I went to Silver Dollar City the other day. For those of you not familiar with SDC, if you mated the movie Deliverance with Disneyland, you get SDC. It is a hillbilly theme park that is actually a lot of fun–if you go into it with an open mind. Everything has a down-home, country, Christian, aw shucks kinda feel.
Like its restaurant sister, Cracker Barrel, it oozes patriotism and a morally upright fervor. “God Bless America” is displayed often as well as “God bless our troops.” For those Veterans so inclined, they offer special red, white, and blue ribbons to be worn in order to show one’s Veteranness to everyone.
While I’ve never worn one of these snazzy ribbons on my several trips to the park, I don’t condemn those who do. For some, displaying their past/current service is important and meaningful. I support and appreciate their pride, despite my own differences. I’m often one of those who randomly shakes their hand and thanks them for their service. Many are senior citizens whose ribbons accessorize “WWII” or “Korean War” ball caps, and I realize their nostalgia from experiences with my own father, a WWII vet.
I know that the honchos at SDC genuinely want to recognize and honor military service (while keeping at least one eye on profit margins). I appreciate that as well as similar acts from many other organizations. For most, the appreciation comes from the heart. Their flagwaving, apple-pie advocacy originates with good intentions and honor, but not all businesses possess the same good intentions.
Travel to any decent-sized military installation, and you’ll be bathed in red, white, and blue as you approach the front gate. Pawn shops, used car sales, “financial consultants,” payday loans, tattoo parlors, and “massage” parlors sour the earth outside the fences of the base. They all tout their love for America and those who serve the country. They boast a willingness to close deals and extend credit to those serving the nation. Of course, they’ll never admit that all of this revolves around their knowledge of a steady paycheck afforded to each of these individuals courtesy of Uncle Sam.
Even the more “legitimate” businesses seek to utilize patriotic fervor. They tout themselves as All-American Realtors, All-American Sandwich Shop, All-American Tailors, All-American Barbers…..well, you get the idea. It’s so bad, you’ll feel like vomiting red, white, and blue, in All-American flavor, of course.
As a young Lieutenant ( in the mid 90s), my peers and I were constantly invited to dinners hosted by the folks at USPA & IRA (now known as First Command). This was a nationwide firm of financial consultants who specialized in providing structured, long-term investment opportunities for service members.
I never went to a dinner, but I was pitched the service by one of their “Financial Planners.” My particular salesperson was a retired Sergeant Major who spent 90% of the conversation talking about his amazing exploits as a soldier, and 10% of the conversation talking about financial stuff. Plenty of my buddies took advantage of the free dinner, and they had pretty much the same breakdown. Of course, they also ranted about the high-pressure sales tactics utilized by their retired Sergeant Major. We compared notes, and here is the gist:
- Investing and saving are good things.
- USPA & IRA believed it was the best financial services company in the history of the galaxy.
- They pushed front-loaded mutual funds.
- Their commission was 50% of your total investment for the first year, and you must contract for a systematic investment plan. Other commissions may follow.
- The “financial consultants,” when asked, lacked any professional degree or certification in finance or financial planning.
- It wasn’t that good of a dinner.
Well, lets take this step by step.
Investing is a good thing. I agree wholeheartedly. Best financial services company? Well, I’m not going to speak on this one. Instead, I’ll let this Wikipedia summary suffice:
On 15 December 2004, the U.S. Securities and Exchange Commission (SEC) determined that First Command had violated Section 17(a)(2) of theSecurities Act of 1933, which deals with fraudulent activities by mail. The SEC alleged that First Command had “offered and sold systematic plans by, in part, making misleading statements and omissions”. The key areas highlighted by the SEC centered around marketing, comparisons with other funds, the availability and effectiveness to military personnel of TSPs, and the ability of a large front-end load to keep people committed to the systematic plan.
In an independent investigation, the NASD charged First Command “with inappropriately confronting a customer who complained, failing to maintain e-mail, failing to maintain adequate supervisory systems and procedures and filing an inaccurate Form U-5 regulatory report”.
In December 2004, First Command settled with the SEC and NASD without admitting guilt. As part of the settlement First Command agreed to offer restitution to all clients who had purchased and sold a systematic plan between 1999 and 2004, establishment of educational programs, and monitoring or prefiling. People who had not terminated their systematic plan were not covered in the settlement. In September 2007, a California judge granted “Class Action” status to a 2005 law suit filed by systematic plan holders whose plans were active when the SEC issued its ruling on December 15, 2004. In October 2008, attorneys for the plaintiffs sought court approval for a settlement. The settlement was approved by the court in April 2009.
Ok, well, that doesn’t sound very good.
As for front-loaded funds and high commissions, I think they speak for themselves considering that most quality investment companies offer no-load funds and little or no commissions.
Of course, I’m sure the folks at USPA & IRA/First Command learned their lesson.
In 2005, First Command hired Adan Araujo, the Senior Counsel for the SEC, as its new Chief Compliance Officer. Adan stated, “My long-term goals include ensuring that First Command’s legal compliance procedures are second to none, and to help provide the ultimate financial protection to our clients and employees.” To that end, they recruited Bachrach and Associates Inc. According to Financial Planning Magazine, Bill Bachrach is one of the four most influential people in the financial services industry. Bachrach said,
Sales techniques are what have to be used with people who don’t trust someone. We’ll teach planners how to quickly and predictably earn people’s trust so they don’t have to sell. When a financial advisor is trusted, people will give them all of their money and follow their advice without having to be sold. Don’t be a salesperson. Be a trusted advisor.
Wow, Bill, here’s my wallet. But, it sure sounds like you’re trying to be a trust salesperson. Call me crazy.
Now, to be fair, since the debacle in the mid-2000s, they discontinued their practice of systematic investment plans. They also opened their doors to more than just servicemembers. Now, the general public and small businesses can get in on this wonderful service.
I’ve heard the organization did, in fact, clean things up (I haven’t checked on this, and I don’t really care to know), but my point here is how USPA & IRA once did business. They’d target pay grades E-6 and above (the folks with healthier government paychecks), buy them dinner, and pressure them into a plan using the schtick of how wonderful they are for serving the country and how they deserved a sound financial future. Often, the plan was pitched by a retired officer/NCO who relies on their experiences to sucker folks into the scheme.
Their brand of “military appreciation” wasn’t genuine or heartfelt at all. Instead, it was a profit-driven strokejob. So many of the flag-waving commercial enterprises are. Check out some of the cliches used in military installation cable TV commercials.
- Because of your service, you’re guaranteed credit.
- I’ve got a car for any soldier who comes in (with dealer-friendly financing terms)!
- Military discount (off of a 1000% markup).
- Flexible payment options (as long as you are OK with 20+ percent interest).
- All you need to do for credit is bring us your LES (pay stub)!
- We want to honor our nation’s heroes (by helping them to shoulder the burden of that paycheck).
The tactics are endless. Usually, they are shouted at the camera by some guy wearing an American flag tie.
I know I’m picking a bit on USPA & IRA, but there are plenty of others. Their’s is an easy target due to the wonderful work done by our friends at the SEC. The tactics and techniques are alive and well, and their targets are current and former servicemembers.
I’m thankful for those who truly appreciate military service and the sacrifices made by those who serve today. At the same time, I despise those who use disingenuous patriotism to make a buck. It’s nothing more than a red, white, and blue strokejob designed to make you feel good for about 15 minutes (but full of regret and shame afterward). If you need one of those, just find a “health spa” with an American flag mural outside the fort. They’ll hook you right up.