milligan4congress.com

Edited by CRISTINA LOUROSA-RICARDO

There are plenty of stupid investments you can make in this world. Stock in Pets.com and Washington Mutual didn’t work out so well. Nor did those Las Vegas condos. Some of the social media and Web 2.0 stocks flying high on Wall Street will probably follow suit.

But the most foolish investment of all may be right in front of you. And there’s a worrying chance you’re buying it.

The investment? Stock in your own employer.

According to data from the Employee Benefit Research Institute, only about 40% of employees participate in 401(k) plans that even offer the company’s stock as an option. Those employees are still investing from 16% to 19% of their plan portfolios, on average, in their employer’s stock. At the same time, they have been shrinking their overall equity exposure dramatically.

One dollar in your employer for every two dollars spread across all the other companies out there? It makes no sense.

First, you already have a big investment in your employer. You work there. If you are hoping to work there for some time, it may well be the biggest investment in your portfolio.

The value of an investment comes from its cash flow. Let’s say you’re hoping to earn a modest $45,000 a year for the next 10 years. An annuity producing that series of cash flows might cost you about $380,000. For 20 years: nearly $600,000.

No, a job and an annuity aren’t identical. But the analogy is useful. Your cash flow already gives you a huge stake in the company. Do you need to double down?

Legions of workers did just that and became two-time losers. Their employer collapsed. They lost their incomes and their savings at the same time. Think of Enron. Think of WorldCom. Think of all those who worked at banks that collapsed in 2008. Bank of America and Citigroup avoided bankruptcy, but their stocks fell to pennies on the dollar.

The second problem with investing in your own employer’s stock? It’s based on the theory that you’ll benefit from the company’s improved performance and that you’ll have incentive to contribute. You’ll be a stockholder as well as an employee, and you’ll think like one. Employees buying company stock think they will have some influence over how it does.

Good luck with that.

The theory is fine if you work for yourself, or in a small partnership. But in a company of 500 or 1,000? No matter how hard you work, you won’t have any material effect on the share price. The only people who can do that are the senior executives.

Speaking of whom: Many people who buy company stock think they’re following safely in the footsteps of top executives. But this, too, is an illusion. Even if the CEO holds $10 million in company stock, so what? His financial situation is totally different from yours. He may hold $50 million in other investments. If he gets canned, he may have a golden parachute and a network of golden handshakes to fall back on.

And are CEOs really investing in the company? Most just get free stock and options—which they then sell.

—Brett Arends, SmartMoney Magazine

Eye on Overdraft Fees

Bank overdraft fees are the latest target of the Consumer Financial Protection Bureau, which said last week that it would demand data from the biggest financial institutions and look at ways to make the fees on checking-account statements easier to understand.

This overdraft-fee campaign could eventually help consumers avoid unexpected charges.

The bureau said it will gather data “from several of the largest banks in the country to evaluate how those institutions’ overdraft policies affect consumers,” without specifying which banks were asked to supply data.

The American Bankers Association has said most bank customers don’t pay overdraft fees and that customers can avoid the charges by keeping extra money in their accounts or by linking checking accounts to savings accounts.

The bureau, however, said it’s concerned some banks may be charging and calculating the fees in a way that is misleading or confusing for consumers and that the banks aren’t consistently following previously outlined “best practices.”

—Maya Jackson Randall, Dow Jones Newswires

Bypass the 10% Penalty

Thinking about raiding your retirement funds? There are ways to do so without triggering the dreaded 10% penalty on early withdrawals for people under the age of 59½.

If you leave a company in the year in which you turn 55 or older, you can take penalty-free withdrawals from a 401(k) plan. (The distribution would be taxable, of course, but the 10% penalty would not apply.)

There also are ways to avoid a 10% penalty with an IRA.

IRA owners can take so-called 72 (t) withdrawals. Under their rules, you can start taking these withdrawals at any age. But once you start, you must continue for either five years or until you reach age 59½—whichever is longer. (You can do it with a 401(k) as well, but you must have left the company first.) Moreover, because the payments are calculated according to actuarial tables, you won’t be able to adjust the amounts.

IRA owners who are unemployed can take distributions from a SEP, Simple, Roth or traditional IRA to pay health-insurance premiums for themselves, a spouse and/or dependents. You have to have received unemployment compensation for at least 12 consecutive weeks among other qualifications, says Ed Slott, an IRA expert in Rockville Centre, N.Y.

—Anne Tergesen, Encore Blog, SmartMoney.com

Tooth Inflation

How sweet it isn’t.

The average gift from the Tooth Fairy dropped to $2.10 last year, down 42 cents from $2.52 in 2010, according to no less an authority than the Original Tooth Fairy Poll, which is sponsored by Delta Dental Plans Association.

“But the good news,” their PR folks hasten to add, “is she’s still visiting nearly 90% of homes throughout the United States.”

Some other data points:

• The most common amount left under the pillow by the Tooth Fairy is $1.
• Most children find more money under the pillow for their first lost baby tooth.

—Total Return Blog, WSJ.com—The Aggregator, edited by Cristina Lourosa-Ricardo, features news and commentary from The Wall Street Journal and other Dow Jones publications. Email: cristina.lourosa@wsj.com

Corrections & Amplifications

About 40% of workers were members of plans that offered company stock as an option, according to data from the Employee Benefit Research Institute. An earlier version misstated that about 40% of 401(k) plans offered company stock as an investment option.

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By SOPHIA HOLLANDER

In most New York child support cases, courts award no more than $23,000 a year to cover a child’s basic needs.

Then there is the 5-year-old son of billionaire businessman Francois-Henri Pinault, whose companies include Yves Saint Laurent and Gucci, among others, and millionaire model Linda Evangelista.

On Thursday, the parents will appear in Manhattan Family Court to begin a trial over child support payments with staggering sums at stake: Ms. Evangelista has calculated the monthly expenses of their son, Augustin, at just under $47,000 a month—or about $560,000 a year.

Mr. Pinault, who never wed Ms. Evangelista and is now married to actress Salma Hayek, is challenging what would be a historic support amount if it were to be granted in total, according to lawyers across the state.

Ms. Evangelista’s attorney, William Beslow, declined to comment, as did Mr. Pinault’s attorney, David Aronson.

It is hardly the first time wealthy parents have tested the limits of New York’s child-support standards, enabling courts to issue their own judgments about appropriate awards.

That authority was largely stripped from judges when New York enacted mandatory guidelines for child support in 1989. Today, a formula applies to the first $136,000 of a couples’ combined income and assigns each parent a share of the expenses. Under that standard, an only child is entitled to about $23,000 a year—or 17% of $136,000—which is split by the parents in proportion to their relative incomes.

But couples whose income exceeds that threshold have more uncertain futures. In those cases, judges have a broad discretion to make more substantial awards. They must sift through claims about reasonable costs, while recognizing that lifestyle standards may change for income brackets that far exceed their own.

At the same time, they must be wary of requests that use child support to bolster a parent’s lifestyle, or what is known as “disguised alimony,” said Robert Stephan Cohen, who has represented Christie Brinkley, Dina Lohan and New York City Mayor Michael Bloomberg.

Many judges will simply raise the income cap and apply the formula accordingly, though they rarely lift it beyond $500,000 said many lawyers—even when the parents earn millions.

“You don’t want to create a windfall—in essence give a support award that’s supposed to be for children,” said Nassau County matrimonial attorney Lee Rosenberg. “You look at the child’s actual needs and not the wealth.”

As a result, “there’s a tremendous amount of discretion, but that discretion is really limited to the proof of the child’s actual lifestyle needs,” he said. If claimed expenses are “too outrageous the court can cut it back.”

But outrageous is a relative term, some said.

For “parents with seemingly unlimited resources, the court is going to look at what we would call the ‘New York City package,’” said Manhattan matrimonial lawyer Alton Abramowitz, who is the president-elect of the American Academy of Matrimonial Lawyers.

That includes a significant award for basic child support, along with additional expenses paid directly to a vendor, such as private school tuition, medical costs, and child care. Ms. Evangelista’s estimate of about $47,000 a month includes those additional costs.

Still, Mr. Abramowitz said, judges will draw a line. In some of his cases involving wealthy families, courts have declined mothers’ requests for summer homes and Rolls Royce cars as part of the child support payments, Mr. Abramowitz said.

“The sense of entitlement, that because someone has a child by a wealthy parent, that they should receive child support as if it were alimony, is really a foreign concept in terms of New York law,” he said.

Ms. Evangelista’s listed expenses include $175,000 a year for bodyguards and a driver and $90,000 to pay three separate nannies working eight-hour shifts.

The numbers evoked incredulity among some lawyers.

“It’s an unheard-of number,” said Mr. Cohen. “I don’t know the facts but it would be extraordinary. Lawyers push the edges of the envelope, that’s sort of our job, but this push is beyond anything that the courts in our state have ever done.”

There have been high-profile awards in the past. In 2001, a judge awarded Patricia Duff $12,825 in monthly child support in her case against Ronald Perelman. Mr. Perelman was also responsible for all of their daughter’s educational, medical, extracurricular and camp costs, according to court documents.

In 2006, an appellate court overturned a child support award of $35,000 levied against Sean “P. Diddy” Combs, reducing it to just over $19,000. Mr. Combs was also responsible for additional expenses, including for tuition, health, summer camp and security, according to court documents.

Ample proof must be offered to convince a judge of such significant expenses, many lawyers said, including detailed records of past payments, documentation of death threats, and even expert testimony regarding the appropriate standard of living.

In New York, it can add up quickly, some said.

“If you take two kids living in a $30,000 a month apartment with $50,000 in school tuition for each one, suddenly you’re up to $460,000 and you haven’t had a bite to eat,” said lawyer Peter Bronstein, who has represented Barbara Hearst and director Guy Ritchie. “It’s incredible how wealthy some people are.”

Write to Sophia Hollander at sophia.hollander@wsj.com

A version of this article appeared May 3, 2012, on page A17 in the U.S. edition of The Wall Street Journal, with the headline: Looking to Raise a Child on $47,000 a Month.

By TERI EVANS

When Andrew Schuman bought Hammond’s Candies in 2007, the nearly 90-year-old candy company was operating in the red. Mr. Schuman, who says he knew nothing about the candy business, soon learned that an assembly-line worker, rather than an executive, had dreamed up the design of the company’s popular ribbon snowflake candy.

It was an “aha” moment, he says. “I thought, ‘wow, we have a lot of smart people back here, and we’re not tapping their knowledge.’ “

So last year Mr. Schuman decided to offer a $50 bonus to assembly-line workers who came up with successful ideas to cut manufacturing costs.

“They’re the ones making and packing the candy, so I thought they probably know how to do things better and more efficiently,” says Mr. Schuman, president of the Denver, Colo., company, which has about 90 employees.

The informal idea program, which is open to all Hammond’s Candies workers, has handed out more than $500 in employee bonuses since it began last year. One worker suggested a tweak in a machine gear that reduced workers needed on an assembly line to four from five.

Another employee devised a new way to protect candy canes while en route to stores, which resulted in a 4% reduction in breakage. “It’s these little tiny things that someone notices that help us in the long run,” says Mr. Schuman, who adds that the company was able to earn a profit this year.

Mike Hall

As more entrepreneurs turn to employees for innovation to gain even the slightest advantage in a still-sluggish economy, many are discovering the usefulness of cash incentives or other rewards to encourage workers to come forward with ideas. Particularly for small businesses with limited resources, it’s a relatively cheap way to gather “lots of ideas and get people proactively thinking about what would make the product, service or company better,” says David Hsu, entrepreneurship professor at the University of Pennsylvania’s Wharton School.

Mike Hall, chief executive of Borrego Solar Systems in San Diego, introduced two quarterly employee contests this year, each with a $500 prize. Beyond the competition, the company’s 55 employees are rated on innovation in their annual reviews.

One contest seeks the best business innovation, which Mr. Hall says must be formalized on paper to include the problem the idea solves, as well as its costs, risks and benefits.

The other competition rewards the best “knowledge brief,” which requires employees to share valuable information that can benefit the company as a whole. For example, one worker won for creating a glossary of acronyms in the solar industry.

“It accentuates the importance of disseminating knowledge and trying not to hold it in silos,” Mr. Hall says. Winners are determined by a companywide secret ballot.

Prof. Hsu says finding unique ways to reward employees for their ideas is a way to foster esprit de corps. “It’s why a lot of people work for small businesses in the first place; there’s a closer connection in the effort they put forward and the final product,” Prof. Hsu says.

Jared Heyman, founder of Infosurv, a market-research firm in Atlanta, says his company has long turned to employees for business ideas. “In every industry, as soon as one company creates an innovation everyone else is then playing catchup,” he says.

Five years ago, Mr. Heyman began awarding a $150 restaurant gift card every quarter to the employee with the best business idea. One employee won for developing a technology innovation that helped the company retain a major client that was about to jump ship.

“The [ideas] program has paid for itself a thousand times over,” Mr. Heyman says. “In terms of cost savings, revenue enhancement and efficiencies, it’s certainly in the six-figure range.”

This year, he upped the ante with a second contest, 100 Days of Innovation, in which the company’s 15 employees have to come up with a total of 100 innovative ideas by year’s end in order to each receive a $100 reward. Employees write their ideas on post-it notes and stick them on the “Innovation Board,” created to provide a visual reminder.

“I think a lot of folks are motivated by the fact that if we fall short nobody wins anything,” Mr. Heyman says. “It reminds everybody that we work together and we’ll succeed or fail together.”

During the last decade the march to democratize the markets has charged forward, with each new innovation or revamp heralded as evening the playing field and giving smaller investors a sense of fairness and trust.

These efforts have yielded two tangible results: lightning-fast execution and slashed trading costs. The floor of the New York Stock Exchange is witness to this shift. The number of floor brokers has shrunk by half, to 1,500, in just five years. Actual trading on the floor is less than 10% of volume.

MarketWatch columnist David Weidner visits Mean Street and spotlights the sentiment many have that the markets are unfairly tilted against them, and it is increasingly difficult to buy low and sell high. Photo: AP.

Taking the place of humans are those coldly efficient and incorruptible machines.

And yet despite these efficiencies, most investors find themselves questioning tried-and-true principles and strategies: value investing, technical analysis, momentum plays and even the simplest maxim, “buy low and sell high.”

Poll after poll shows that investors feel the markets are tilted unfairly against them. What’s worse is that investor skepticism is higher than it was before market “reforms” allegedly improved the system.

In its latest poll, released in December, the Chicago Booth/Kellogg School Financial Trust Index found that only 16% of investors said they trust the stock market. That is roughly the same level of “trust” the survey found in the months after the collapse of Lehman Brothers Holdings Inc. and the Dow Jones Industrial Average fell to below 7,000.

To illustrate how far trust in the market has fallen, consider that in 2002 a USA Today poll found that fewer than 50% of respondents trusted the stock market, a trend blamed on the accounting and financial scandals at Enron Corp. and WorldCom.

Market confidence has historically ebbed and flowed with market performance. People feel ripped off in a correction. They feel they are getting their fair share in bull markets. Today the Dow is in the midst of a six-month rally, flirting with the 13000 level—so why is confidence still in the tank?

There are multiple reasons. Regulators such as the Securities and Exchange Commission and Commodity Futures Trading Commission are forever a step behind. Alternative trading platforms, or “dark pools” are anonymous, menacing and have been susceptible to market manipulators, critics say.

Also, there are the high-profile wreckages: the botched BATS initial public offering, for one, which came on the same day Apple Inc.

shares went through a trading glitch that slashed value.

Those factors are enough to make investors nervous. But it is the bigger trends that are really at play here, not the momentary glitches. They make those of us old enough to remember long for the good old days when trades were handled by fallible, corruptible humans. In a nutshell there are three new trends that have made many investors spectators in a game they are supposed to be playing, not watching.

•High-frequency trading. Now an estimated 70% of the volume pie, computerized-trading platforms seem to have their own will. Most investors, while benefiting from the liquidity these machines provide, are reasonably skeptical of HFT’s influence on price, especially in periods when the markets have low volumes made up mostly of mechanized transactions. Witness shares of General Motors

that traded at more than $1 even after the company filed for bankruptcy in 2009, a mystery that was blamed on HFTs propping up the stock so they would continue to collect rebates for filling orders.

•Derivatives. Today’s markets are often the tail wagging the dog. Futures and exchange-traded funds are a part of this, but a bigger menace is the credit-derivatives market—the vast network of agreements and contracts that bet on debt. Bond prices are now set in the derivatives market, a trend that has extended to the equity market as well. A study by Greenwich Associates in 2007 concluded, “In many ways, hedge funds have become the market.”

•Absence of the big computer. Perhaps the biggest difference between today’s market and that of a decade ago is the disappearance of brain power. For as much as they were maligned, specialists and floor traders kept a measure of reason in stock trading. When a trade didn’t look right there weren’t big, inexplicable flash crashes. The trades were held by humans who used instinct and experience to avoid panic. For all electronic advances, the big computer—your brain—still is the most powerful of all. That is why much of the business during the May 6, 2010, “flash crash” ended up in the hands of humans—not that they were any match for the machines.

Ultimately, these factors have combined to make the best intentions of regulators and exchange companies ineffective. Investors used to worry that a specialist might front-run a trade or play favorites. And certainly, as SEC investigations of the early 2000s showed, those fears were real.

But when compared with an entire landscape so completely skewed by outside forces beyond simple supply and demand economics for a stock, the days of front-running almost seem quaint and innocent.

Buy low and sell high? What’s low? What’s high? Is there anybody out there?

Write to David Weidner at david.weidner@dowjones.com

In 2009 the anti-poverty program Grameen America opened an office in Omaha’s largely Latino south side, at the invitation of Warren Buffett’s family. Grameen had opened its first U.S. branch the year before in New York, making “microloans” of less than $1,500 to women who wanted to start a small business and lift their families above the poverty line. That idea earned a Nobel Peace Prize for the program’s pioneer, Muhammad Yunus.

In Omaha and New York, it turns out that many women took their Grameen microloans and joined Herbalife (ticker: HLF) and other multi-level sales organizations as self-employed distributors, according to present and former employees of Grameen America.

A visit this month to the historic neighborhood surrounding Grameen’s South Omaha office revealed half-a-dozen storefronts draped in the bright green curtains of an Herbalife Nutrition Club. Most were empty, and those that weren’t had just a few customers, sipping Formula 1 weight-loss shakes and aloe-digestion drinks on folding chairs set beneath posters of soccer stars and swollen intestines. South Omaha had more Herbalife clubs a year ago, said neighbors, but their operators gave up waiting for a profit. The earnest manager of Omaha’s Grameen America branch, Habib Chowdhury, said his office’s 1,400 borrowers have established a variety of businesses and repaid their loans. The organization trusts borrowers to make their own choices, but Chowdhury says he now discourages women from borrowing to join Herbalife. “It’s not a good business,” he opines.

For Herbalife and its health-products rival Nu Skin (NUS), however, business has never been better. They’ve gone international with their offers to get rich by recruiting others who will, in turn, recruit recruits into so-called multi-level networks devoted to ordering the companies’ wellness products. Herbalife is known for its protein shakes, Nu Skin for its “anti-aging” skin treatments.

Over the past five years, Los Angeles-based Herbalife more than doubled its earnings to $3.30 a share and saw its stock quadruple. Nu Skin tripled profits, to $2.38 a share, over the same stretch; the Provo, Utah outfit’s stock likewise tripled. Both NYSE-listed companies have shared their swelling cash flows with stockholders, through dividends and huge share repurchases. Herbalife Chief Executive Michael O. Johnson was the highest paid boss of a public company last year, earning $89 million.

In their early days, each company settled regulatory actions related to their recruitment practices and product claims, but no U.S. regulator has challenged either business in more than 15 years. Like many successful companies Herbalife and Nu Skin now have friends in high places. The current U.S. congressman from Nu Skin’s district, Jason Chaffetz (R., Utah), used to be the company’s official spokesman. When recent presidential candidate Jon Huntsman Jr. was Utah’s governor, he visited China with a Nu Skin delegation and persuaded that country to ease its regulation outlawing multi-level marketing companies. Nu Skin execs have put millions of dollars into Mitt Romney’s presidential campaign. Herbalife has enjoyed repeated endorsement by CNBC’s Jim Cramer. “You have made fortunes for our viewers,” Cramer told CEO Johnson, in an August 2011 interview. “This is perhaps the best-performing stock we have ever talked about.”

UNTIL RECENTLY, AT LEAST.With shares of Herbalife and Nu Skin at all-time highs of $73 and $62, respectively, investors were listening to a conference call about Herbalife’s record quarter on May 1 when hedge-fund manager David Einhorn asked some skeptical questions. Panic ensued, knocking more than a third, or a combined $5 billion, off both companies’ stock-market values. Brokerage analysts warned that the Greenlight Capital honcho might be planning an attack on the multi-level marketers at the Ira Sohn Conference, a New York charity event scheduled for May 16 and the scene of Einhorn’s previous critiques of Green Mountain Coffee Roasters (GMCR) and St. Joe (JOE), which subsequently proved well founded. Shares of Herbalife and Nu Skin remained under pressure last week, closing Friday, respectively, at $45.34 and $42.25. Einhorn declined to discuss the businesses with Barron’s.

Maybe Einhorn will talk about the firms on Wednesday, maybe not. But the prospects for Nu Skin and Herbalife—and their shares—will depend more on the good sense of common folk like Grameen’s borrowers than Wall Street, state regulators or stock-market pundits. The companies’ reports, summarizing their distributors’ compensation, aren’t as lucid as they should be, and the multi-level marketing industry has been known to tout the riches enjoyed by just a few of their top distributors rather than the experience of the great majority.

Careful analysis of Herbalife and Nu Skin numbers—which we show in the charts nearby—suggests that over 90% of their U.S. distributors make no profit. International markets offer fresh prospects for the companies, but even so, Herbalife’s filings show it has to replace more than half of its distributor ranks every year. The world is large, but it is finite and increasingly well-informed. Herbalife chief Johnson has said that his company is the “intersection of health and wealth,” but the numbers show that distributors are capable of figuring out that it’s a dangerous intersection.

In some New York City neighborhoods like Jackson Heights and Corona, there seem to be as many Herbalife Nutrition Clubs as Starbucks. You can identify them by their green curtains, because Herbalife rules forbid signage, cash registers and other tools of most retail trades. Unlike Starbucks, the operators are footing all the bills and don’t earn salaries.

The clubs don’t evoke the flashy lifestyle flaunted by established Herbalife distributors like Doran Andry, a Los Angeles area success story who brags in promotional videos that his biggest decision each day is whether to drive his Porsche, Bentley or Jaguar. To recruit prospects into opening Herbalife Nutrition Clubs, Andry’s Website (cmwellnessworks.com) presents a spreadsheet showing that you could be making $55 million in annual profits within 10 years of opening your first club. His calculus, however, assumes that your territory will grow to 27,475 clubs over that decade. An Herbalife spokesperson said that such an income projection isn’t realistic.

WILDLY OPTIMISTIC NUMBERS aren’t unusual in multi-level networks, where the first few into a new territory have by far the best chance of making good money as they build a “downline” of subordinates. The distributors who follow them are mathematically doomed to failure because, as the group grows, it becomes more difficult to find new distributors to bring in. The distributors at the top of each network get paid from the sales of those below. In Nu Skin, this incumbency advantage is reinforced by blood and marriage. Over a dozen of the top distributors and employees are relations of founders Blake Roney and Sandie Tillotson. “Direct-selling is a ‘friend and family’ business,” Nu Skin said in a written response to Barron’s. The response noted that the relatives “only get paid commission on sales through the sales network they have created through their own hard work.”

Nu Skin’s and Herbalife’s annual reports disclose the commissions earned by their U.S. distributors. But the disclosures by both firms tabulate commissions for only a top fraction of their networks—giving a distorted picture of what a distributor could expect to earn. Only by digging into the footnotes of those reports, and checking other filings at the Securities and Exchange Commission, can you estimate that the tables leave out 90% of Herbalife’s distributors and almost 95% of Nu Skin’s. Even in the small slice shown by Nu Skin, most are in a segment that averages under $600 in commissions per year. Only 451, or about 0.2% of U.S. distributors, are in the sliver that averaged more than $15,000 in commissions last year, according to Nu Skin’s compensation summary. The numbers are better at Herbalife, but still daunting: About 1,200 made it into the 0.2% sliver that got more than $100,000 in commissions.

Even within the elite stratum of distributors that the two companies portray, turnover is high. Herbalife’s SEC filings do a good job of documenting the churn within its ranks. Last year, it lost 51% of its “active” distributors worldwide–an improvement from the 60% churn in 2009. Nu Skin, for its part, refused our request to quantify its turnover rate, which SEC filings simply describe as “high.” “It is easy to start a Nu Skin business,” says the company. “It [is] easy for them to drop out.”

If turnover in the top decile of these distributorships is high, one can only imagine what it’s like among the rank and file. Both companies acknowledge that as their markets mature, recruitment becomes harder. In the U.S., for example, Herbalife’s ranks are only growing among Hispanics, while Nu Skin’s are tapering. Asia’s developing markets are where both now find their growth.

An analysis published in a scholarly journal by Federal Trade Commission economist Peter Vander Nat in 2002 looked at these kinds of sales networks in a different way. Vander Nat tried to estimate whether the commissions paid by a multi-level marketer seemed primarily intended to reward recruitment instead of the sale of its products or services. In other words, does the outside world want the business’ products or just revolving-door ranks of commission-seeking recruits? His analysis was based on how much a company would have to sell to outsiders for those sales to account for more than half the commissions paid to distributors. David Einhorn’s conference call questions followed a similar vein; he asked what portion of Herbalife’s products are consumed only within its distributor base. The FTC, in a 2004 advisory opinion, declined to use Vander Nat’s analysis as a bright-line test.

But investors might find it a useful measure of external demand. Using the companies’ suggested retail markups, we calculated how much they’d have to sell to outsiders to account for half the distributors’ commissions. For Herbalife, we figure the percentage would be about 80%. For Nu Skin, about 65%.

Nu Skin tells Barron’s that it is confident that over 70% of its sales volume is consumed outside its network. Herbalife can’t answer that question. In SEC filings, Herbalife reports a number called “retail sales,” but a footnote admits that the number is a conjecture based on Herbalife’s suggested retail prices. It says it has no information, and seeks none, about its distributors’ actual sales.

It’s the hopeful working stiffs of the world, of course, who will decide the fate of these two sales outfits. Grameen America CEO Stephen A. Vogel is not going to stand in their way. “We support whatever business they chose to pursue,” he tells Barron’s in a statement. “The only requirement is that they use the loan for income-generating purposes.”

The Herbalife spokeswoman says “we are pleased that Grameen thinks becoming an Herbalife Independent Distributor is a good opportunity for women seeking the organization’s microloans.”

E-mail:
editors@barrons.com

By EMILY GLAZER

You don’t need a high net worth or complicated investments to create a financial plan.

There are a crop of new resources that let you get financial-planning services on the cheap. For a flat or hourly fee, a certified financial planner can help you develop a savings plan, get your budget in order and pay down debt.

But keep in mind that you get what you pay for—so don’t expect any of the bells and whistles of a full-service financial-planning or brokerage firm. Some financial planners don’t offer any investment advice. And most of the consultations are done over the phone and via email. What’s more, some financial experts warn that this isn’t a solution for every investor since the quality of financial advice can be limited. And you may want to do some due diligence on the financial planner you are considering.

Still, “this is a wonderful way for young people or [those] who suddenly have to manage their own finances to get off on the right foot,” says Susan John, a certified financial planner and national chairwoman of the National Association of Personal Financial Advisors.

Personal-finance website LearnVest.com began offering three types of plans in January. With the entry-level plan (costing $69) you get a customized budget breakdown and a financial to-do list, such as building an emergency fund; one phone consultation; and three months of unlimited email support with a certified financial planner. The middle offering ($229) provides a five-year financial plan, a phone consult and six months of unlimited email support. The last plan ($349) adds three phone check-ins and one year of unlimited email support.

The phone and email discussions center around the financial plan that is drawn up for you and making sure you’re on track or making alterations if something like a job loss occurs. You don’t get any investing advice with LearnVest, however.

Amy Lewis, a civil engineer in San Antonio, Texas, signed up for LearnVest’s top-tier program earlier this year. Two weeks after filling out a questionnaire about her goals, credit score and debt, Ms. Lewis spoke with a financial planner on the phone for about 30 minutes. They discussed how to best divide up her money to save for specific situations, like retirement.

For instance, Ms. Lewis says the financial planner suggested she open additional accounts for specific purposes, such as paying property taxes. She also has raised the amount she’s contributing to her retirement by 1% of her pay and has beefed up her emergency savings fund to last six months, from three months.

“I’m looking at long-term savings and just where to go,” the 32-year-old says. “Am I saving for retirement well? Is there something I should do?”

If you’d prefer more in-depth help, Myfinancialadvice.com, has a national network of certified financial planners who are also registered investment advisers—so they also can offer specific investing advice on stocks, bonds and mutual funds with no investment minimum. Planners have on average 15 years of experience and charge on average $135 per hour, with communication done solely by phone and email, says Ron Peremel, the site’s founder. You will get a financial plan in addition to investing advice.

Wealthfront.com also offers online-only investment advice. It uses software to determine your risk tolerance and then creates a financial plan. It doesn’t charge an advisory fee for the first $25,000 you invest.

There are affordable ways to get in-person advice. The Garrett Planning Network has 320 certified financial planners who charge anywhere from $180 to $240 per hour for in-person meetings. Financial experts say this approach works best for investors who need an initial one-off planning session and then an occasional check-in, such as young adults or someone whose finances don’t change much from year to year.

Ann Wittkowsky, a clinical pharmacist at the University of Washington, looked to the Garrett Planning Network while searching for a financial planner not affiliated with any investments.

The 54-year-old says she pays her planner $210 per hour and has saved at least $2,000 a year based on what she was paying previous planners and a shift in investments, including switching to mutual funds with lower fees.

If you’re still looking for more service, you may need to go the route of firms like Charles Schwab, Vanguard Group and Fidelity Investments, which offer different tiers of financial planning, often based on the amount of money being invested. But there are typically investment minimums for this option.

Write to Emily Glazer at emily.glazer@wsj.com