Is Motley Fool A scam?
Apparently that is a question on a lot of people’s minds out there. I know this because when I review my website metrics for what phrases people are googling (or binging or yahoo’ing or otherwise searching the Web for) when they find my site, that phrase shows up with surprising regularity. When I first saw it I admit I laughed a little bit, but after more than a year of running this site, the phrase continues to show up with alarming regularity, and it got me to thinking.
The term “scam” is a highly charged word, particularly as it relates to financial or investing services. To call the Motley Fool a scam is to accuse it of the worst crime imaginable to a possible investor – namely, that it will knowingly cause you to lose money through deceit and misrepresentation.
This is much different than asking whether the Motley Fool is any good or worth your money. Those are reasonable questions that any informed consumer asks themselves. However, to ask if they are a scam infers a lack of trust from the get go. It’s a question that already assumes some level of guilt on the part of the Motley Fool. And for a service that prides itself on transparency it begs the question what are they doing wrong that people perceive them as a possible scam? I’m pretty sure I know the answer.
No, the Motley Fool Is Not a Scam
So let me say right off the bat that Motley Fool is not a scam. As a member for 7 years, I can unequivocally say that the Motley Fool has some of the most customer friendly policies I have ever experienced in my life, to the point where I wonder sometimes how they are able to not only stay in business, but apparently thrive. Every one of their newsletter services offers a month long trial membership whereby you get full access to the service and can get a full refund after 30 days, no questions asked. Many of their premium services offer a full 1 year money back guarantee – not a prorated amount, but a FULL money back guarantee. I have said this before but I have been a member of their most expensive Motley Fool One service for just under a year now, and I could call them up right now and get every single penny back. What other business out there provides such generous terms?
What about the quality of their services? Motley Fool is not for everyone. They are long term buy and hold investors; they are not active traders. That style can be frustrating for some, especially when one of the first Motley Fool recommended investments they make loses a bunch of money right out of the gate. But their performance is generally very impressive, as my monthly performance reports show. Sure there is some survivorship bias here as some of their less successful services have been shut down and don’t show up in their performance statistics. And you can argue forever about whether their use of average returns since inception versus the S&P is the best performance metric (sort of like arguing about who is the greatest baseball player of all time) but it’s undeniable that they have had great success. And the Hulbert Financial Digest recently named 3 of their newsletters as the top 3 investment newsletters out there. So they must be doing something right.
But Wait There’s More! Act Now And Get a Free Toaster
So why do so many people need to ask the question as to whether Motley Fool is a scam or not?
Whenever I tell my friends or family about how great the Motley Fool is, and refer them to a sign up page, I usually get the same response: “Are you sure? Their marketing sounds so cheesy. I feel like I’m watching a late night infomercial.” At which point I am put in that uncomfortable situation of having to make excuses for them like when you bring around that new girlfriend that your friends don’t really like: “I promise she’s a really great person – once you get to know her.”
But they are right. Motley Fool marketing is embarrassingly hyperbolic. Their marketing campaigns are riddled with phrases like “we will reveal the once in a lifetime investment opportunity that could literally revolutionize everything you thought you knew about transportation” or “apply quickly to see if you are one of 1 in a 1000 applicants qualified for our new one of a kind service” or “find out why we think this recommendation that has already returned over 1000% could still return another 1000%”. These are the high pressure, “promise the moon” marketing tactics of get rich quick scams. This is the language of penny stock purveyors and not the language of the intelligent, thoughtful, dedicated, and actually likeable advisors and team members who work at the Motley Fool.
The over the top marketing has been a subject of many posts on the Motley Fool boards, with many other long time members voicing similar complaints. In response, some of the Motley Fool advisors have alluded to also being unhappy about the approach as well but stated basically that the marketing department is separate from the investment services and beyond their control.
But ultimately that marketing team rolls up to the CEO, Tom Gardner, co-founder of the company. Tom and David Gardner both cherish integrity in the leadership teams of the companies in which they invest. Most of how they run their own company reflects this.
So why do they then allow these over the top, marketing campaigns that actually undermines the trust they seek to build and the great work done by their investment advisors? I can only conclude that the marketing must be wildly successful. Why else would they take that approach unless it works to brings in a ton of revenue for them?
Ultimately the Motley Fool is a business and I accept that their marketing must build excitement and attract customers. But they should take a lesson from one of their favorite CEO’s, Steve Jobs of Apple, whose marketing inspired the unrivaled loyalty of legions of fans without coming on like a used car salesman. After all, the Motley Fool is actually a great investment service – once you get to know them.