Network Marketing” back in 1999 and loved it.
Excellent article and a very good primer on Numis from the potential business partner perspective.
Your analysis of where the money is in Numis, reminds me of my analysis of a cellphone company using network marketing. Most of the money came from other things besides the cell phone service.
Thanks!
Alan
I think the most interesting part about this opportunity is that you don’t need a securities license to promote precious metals. They are merely riding an economic wave through positioning a cornerstone of value.
It’s also important to bear in mind they worked for years as comp plan consultants to the network marketing industry for 10 years prior to forming numis. They are also responsible for constructing the technical online back offices for hundreds of network marketing companies as well.
Lots of experience and tons of wisdom. I split hairs on this company and there aren’t any “gotchas”….yet.
Besides, the people that fail in the industry get stuck with a garage full of gold and silver instead of hair gel and juice products.
Time has passed and Numis Nation still stands! It will Stand forever we are having our 3rd Annual Convention in August. For more information friend me on Facebook or send me a message.
Not a very good article just sayinnn