The affiliate trap: How professionals can lose both trust and income

Amazon just severely changed its commission rate, showing how easy it is to lose not only trust with affiliate marketing, but also income.

There are many ways that flout conventional wisdom in building my financial coaching business.

For one thing, I don’t use Facebook. I never have. So many coaches have Facebook groups, and I may start an online group at some point (if you’re interested), but I have no interest in using such a privacy-invading platform.

I don’t have a smartphone either, which certainly complicates some things. (Though it is certainly possible to live life today without a smartphone. I even briefly started a website to talk about The Smartphone Free Life.)

But when it comes to making money online, one of the most obvious ways that people engage in is through affiliate marketing.

Affiliate marketing is the overt (or semi-overt) selling of related (or even unrelated) products that earn a commission for you.

You’ve doubtlessly seen this before. A link in an email or a website leads to a product, often accompanied with a notice (“we may receive a commission from any sales that occur when you click this link“).

There is nothing inherently wrong with affiliate marketing. That’s how Wirecutter earns its living, and I’m basically a walking advertisement for Wirecutter in my life and home.

But affiliate marketing is not for me, as I don’t believe that it fosters trust with my clients or my readers.

This is a principled stand, which is nice, but there’s another side to this: financial sustainability. My coaching business is one that I want to maintain for years to come, and I want to earn my living on my own terms, not on commissions to other companies.

This has turned out to be prescient in all sorts of ways.

To show this, let’s talk about Amazon.

“So Amazon Just Totally Screwed Us”

I’ve been following Sean Ogle and his Location Rebel site for a number of years. I’ve been impressed with his ability to keep going with freelance writing and location independence after almost a decade. Clearly, he’s figured out something that works.

One of those things, apparently, is being an affiliate for Amazon. What that means is that when he links to Amazon, and someone makes a purchase, he earns a commission.

So far so good.

But when I received an email from him titled “So Amazon Just Totally Screwed Us…Now What?” I was intrigued.

Now, I’m not a big fan of Amazon, and I’m hoping to go to my grave before I sign up for Amazon Prime, but I do use the service, albeit reluctantly.

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Apparently, what happened was that Amazon cut its commission rates. In a few categories, the commission went from 8% to 3%, a 63% rate cut.

This means, that if you earned $1000 from Amazon affiliate marketing, you’d now be earning less than $400. Yikes.

As Sean said, Amazon just “nuked” their affiliate program.

And as Amazon controls 50% of e-commerce sales in the US, that’s a lot of people who just got “nuked” too.

Trust and income

I’ve long thought that the biggest issue with affiliate marketing is one of trust. When I talk about a financial product I like, I want you to know that I’m talking about it solely because I like it, and not because I’m going to make money if you use it.

In the financial world, there is a term “fiduciary” which means “a person or organization that acts on behalf of another person or persons to manage assets. Essentially, a fiduciary owes to that other entity the duties of good faith and trust.” (Definition from Investopedia.)

Being a fiduciary is in contrast with a commission-based financial advisor, which earns commissions based on products purchased by the client.

Being a fiduciary is of paramount importance to me. I want to work for you. I want to work in your best interest.

But do you see where I’m going here? To my eye, a financial professional that earns a commission is no different than someone who does affiliate marketing. In other words, I don’t believe that I can be a fiduciary and sell products where I earn a commission.

So I don’t.

But only now is it coming to mind how precarious such a situation could be anyway.

Suppose I built my business on affiliate marketing. Not only would I have potentially jeopardized your trust in me, but, I’m apparently leaving myself open to what Amazon did, adjusting the commission rates on a whim, and leaving me scrounging.

If I did that, I’d have lost both your trust and my income.

No more “nukes”

I feel for Sean and all the other folks who have relied on Amazon for affiliate marketing, and I worry for everyone who leans on this method of income earning in general.

But I feel more emboldened in my choice to stay affiliate-free, even though I’m sure I’ve lost out on lots of income over the years.

What this means is that I can continue to say with sincerity that you can trust me. When it comes to achieving financial wellness, I’ve got no financial reason not to work in your best interest.

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What helps earn your trust in a financial professional? I’d love to hear about it in the comments below.

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