First Command
One of the things that pissed Otter and I off to no end when we first got on active duty was the eager beavers at First Command. Apparently, they aren’t the only ones out there pushing military members into bad investments. It looks like even the New York Times can get a story right.
Insurance agents have made misleading pitches to “captive” audiences like the ones at Fort Benning. They have posed as counselors on veterans benefits and independent financial advisers. And they have solicited soldiers in their barracks or while they were on duty, violations of Defense Department regulations.The Pentagon has been aware of practices like these since the Vietnam War; investigations have even cited specific companies and agents. But because of industry lobbying, Congressional pressure, weak enforcement and the Pentagon’s ineffective oversight, almost no action has been taken to sanction those responsible or to better protect those who are vulnerable, The Times has found.
And the problem has only intensified since the beginning of the Iraq war, say military employees who monitor insurance agents. With the death toll rising in Iraq, interest in insurance among the troops has surged, making the war a selling opportunity for many agents, they said.
Otter and I ran into our friendly First Command peeps in the first weeks of our time here. Once we got back from all the tech schools, they were even more all over us since they knew we would be here for a while. Fortunately, Otter and I are skeptical about different things. I was more inclined to go with their investments, and Otter was more inclined to go with the life insurance deals. So, we being us, we decided to skip the whole thing and get as many free dinners out of them as possible, which worked out pretty well.
Unfortunately, most young military members aren’t as naturally suspicious as we are and can easily be persuaded to sign up to whatever is put in front of them. These bastards take advantage of that fact to sign us up to life insurance which isn’t near as good as SGLI, which most people leave at the default maximum of $250k. Or, they sign kids up to investment “deals” which rob them of the up-front money, which is the most important.
When Capt. Jennifer Jusseaume was a junior at the Air Force Academy in Colorado Springs in 1998, she took advantage of lenient loan terms that financial companies have traditionally offered to third-year students at the military academies. She borrowed $19,000, at 1.5 percent interest.She knew she would use some of the money to pay off her credit card debt. But while she was deciding what to do with the rest, her commanding officer arranged a financial briefing for his cadets in their squadron’s common area. The briefing was given by the commander’s investment adviser, a retired officer who was an agent with First Command.
“It was about investing,” said Captain Jusseaume, now 25 and married to Capt. Brian Jusseaume, who returned from duty in the Persian Gulf in time for the arrival of their first child this month. “If you were interested, you signed your name.” She did, ultimately investing in two mutual funds that First Command sells as an agent for several large mutual fund families.
Both funds, the Fidelity Destiny Fund II and the Pioneer Independence Fund, consumed half of the first year’s investment in sales charges, a drag on her future returns from which she will never recover.
The type of mutual fund that First Command sells to virtually all its customers is traditionally called a contractual plan. Under this plan, fund shares are purchased in monthly installments over 15 or 20 years.
The plans have been around since the 1930’s but all but vanished from the civilian market in the early 1980’s after decades of sales abuses and regulatory crackdowns. Their biggest drawback, fund experts say, is the impact that the loss of 50 percent of the first year’s investment has on future earnings. Even a faithful investor never recovers from that burden, regardless of how well the fund does over time. And investors who do not go the distance – historically a high percentage – wind up paying a substantial percentage of their total investment in sales charges.
The deal that the Capt got as a cadet was from a institution which really does care about military members, USAA. They have offered those great deals to2-Degrees for along time, and only the idiots have gotten introuble over them. However, I remember getting the same kind of talk from First Command soon after we got our money. It was very tempting, but I had already had issues with banks signing me up for things, so skipped out on it. I am very glad I did.
I’ll keep an eye out for the continuation of the article, and comment on that when I get a chance.
Army Transformation
If you look at the era of limited warfare since World War II, this continuum of American involvement in limited liability wars from Korea to Iraqi Freedom, you’ll notice that 81 percent, or four out of five, servicemen and…
See the 1 Oct NY Time articile on First Command and judge for yourself what type of company First Command is.
I don’t know why everyone busts on 1st Command so much. What baffles me is that everyone is PISSED that a financial planning company charges a FEE for SERVICE! Imagine that! Instead of doing the typical approach of a 5.5% load and an annual membership fee, they do the front load. Which in the end is a lot cheaper if you invest for a number of years.
I have had nothing but great experience with all the agents I have had. I have gotten great advice and even was talked out of doing some investments that would have made my agent money, but wasn’t in my best interest after my agent explained the time frame was too short.
Also, what is wrong with life insurance? SGLI is great, I have it as well as some civilian insurance, it was good to have that peace of mind in Iraq. But two things to keep in mind, 1) 250K won’t go far when I am dead. My wife stays at home and I have three kids, it will be gone in a year. 2) What about after I retire? That SGLI is terminates, VGLI is a rip-off, and if I try to replace the SGLI then with some civilian insurance, it would cost a hell of a lot more. That is assuming I would still be insurable after three tours in Iraq.
Stop busting on First Command guys. If you are too smart to use them, if there is another approach that you would prefer, go ahead. But don’t think they are out there screwing people. But when you consider that 70% of their clients would be doing NOTHING if not for 1st Command, even if they pay a little bit more in fees, SOMETHING is better than NOTHING! I think we could all agree on that at least.
On this Veteran’s Day, let me thank you for your service—especially your service in Iraq.
Something is better than nothing. Many things are better than First Command.
Your argument that 70% would be doing “NOTHING” if not for First Command doesn’t hold water. You can’t back this up. One thing I can back up is that that 50% first year load sets investors back so far it takes years to break even and start making a profit.
I do think that the military needs to provide more in terms of financial education to Soldiers. One way NOT to provide this training is to invite the local First Command agents in to brief the unit (which is something First Command agents did frequently in the past).
Here is what servicemembers should be doing instead of going to First Command http://www.tsp.gov
The main problem is that First Command abuses the trust they get from using retired military people as agents and sell high commission products.
Go to http://www.diehards.org and search on “First Command”
Go the discussion board on http://www.kiplinger.com and search on “First Command”
Go read the articles that appeared in the NY Times and Kiplingers.
Here are a couple of other sites with some cogent discussion
http://iraqnow.blogspot.com/2004/02/finance-tip-fire-your-first-command.html
http://www.angelfire.com/journal2/johndd321/
So I assume just because some people in the media don’t like First Command that they are right? After seeing what the media would report about what was going on in Iraq, places I was at and people I saw, I don’t put much faith in what the New York Times has to say.
That said, you can’t expect everyone to agree on the business practices of any company. There are people that don’t like USAA, Paine Webber, or Edward Jones. Does that mean they are bad companies? I hardly think so. They may have an approach and a philosophy that is not for everyone.
Bottom line is this, is the front load expensive? Yes, if you invest for a short amount of time. But I have been a client for 10 years and my investments have done well. I am sure I could have done better elsewhere, but I wouldn’t have. You know why? Because I wouldn’t have done anything! I didn’t know what a mutual fund even was, let alone which one was right for me. My job is taking care of my soldiers and making sure they are trained for war. I don’t have the time to go over all that crap. First Command figured it out for me and if they make a buck of me in the mean time, fine. In the end, I always know there is a place and a person to see when I have questions. All my agents have been real honest with me.
The TSP is great, I used it in Iraq and I tell a lot of my soldiers who are drinking up their pay check every month in invest in it. BUT, it is hardly the only thing you should be doing, and from what I understand, it isn’t as good as a Roth IRA. TSP you take the tax savings today, Roth you get it at retirement. Besides the TSP can’t really be used for anything before I am 60 right? What if I need money before then, I may have $200K in the TSP, but what good will it be for me at age 50?
Everyone has an opinion, people don’t like First Command—- Fine. Figure it out yourself, go with another company. But this I know for certain. 1) I wouldn’t have the money in my investments now (or even be investing) if it wasn’t for 1st Command. 2) I have had never any reason to suspect I wasn’t getting quality advice and counseling from my agents. And I am a VERY suspicious guy.
Todd, if you read anything else on this site, you would know that I do not trust the New York Times in many areas. However, in this case, I have personal knowledge of the pressure filled tactics and deviousness practiced by First Command in their quest to get customers. As a matter of fact, I responded to your original comment yesterday.
From you comments, I have a feeling that you would have a problem with the management style at say a USAA, where they are hands off and let us make our own choices. However, they are always available for questions, and often go the extra length for taking care of transactions. But, again, this presupposes that you have the willingness to do an hour of research maybe once a month, or simply read the business page.
My question for you is this. Why, if they have been so good for you, do you have to defend them so hard? Like you said, everyone has an opinion, and our opinion of First Command is negative in large part because of our experience with them. Hell, even I don’t think USAA walks on water, and they are my preferred institution.
I appreciate your input, and am glad that First Command has helped to provide you with some investment advice. With the requirements of command and the demands of family, it may be that they are your only avenue. I’m trying to point out that, in the beginning, you should have been made more aware of the other opportunities in the investment world.
My whole point in defending First Command is because I don’t feel they do an adequate job of defending themselves. I asked my agent they other day, “Why don’t you guys stick up for yourselves more.” My agent said, “Because, when you wrestle with a pig, you both get dirty and the pig likes it. It is best just to let our record speak for ourselves. Some agree some don’t.”
Perhaps it would have been better to leave it alone. I am just annoyed that people like yourselves seem to base the opinions of an entire company off of a couple of experiences you have had or heard of. It would be the same if I bought a BMW and had nothing but problems. Perhaps I got a lemon, but does buying one car (or a couple of cars) and having problems mean the entire management, product, dealership, and service of BMW is terrible? I hardly think so.
All I am saying is that there are some flaws in your logic. Such as, “These bastards take advantage of that fact to sign us up to life insurance which isn’t near as good as SGLI.” I have never had an agent tell me or imply to cancel my SGLI. I read your statement and to ‘test’ my agent, I called him and asked him his opinion. He was very defensive of SGLI. He told me it was the best deal in the world, 250K backed by the Federal government for $16 bucks a month. Who can beat that? But he also reminded me that it was temporary and will expire when I retire. That is why I have the additional coverage with First Command, I suspect that is why your agent recommended it to you years ago.
Again, are there other options, opinions, or avenues? Sure. That is why there is more than one financial planning company in the world, people like different things. But First Command are hardly ‘bastards’ for recommending replacing insurance that (in my case) will be gone when I turn 45 and would cost a fortune to replace at that age. Assuming I am insurable after all my combat time in Iraq.
But in the end, the reason First Command got my business is because there was a person to talk to, and hold accountable. Whenever I call USAA for anything, they are friendly, but I always get someone new. I had to settle a car accident with them and I kept getting the run-around and was very frustrated. I realized what a situation I was in. What was I going to do? Fly to San Antonio and hell at a supervisor. At least with First Command, I can look the guy in the eye, have a door to kick open and someone’s ass to beat if something is wrong with my money. Having that kind of control is good for me. Besides, my agent calls me often when things come up in my account. Just last week he called me about increasing my IRA because the maximum goes up next year. I am sure it is no secret if you have time to look into things like that. But frankly this crusty sergeant just doesn’t have the time. I am sure USAA will mail you something, but what if you brush it aside, what if you miss it, gets lost in the mail? If you were like most soliders I know, you hardly read the junk mail that comes to your house anyway. At least with my First Command agent, he will talk with me about my options and it is good to know I have someone looking out for me personally.
So you do it your way….Fine. I do it mine….Fine. But the reason for my writing is not to defend First Command so much as to say simply this, they are not screwing people. You have your preferences, other people do too. But you are imply they stealing the money of soldiers to pad their own pockets. I am one happy client telling everyone I have never had anything but great service and advice from them.
Cool deal, Todd, thank you very much for your reasoned input. I think this is one of the times that reasonable people have to agree to disagree. I am glad that you are having a good experience with them, especially since you’re off killing bad guys for me.
It’s always good to have a different, positive, experience on something presented. So again, thanks for presenting your side in a reasonable, and well thought out, manner. I hope you stick around, or at least every once in awhile check the site out. It could probably use a reasonable voice of experience once in a while.
I appreciate your reasoned manner in discussing this issue as well. I am also very humbled by your support for guys like me in the War on Terror. Sometimes when you read the newspapers, you wouldn’t think so.
I never back down from a good arguement, but frankly I was a little concerned voicing my opinions because sometimes they degrade into a yelling match over ‘I am right and you are wrong.’ I am glad to see that didn’t happen here.
Great website by the way. I am happy I stumbled upon it.
Well, I am glad someone had a good experience with First Command because we didn’t.
We used to be with First Command – we like to call them “Last Command” now
You should have seen it when we cancelled our whole life policies & contractual plan, it was interesting to say the least.
Our agent, “M” was always a very nice guy. Always had a smile, always chatted about family & really seemed interested in what we were doing outside the financial arena; that was until we meet with him to cancel our policies.
“M” chatted for a few minutes then asked why we wanted to cancel. Boy did his blood pressure rise a few points. I explained our plan (get 20/30 yrs term ins) and that if I passed away, that money could be used to pay off our rentals and that would provide DW an income for the rest of her life along with about 60K per year for a few years too boot. Also pointed out that term was less than over half what we were paying for whole life, and that using that difference to invest in IRA/mutual funds would bring in @ 200K more than if we went the whole life route. I then told him that in a few years we would have a paid off house, so again whole life would not be necessary. I stressed that we were going to trim the fat, cut expenses, increase our income and invest the differences in Roth IRAs, TSP, mutual funds, etc). IOW, all the stuff Dave Ramsey says (he has a cool site at http://www.daveramsey.com).
“M” was getting a bit hot. His body language went on attack posture and he started to lay into the “my mother had cancer and if she had whole life, she would have been ok” speel. Ok now he is trying to play on my emotions & something outside the realm of life insurance (BTW his mom is still alive). He went into comparing apples and rocks as I like to say.
Nice try but no dice “M”.
He then brought up that whole life was the best thing and that he was concerned about protecting my retirement pay for my wife when I died. Duh… I thot I explained that part already, use term to pay off rentals & DW would have income producing assets (paid in full). That would allow her to not only allow her to enjoy the positive income (thousand of $ per month), but also the peace of having 100% secured investments (minimal risk). The real estate would also still appreciate (Lord willing), another benefit of REI.
Anyway, I also mentioned that the properties would be held in a corporate entity. That way we would not be personally liable (again less risk). Smart business if you look at the big picture.
“M” didnt see it that way. “M” then got more angry & went to left field…
He said that DW’s properties (held in an LLC &/or C corp) would be bought out thru a forced hostile take over from another company, which happens all the time (What the hell is he talking about now???). From there it went down hill – his attitude was like that of a spoiled child, almost on the verge of throwing a fit. He even said that he had a masters degree and implied that I did not know what was good for my own family (geez, this guy was going from Mr. Jerkel to Mr. Hyde real quick – matter of fact my wife said it scared her and that she didnt want to ever see this guy again). I then explained again in a quite tone what we were doing and why…. He then jumped up from his chair got the cancellation letter from his desk and thru it in front of me and said “FINE… there sign it! Its obvious that you dont care.. and that you have made up your mind! Sign it… we are done!”
Alrighty then… this immediately reminded me of a few bible verses…
——————————————————————————————————————“Out of the abundance of the heart the mouth speaks”
AND
”...by their fruits you shall know them”.——————————————————————————————————————
Its obvious that we had found some bad fruit here… Imagine that.
I continued to explain what we were doing and that each situation needs to be assessed and evaluated on an individual basis, hence the term “personal finance” and that what we were doing was best for our situation & long term plan. I even said that whole life was a viable product, but just not for us at this time (I had to let him save some face). After all this was not a personal confrontation, but a common sense/business decision (something I emphasized to him again).
“M” calmed down a bit & obviously realized that anger had got he best of him and it was time to change tactics. He brought up that he had a masters degree and that he knew what was best for us so we didnt end up like his poor cancer ridden mother (I still dont know how a whole life policy would have helped her out as she is still alive and I wasnt going to ask either, oh well). I knew I shouldnt have trusted this severly overweight ex army officer (he apparently got booted for being too heavy, but I wont get into that). I should of followed my first impression when I had the chance in the begining – I should have never signed up. Oh well, lesson learned.
Anyway, I talked for a while and I guess he really started to see what we were talking about. His demeanor changed and it seemed that he knew that he was wrong (for a split second – we could see it in his eyes). From then on, he couldnt look me in the eye (imagine that). In the end, we left feeling great that we had gotten out of that mess; but we felt sad that “M” who we had considered a friend, was so two faced. There is nothing that we have in common anymore. Oh well.
So that was our story.
Our final advice – stay away from “Last Command” & “Be the smartest one in the room when doing business”.
If I could do it all over again, I would pass on first command, get educated by going thru Dave Ramsey’s Financial Peace University program (which was sponsored by the chaplain on post), and conduct a lot of research before I put my money into another other type of program. At least I am doing that now.
Take care,
SW
p.s. BTW I filed a complaint with the SEC about the sales tactics used and the lack of comparisons (other available products – i.e. term insurance, no load mutual funds, thrift savings plan, etc) used in their sales pitches. I am also going to get reimbursed for all fees over 5% in their contract plan. So they will be paying me my money back. Sure I will lose a little, but I learned a big lesson from all this – be the smartest one in the room when doing busines
p.p.s. here is the link about the case specifying the reimbursement
http://www.marinecorpstimes.com/print.php?f=1-292925-558075.php
Oh yea, one last thought… why did they agree to pay the 12 million unless they knew they were wrong. I mean we tell soldiers to stay away from those car dealers & payday loan places that charge 28% interest, what is the difference? First Command charges 50%. That is a red flag in my book.
Thanks for letting me post here
We used to be with First Command – we like to call them “Last Command” now
You should have seen it when we cancelled our whole life policies & contract plan (we had become much more educated since we signed up), it was interesting to say the least.
Our agent, “M” was always a very nice guy. Always had a smile, always chatted about family & really seemed interested in what we were doing outside the financial arena. The thing that seemed strange when we started with them was that he never compared other alternatives in regards to their plan (term life insurance, no load mutual funds, TSP, etc) Everything was just about their products, and their products only (as brought out in the NASD & SEC rulings). Oh I wish I had done my research instead of listening to his line of bull. Oh well. Anyway, all was ok till we meet with him to cancel our policies/plan.
“M” chatted for a few minutes then asked why we wanted to cancel. Boy did his blood pressure rise a few points. I explained our plan (get 500K 20/30 yrs term ins) and that if I passed away, that money could be used to pay off our rentals and that would provide DW an income for the rest of her life (way more than my retirement pay) along with about 60K per year for a few years too boot. Also pointed out that term was less than over half what we were paying for whole life, and that using that difference to invest in IRA/mutual funds would bring in @ 200K more than if we went the whole life route. I then told him that in a few years we would have a paid off house, so again whole life would not be necessary. I stressed that we were going to trim the fat, cut expenses, increase our income and invest the differences. IOW, all the stuff Dave Ramsey says
Check out the http://www.daveramsey.com he has some great info on getting a good financial foundation started (BTW the post chaplain hosted his FPU program on post and it was worth its weight in gold). Anyway…
“M” was getting a bit hot. His body language went on attack posture and he started to lay into the “my mother had cancer and if she had whole life, she would have been ok” speel. Ok now he is trying to play on my emotions & something outside the realm of life insurance (BTW his mom is still alive). He also brought out a few other things, but they were just too stupid to mention here.
Nice try but no dice “M”.
He then brought up that whole life was the best thing and that he was concerned about protecting my retirement pay for my wife when I died. Duh… I thot I explained that part already, use term to pay off rentals & DW would have income producing assets (paid in full). That would allow her to not only allow her to enjoy the positive income (thousand of $ per month), but also the peace of having 100% secured investments (minimal risk). The real estate would also still appreciate (Lord willing), another benefit of REI. I also mentioned that the properties would be held in a corporate entity. That way we would not be personally liable (again less risk). Smart business if you look at the big picture.
“M” didnt see it that way. “M” then got more angry & went to left field…
He said that DW’s properties (held in an LLC &/or C corp) would be bought out thru a forced hostile take over from another company, which happens all the time (What the hell is he talking about now???). From there it went down hill – his attitude was like that of a spoiled child, almost on the verge of throwing a fit. His voice got louder and louder (it really scared my wife) and his face got more red as time went on. I then explained again, still in a quite tone, what we were doing and why…. He then jumped up from his chair got a cancellation letter from his desk and thru it in front of me and said “FINE… there sign it! Its obvious that you don’t care.. you have made up your mind! Sign it… we are done!” With that he stomped out of his office for about a minute or two – talk about a tense situation.
Alrighty then… [Q][B]”Out of the abundance of the heart the mouth speaks”[/B]
AND
[B]”...by their fruits you shall know them”.[/B][/Q] Its obvious that we had found some bad fruit here
When he returned, I explained that this was not something to get mad about. I continued to explain what we were doing and that each situation needs to be assessed and evaluated on an individual basis, hence the term “personall finance” and that what we were doing was best for our situation & long term plan. I even said that whole life was a viable product, but just not for us at this time (I had to let him save some face). After all this was not a personal confrontation, but a common sense/business decision (something I emphasized to him again). I also asked why he had not informed us of offer products, such as term life insurance, TSP, 401Ks, etc. There was no answer…
“M” calmed down a bit & obviously realized that anger had got he best of him and it was time to change tactics. Maybe he thought he could save his commission by playing one last card. He brought up that he had a masters degree in business/finance and that he knew what was best for us so we didnt end up like his poor cancer ridden mother (I still dont know how a whole life policy/contract plan would have helped her out as she is still alive and I wasnt going to ask either, oh well).
Anyway, I talked for a while and I guess he really started to see what we were talking about. His demeanor changed and it seemed that he knew that he was wrong (for a split second – we could see it in his eyes). From then on, he couldnt look me in the eye (imagine that). In the end, we left feeling great that we had gotten out of that mess; but we felt sad that “M” who we had considered a friend, was so two faced. There is nothing that we have in common anymore. Oh well.
I knew I shouldnt have trusted that ex-military officer (booted for overweight, err sorry, the politically correct term is “rifted for physical imparement”) from the start
So that was our story.
Our final advice – stay away from “Last Command” & “Be the smartest one in the room when doing business”.
Take care,
SW
p.s. BTW we are getting reimbursed for the excessively high charges we incurred with 1st Command. The strange thing is that 1st Command did not admit fault in the suit, but they are paying 12 million in reimbursements & education – things that make you say “ummm…”. Sounds like a Michael Jackson/NeverLand sleep over if you ask me.
p.p.s. Another thought for you all. As a senior NCO in the military I have always warned my soldiers to stay away from payday loan places & those used car lots close to post as they charge 28%+ on their loans/services (they are on the fringe of the law; barely within the legal limits). Then why is it ok for First Command to charge 50%? One more percent & would be illegal – considered ursury and punishable by law. I mean, come on know, lets use some common sense here – if we protect our service members from these type of predatory services (payday loans & “Honest Harry’s car lot”, etc), then how much more should we keep them away from 1st Command? Probably pretty far.
One last thought… I educated myself by doing a lot of research & by taking a few college classes (financial management). I also had the opportunity to meet with about 10 investment brokers & financial planners who have their series 7 certifications (these financial planners make financial plans for those people who make 6 figures and above). Its amazing how all of them regard First Command as the bottom of the barrel in regards to the financial planning world.
Just remember “A fool and his money are soon parted”
Peace, and thanks for letting me post my thoughts here.
:mrgreen:Todd above wrote that with First Command he has a door to kick open and someone’s ass to beat if something goes wrong. Well Todd, go read the detail of the First Command settlement on the SEC web site and start kicking and beating.
Todd also wrote that his caring First Command agent recenly contacted him about increasing his IRA next year because the limits go up. Isn’t it great that FC agents look out for their customers? Oh and by the way, if Todd increases his IRA from $3000 to $4000 next year his FC agent will pocket half of the first year’s increase ($500). Not bad return for the price of a phone call.
I never said that there weren’t cheaper ways to invest. There are no-loads and what-not out there. But I challenge you to find a company that will take an E-5 (like I was) who was over $10K in credit card debt, no assets and turn their finances around, get them started on a $100 investment and insurance program.
Short of the sales charge (which I was going to pay either way going with a broker-dealer) I didn’t pay anything for my financial plan. First Command aren’t selling the front loads anymore, but even if I did increase my Roth and pay the $500 sales charge, I would have paid about $550 over 10 years with a loaded fund. I am almost 40, I got more than 20 years to invest in my IRA and in only 10 years I would already be paying less than the front load.
Again, are there cheaper things out there…..definately. But again, I didn’t even KNOW what a mutual fund was, let alone which one was right for me. Besides, which is the bigger crime, charging a front load to take on a low dollar client, or that person not investing at all and retire broke? Most mutuals out there from what I have seen on Morningstar require $2000 – $2500 minimum investment, I never had that kind of money as an E-5 even if I did know what I was doing.
But here I am 12 years later worth over six figures, no debt and investing 10 times as much. I feel like I got more direction in my finances than I ever had. I got all of this by paying my fees for my investment in the first 12 months than the rest of my life.
Again, First Command isn’t for everyone. But you guys all act like they should be working for free. If that logic holds, where is the outrage over Merrill Lynch? A.G. Edwards? or Smith Barney? They charge fees don’t they? But they just do it differently because they only take on big dollars clients right? They wouldn’t have even given me the time of day if I called them up 12 years ago asking for help with my debts and $100 to invest.
So I guess I will be the butt of your jokes, but in the end I am happy. If for no other reason than they actually cared enough about me to help me out when no other company would have.
[...] W server issues, alumni association in-fights, and fighting the last war. In the meantime, go comment about First Command.
Filed under: Web site Life — uruloki @ 1252 [...]
Todd, In your case First Command was probably a blessing, but First Command didn’t get you to six figures—YOU DID IT YOURSELF WITH YOUR MONEY—First Command only provided advice.
You can start an monthly automatic investment into a USAA no-load fund for $50. You don’t need $1000 or more to get started. Other companies also let you start out with no initial big deposit if you make automatic monthly investments.
You can start TSP without an initial large contribution also.
“You miss 100% of the shots you don’t take.”
Thanks for making my point RM. OF COURSE I could have gone with USAA and gave them $50 to do what with? Do you have any idea what fund was the best given my situation at that time? I sure as hell didn’t. If I opened up an investment with them it would have been the same as throwing a dart at a wall of mutual funds and said, “That’s it.”
Besides, I know how lazy I get and EVERY ONE of my investment increases came from my agent calling me and reminding me of my E-7 pay raise, or the increase to my Roth, or the $100 increase to my base pay. A gentle nudge to do what I already needed to do. Like I said, the encouragement to do more and invest more. Frankly, if it wasn’t for my agent, I would likely still be investing that $50 a month instead of $1000.
It just blows my mind on how much you hate a company for helping soldiers. It all keeps coming back to the fees. I was thinking the other day, “You know, even if I had to pay $20,000 in fees over my life (which would be no where close to reality) and at retirement I had $5 million…...wouldn’t that be worth it?” Instead, I could have saved maybe a couple thousand dollars on fees, but then didn’t have as much or nothing at the end of it. Which is worse?
As well, the way you guys talk is like all these soldiers and NCO’s are sitting on top of all these invested assets or well on their way to being millionaires and First Command comes along and corrupts them and moves them along a path of destruction! I can only speak for myself, but everyone I have either sent their way or talk to about it was either doing nothing or the wrong thing before they got more direction with First Command.
In fact, a drinking buddy of mine and I were talking about finances the other day. I asked if he was investing. He said, “Yeah, I am all set on a great plan, I am buying all savings bonds. I read that that is the best thing to do.” SAVINGS BONDS?!?!?
I got him in to see my agent and he started a plan and will be a helluva lot better off. Don’t you agree? Or are you so obsessed in your hatred you cannot even admit that First Command is better than savings bonds?
Yes, I made the money. But the ONLY reason why I made it was the encouragement from my agent. Again, you may not need them, but I do and did. I just got in and started a 529 plan for my kids. What the hell is that? Until two weeks ago I never even heard of such a thing. I wonder if I called up USAA they could of, would of helped me with that?
But hey, I love these exchanges. At the very least I am learning more about what I am doing and why I am doing it. I have started to take more interest in the types of accounts I have by reading some of these blog sites. For the record, I am very happy with everything I have so far. It would seem, you guys have only reinforced my opinion of First Command.
Laters,
UPDATE – I don’t know where you got the “only need $50 to invest” information from with regards to USAA’s initial investment. I just hit the Morningstar website and randomly picked five USAA funds and they all had an initial investment of $3000.
So unless you are buying under the ‘Friends of USAA’ clause.
Morning star disagrees.
(True, if you are a member, they may have cheaper fees. Frankly, I never looked into USAA for investments, I wasn’t impressed with what their returns were. I am just going off what they are reporting on Morningstar.)
Todd, I was wrong. You can invest in any of six of USAA’s mutual funds for as little as $20 a month with no upfront deposit. Now, USAA’s funds may not have the greatest track record, but there goes the First Command pitch that only they make it easy for one to get started. Info is available at http://www.usaa.com. T. Rowe Price will let you get started for as little as $50 per month. I am sure there are others.
Now, First Command has done some good—they got some started who wouldn’t have otherwise. You are one of those people.
My beef is this—they lie and deceive. If they just came out and said “you pay me this, I give you advice” they wouldn’t be in this mess. Instead all this BS about “deterring speculators” and “constant cash flow”, and “instilling discipline”, and TSP is bad, and “here is why you need whole life on your kids”, and all the military bubbas who used (agents) or sold their rank (executives and advisors) to make money via First Command is what is hurting them now.
By the way, here is news on the latest class action lawsuit filing against First Command. Check it out. You might be able to get some money back.
http://www.insurancenewsnet.com/article.asp?n=1&lnid=255720708
Info on lawsuit filed in Kentucky
This one was actually filed first, the one above, second.
http://www.whatleydrake.com/CM/NewsandInfo/FirstCommandArticle.asp
Why would I want to get my money back? To do so would mean walking away from my front loaded investment after twelve years, after I am damn near completed with it to take my money out, tax hit, and hope to hell it goes somewhere else that will do as good? Yeah, that is good advice.
But seriously, your beef with them is that they are not honest? What is more honest than 1st Command? Were they anything but upfront with you about the costs? They kinda had to be, I mean it is plain as day on your statement? To say nothing about the fact that for the last 30 years they have been known as the ‘Front load guys’.
I have little sympathy with anyone saying they felt cheated. I can only speak for myself, but I knew exactly what I was getting into. That front load is 50% up front but no fees after that. Which after 15 years equals around 3.3% of my total investment (if my math is right). What sold me was knowning that I was a long term investor (especially in my IRA) and knowning going with another company and having a financial plan, world wide service, and an advisor was going to cost me at least 5.5% and a crap load intial investment.
I mean, I can’t understand some of these people who claim to have been never told of the front load! Even if your agent tried to hide it from you and deceive you, it says “15 year systematic plan” right on the statement I get every month. That’s right! Long term! I watched every month for the first year 50% of my contributions going away, clearly labled “sales and creation charges” Hello! The front load! In my prospectus every year and all the sales literature I have ever received all they do is talk about the 50% upfront to say nothing about it being common knowledge around the water cooler at work!
But you know, I still believe there is some truth in the ‘deterring speculators’ and ‘stable cash flow’ piece. After all, you didn’t get with it. It must work on some level! Not only that, everyone knew the sales charges were exactly that, a sales charge! If there were some other advantages to it being all upfront instead of spread out, why not mention it?
Also, what the hell is wrong with whole life insurance on children? I have 50K of whole life on my daughter with guaranteed insurability. That means she will have that insurance forever, and can buy more. Besides, I am not buying that for myself, because if something happened to her, God forbid, I would be financial ok. I am buying it for my future grandchildren. Because if my daughter gets sick or injured, this policy may be all she could get. What do I pay for this piece of mind? $16 a month. Now THAT is a hell of a deal.
I must admit RM, I have been giving your last post a lot of thought this morning on the way to PT. I started to think, “How much of what 1st Command (or any company) is going through has to do with them screwing up, or politics?
I came up with this, there are really two options:
1) First Command for the last 30 some years has deliberately lied to their clients and the NASD and SEC on their business practices and finally got caught.
2) First Command has been doing it right that whole time and only recently started to do questionable things and got caught.
Well, I think we can eliminate number 2 by your own admission, they have been selling front loads for years. Which brings us to number 1, basically the NASD and SEC not doing their job.
It seems to me that either the NASD had no trouble with what First Command was saying or doing all this time and finally started to hammer down on them because of all the publicity and ‘white collar crime’ after the tech bubble burst. Or they completely were incompetent and did nothing to stop a problem that they knew existed until they had some political heat on them.
All I can keep coming back to is, why now? Has First Command REALLY changed much in the last few years? Not that I have noticed. They keep selling the same products and recommend the same things as they always have. The timing just seems suspicious. Especially on the heels of an election year.
Also, they are hardly the only ones with all the trouble. I read online that the SEC issued out $102 million dollars in fines last year to brokerage houses. Where is your outrage over these other companies fined. It would seem that it is unusual not to find a financial company in some trouble these days.
So say what you want. I am working on my BS in Business (I hope to be done before I go back to Iraq this fall) and decided to do my term paper on First Command. I am learning some interesting stuff. Mostly, I have learned, that when these fines are levied out, they typically are for the tax payers so the government can say ‘we did something’ and seldom because the company did anything wrong.
Politics played a minor role. I’m not sure what got this all started—apparently someone filed a complaint with NASD. I think what really got the ball going was First Command undercutting an investigation started by some lower level JAG officers and a First Command agent going after a USAF officer who was badmouthing them. Did you ever read the excellent Diana Henriques article in the NY Times? Here is a link
http://nucnews.net/nucnews/2004nn/0410nn/041002nn.htm#313
Here is a link to some of her other articles:
http://www.yourlawyer.com/practice/news.htm?topic=Military%20Financial%20Fraud
I must also credit Steve Goldberg also wrote an article in Kiplinger in Sept 2003 that got a lot of attention.
Todd, You can keep your FC investments and keep making contributions. If the lawsuit holds up in court, one day you will get a check in the mail because others decided to sue. Also, I’m not sure why you think you have to pay a 5.5% load on investments (I think this is what FC has gone to now). Go do a little reading and spread your money across a couple of good funds. There are a lot of no-load funds out there that are way better than the 2-star rated Destiny funds sold by FC.
P.S.
Todd, I also see that you have bought into the FC pitch that a 50% first year load that averages out to 3.3% over 15 years is equivalent to a fund that carries a constant 3.3% load, and way better than a fund that charges a constant 5% load. (I won’t even bother to mention no-loads).
Run the numbers. That first year load sets you back so far it takes YEARS to make it back to breaking even.
Of course it takes years to break even, you are starting 50% behind everyone else. DUH!
RM we are talking apples and oranges here. You are making the case that you pay less in a no load – Given.
I am making the case the First Command is better than nothing, better than savings bonds and better than TSP alone. I am also making the case that without First Command, many deserving Americans that are investing with First Command would not be doing anything. This point you have not conceeded and I doubt you ever will. To do so would mean First Command does something good. You remind me of these damn Liberals that can’t bring themselves to admit that George Bush does ANYTHING right because of their rooted hatred.
You keep bringing up no loads. Well, the reason why no loads cost nothing, is because you get NOTHING!
For some people that is fine. Some people can buy their own lumber, paint, electrical, shingles, cement, plumbing etc. and build their own house. Do I trust myself to do it? Do I think I could do it better than a pro? Do I have time to do it? No. Then why would I go about attempting to do something that I have little or no knowledge in doing? How much money and time would I have to spend to unscrew mistakes that wouldn’t have happened if I just let a pro in there to do it in the first place? Sure, I may have had to pay more, but at least the job would be done right. If not, then I have someone to hold accoutable.
Secondly, something I am learning in pursuing my degree is that investing the money is the easy part. Making the invested dollars isn’t that tough. It takes time, discipline and a plan. Things that First Command helped me in doing.
The hard part in retiring successfully isn’t making the money, it is keeping the money. Of course any nut can buy a no load fund and sock money away. Then what happens next? What happens when you have 4 million dollars in that no load fund when you are 55. What do you do then? If you screw up a $4000 investment, you are out a few months pay. If you screw up a 4 million dollar investment you are likely out your entire life savings.
So, RM, is it safe to say at some point in your life, you will pursue professional help in managing all these USAA assets? Do you really feel comfortable keeping it in a no load fund at that point? And upon seeking this professional help, do you really think it is going to be as ‘free’ as your no load fund? Is is safe to say that that company or person will charge a management fee? And is it also safe to say that that management fee will be quite high given the large volume of assets you will have? Don’t agents and companies work on commissions in relation to the assets under management?
Sooner or later RM, you are going to pay those fees that I already paid for a professional. And I am pretty sure they will pale in comparison to my front load. Difference between you and me, I already have my professional hired, and he is paid in full.
Oh, and before you go on about having to move assets out of my Fidelity account into an income fund or something will incure added sales charges. Nope, sorry. First Command has a nice deal worked out with Fidelity and any assets that I move within Fidelity is without any sales charges. Already thinking ahead, I looked into that.
By the way. I don’t think I have ever had an agent tell me or a piece of sales literature or even any rumors that said First Command does not condone or even support the TSP. In fact, I would challenge you to find something from First Command that says such a thing. The only thing I have seen is that they say a Roth IRA should take priority over a 401K without matching funds (TSP). Don’t you agree?
Also, I don’t know the details of what First Command did about some JAG guys. From what I understand, it was a couple of JAG officers that were WAY out of their lane and First Command probably got out of their lane and tried to solve the problem in house without stirring up a bunch of press about some crazy lawyer. (Believe it or not, they exist. I have had more than a few brushes with those JAG mothers in Iraq).
On that point. I would be very careful to mention the New York Times as a reference. It would seem you have your issues with the paper as well given prior posts of yours. I have seen first hand how the media works being in Iraq. They can say and do pretty much what they want about anything. These days it isn’t as easy to get away with it because if the internet. But I am still pissed at things I have read reported as ‘news’ in Iraq by the New York Times.
So RM, can you bring yourself to admit at least this…...First Command is better than nothing? And there are some people out there that are clients that are walking around with money that may never have had it hadn’t been for First Command?
Keep it real…..
Todd, Go back and read the thread again
I said in Post #4 above I said “Something is better than nothing. Many things are getter than First Command.” In effect I said First Command was better than nothing”.
I said in Post #18 “Now, First Command has done some good—they got some started that wouldn’t have. You are one of those people.”
Regarding First Commands statements about TSP, go read the SEC settlement proceedings at http://www.sec.gov/litigation/admin/34-50859.htm
The good thing about a fee for service provider is that you can fire them. You can’t really fire First Command unless you just walk away—you paid all your fees up front.
First Command could have been a good company. They could have been more straightforward and said “here is what you pay, here is what you get.” Instead, it was “no-loads are for short term investors” and “first year load instills discipline and deters speculators”. Add to that the way in which they make the uninitiated think they can only do dollar cost averaging by going through First Command. Add to that incomplete info about TSP and fallacies like “everyone needs whole life”. Add to that some bad agents and a marketing scheme that is based on gaining trust for things other than their products (First Command sponsors all sort so things with the money they get from clients). Add to that a dubious board of advisors and a questionable educational foundation. Add to that the way in which they have handled this whole situation. They proved to me that they are not to be trusted.
RM you made some good points in your last post. And you are right, if they just said, “Hey, here is what it costs” instead of adding bells and whistles to the front load, they may not be going through what they are going through.
Which leads me back to one of my original points…...”Why now?”
I have a hard time believing that if the NASD or the SEC ever once said to First Command, “You cannot say these things about the front load, it is misleading.” If they said that or warned them, I have a feeling that First Command would have quit. I doubt their response would have been, “Screw you, we are doing it anyway, fine us.”
Bottom line, they have been selling front loads in this manner since the 70’s. And in that entire time, I am sure they registered their sales materials this entire time with the NASD and SEC. (I think every broker dealer is required to by law). If what they did was so bad, what did it take 30 years to fix? And if what they were saying and doing was fine for the last 30 years, why is it not all of the sudden?
I still feel that politics weighed into this greatly. I thought that the NASD and the SEC were there to prevent companies from doing things wrong. Not to come ‘after the fact’ and deal out fines for not catching problems until someone complained. It seems to me that these guys were not doing their jobs.
Some issues with your last post:
1) I went to that SEC website and skimmed through the findings. I wanted to read how First Command was not endorsing TSP (in fact my agent informed me that First Command clients have more participation than non First Command clients. A detail somehow avoided in the SEC findings) Anyway, all I could find was some vague reference about since First Command referred to no-loads as for the short term and TSP is a no-load, First Command was not encouraging TSP. That seemed like a long reach to me. If there is more information than that in there, I would like you to point it out to me.
2) What is wrong with whole life? Granted it perhaps isn’t for everyone, but damn near. Term is cheaper, but the reason why is because it seldom pays out. Something like 93% of all term policies pay nothing to no one. That is why it is cheaper. Perhaps whole life wouldn’t be needed for a person with no children or family. But it is seldom you see in our society that a person goes his/her whole life and has no responsibilities to anyway upon death. At the very minimum have enough to pay for your funeral. And if you are 30, and live to 80 (which statistically is likely) fifty years from now $250K will have the same buying power as $25K today. Don’t believe me? A new Porsche convertible in 1952 cost a little over $4500. How much do they cost today?
3) First Command cannot be trusted? Who can? Find a broker dealer out there that hasn’t had issues. What has USAA done to earn your trust and business. Because they don’t call you so they aren’t as annoying? They don’t have agents walking around? They are nice on the phone? Anytime I ask ‘why USAA’ I usually get a simple comment like one of those. And that is a poor judge to measure a company handling your money. Personally, sitting in ones office, looking the guy in the eye, and having him earn my trust the old fashioned was goes further. But we are all different in what we look for.
It is clear RM that we will never agree on First Command. But there is one thing I have noticed doing the research I have done and talking with my agent:
There is no shortage of advice out there on where your should put your money. And you know what, they are all right. Advice out there that you read about is basically true and applies to someone, the trouble isn’t finding the advice, it is trying to determine if it applies to you. Frankly, term may be better in some situations for some people, in others, it is the wrong move. Front loads might be the best option for some people, others not.
But sooner or later we are all going to need to sit with a professional and determine the answers to these questions. Because just investing is not enough. Besides, I have always said, you have one shot at your retirement. If you mess up, invest in the wrong place, or follow the wrong advice, you cannot go back in time and fix it. What you have at 65 is what you have. I would prefer to hold someone accountable for my success or failure.
Laters,
Some Army and Navy officers have now filed two separate lawsuits against First Command
http://www.whatleydrake.com/CM/NewsandInfo/
http://www.insurancenewsnet.com/article.asp?
Todd, above you regurgitated some First Command spin regarding how First Command clients have more participation in TSP than non-clients. So what?
Is this because First Command told their clients to invest through TSP?
Or is it because these clients are interested in their futures and they enrolled in TSP on their own initiative?
According to the SEC proceedings “The SEC Order also finds that First Command sales materials contained misleading statements and omissions concerning the availability of the Thrift Savings Plan…” One would have to see the sales materials to discover exactly what the SEC found as misleading.
I “regurgitated spin” or I relayed a pertinent fact? I find it interesting that a company that supposedly discourages soldiers from investing in the TSP has higher participation than non clients. Isn’t that odd?
Who cares what the reason is. Maybe the reason they are involved in the TSP is because First Command has encouraged them to take a more interest in their financial future. Certainly was the case in my situation.
I would like to see the sales literature regarding the misleading information about TSP. I have never seen anything and I asked very specific questions about the TSP.
My agent broke it down like this, “Your Roth has better tax advantages, max out that first. Then max out your wife’s. Next priority should be your financial goals next 10 – 15 years, (TSP or Roth can’t help with that) after those goals are covered, if there is money left over, do the TSP.” I don’t know about anyone else, but that seems like sound advice to me.
By the way, stop trying to impress me with on going lawsuits from some disgruntled clients about First Command. I am sure many of them smell blood in the water and trying to get in on the action.
Besides, as I mentioned in an earlier post, I don’t have any sympathy of anyone that feels ‘cheated’ by First Command. If your dumbass wasn’t smart enough to listen during the appointment when they talk about the front load at length, or managed to miss it on one of your first twelve statements, or didn’t catch the 30 year ‘buzz’ that First Command are the ‘front load guys’ or pulled out early because you have no discipline. It is your own fault. There were plenty of chances for you to decide if this was right for you or not.
In the end, I am happy. If for no other reason than First Command stayed on top of me to do the things that I needed to do. Kinda like my annoying wife that consistantly bugs me to clean out the garage every month, First Command stayed on top of me to keep investing my pay raises and promotion raises. Without them, I know that I would either be doing nothing or next to nothing for my own retirement.
But, I guess you guys are just too smart for them.
Still waiting on that call from USAA to max out your Roth?
Since you have posted all these links to how First Command seems to be doing things wrong, I decided to snoop around the internet to see what USAA has been doing. Found tons of stuff about not paying insurance claims and inappropriate coverage for certain clients. But this is an interesting article from 2001 on an automobile lawsuit:
http://www.ohiopia.com/Legislation/ProAction/ProAction%2001/pa11_01.htm
USAA says they cannot be held to same standards as agents
In a recent Arizona court decision, the United Services Automobile Association (USAA), the Texas-based direct writing insurance company, argued that since it does not use agents, it should not be held to the same standard of client care as independent agents!
USAA argued that it had no obligation to counsel a policyholder on coverage options. Mr. and Mrs. Lawrence Lesser sued USAA after an accident in which they received only $15,000 under their underinsured motorist (UIM) coverage instead of the $300,000 they presumed they would receive under the uninsured motorist (UM) coverage they did not have. The Lessers believed that USAA did not properly advise them regarding the purchase of the coverage even though they had the policy for several years. USAA contended that the standard of care for a company employee is lower, arguing an independent agent “owes a duty to the insured to exercise reasonable care, skill and diligence in carrying out the agent’s duties in procuring insurance,” according to the court summary.
Apparently, USAA does not hold its employees to the same standard. USAA had won their argument on summary judgment in a lower court, but the Arizona appeals court remanded the case because the lower court improperly granted summary judgment when a jury should have tried the case. So, the jury’s still out on whether USAA has the same standard of care as an independent agent! Watch for more information from PIA regarding further developments on USAA’s legal battle. If the jury rules against USAA, agents will have plenty of ammunition to counter the company’s marketing efforts.
It would seem that USAA would argue that since they do not have agents walking the streets, they are not as liable for their recomendations or even conduct in dealing with clients over the phone.
It makes one wonder, if they feel this way regarding your car insurance. I.e. “you should have known better and asked better questions with regards to your coverage.” I wonder how they would feel if you complained because you were not properly counseled on the risks involved in a particular mutual fund you invested with them?
Think about it.
Hey! Is anybody else reading this besides Todd and myself?
Based upon my personal experience with both companies, USAA is a great company, First Command is a lousy company.
USAA=honest, upfront, reliable
First Command=deceitful, self-serving, untrustworthy
I don’t know RM, it may just be you and I reading these posts.
By the way:
Based upon my personal experience with both companies (and it sounds like I have more than yourself because I can claim to currently own products from both companies) USAA is a lousy company, First Command is a great company.
USAA = deceitful, self-servicing, untrustworthy
First Command = honest, upfront, reliable
Hmmmmm, it would seem that we see both companies on basically the same way. Except I would argue that I have more of a basis for judging USAA than you have with First Command.
From what I have read, your opinions of First Command come from politically motivated legal action and limited personal experience with the company years ago.
Unlike myself that still owns USAA products, have had pretty lousy experiences and questionable customer service (that still continues, I would drop them like a dead cat if it weren’t for the monopoly they have in Europe)
And so far, aside from the front load (which they are not selling any more) I have not heard much of an objection to First Command’s business practice. Is this to assume that you may come to think differently about First Command because they have stopped selling the basis for most of your complaints? After all, since they are not selling the front load, why all the hatred for First Command? In your eyes, haven’t they turned themselves around, even if it wasn’t by choice?
One other question, is a personal agent to handle your investment and insurance concerns an advantage? Is having someone personally looking after your investments and calling you when problems/issues come up helpful? And if it is, wouldn’t this put First Command on top of USAA when it comes to service?
And you still haven’t answered this, what has USAA done for you to earn your business? What have they shown you, done for you, service they provided to earn your business? And being friendly on the phone doesn’t count.
Also, if you do a casual search of the internet, you will find that USAA has been swamped with legal action over the years. Mostly because of their auto and home insurance. According to your constant postings of legal action against First Command (which is redundant because if revolves around one issue and doesn’t compare to USAA’s volume of legal issues) wouldn’t this put USAA in the ‘more suspicious’ column?
Aren’t you the least bit concerned placing your financial future with a mail order company? One that doesn’t think they should be held to the same standard as a company with agents on the ground? Isn’t that a tad risky?
Todd, I would venture to say that I have much more experience with both companies than you.
USAA doesn’t have a monopoly in Europe. If they do, you should be glad they are there providing you a valuable service. I can only guess what a German insurance company would charge you for comparable coverage.
USAA doesn’t use agents to go out and hunt down potential clients and then use misinformation to sell high commission products that are in the best interest of the agent (vice in the best interest of the client).
First Command’s marketing scheme is permeated with deceit at every level—from the lowliest agent all the way to the top.
Dodging the question RM?
It still stands, what has USAA done, said, shown you or proved to you that earned your trust and business? It clearly wasn’t the dismal returns on their mutual funds. But I think it is a fair question.
You know more about both companies than I do? Maybe. Although you didn’t elaborate or qualify your statement. A simple question to ask, how long have you been a client of First Command? Never? That would lead me to believe that you have next to nothing in the way of personal experience dealing with First Command. Talking with or seeing one or two agents in your life hardly qualifies you to judge a whole company.
I have been a client of USAA for 15 years and I have owned most of their products from the bank, car insurance, mutual funds, and renters insurance. I think I can make my own first hand judgements of USAA.
True, with the exchange rate these days, German insurance would probably cost more. And I guess USAA doesn’t have a monopoly here in Europe if you throw in the German insurance. But if I want to have coverage back in the states when I rent a car, USAA is the only company that will cover me over here and back in the states at the same time. You can split hairs if that is a monopoly or not, but they have been screwing me being overseas.
And from your last post it would seem that you believe that First Command exists for the sole reason to screw soldiers. That they make it their mission and strive to do what they can to screw soldiers out of their money. But yet you admit that they are better than nothing. You admit that they have made people money. You admit that they have motivated people to save and invest (in some cases people have taken their advice and went to other companies, but First Command got them motivated).
So it would seem that while they may charge higher fees in the short term (lower fees in the long term), First Command does seem to provide a valuable service in the military community. This in contrast to a mail order company of USAA.
One has to ask, if your allotment went to USAA last month for an investment. And for some reason it didn’t post to your account, who do you call? Not what number do you call, not what department do you call, WHO do you call?
Whoever that is, let’s hope that they have had more than a six hour block of instruction.
But I guess you would know that only if you flew yourself to San Antonio and rang the door bell. Let’s hope they answer.
Todd, Are you a First Command agent? Do you have a family member who is a First Command agent?
I have been a client of both USAA and First Command. I stand by my statement that I have more experience with both companies than you. I am not recommending USAA mutual funds (by the way, check out the year to date performance of Destiny I and Destiny II).
Getting screwed a little bit by First Command is better than being screwed a lot by someone else. Not getting screwed at all is best of all (well….depending on you definition of “getting screwed”).
Let’s review recent developments regarding First Command: – investigated by the NASD and SEC – settled for $12 million with the NASD and SEC to be followed by 12 month NASD oversight – FC district agent fined $25,000 and suspended for 30 days – FC CEO testified (and lied) before House subcomittee – House passed legislation banning contractual funds by a vote of 396-2. Senate didn’t take action last session and the same legislation has been reintroduced this session. – FC license suspended in Georgia for 90 days to be followed by one year probation. – Lawsuits filed by FC clients in Kentucky and California
P.S. Your statement that First Command provides “lower fees in the long term” is absolutely and unequivocally WRONG! There are numerous good funds that provide better returns and lower fees.
Could it be that you haven’t answered the question for the third time is because you don’t have an answer? USAA just happened to have no loads and since you had their car insurance you just went with them? Like most people investing with them, they just were easy, but not a lot of thought went into selecting them. Not the best way to go about selecting a company to help you reach your financial goals.
By the way, while we are comparing funds, look up USAA growth, and USAA aggressive growth.
Bottom line, investing usually isn’t a sprint, it is a marathon. I am not investing for a year (which is why I have front loads) but in it for the long haul. Every fund has their ups and downs, you should be smart enough to know that. Last years winner is next years loser. Why are you not pumping up on Janus funds, they were the rave five years ago, where are they now?
One quick personal story, the front load works, at least for me. Five years ago I had a buddy pull all his money from all his funds with USAA and went with Janus funds. He followed the buzz and the internet rave on Janus. Well, he lost a TON of money and still hasn’t broken even yet. He tried to get me to go in with him and I almost did the exact same thing he did, I didn’t really know better. But you know, the only thing that kept me from making the biggest financial mistake of my life was the front load. I thought, ‘well I am already in it, I paid all the fees, screw it, just keep my allotment going.’ Maybe there are better ways to invest, maybe not everyone is as foolish as my friend, but in the end, it was only the front load that kept me from buying Janus at the peak and licking my wounds now.
Also, when I referred to ‘lower fees’ I was referring to how the front loaded funds themselves have lower fees the longer you stay with them. I.e. your invested assets compared to sales charges paid are lower the longer you put money in it. I.e. lower fees in the long run. Guess I should have explained myself better for you.
The troubles First Command has been having are hardly unique to the industry and have been hashed out several times on this website alone. My only points are:
1) If what First Command has been doing for the last 30 years was so bad, why did it take so long to fix? And if they were not doing anything wrong that entire time, why is it suddenly an issue now?
2) Congress voted to ban contractual plans? So what? First Command isn’t the only broker dealer that sells them, there are companies here in Germany that sell them as well. First Command was just the biggest. By the way, if there was something wrong with contractual plans, why did the fund companies not get into any trouble? It seems to me the issue wasn’t the sale of contractual plans, but how they were sold. Bottom line, you point doesn’t seem valid, front load funds were (and still are) legal investments to sell.
3) Lawsuits can be filed by anyone. Simply filing it proves nothing. Do we really want to compare USAA lawsuits and First Command lawsuits? I have a feeling I know who would win if we tally that up.
4) First Command CEO lied before congress? Well that is a heavy accusation. I suppose you have proof of this? Something missed by the congressional members, the media and the authorities? Shouldn’t you be starting a petition to have the CEO brought up on pergury charges?
5) First Command under investigation? Well they are in good company. I think I read somewhere that in 2004 alone there was something like 50 broker dealers under investigation and fined. I guess they are all screwing people too?
You are accusing me of being a First Command agent, but in the next sentence you are saying you know more than me about both companies? That is a little contradictory don’t you think?
By the way, I am not affiliated with First Command other than being a client. Do you work for USAA? Do you have a family member that does? Why is it when someone knows anything about First Command and/or tries to stick up for them, they are labeled as an employee? No one has accused you of working for the competition because of your rooted hatred of First Command…...unless….....hmmmmmmm
Chill out Todd.
I only brought up USAA mutual funds in this thread as an example of a company that would allow an individual to start an automatic monthly investment plan without having to come up with a large initial investment.
I am not necessarily advocating USAA as a great fund company, but check out the performance of USAA Growth versus Destiny II over the last 10 years. And this doesn’t even factor in the loss of 50% the first year in Destiny II.
Correction: I meant USAA Growth and Income (USGRX).
Destiny II actaully outperformed USAA Growth over 5 and 10 year periods (if you ignore the front load). USAA Growth and Income blew Destiny II away the last 5 and 10 years.
I need to chill? Dude I am cool, I am actually enjoying this debate.
We can toss around funds all day long, that is the advantage of looking back in history and saying, ‘Yes, I should have been in that fund.’ I should have turned left, but instead I turned right.
But in the end, no one can tell the future, and no one can be certain which fund is going to be the best in 15 years. Fidelity Destiny had a pretty good run in the late 1990’s and blew away many USAA funds. No fund, no matter how well managed or ‘lucky’ will always be on top. Everyone has good and bad years.
In fact, I doubt there is a financial planner out there that if had a crystal ball and knew which fund would do the best wouldn’t recommend it. That would solidify his client base, right?
By the way, am I to assume that if Fidelity Destiny II did better than USAA growth and income in the next 10 years that you would say people should have bought it? Just wondering.
But in the end we are a little off the subject. Because in the end, great ideas are only that, ‘ideas’, until action is taken. First Command got many people (including me) investing that otherwise likely wouldn’t have. And in the end, if it cost a little more, but I got started and got saving, well then I am better off aren’t I?
Finally, consider this. If all these soldiers were smart enough, proactive enough, and had the time to invest for their own future and do the right things, they would already be doing it right?
I mean, what need would there be for First Command if these soldiers were already doing the right thing? First Command would be out of business. But since they have 300K+ clients and getting bigger, it stands to reason that most of these soldiers/clients either don’t have the knowledge, time or desire to go out and invest for their own retirement. I.e. First Command fills that void and provides them with the opportunity. So far, they are the only ones in the military community proactively trying to get soldiers to invest. Say what you want about their methods, but that objective alone will get my vote as an honorable company.
I challenge you on the claim that First Command is “getting bigger”.
What DoD provides to military members in terms of “financial education” is pretty poor. Maybe some day this will change. Hopefully the $8 million First Command had to pay to NASD to fund financial education for military members will have a positive impact.
Well, that’s a tough arguement to prove I guess. That ‘First Command is getting bigger’. But in the investment world, you are either getting bigger or going out of business. There isn’t much of a middle ground. And it seems (for now) First Command is going to survive this.
Also, when I became I client I remember my agent commenting how First Command just went over the 100,000 mark in clients serviced. And in twelve years they are over 300,000. I also doubt you are going to see a mass exodus (at least very few of the people around here that are clients seem to be planning to take their money elsewhere). So that leaves ‘getting bigger’. I guess time will tell.
I DO think the DoD could do more to provide soldiers with financial information to help with their investing. But sometimes I wonder if that wouldn’t do more harm than good. Not that everyone should be a First Command client, but certainly not everyone should be flapping about investing in whatever CNBC recommends.
Sometimes the best approach is the one in which someone sits down with a soldier and maps out their life, makes investment recommendations accordingly. If the DoD wants to pay a GS guy to do that, I am all for it.
But until then, First Command is really all there is if that is what you are looking for. Besides, the Federal Government is looking out for itself. I can’t help but to think they would be pushing soldiers to buy savings bonds, invest in the G-Fund with the TSP, and do TSP before a Roth.
Let’s not forget the quality of guys they would have working. Since they would likely be on salary, I doubt there would be much of an incentive for someone to make sure they were doing the right thing. Not only that, but the Federal Government is a ‘go with the lowest bidder’ mentality. Not the best motto I would want my financial planner to have.
So we will see what shakes out. But until then, if you want personal face to face service, someone with some knowledge of government benefits, and world wide service. First Command is all there is.
If First Command is to survive they will have to make up for the 50% first year loaded “systematic investment plan” cash cow. How do you think they are going to do that? Also their reputation is damaged. How many new customers do you think they are taking in now? The bad news has been all over Army/Navy/Air Force/Marine Corps Times, the Stars&Stripes, Military Money, etc., etc.
I have no idea how they are going to make up for the lost revenue of the systematic investments. Perhaps they will reorganize the company, investment structure, offer new products, who knows. But I doubt a company with 300K+ clients and billions of dollars under management is going to dry up because a single black mark on their record.
One thing that I feel is certain is that the company is not going away and will likely come out of this stronger. I believe in the saying, ‘What doesn’t kill you makes you stronger.’ I don’t think First Command is dead, so I think they will come out of this stronger. Perhaps not as naive as they once were about the business and realized times have changed.
They are not selling the front loads, the primary reason people had issues with the company. What will the nay-sayers have to talk about now? What have you got against First Command RM, now that the sytematic plans are gone?
At this point they are on par with any other brokerage firm, yet they still provide personal, world wide service and extensive knowledge of government benefits for soldiers like me. Who else is doing that? Who else will? Who else will take an E-6 with a mountain of bills and debt and get them started on a plan for $50 a month and see them every year to make sure they are on track?
Granted, their reputation is damaged, but only temporarily. These days bad news (or any news) is forgotten pretty quickly. I mean, I haven’t heard many people talk about the bad news First Command has had recently. I wouldn’t say it is forgotten, but in our fast paced media world we live in, news like this has a shelf life of a couple of months. After that, no one remembers. Not only that, if I was a First Command agent, I would have a pile of other news articles documenting other companies like Merrill Lynch, T. Rowe Price, and Smith Barney and all their settlement and lawsuit issues. Making the point that First Command is hardly unique in their legal issues and finding a company without legal troubles these days is rare.
It is interesting to note that Bank of America was fined for something like $400 million dollars for illegal trading and other activities. I am quite certain that Bank of America dwarfs First Command in the number of soldiers it services (mostly because of their banks overseas). Even though they have greater market penetration and was slapped with a much higher fee, there has been no media coverage about this (at least in the Stars and Stripes or Army Times). Try to tell me again politics didn’t have something to do with all this.
But I am confident while First Command will not be the same 10 years from now, it will be here, and bigger.
Todd, You appear to be pretty tight with First Command. What is their new business plan? I have heard they are now selling mutual funds with a high front end load (on every investment) and high annual operating fees. Do they still try to sell whole life to every client and to every member of a client’s family? Do they still try to gain implied endorsement from the military by sponsoring all sorts of military events and military awards. I notice in the last issue of First Command magazine they USED clients who have received Bronze Stars and other honors. They don’t appear to have changed very much to me. I do notice they have scrubbed their Web site and removed every trace of their so called “board of advisors” (I wonder if any of these retired flag officers and senior noncomms jumped ship after the $12 milllion settlement).
I am afraid that some of those questions are a little out of my lane. I mean, I have no idea of what the political inner workings of First Command are. I can really only speculate why they would take the ‘Board of Advisors’ off the web page. I suspect it is to lay low and let the storm pass. But I am only guessing.
Yes, they are selling loaded funds, but I am unclear what you mean about ‘high up front end load’ and ‘high annual operating fees’. If by that you mean do they sell loaded funds with a sales charge and expense ratio, that is true, but it is hardly ‘high end’, it is about average of what you will find in the market.
I recently bought a Fidelity asset allocation fund for a home purchase in 10 years (play it safe with buying a house). Anyway, that expense ratio is .33% and a sales charge of 5.75%. Not extreme if you ask me.
I went to Morningstar and poked around AIM(link), Pioneer, and Fidelity Advisor funds at random (the ones that First Command are selling) and the sales charges were 5.5% to 5.75% and the expense ratios averaged around 1.3% but went as high as 1.5%.
To compare with other brokerage houses, I also reviewed Smith Barney and Merrill Lynch. Merrill had sales charges of 5.25% and expense ratios from 1.37% to 1.49%. Barney had sales charges around 5.0% (one as high as 8.5%!) and expense ratios around 1.2%.
So I would say that what First Command is selling these days is comparable to what the rest of the industry is selling. Granted, no loads are cheaper, but again, the reason they cost nothing is that you get nothing. At least you get world wide service with First Command and your own agent. Unless you have a few hundred thousand, I doubt you would get a phone call from Merrill.
One other thing I would like to mention if you go with these other brokerage houses. If you go with USAA, Merrill, or Barney…..they have their own funds. They are going to try and sell you their own funds. They make the most money on their own stuff. I like the fact that First Command does not have their own mutual funds. In my opinion, it makes the agent more honest in selecting what is best for the client, not necessarily what is best for the company. The agent does feel pressure selling a fund that isn’t doing so well these days and they need to get more dollars in that fund. (I had a friend that works at Merrill, I know what the deal is.)
First Command’s belief is that whole life is better than any other type of coverage for the money. I agree. When it comes to your family’s security, there is nothing better. If you want to take chances, do it with your investments, not your insurance. Obviously there is a ton of opinion on this subject and the reason there is more than one product out there is because people want different things. But when you consider that less than 1% of term policies pay anything to anyone, I don’t know why anyone would want to buy a product that had a 99% chance of showing zero return for the dollars spent. Especially when you consider that death is a certainity, just a question of when.
I don’t know anything about the Bronze star winners in their magazine. And I think it is very unfair to say they ‘USED’ that person. I doubt any company is going to put a soldier in a magazine without his/her consent. That is leaving yourself wide open for a lawsuit, something that I feel certain First Command is trying very hard to avoid these days.
As far as sponsorship. You seem to think they are gaining implied endorsement from the military by sponsoring events, donating money and doing things in the community. Why is this a bad thing? Do you know how hard it is to get money to do any kind of event when you work through the government bureaucracy? Besides, at least they are putting money back in the community, I have never seen USAA do anything. They just take your money and run it seems. Besides, if ‘Military Car Sales’ here outside of post sponsors an event, I guess that is ok for you. But if First Command does it, they are trying to get ‘implied endorsement’. What’s the difference?
I am still trying to identify this rooted hatred for First Command. Especially since they stopped selling the front loads. These days, they are on par with most other brokerage houses as far as fees and expenses. But they are providing more and better service. Isn’t this a good thing for the soldiers?
Todd, your repetition of First Command’s sales pitch and spin is remarkable.
You appear to know quite a bit about investing—why do you keep running back to First Command and giving them your money? If you are not an agent, then perhaps you have fallen for the old “you know you would make a great agent someday” from your FC rep (a common FC tactic). I think perhaps you have dreams of becoming an FC agent one day. Having an extensive long-term FC portfolio is one thing FC looks for in their agents. This way you can whip out your account statements and show them to prospective clients (another common FC tactic).
Some counters to a couple of your points:
First Command claims their independence allows them to choose the best products for their clients. Right…..First Command’s independence allows them to sell products that benefit the agent and FC the most.
So what if 99% of term policies are cancelled before the death of the insured. After all, it is LIFE INSURANCE isn’t it? How many whole life policies are cancelled before the death of the insured (despite the fact that the selling agent earned big commissions up front)? Here is one indisputable number—100% of whole life policies sold by FC agents earned them big commissions.
A given amount of term insurance costs much less per month than a comparable amount of whole life coverage. Buy term and invest the difference—this is what many, if not most or near all, independent financial advisors recommend. So much for your “zero return for the dollars spent” argument.
By the way, check out the year to date returns for Fidelity Destiny II. The business section of my Sunday paper lists return for 79 Fidelity Funds. Destiny II’s YTD return is listed at -4.6% for 2005 and is tied with one other fund for second to last. So, the stock market is at a 3 1/2 year high, Destiny II investors paid 50% first year loads, and Destiny II is among Fidelity’s worst performing funds. “Thank you First Command.”
Anticipating that you will repond with “First Command only advocates a long term strategy, and returns over the last 2 months are only a blip on the screen,” I suggest you compare Destiny II’s performance against the S&P 500 index for the last 15 years.
First Command has already had to pay $12 million, we’ll see what the results from the lawsuits.
RM your repetition of the nay-sayers First Command talking points is remarkable.
Since you are SO SMART and hate First Command SO MUCH this would mean that you are an employee of USAA or Merrill? Or would like to be one day? Why can’t a guy that knows a little about the market (and the reason I know what I do these days is because of my college courses I am currently taking, thank you very much) advocate what a company is doing? What makes you right and me wrong? This little lawsuit? You are going to have to do better than that or come right out and say any company with legal trouble is out to screw people. In that case, you would would have a very short list of companies to choose from.
A couple of your counter points:
1) First Command’s independence allows them to select products that benefit First Command the most? That is a pretty weak arguement and complete conjecture. Especially when I just got done writing the numbers on how much their investments cost these days. Pretty average compared to the industry. They are making as much as everyone else it seems.
2) I don’t have statistics on how many whole life policies pay out. But I know that 100% of the people that pay the premiums see a death benefit upon death. You can’t say that about term. Bottom line, if you had a crystal ball and knew when you were going to die, this would be a very easy decision to make. Since you don’t, go with the averages. Statistically, you are going to live to 80 (and that age is going up every year because of advances in medicine and technology). Meaning, in most cases, you will long outlive most term policies or pay a crap load for them and see nothing out of it.
You also mention term life invest the difference. Such an approach is very risky and generally doesn’t work out in the favor of the customer. It is dynamite on paper, but doesn’t always work in practice. This is due mostly because it takes a dozen things to work out in your favor (market growth, never taking the money out, always able to contribute, living a short life and avoiding high taxes). Most of those are beyond your control. In fact, I am reading about it right now in my estate planning section of my economics text book and they discourage it.
In fact, there is a sentance in the book that states, “In virtually every situation, there is not a more economical way to settle an estate than with life insurance.”
Besides, if the object is to have a lot of money when you die, then the wealthy in this country should be the last people to buy life insurance right? Then why did I read a newspaper article that in 2001, Ralph Lauren paid over three million dollars in life insurance PREMIUMS. Not his coverage, that is what he paid for it. If the object is to have money when you die, he should be the last person to have it. Then why did he buy it? And why did he think it was important enough to pay over $250K a month for it? I think someone smarter than you or I (and even First Command) recommended it for him don’t you?
It is less about how much money you have when you die as it is what KIND of money you have when you die. That is why life insurance is so important to a financial plan. Life insurance is tax free upon death and goes a long way to pay the estate taxes when you die. You play it risky if you want, I will play it safe. I have a family to think about.
Also, whole life does pay out more in commissions than term, but if First Command was really out to screw people they would be selling them Universal Life or Variable Universal Life. Such products are very risky, prone to market fluctuations, have high policy fees…......and pay a TON in commissions (especially for policies in force for a number of years.) I know this because that is what my father bought, had for 30 years and was cancelled because the separate cash account was exhausted because of weak market returns. Call me a whole life believer after that!
By the way, stop with the “let’s compare funds” game! You are right, two months is hardly enough time to judge a fund, besides I could bore you to tears with just as many other funds that have faired just as poorly (or more so). Bottom line, every fund has their day. Just because a fund is doing poorly doesn’t mean it is a bad fund. Besides, unless you are wanting to cash out, this is exactly what you want it to do, i.e. dollar cost averaging. You still never answered this, if Destiny comes back in five years and puts on big numbers, are you going to say that people should have bought Destiny? Especially now while the share price was low?
I have thought about being a First Command agent a few times, but frankly, the thought of dealing with guys like you that can’t seem to get it in their heads that there is more than one side to a story and more than one way to do something is enough to wave my hand at the idea. I am sticking up for First Command because without them, I would have nothing but a few thousand bucks in a savings account. They have helped me make a lot of money and the more I think I know about the industry and ‘want to try it out myself’, the more I realize I don’t know and trust the experts. You may not think they are, but they do this stuff 24/7, I would put my faith with them before some guy writing a newspaper article.
By the way, I said what I am doing for my retirement, what are you doing? Who are you going with? What is your plan?
Todd, You think First Command is a great company. I see it differently. We can debate this for years. Let’s stick to facts: – FC pulled sponsorship of the USAF “Tops in Blue” show after some low level USAF JAG officers tried to start an investigation – USAF JAG MajGen Tom Fiscus issued a letter of apology to First Command after FC used its retired 4-star VP to contact the USAF Deptuy Chief of Staff (Maj Gen Fiscus, now Colonel (Ret.) Fiscus retired in disgrace at a lower grade because of his his inability to control his libido) – First Command’s was investigated by the NASD and SEC – FC settled for $12 million with the NASD and SEC to be followed by 12 month NASD oversight – An FC district agent was fined $25,000 by the NASD and suspended for 30 days for harassing a USAF officer (FC had taken no previous action against the agent) – The House passed legislation banning contractual funds by a vote of 396-2. Senate didn’t take action last session and the same legislation has been reintroduced this session. – FC stopped selling contractual plans despite the fact that FC thought they were so great for investors. FC announced they would expand into the civilian market. – FC’s license was suspended in Georgia for 90 days to be followed by one year probation. – Lawsuits filed by FC clients in Kentucky and California
All true RM. But I am saying there is more to the story than what is in the newspapers. (I know that first hand seeing how they work in Iraq)
My talking points are these:
1) If what they were doing was so bad, why did it take 30 years to fix? I really doubt that if warned about their business practices, First Command’s response would have been ‘screw you NASD’.
2) First Command is the ONLY company out there actively trying to get soldiers investing. The reason no one else is, there is no money in getting a person investing $50 a month. What is the commission? $2.50?
3) Something is better than nothing right? If First Command went out of business tomorrow, who would take care of these soldiers? Who would actively be trying to get them to invest?
4) Yes they have issues now. Their first in 48 years? What other broker dealer can say that?
5) Not everyone agrees on the proper way to save and invest. There are many different methods, approaches, and philosophies. Simply because you don’t believe in the approach of a particular company doesn’t mean they are screwing people. It also doesn’t mean that their methods wouldn’t be appropriate for someone else.
6) A single First Command sponsored dining in brought more money to the community than ANYTHING I have seen USAA or MBNA or Bank of America do. You call it shady sponsorship, but you know, in the end they are putting money back into the military community. What are these other companies doing to help the hand that feeds them?
7) Lawsuits are fine, but hardly indicative of wrong doing by a company. If you went by that measure alone, every Fortune 500 company would be black listed. USAA goes through dozens of lawsuits and class actions a year. (mostly because of their home owner and auto insurance). When we live in a country where a person can spill hot coffee on themselves and get millions of dollars, such an arguement doesn’t carry much weight with me.
To sum it up, First Command is better than nothing. You even agree to that. They also have got people investing that normally wouldn’t have. There are also many people walking around with lots of cash and retirement is looking good because of First Command. You will never get 100% of people to agree to the practices of any given company.
But I chalk this whole situation to politics rather than First Command doing anything wrong. I mean, it apparently was legal to do what they were doing in 2003, but not in 2004? I would agree with you RM if they started selling front loads two or three years ago, but it has been a staple of their business plan for 30 years. Why now? Why did it take so long to fix? Why was nothing brought down on the fund companies? Why were no other companies targeted? First Command is not the only broker dealer that sells front loads. I think these are valid questions that have yet to be answered.
But you are right, we will never agree. But I am a happy client, and First Command has never done anything wrong to me. I am happy with my plan and happy where I am going with it. I guess we could always link u