Drive by any military installation in the U.S. and you’ll see a similar landscape: used-car dealers, payday lenders and rent-to-own stores. Their signs blare at base residents: “We finance service members!”
Why are soldiers easy targets for financial predators? There are a couple of issues. Part of the problem is that, under Defense Department rules, commercial creditors can garnish up to 25% of a soldier’s wages — making service members an attractive target.
The other issue is ignorance — soldiers who don’t understand basic financial principles, who think that since they have checks in their checkbook, they have money. As a veteran, I’ve seen this myself. I’ve had to counsel soldiers in my unit to pay down debts on payday loans. And of course, the military is not a high-paying profession in the first place.
Compounding the problem, certain “financial services” firms hire former officers and senior non-commissioned officers to sell high-commission insurance products and front-loaded mutual funds to the soldiers and junior officers whom they’ve just led. The newly minted sales reps show pretty charts and explain that, if the markets go down, people who didn’t pay front loads would flee, creating more opportunity to buy more funds for those who did pay up front.
I fell for the pitch myself. The salesman was a former company commander in my battalion. He drove a convertible BMW. At the time, his charts and graphs all seemed to make sense.
I should have known better. Here I was, toting around a degree in engineering from West Point, and I fell for the fallacious reasoning. Soldiers with less education stood no chance.
It wasn’t until a couple of years later, when I started reading up on basic personal finance, that I realized what a raw deal service members were getting. That’s when I decided I wanted to be a financial planner.
Fast-forward about 10 years: I passed the CFP exam and, after completing the sale of another company, I established my own RIA as an hourly, fee-only firm. I wanted to be everything those “advisors” prowling military bases weren’t: independent, unaffiliated and conflict-free.
I didn’t want to feel the pressure of chasing dollars for commissions or AUM, which is why I built and sold a company before becoming a planner; I wanted to be financially independent.
Establishing my own RIA has allowed me to offer pro bono work for veterans and service members. Each Veterans Day, I give away my Winning With Money course to anyone affiliated with the military.
Challenges remain. There is no venue through which I could go down to the nearest base — in my case, Fort Hood — and spend a day giving free advice to anyone who walks in. The military distrusts the planning profession, and rightfully so. I hope they figure out a way to sort out those who view soldiers as walking piggy banks from those of us who truly want to help them sort out their money problems.
Jason Hull is a financial planner in Fort Worth, Texas.