Jones has a job, but what is it?
He follows a financial guru who rejects conventional paths to success.
By JENNIFER LIBERTO
Published October 27, 2006
Daryl Jones does not have a run-of-the- mill job.
Many of his political supporters, friends and his next-door neighbor said they aren't quite sure they understand what he does for a living.
The Democratic candidate for lieutenant governor sells prepaid legal services and is involved in real estate investment. But it's more complicated than that.
He's a disciple of the teachings of Robert Kiyosaki, who argues against conventional advice about financial success: get a solid job, work hard, save money and invest for the long term.
Kiyosaki and his followers believe that the rich know tricks to getting rich that can be taught to the poor and middle class:
Don't work for someone else, form a new business, use corporation names to shield your income from taxes. Invest in risky but sometimes lucrative ventures like small start-up companies, the stock market and real estate. And, just in case, get a good lawyer.
For Jones, that meant dropping out of a law firm and starting D.L. Jones & Associates, which sells insurance policies for Pre-Paid Legal Services Inc., a publicly traded company. He also started EquiVest, a company that puts together housing deals by allowing some of his legal insurance policyholders with bad credit to become lease-to-own tenants while they shape up their credit.
As someone who survived in the largely Republican world of the military and the largely Democratic world of minorities, Jones, 51, says the job is a good fit, because he's sharing financial information.
"What it means is ultimately, I have an entrepreneurial spirit and I understand a broader range of things than most people do," Jones said.
But both industries have faced criticism. Pre-Paid Legal Services has been accused of selling a product that promises more than it can deliver. And affordable housing advocates frown on lease-to-own real estate deals because tenants with bad credit rarely get to a place where they can afford to become homeowners.
The St. Petersburg Times ran Jones' strategy by a half-dozen financial and real estate experts, all of whom were surprised to hear that someone running for such a high-profile office would be involved in business practices that espouse Kiyosaki's philosophies.
"I think it skates a bit on the gray edge, if people aren't careful," said Peggy Ruhlin, a financial adviser in Columbus, Ohio.
Jones said every industry has a few bad apples, but he's not one of them. He said that Kiyosaki, who published a book this month with Donald Trump, is a widely recognized, credible businessman.
"What he talks about, most financial planners don't do," Jones said, but that doesn't mean Kiyosaki's investment advice is wrong. "The avenues for investment in America are wide and varied."
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Jones got into selling legal services and investing in real estate deals through Victor Alvarado, a friend and fellow Kiyosaki fan.
Jones and Alvarado met 20 years ago, when Alvarado worked as a vice president at City Bank in Miami.
They had brainstormed real estate ideas over the years. When Alvarado heard that someone in Sacramento, Calif., was executing a Kiyosaki-like "wealth-building" system, he moved there to get in on the action. Jones now duplicates it in Florida.
Alvarado declared bankruptcy in 1992 and has had to pay off $38,000 in IRS liens on his Miami home over the past decade. He says his debt makes his success story more dramatic, because he used to be "young and dumb" but now he understands "financial intelligence."
"I did make some mistakes when I was younger, and I didn't use my investments wisely," said Alvarado, 45. He said he made more in the past four years than he had in the prior 20.
Following his friend's example, Jones teaches his clients a four-step plan: accounting, investing, marketing and legal protection.
Accounting means structuring finances to minimize money given to the taxman.
Kiyosaki explains in his book, Rich Dad, Poor Dad:
"By owning your own corporation - vacations are board meetings in Hawaii. Car payments, insurance, repairs are company expenses. Health club membership is a company expense. Most restaurant meals are partial expenses."
Alvarado said he and Jones teach clients that if they set up home-based corporations, some personal expenses, "gas, your cable bill, your entertainment, that now becomes a write-off."
The second of the four steps is investment, which is where EquiVest and its partner real estate management company, Eagle Management Consultants LLC., come in.
For a fee, Jones pairs up investors with high credit scores with someone who would not qualify for a conventional loan because of poor credit. With EquiVest's help, the investors buy the homes and lease to the person with the low-credit rating.
After three to five years, if the tenant has made his monthly payments and shaped up his credit, he can purchase the home at the appreciated, higher price. In return, EquiVest will give the tenant half of the sale's profit.
The third step is marketing, getting the message out through referrals passed by word of mouth.
The final step is getting access to good legal advice.
"We live in a litigious society. Everybody wants a piece of your action," Kiyosaki writes in Rich Dad, Poor Dad.
That's where D.L. Jones & Associates comes in. Jones sells insurance policies for Pre-Paid Legal Services, a publicly traded company that has been offering insurance policies for legal services for decades.
For an average $250 a year, a policyholder gets unlimited phone consultations with an attorney. The legal service plans cover wills, most traffic tickets and contract reviews.
* * *
It's the investment real estate and the legal insurance that raise questions.
In most lease-to-own deals, the tenant pays a fee up front as well as higher-than-usual rent, which gets credited toward the home's purchase price. The pitfalls come for tenants who get to the end of a deal and can't purchase the home; they forfeit the extra money they put toward the purchase over the years.
John Reed, editor of Real Estate Investor's Monthly, is dubious of all lease-to-own deals.
"Lease options are a way to get tenants to pay much more than they really should pay," said Reed, who is a critic of Kiyosaki. "It's impossible for them to make the terms of the agreement or be able to buy the house, especially if they have bad credit."
Jones said his company has found a reputable credit repair company that works with tenants to clean up credit. When a tenant applies for a conventional mortgage to buy the home, his company will provide the bank a record of timely payments.
Alvarado's company in California has had tenants with bad credit manage to purchase their homes, but Alvarado said many end up with nothing. "Percentage-wise, very few pay their notes on time, but that's nothing we can control."
Jones said his company is so young that none of his clients have reached the point where they can buy their homes.
The company Jones sells insurance policies for, Pre-Paid Legal Services Inc., has fought off a litany of lawsuits accusing it of deceptive practices.
The lawsuits accuse the company of touting a product that will solve customers' legal needs, but not all issues are covered, including divorce, bankruptcy and alcohol-related offenses. The company tends to win lawsuits, because the fine print on brochures detail what it excludes.
Only one-third of the $250 membership goes to pay an attorney who provides the legal advice. The rest is split between the salesman and those who recruited the salesman to sell policies. For example, every time Jones sells a policy, Alvarado makes money.
"With the amount they charge, very few dollars go into legal services, most of it goes into commissions and such," said Scott Jay, past president of Florida Lawyers Legal Insurance Corp., a not-for-profit that educates consumers about prepaid legal service plans.
Jones said that Pre-Paid Legal Services' strategy and business equation is typical of other insurers and that the plan meets his clients' needs. He said that legal services policies would be far too expensive if they covered every legal situation.
"Justice is green in America," Jones said. "If you don't have it - the money - you're not getting any. This is what allows people to get justice without paying an arm and a leg."
The Jim Davis campaign said they were aware of Jones' involvement in lease-to-own real estate deals and prepaid legal services when they chose him.
"We chose the most qualified candidate, in terms of his experience. His career has prepared him for a job as big as being the lieutenant governor of Florida," said Davis campaign spokesman Josh Earnest.
There have been no consumer complaints filed against Jones or his companies in Broward or Miami Dade counties. Jones said it's not fair to lump his business practices with the troubles of others.
"My goal is to be one of the good guys in the end. While an industry may not have the best reputation, there are some people who treat people well. And I'm one of those folks."
Jennifer Liberto can be reached at (850) 224-7263 or email@example.com.
[Last modified October 27, 2006, 09:52:53]
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