If it walks like a duck, it sounds like a duck; maybe it is a duck. I can’t tell you that Beam Financial is a scam or not. However, let’s just say the optics don’t look right.
Beam targeted millennials, through their free app, in an attempt to provide them a no-fee high-interest rate savings account. They were claiming interest rates as high as 7% at first, which is a little smoke and mirrors. They have some complicated formula that kicks in if you spread the word and get people to join. Apparently, they bump up your rate to 7% for a day, however, there is a way to get to 4%. In addition, they claim to be FDIC insured, even though they are not a bank but claim to hold the money in FDIC member banks.
When this first came out, I had many inquiries from clients wanting to know my opinion. MY opinion was simply this:
As a business, how do you give up to 4% in interest when the highest bank interest rate is paying .66%? Further and beyond making up that difference, how are you paying your expenses as a business while charging no fees?
So, what is the problem? In a CNBC investigation and now a Federal Trade Commission inquiry, it has been revealed that customers are having trouble getting their money. Beam has come up with every excuse in the book. The bottom line is that if it didn’t look like a duck, customers wouldn’t be having trouble getting their money.
There are even questions about these “partner” banks that are holding the money and whether there is any FDIC insurance protection. Unfortunately, savings account holders may have lost all of their money.
What’s worst, you can still go online, sign up, and send them your money as of this blog post. Why hasn’t the FTC shut them down? You shouldn’t be able to take new customer money when you can’t even provide current customers the ability to access their money. That is called a Ponzi scheme.
What is the lesson?
If a company offers a guaranteed interest rate that is well above the going rate amongst banks, you are taking a risk, and that risk is the loss of principle. Paying a 4% interest rate when the going rate is around .50% is troubling, to say the least. Of course, it is only a 4% rate when you earn it and take it out of your account.
Of course, there is Beam’s story and whether or not it is true is up to the investigators.