First Command Financial Services, a financial company that caters to military officers, has stopped selling an archaic type of mutual fund with upfront sales charges that can eat up half of an investor's first-year contributions.
First Command, based in Fort Worth, had sold the funds, called contractual plans, to hundreds of thousands of military families over the years, marketing them as a disciplined way for service members to invest a fixed monthly amount over as many as 20 years.
Because of their high fees, the funds largely vanished from the civilian market decades ago. An article in The New York Times in July reported that they were still being sold to military families, and the House passed a bill in October that, among other things, would have barred the sale of new contractual plans. A similar Senate bill did not come to a vote before Congress recessed for the year.
First Command also acknowledged yesterday that it expected to face disciplinary action soon by regulators at NASD and the Securities and Exchange Commission.
[...]
Supporters of the bipartisan bill that passed the House in October said yesterday that First Command's decision, while welcome, did not eliminate the need for Congressional action to protect military families from expensive and unsuitable financial products.
The House Financial Services Committee "would have preferred the outright ban contained in the legislation which passed the House," said Peggy Peterson, a spokeswoman for the committee. "Nonetheless, the decision moves the marketplace in the right direction."
Representative Rahm Emanuel, an Illinois Democrat on the committee, said, "A lot of questionable financial companies and products, besides these funds, are being marketed to enlistees on the base. We still have to make it clear that these enlistees are not an A.T.M. machine."
Lamar C. Smith, First Command CEO, said that his company's decision to stop selling the plans did not mean that it regarded the products as improper or unsuitable.
Neither are they illegal. What the products are, however, is a cruel and calculated abuse of the relative youth and financial inexperience of American soldiers held captive to their sales pitches.
Okay, so they've stopped selling them. What about the "hundreds of thousands" they have sold already? What happens to the financial prospects for those accountholders? You guessed it — FUBAR.
What First Command calls a "disciplined investment" is actually a rigorously planned, orderly way for soldiers to screw themselves. Not alone, but with an awful lot of help from the people who gave First Command, and only First Command, face-to-face access to meet with men and women in uniform. Somebody somewhere gave the go-ahead for First Command's financial "planners" to sell crazy-expensive mutual funds and unnecessary life insurance to enlistees. That kind of exclusivity comes at a price. You have to ask yourself: What kind of hidden reward is waiting for the ones who gave First Command access to soldiers in the first place?
You would expect the American government to protect soldiers, those whose mission is to protect Americans. But who is "up-armoring" them against unscrupulous life insurance salesmen?
