uruloki’s lair

In the comments to “First Command”, Todd left a comment addressing the negative view that myself and some others have taken towards First Command’s policies and practices. I’m going to address a few of his concerns here, in order to move the issue up to the front of the site.

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.

What gets us upset is not the fact that FC charges a fee for a service. Them charging a fee helps us both because it ties their performance to their reward and is completely normal for a business to do. The problem comes back to how they charge that fee.

It all comes back to that magical thing called compound interest, which is the whole reason for saving in the first place. Let’s do a small intellectual exercise, starting with a $1000. (Compound interest explained here) We’ll assume a one time amount over 5 years, with an annual return of 8.5%. At First Command, that is $500 to plug into the calculation for FV, yielding a return of $21.70 after five years. That same $1000 in even a 5.5% load fund, from a starting point of $945 yields a return of $986.01, a gain of $41. After 30 years, your First Command investment is worht $645.17, while the other one is $1219.38.

Notice that I did not address the membership fee. This is because the membership fees most commonly appear when working with a brokerage house, in which case you are dealing sufficiently large funds for the membership fee to be negligible. Additionally, the best starting investments are no-load funds, not a load fund.

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.

I never said that the agents at First Command weren’t helpful and friendly. They are nice people, but in the end the commission means that their interest is far higher in certain investments than in others. I prefer my money managers to have a vested interest in having my account be up at the end of the year and be rewarded at that time rather than receiving the payment upfront, which is the way it works for First Command.

About that investment: did you approach him about it or did he approach you? If you approached him, it probably wasn’t one of the preferred investements that would have gotten him a greater comission. If it was him approaching you, kudos to him; it is, however, the first time I have heard about a First Command agent doing that.

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.

You are in a different situation than the kids in Basic/OTS/Academy (or on first assignments) that are First Command’s target audience. 1) $250K by far covers them since the majority are unmarried and/or do not have kids. In your place (family wise), I would probably do the same thing and we will reevaluate our position if we ever have rug-rats. 2) After retirement also depends on the family situation. A single person has no need of anything beyond the VGLI, while a family will (hopefully) already have made the determination of what is needed after as the family grows. I recommend Clark Howard’s life insurance tips for the determination of exactly what to get.

You notice what both of those topics have in common? Family versus no family.

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.

Erm. I can and will bust on anyone I please, especially when I think they are giving people the shaft. By giving people the shaft, I am explicitly referring to the practice of using retired military personnel to do their recruiting for them. The “investment” forums which are set up are done so with the sole intention of getting young guys and girls to put their money in First Command’s pockets. That something you are referring to is almost as bad as the nothing in the first place, thanks to the gargantuan 50% front-load that First Command takes. I am in complete agrement with what “anonymous” said:

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).

This is a QOL issue for commanders and their new troops. They need to refer the troops to financial planners at the base learning skills centers, rather than accepting offers from previous commanders/personal friends/agents to hock First Commands wares. In this way, people can approach First Command with open eyes and make an informed decision. I am not knocking you for choosing First Command, period. I dislike their fee and recruitment policy, and think that people could do much better if they have the necessary knowledge.

Tags: Life, Questions //