Financial literacy key to avoiding pitfalls

 Direct selling is, an editorial in todays edition of The National says, a practice as old as, well, vacuum cleaners. But gone are the days when it meant a travelling salesman going door-to-door and trying to sell you household cleaning products, books or, as many may remember, DVDs. "And today, with the advent of social media, it might seem that it has never been easier or quicker to find success in direct marketing on the road to financial independence. But there are pitfalls," it warns.

"Consider the near ubiquitous online advertisements for get-rich-quick schemes that litter our web browsers. The sheer volume of these offerings ought to raise suspicion – for why aren’t we all selling stuff and getting rich? These plans, too often fake, prey on the weak and vulnerable, such as AK, an otherwise unnamed construction worker from Dubai about whom this paper reported on its pages yesterday," it continues.

"AK was lured into direct selling with a company by a friend who said he could secure his family’s future if he signed up. He borrowed and subsequently invested AED10,000 after being promised that he would soon make his money back and more in commission, only to belatedly realise that he had lost all his money. Now he is warning others to do their homework before handing over thousands of Dirhams in joining fees.

"With the economy subdued and many people struggling to get ahead, direct selling can indeed provide a way to generate extra income. The problem is that many people enter into contracts without performing the necessary due diligence, which makes them vulnerable to the worst excesses of the more dubious schemes. As with all things to do with money, potential investors have to do the legwork. And the first thing to do in this regard is to check if the company one plans to invest in is registered with the Direct Selling Association of the UAE."

The editorial concludes with some sage advice: "Checks and more checks and talking to others with experience are key to separating real opportunities from doubtful ones. To help out, more awareness campaigns, along with greater oversight by the authorities on unethical business practices, will help people avoid imprudent risks. But ultimately, the responsibility rests with the individuals hoping to strike it rich."

[Image caption: Many people enter into contracts without performing due diligence, incurring losses and only exacerbating their stress levels. Photo: Getty Images]

Source: Wam