World Financial Group Review – Is WFG a Pyramid Scheme?

WRITTEN BY Dan Kent | UPDATED ON: May 25, 2024

World Financial Group Review

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Isn't it highly annoying when a friend, former co-worker or associate approaches you to discuss a foolproof business opportunity?

They don't even need to discuss the actual details. Your eyes immediately gloss over, and your defenses go up.

At best, it will be some hair-brained scheme a serious investor wouldn't touch. At worst, it'll be an outright scam, some pyramid scheme designed to enrich the people at the top at the expense of the plebs at the bottom. 

That conversation has likely happened millions of times, initiated by a small army of Western Financial Group agents. 

World Financial Group

Is WFG a legitimate company?

Yes, World Financial Group is a legitimate company. However, depending on who you talk to, World Financial Group -- or WFG -- is either an excellent business opportunity or an outright scam. 

The company has thousands of happy employees across Canada and the United States. Still, it also has a seemingly unending supply of online negative reviews from former employees and disgruntled customers.

Let's take a closer look at the company today, focusing on the positives and negatives in this WFG review.

Is World Financial Group legit?

World Financial Group is a multi-level marketing (MLM) company. The original idea was baby boomers would need comprehensive financial planning tools to help fund their retirements, so they could travel and do everything else they loved.

The company decided it would be more effective to adapt Primerica's "buy term life insurance and invest the difference" strategy into one incorporating variable universal life insurance. This insurance product also offers an investing component. 

Rapid growth ensued, with the upstart company attracting plenty of attention in the financial services sector. It held its first convention in Las Vegas in 1992, with some 2,000 associates attending. It expanded operations to Puerto Rico and then to nations like Canada, Mexico, the Philippines, Guam, and Taiwan. Growth was further accelerated by the building of a 100,000-square-foot headquarters in Duluth, Georgia, in 1998. 

Who owns World Financial Group?

It was founded by Hubert Humphrey after he left Primerica in 1991. In 2001, financial services giant AEGON acquired select assets of World Financial Group. The company was rebranded as Transamerica Securities in the United States in 2015, although it is still a subsidiary of AEGON. The founder was forced out, signing a non-compete agreement through 2013.

AEGON told investors it was putting in strict regulatory and compliance procedures to protect the company against the actions of a few bad actors. Still, regulatory issues persisted even after the sale.

The company was fined $150,000 by Missouri's commissioner of securities in 2006, $50,000 by the state of Utah in 2007, and $60,000 by the Mutual Funds' Dealer Association (MFDA) in 2016. 

Has WFG been sued?

WFG has been fined in Canada for wrongdoing, including an $865,000 penalty when 12 former agents in Mississauga falsified Know Your Client information on 95 documents. 

As of 2021, WFG had approximately 50,000 life-licensed agents spread across Canada and the United States, with a collective 1.3 million clients. 

How does the World Financial Group work?

WFG bills itself as an entrepreneurial opportunity for folks looking to build a business. 

It goes something like this. New recruits are offered a two-prong sales system. The first is offering investing, insurance, and financial planning services to prospective clients, using partnerships with dozens of financial service companies. The second part of the system is much more controversial; it requires the agent to recruit other people to work under them. 

Let's start on the financial services side. As mentioned earlier, WFG agents are trained to sell indexed universal life products. These insurance products combine a life insurance portion with an investment portion. 

Universal life is a controversial product

It has certain advantages, like principal protection -- thanks to the insurance part of the product -- and proceeds can be used to fund retirement or pass onto heirs without paying any taxes. But they're also confusing for most people to understand, riddled with high fees, and are a poor choice for many investors who would likely end up richer if they focused on index funds or other more conventional offerings. Critics argue WFG pushes these products because of their high commissions at clients' expense.

Other financial service companies offer lead generation services for new associates. WFG uses a different method, encouraging recruits through its Fast Start process to start by selling products to 100 family and close friends. Do an excellent job for them, and word of mouth will take over, ensuring an agent has a steady stream of new business. 

How much money can you make at WFG?

The average World Financial Group employee salary ranges from $50,000 to just under $100,000. However, the most controversial thing about World Financial Group is getting to that higher level of salary. Lets see how its done.

Recruiting new agents

One of the most significant issues for many WFG employees is the company's relentless push for its associates to recruit new agents. 

The company offers substantial benefits to those who do so through higher commissions. New agents start at the Training Associate level, with a 25% commission share. 

After a Training Associate gets three people underneath them, they move up to an Associate level and a 35% commission split. 

Next up is the Marketing Director position, achieved when an agent has 25 people working under them. It comes with a 50% commission split. 

The next level is a Senior Marketing Director, with a 65% commission split after a Marketing Director recruits 100 people to work under them. 

WFG also gives agents a piece of commissions generated by people working under them through the override system. This percentage gets higher at each level. 

Critics argue WFG places too high an emphasis on recruiting new agents and not enough on selling suitable financial products to consumers. They allege this multi-level-marketing method of promotion is heavy on promises and leads to a culture where WFG agents will do anything to get a mass of people working under them -- including misleading them about the potential benefits and the downfalls of such an arrangement. 

The benefits of WFG

Despite the company having one of the poorest reputations in the financial services industry, there are some advantages to building your career with WFG.

There's a certain amount of flexibility not allowed by many similar companies

WFG agents can try it out part-time while keeping their current full-time job. It's also a way for many folks to get their proverbial foot in the door, who dreams of becoming a financial advisor or insurance broker but can't get more traditional employment.

A good living if you put in the effort

The type of person who can easily convince dozens of direct recruits to sign up and start selling with the company can make a pretty good living. Senior Marketing Directors with an average of 3 years experience or less make average salaries of US$88,075, according to WFG's official site. That goes up substantially for people who have surpassed that level, too.

A means of passive income

One of the promises WFG gives recruits is there's a certain amount of financial security in recruiting others to work underneath them. These recruits should constantly bring in new business, which generates commission without having to do any work. It's a form of passive income that must be continuously monitored and maintained.

Not much of a difference between WFG and normal corporate structure

WFG also argues its form of multi-level marketing isn't much different than the traditional top-heavy organization seen at any large business. Most organizations have an army of low-level staffers making a fraction of as much as VPs or others who have risen to the top. WFG has the same sort of organization, but the twist is that promotions are gauged by an agent's success. 

The negatives of WFG

The internet is filled with a beef about WFG as thousands of former agents, dissatisfied customers, and consumer advocates flood online to voice their displeasure with the organization.

Allegations the company sold agents on a false promise

They wanted to use WFG's platform to help people retire comfortably, achieve financial independence, and build an estate preservation plan. Instead, they were pressured into making a network of distributors to enrich those above them in the pyramid further.

Many didn't realize how great the pressure would be, or they felt this wasn't properly disclosed until they were well into the process -- wasting time and energy for what would always be a disappointing result. For many, the point of WFG is to become their own boss, not to supervise a bunch of associates.

The emphasis on building a network of direct associates comes with other drawbacks

When commission levels are based on the number of people under someone, that person has a big incentive to look the other way if that person is doing some unethical things -- despite any internal controls put into place.

Commission levels in general are much lower than most other insurance companies

This is the reality of a multi-level marketing company with many levels of people getting a cut of the next level's commissions. Critics also argue WFG pockets a much more significant share of the commission than its peers at its agents' expense.

Problems with the product offering

Even though World Financial Group Insurance Agency and World Group Securities offer insurance and mutual funds from dozens of providers, agents are pressured to use internal options. Such options generally pay the most commission. These products aren't necessarily the right fit for clients.

Critics also argue a universal life product isn't right for most of WFG's clients. These folks should use more conventional retirement strategies of investing in exchange-traded funds or cheap mutual funds, not in an insurance product with a high-fee investment portion attached.

Those looking for insurance protection would be better off buying term life insurance. Many people who want to leave a financial legacy behind after passing away would be better off looking at options other than universal life insurance. 

Company's regulatory issues

As mentioned, it has dealt with various sanctions over its lifetime as rogue agents get caught breaking the rules. Many argue WFG's network-first approach creates a culture where reporting bad behaviour is discouraged. In other words, WFG's unique structure leads to more regulatory issues than the rest of the industry.

Should you join WFG?

WFG has a noble mission. It aims to help individuals and families achieve financial independence. But reality has turned out to be different. 

Naysayers argue the mission is to expand the organization and recruit new blood into the fold, to grow the organization at the expense of agents who want to help folks achieve their financial dreams. 

It's also easy to argue the company's bread and butter product -- universal life insurance -- is a poor choice for most of its customers, who would be better off with low-cost funds and term life insurance.

WFG could be a good choice for those looking to build a business or those who like recruiting people and helping them through the process. But for folks who want to help others, or those who have been identified as a prospect, be cautious. For most, WFG isn't worth it.