- First Command Financial Planning, Inc.
company_type = Privately held companiesFirst Command website [http://www.firstcommandbank.com/index.asp?pID=about&sID=history About Us] accessed 4/13/2007]
company_name = First Command Financial Planning, Inc.
foundation = 1958
Fort Worth, Texas
key_people = James N. Lanier, Chairman of the Board and CEO
Martin Durbin, President and Chief Operating Officer
num_agents = 1000 industry = Financial Planning
products = Mutual Funds, banking, life insurance
First Command Financial Planning, Inc., formerly known as USPA & IRA, is a
financial servicescompany that for decades catered primarily to U.S. military members and their families.First Command website [http://www.firstcommandbank.com/index.asp?pID=about&sID=history About Us] accessed 4/13/2007] Founded in 1958 and based in Fort Worth, Texas, First Command employs approximately 1,000 registered agents in the United Statesand other parts of the world, primarily in Europeand Japan.SEC p. 2.] Prior to 2004, the company claimed to be " [t] he #1 independent provider of financial plans to the professional military family."SEC p. 2.] They have since started to serve non-military families. [First Command Press Releases: [http://www.firstcommand.com/pdf/ADA_press_release_GILES_--_10-13-06.pdf First Command commits to serving small business owners, self-employed] Accessed June 17, 2007. [http://www.firstcommand.com/pdf/realtor_release.pdf First Command promotes benefits of long-term financial planning at 2006 REALTORS Conference & Expo] Accessed (sicsic) June 18, 2007 [http://www.firstcommand.com/pdf/women.pdf First Command rolls out new Web resource for women] Accessed June 18, 2007]
First Command was founded in 1958 by Carroll Payne, a retired military officer who realized that military families needed assistance in planning for their financial futures. Payne wanted to create a company that recognized and dealt with the unique circustances surrounding United States military personnel.Fact|date=June 2008
USPA&IRA, the previous name of First Command, received its broker/dealer registration from the U.S. Securities and Exchange Commission on January 2, 1959.Fact|date=June 2008 On January 21, 1959, the National Association of Securities Dealers (
NASD) approved the company’s application for membership.Fact|date=June 2008 On April 21, 1997, "First Command Bank" opened its doors to expand the services of the company. Four years later, in 2001, the company changed its name to First Command Financial Service.Fact|date=June 2008 The company explained that they changed their name because:
We are sometimes confused with other companies that service the military and former military clientele and whose names also start with letters “US…”. There are several such companies, but none like us and we don’t want any confusion. [Spring 2001 issue of "Independence" (the company's monthly magazine now known as "First Command")]
In 2004, the Board of Advisors included General
Anthony Zinni, the retired Commander in Chief of the United States Central Command;Henrique, Basic Training] Coast Guard Commandant Robert E. Kramek, General Lloyd "Fig" Newton, and Vice Admiral John R. Ryan, former superintendent of the Naval Academy.Fact|date=June 2008
December 31 2006, First Command had over 294,000 client families, $17.4 billion in managed assets, $52.2 billion in insuranceproducts, and $567 million in banking assets. First Command states that out of all members of the U.S. military, their clients include 40% of the general officers, 33% of commissioned officers, and 16% of non-commissioned officers.SEC p. 2.] Most of First Command's agents are former senior enlisted personnel or retired officers.Fact|date=June 2008
On 15 December 2004, the U.S.
Securities and Exchange Commission(SEC) found First Command guilty of violating Section 17(a)(2) of the Securities Act of 1933, a section which deals with fraudulent activities and the mail. It was determined by the SEC that First Command "willfully" violated the law by making "misleading statements and omissions" concerning marketing, comparisons with other funds, the availability and effectiveness to military personnel of TSPs [the military's equivalent to a 401(b)] , and the ability of a large front-end load in keeping people committed to the systematic plan.SEC p 10. The Company targeted senior enlisted personnel (E-6s and above) and officers as their target clientele. Smith, p. 3.]
The SEC was highly critical of the manner in which First Command's sales script compared their Systematic Plans with other mutual funds, in particular, the representation of no-load mutual funds. According to the script, no-load funds "attract only speculators" while the Systematic Plans were the "only five mutual funds that are designed to attract only dollar cost average investors."SEC p. 8.] The advantage of the Systematic Plans, the company claimed, was that they maintained stable cash flow. No-load funds are portrayed as being highly volatile due to fund managers having to sell shares when speculators unexpectedly redeem their shares. This, the script posited, caused no-load funds to "frequently have some of the highest long-term costs." The SEC, however, noted that no-load funds are lower than load funds or Systematic Plans.SEC p. 8.] The SEC found that when comparing TSPs with Systematic Plans, the literature "fail [ed] to account for the impact of the 50% upfront sales load on the long-term cost of systematic plans, both in terms of the actual costs and the lost opportunity costs in terms of overall return." [SEC p. 8, 14-15.]
First Command "mischaracterizes the upfront sales load as the only way a fund manager can ensure that most of the
shareholders are committed, long-term investors."SEC p. 9.] The SEC then goes on to indicate that the company knew that the sales charge has not "worked." In fact only 43% of those people who purchased Systematic Plans between 1980–1987 completed their contract.SEC p. 9.]
In December 2004, First Command settled with the SEC and NASD without admitting guilt. As part of the settlement First Command agreed to
restitutionto all clients who purchased and sold a systematic plan between 1999 and 2004; establishment of an educational programs; monitoring or prefiling.SEC p. 12.]
Operations since settlement
After the settlement, 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." [Araujo, Adan. Questions and Answers. First Command Magazine Summer 2005.] 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. [ [http://www.speakersroundtable.com/bachrach/index.html Speakers Roundtable] Access June 18, 07] 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. [Business Editors. [http://www.thefreelibrary.com/Financial+Profiles%2c+Inc.+Hosts+Bill+Bachrach+Seminars-a079828603 Financial Profiles, Inc. Hosts Bill Bachrach Seminars] Nov 7, 2001. Accessed (sicsic) June 18, 07.]As a result of its relationship with Bill Bachrach, the marketing techniques of First Command have changed significantly. The company no longer endorses the use of the introductory seminar/dinner.Fact|date=June 2008
In the spring of 2005, First Command filed with the SEC to become a
Registered Investment Adviser(RIA). This requires their agents to obtain additional training and certifications. As RIAs, the agents are now "Financial Advisors" as compared to "Registered Agents", [ [http://www.azcentral.com/arizonarepublic/business/articles/0415biz-Wiles0415.html Financial job titles clarified by ruling, licenses] The Arizona Republic. April 15, 2007. Accessed June 18, 2007.] the former being held to a higher ethical standard (similar to a CPA versus an accountant.) The company no longer offers the controversial systematic investment plans.First Command. [http://www.firstcommand.com/pdf/DOS.pdf Description of Services: First Command Financial Planning Inc.] Accessed 6/19/07]
As of August 2006, Mary Shapiro, the NASD Vice-Chairman and President of Regulatory Policy and Oversight, continued to be critical of First Command, calling it an "unscrupulous organization" with an "awful" product. First Command's new president, Marty Durbin, responded to her criticism by stating, "It’s unfortunate that settling these charges still doesn’t mean it’s behind us. But it’s a futile effort to try to fight negative press and so we decided not to put a lot of energy that way." [Lee, Shelley. "Marty Durbin on First Command’s ‘Perfect Storm,’ Moving Beyond, and Serving Middle America" Journal of Financial Planning. November 2006. Accessed June 18, 2006.] Since Shapiro's comments in August 2006, First Command has continued to strive to change its image.Fact|date=June 2008
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. [Karen Jowers. [http://www.airforcetimes.com/news/2007/09/military_firstcommand_classaction_070927w/ First Command lawsuit ruled a class action] September 27, 2007. Accessed 1/7/08]
* Henriques, Diana. [http://www.uslaboragainstwar.org/article.php?id=5716&printsafe=1 Basic Training Doesn't Guard Against Insurance Pitch to G.I.'s.] "The New York Times" June 20, 2004. Accessed 4/16/07
* Henriques, Diana. [http://www.nytimes.com/2004/07/21/business/21military.html?ex=1248062400&en=148de8fc3b0ec7f5&ei=5090&partner=rssuserland Insurers Rely on Congress to Keep Access to G.I.'s] "The New York Times" July 21, 2004. Accessed 4/22/07
* Henriques, Diana. [http://www.justthinkfirst.org/updates/MilitaryService/investment_scandal.pdf Sales of Investments to G.I.'s Under Scrutiny in Washington] NY TIMES July 22, 2004. Accessed 4/22/07
* Henriques, Diana. [http://www.parentadvocates.org/index.cfm?fuseaction=article&articleID=6084 Inquiry Stymied on Company With Air Force Ties] NY TIMES, October 2, 2004. Accessed 4/22/07
* First Command. [http://www.firstcommand.com/pdf/DOS.pdf Description of Services: First Command Financial Planning Inc.] Accessed 6/19/07
* Lobbying Database. [http://www.opensecrets.org/lobbyists/clientsum.asp?txtname=First+Command+Financial+Services&year=2004 First Command Financial Services] Opensecrets.org Accessed 4/23/07
* NASD Press Release; [http://www.nasd.com/PressRoom/NewsReleases/2004NewsReleases/NASDW_012786?ssSourceNodeId=553 NASD Orders First Command to Pay $12 Million for Misleading Statements in Sales of Systematic Investment Plans to Military Personnel. December 15, 2004] Accessed 4/17/07
* SEC [http://www.sec.gov/litigation/admin/33-8513.htm U.S. SEC. Securities Act of 1933 Release No 8513/ Decembber 15, 2004; Securities Act of 1934 Release 508559, December 15, 2004.] Accessed 4/16/07
* Shapiro, Mary. [http://banking.senate.gov/_files/ACFA5E2.pdf Testimony of Mary Shapiro, Vice-Chairman and President, Regulatory Policy and Oversight Before the Senate Committee on Banking, Housing and Urban Affairs United States Senate Hearing on Military Sales] November 17, 2005. Accessed 4/22/07
* Smith, Lamar. [http://financialservices.house.gov/media/pdf/090904ls.pdf "Written Statement of Lamar Smith Chairman and Chief Executive Officer of First Command Financial planning Inc on GI Finances: Protecting those whoe Protect Us before the Subcommittee on Capital Markets, Insurace and Government Sponsored Enterprises of the Committee on Financial Services U.S. House of Representatives September 9, 2004."] Accessed 4/15/07.
* St. Onge, Jeff. [http://www.bloomberg.com/apps/news?pid=10000103&sid=aXdMLwsicomM&refer=us "Pentagon, Regulators to Advise Personnel on Finances (Update1)"] Bloomberg.com February 16, 2006. Accessed 4/20/07
* Swan, Patrick. [http://www.nationalreview.com/comment/swan200407221439.asp No Predator First Command is an honorable service.] National Review Online. July 22, 2004. Accessed 4/22/07.
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