Nicholas Stachler was 19 years old when he reported for basic training with the Army at Fort Benning, Ga., before shipping out for 11 months to Iraq.
A gentle, trusting man, he had only weeks earlier graduated from high school with a handful of trophies in hockey and soccer, middling grades and hardly a clue about how to handle his money. He had held only casual jobs, baby-sitting and mowing lawns, and had never opened a checking account. The bus trip to boot camp, from the foothills of the Appalachians in southern Ohio to the kudzu-covered fields of western Georgia, took him farther from home than he had ever been.
About six weeks into his training, he tasted one of the less honorable traditions of military life: a compulsory classroom briefing on personal finance that was a life-insurance sales pitch in disguise.
As he remembers the class and as base investigative records show, two insurance agents quick-stepped him and his classmates through a stack of paperwork, pointing out where they should sign their names and where they should scribble their initials. They were given no time to read the documents and no copies to keep.
Stachler says he thought he had arranged to have $100 a month deducted from his pay for an Army-endorsed savings plan or mutual fund. When he returned from Iraq, he found that he had not been saving the money at all. He had been paying $100 a month in premiums for an insurance policy that promised him some cash value far down the road and a death benefit that was almost certainly less than $44,000, a small amount compared with the $250,000 in life insurance he had through a military-sponsored plan that cost him $16.25 a month.
A young Marine at Camp Pendleton, Calif., for example, was sold a 20-year insurance policy last fall that gave him a death benefit of just under $28,000, plus some cash value far in the future, in exchange for $6,600 in premiums paid in the first seven years. That was more than 14 times what the same death benefit would have cost him under his military-sponsored plan.
Another product heavily promoted to military people is a type of mutual fund in which 50 percent of first-year contributions are consumed as fees, a deal considered so expensive that such funds all but disappeared from the civilian market almost 20 years ago.
The companies selling financial services in the military market try to recruit former military people to be their agents, people who can fit smoothly into receptions like the one at Fort Bliss.
Few companies have more fervently embraced this form of salesmanship, called affinity marketing, than First Command, a 46-year-old financial services company originally known by the awkward name USPA and IRA. The company said all of the 300,000 families that it serves are headed by former or active-duty commissioned officers or higher-ranking noncommissioned officers; it does not serve lower-ranking service people. And almost all of its 1,007 agents have served in the military or “have military connections.” None, it says, have been cited for rule violations.