Sharks Still Circling the Military Bases: Life Insurance Sold as “Investments”
Back in 2001, I was naive. I joined a financial services group that focused on selling cash value life insurance policies to U.S. Service members. So this article come from personal experience, not textbooks. But I learned and changed for the better. After coming to the realization that several other companies had a handful of bad actors (agents) who masqueraded as, “Financial Planners” (who in retrospect were only life insurance peddlers), I couldn’t stand it any longer. I pivoted to the civilian world where I became a Investment Advisor (securities licensed series 65) and I’ve been ever since. I bailed because these bad actors were often misleading the very people who were fighting for our continued freedom. Sickening. And by 2003, my eyes were wide open on their indiscretions, and I needed to pivot away from what was a negative scene. Then came validating confirmation–with articles and lawsuits–of my beliefs and it was refreshing that others’ saw it too. Here’s a scathing article one from acclaimed Kiplinger: https://www.kiplinger.com/article/investing/t048-c000-s002-taking-aim-at-military-scams.html
In fact, in 2006 right here in Hawaii, we have scary living proof. The Securities and Exchange Commission (SEC) filed a lawsuit against a group who had their business sales offices at the ‘back gate’ of USMC K-Bay. Back gate operators are on every single military installation from Kaneohe to Pensacola, Florida. According to the article, the American Amicable Life Insurance Co. was found misleading buyers of its Horizon Life insurance product. By the way, the managers involved in this despicable actions are still hustling business here in Hawaii! The Honolulu Advertiser article goes on to say that the lawsuit alleges that, “American Amicable agents used deceptive sales pitches and mislead servicemembers into buying policies they didn’t need”. How did this come about? Some young, smart soldier reported these crooks. My piece of advice: Google advisors, companies and agents; you’ll be surprised with what you find. If it’s my money, I’d take those extra steps and protect myself. You should too! Here’s what just five minutes browsing got me in the way of facts. Read the case file and do you due diligence: https://www.casemine.com/judgement/us/59146dadadd7b04934327dd8
The most egregious element is how easy it is for responsible servicemembers to believe the agent selling these sometimes-fraudulent policies. Why? Because the agent selling the insurance policy to these young soldiers is also a higher-ranking VETERAN! The facts prove this to be true. https://www.military.com/money/insurance/supplemental-life-insurance/fraudulent-life-insurance-policies.html
A study by the National Association of Insurance Commissioners (NAIC) found that many oftentimes younger, gullible junior enlisted servicemembers would buy life insurance policies they didn’t need from an insurance agent that was a veteran, because they saw them as an authority figure. Makes sense. Like shooting fish in a barrel. But these are not fish; they are hard-fighting service members. Damn, right?!
There are good advisors out there, just use your common sense. There is no rush; do your due diligence! https://www.militaryonesource.mil/military-life-cycle/friends-extended-family/learn-the-warning-signs-of-military-scams/
And don’t get me wrong. I have colleagues who are properly licensed “Fiduciaries”, and any service member would be lucky to get their help. It’s the high-pressure, loud mouths who use their previous active duty ranking to deceive our troops. Caution is key because scams never stop; just new players come on post. As this Elgin Air Force Base article (“Navigating financial mind fields”) points out, “Scams do not die, they hibernate. The best way to protect one’s self when they arise again is to know what they were like before they went into hibernation.” Well put. Read about it for yourself: https://www.eglin.af.mil/News/Commentaries/Display/Article/902949/navigating-financial-mind-fields/
Buyer beware! Fast forward 20+ years and to my dismay, it is still happening on Hawaii soil in a huge way. I have learned the Schofield Barracks has a weekly indoctrination, a “Newcomers Event” organized by Army MWR here on Oahu, Hawaii and there are 2-3 insurance companies—some very reputable—showing up weekly to have soldiers complete lead forms so they can ‘help them’. Too bad the good agents have been bundled in with the bad. But think about it, how do you distinguish the qualified trusted advisor (hopefully a ‘Fiduciary’) from the shark (i.e. a ruthless, high-pressure tactics agent)? My advice: Don’t ever feel pressured to sign a darn thing. Trust your sixth sense. As Pres. Reagan put it, “Trust but verify”. Here’s a valuable resource, entitled ‘Troops Against Predatory Scams’: https://www.ilsos.gov/publications/pdf_publications/sec336.pdf
Here are some ‘Red Flags’ to be wary of; straight from this insurance industry watchdog, check it out: https://www.naic.org/documents/topics_military_life_report_to_congress.pdf
- Agents pushing insurance products as so-called, ‘investments’ or ‘savings’ products. Insurance is not an investment no matter what they tell you!
- Avoid allotments ‘handled’ for you; here’s another casefile on improper allotments: https://www.govinfo.gov/content/pkg/USCOURTS-paed-2_03-cv-04327/pdf/USCOURTS-paed-2_03-cv-04327-0.pdf
- Non-military (former NCO’s and veterans) posing as financial advisors on veterans’ benefits.
- Ex-military personnel acting as investment advisors in a group or classroom.
- High pressure tactics to rush you to complete the purchase of a life insurance policy.
- Finally, do not buy life insurance unless you intend to stick with your plan. It may be very costly if you quit during the early years of the policy. If you will not hold it for 15-20 years, you’ll be on the losing end!
Of course, the powers to be could help curb this wrath, but MWR needs the funds to give our troops fun stuff and take care of the ‘liberty’ time. This all takes money. For MWR, it must be hard to walk away from sponsorship dollars’, is what one local Hawaii MWR representative told me. Way back in 2008, this report (see link) was published. For a time being, it seems to have made an impact. Now I’m not so sure. Are we reverting backward? Are our defenses down? Again, it’s the top brass that needs to protect their service members. Without a doubt, I know they care about their hard-fighting teams and want to protect them. The question is, are they? 21st century systems are available; most are not high-tech, it’s common sense. On base marketing events needs to be tightened up. As a comparison, when we conduct educational events in the civilian world (i.e. most recently for doctors at a hospital) the administration of the healthcare facility dictates that webinar participants need to request the advisors information. Not the other way around, as is the case with the miltary at MWR events. I know this because I see it happening right now here in Hawaii. In high-level ‘education-oriented’ circles, the reputable organizations restrict the information given to advisors and the make the rules of engagement super clear (i.e. we as advisors don’t get the digits and email addresses). If the doc’s want to see us for planning, they reach out to us. We cannot chase them down, as is the case with military base events, in my experience. We respect doctors enough to treat them this way; why not soldiers, sailors and the Marines who actually fight for the freedom doctors have to do their great work? Don’t ask me; ask the top dogs in the military. https://media.defense.gov/2008/Apr/07/2001713266/-1/-1/1/08-075.pdf
“The Services are providing some personal financial training, but could improve
their consumer awareness training to alert Service members of unscrupulous
practices and inappropriate products before Service members arrive at their first
Five Army, Air Force, and Marine Corps bases we visited provide 2 to 16 hours
of personal financial education from the time recruits begin training until they are
assigned to their first duty station. This personal financial education covers a
basic understanding of pay and entitlements, banking and allotments, and
checkbook management. However, the bases did not provide adequate consumer
awareness training to military Service members prior to arriving at the first duty
station on sales practices that have been declared false, misleading, deceptive, or
unfair for life insurance products considered inappropriate for most junior enlisted
In conclusion, the onus is on YOU. You need to learn about the various kinds of life insurance policies that are out there and pick the one that is best for you. My advice is to contact your base installation’s Financial Readiness Office. At Schofield Barracks, Hawaii, that would be the Army Community Services that has seen this type of shark-infested waters for much longer than many of you have been alive (it’s been going on at least since at least the 1980’s). Yup, this is nothing new. Protect yourself and your financial future. Educate yourself. Compound interest (‘Rule of 72’) takes time; but it also involves being in the right “investment” and not being misdirected into thinking cash value life insurance can ever replace a true equity investment in the long term. If what you need, and desire is an investment. If, on the other hand, life insurance is what you need, than consider your many options. Always remember, ‘the best life insurance program is the one that is in-force when you die’. So if you can’t afford to keep paying on an expensive permanent policy (can be $1000/mo.+), then you may need to reassess it in a serious way. Again, do your homework; due diligence, my friend.
And as they say, Caveat emptor, which means “let the buyer beware.” That’s you. Be careful. I only bring it up because I care. Before I leave you, I want you to know that I have ‘no horse in the race’–I don’t market to the military here in Hawaii and I have no affiliation with any agents or licensed financial advisors(fiduciaries) who do. Here’s to you making good choices that serve you and your family; not the hard-selling hustlers. To be crystal clear: there are some very advisors out there, but you need to do your homework and above all, trust your gut, it’s probably right. Every industry has a few bad apples. Financial advice and insurance sales is not immune. My goal is to get them out of the proverbial barrel. In the meantime, good luck and thank you for your service to our great country. -mgw
M. Garrett Wheeler/The Wheeler Group LLC is a registered investment advisor with offices in Honolulu, Hawaii. Past performance is no guarantee of future returns. Investing involves risk and loss of principal capital. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
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