A six-month examination by The New York Times, drawing on military and court records and interviews with dozens of industry executives and servicemen and women, has found that several financial services companies or their agents are using questionable tactics on military bases to sell insurance and investments that may not fit the needs of people in uniform.Analysis: Some of the companies which give these classes do an excellent job of providing information in an objective and non-pressuring manner. They do so because they want to build good will, which they believe will help build long-term business relationships and profits. But others are less scrupulous. I actually attended a couple of these classes as a young ROTC cadet and 2nd Lieutenant. Fortunately, I had friends and family who were smart enough about investments to remind me of the old adage: caveat emptor. I didn't fall prey to any of the less scrupulous pitches I got, and I tried to pass this maxim onto my soldiers as well, so they could avoid becoming victims.
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.
The military market includes hundreds of thousands of men and women, many of them young and financially unsophisticated, all of them trained to trust leadership, obey orders and show loyalty to comrades.
To reach the buyers, many companies have used their military connections to lend credibility to their sales efforts, recruiting heavily from among retired or former military people for their corporate boards and sales forces. The advisory board at one company, First Command Financial Planning in Fort Worth, includes Gen. Anthony C. Zinni, the retired commander in chief of the United States Central Command.
Many financial experts say the products sold are often ill-suited for the military people who buy them. Like Specialist Stachler, almost all service members purchase low-cost insurance through the military, and, like him, 94 percent carry the maximum coverage of $250,000, the Defense Department says. But agents are nevertheless selling these men and women policies that have steep premiums for relatively small amounts of coverage.
If you visit any military town in America, whether it's Killeen, TX, or Columbus, GA, or Fayetteville, NC, you're bound to see a slew of predatory businesses that exist for no other purpose than to take a share of soldiers' hard-earned money. Pawn shops, used car dealers, electronic stores, paycheck lending shops, clothes stores, etc. — they usually form a strip of stores outside the main gate of any military base that has a large number of young soldiers. I really don't fault these businesses — they're simply responding to market demand. Soldiers have disposable income, and young soldiers often want to burn a hole in their pocket. These businesses may seem predatory or parasitic at times, but the same could be said for almost any business that responds to demand (e.g. bankruptcy lawyers in a down economy.)
The burden, in my opinion, rests on military leaders to teach their soldiers how to avoid the predators and parasites out there seeking to steal their money. Granted, training a unit for combat is already a 24/7 job, so there's not a lot of time left to run Financial Ed 101. But good officers and NCOs find time anyway, because it's part of taking care of soldiers (and their families). Thus, in Ms. Henriques' story, I single out the businesses for their fair share of the blame. But I also single out the leadership at Fort Benning and other bases for their blame too. The military leaders at those locations allowed these abuses to happen, and that's just not good leadership.
Update I: The second half of Ms. Henriques story lays much of the blame for this fiasco at the feet of the Defense Department and Congress. Both have aided the financial and insurance industry to some extent in their solicitation efforts on U.S. military bases, and so both deserve some blame for the abuses committed by these companies.
This is a disappointing story to me, but not a surprising one. Soldiers, sailors, airmen and Marines simply don't have an organized constituency on The Hill the way that the financial industry does. Oh sure, there's the Association of the U.S. Army and the various other service and veterans organizations. But they don't really stand for issues like this -- they typically weigh in on matters of materiel and force structure, or retirement/veterans benefits. Present-day servicemembers rely on the Pentagon to serve as their advocate in Congress. And when the Defense Department puts its priorities elsewhere -- whether we're talking about body armor, new barracks or security from predatory insurance companies -- there isn't another loud voice to speak up for soldiers on Capitol Hill.
Update II: One of my readers wrote to let me know of a November 2002 story by Tom Lauricella in the Wall Street Journal describing many of the same problems as the NYT mini-series by Ms. Henriques. This has been an issue for some time. Yet, the powers that be on the Potomac have done very little to cure this problem, leaving it instead to officers and sergeants at the lowest levels to act with no official policies from Washington. Suffice to say, it's very hard as a young captain in command of a company to bar an insurance company from talking to your soldiers when you don't have a policy from Washington to provide covering fire.