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First Command Financial Planning, Inc.
Type Privately held companies[1]
Founded 1958
Headquarters Fort Worth, Texas
Key people James N. Lanier, Chairman of the Board
J. Scott Spiker, Chief Executive Officer
Martin Durbin, President and Chief Operating Officer
Products Mutual Funds, banking, life insurance
Website http://www.firstcommand.com/index.htm

First Command Financial Planning, Inc. is an investment adviser and a broker-dealer registered with the U.S. Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), all 50 states, and the District of Columbia. It is a member of the Securities Investor Protection Corporation (SIPC).[2]

First Command provides personalized services through locally-based trained and licensed Financial Advisors and through its Home Office in Fort Worth, Texas. The company offers advice on securities, with an emphasis on mutual funds, variable annuities, variable life insurance, and municipal funds (including Section 529 Plans). Through related companies it offers insurance and banking products and services.[2] As of June 30, 2008, First Command had over 290,000 client families, $17.4 billion in managed assets, $51.8 billion in insurance products, and $530 million in banking assets.[3]

As of December 31, 2006, First Command had over 294,000&nbps;client families, $17.4 billion in managed assets, $52.2 billion in insurance products, 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.[4] Most of First Command's agents are former senior enlisted personnel or retired officers.[4]

Contents

History

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Early years

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 circumstances surrounding United States military personnel.[5]

The company began as a broker/dealer called United Services Investment Association Inc. (USIA), which later became United Services Planning Association Inc. (USPA). USIA’s membership in the NASD (now FINRA) was approved on Jan. 21, 1959. [6] In 1963, USPA began offering financial plans to its clients, designed to promote long-term saving and investing. Dollar cost averaging and a pay-yourself-first approach were also used to encourage clients to invest on a regular basis.[7] In the mid ‘60s, USPA expanded its product offerings to include life insurance, leading to the creation of the Independent Research Agency for Life Insurance, Inc. (IRA).[6]

In 1970, USPA and IRA began operating under the combined name of USPA&IRA, a name which remained in use for the next three decades. In 1979, the company opened its first office outside the continental U.S, in Hawaii; three years later international operations began with an office in Germany.[6] A charitable foundation, now known as the First Command Educational Foundation, began in 1983.[6]

Payne died in 1984 and was succeeded by Ralph Smith, who served as chairman and CEO until his retirement in December 1985. George Talley then served as chairman and CEO from 1986–1991.[6] During Tally's tenre, USPA&IRA grew to 500 advisors and exceeded 200,000 families. [7] Lamar Smith, company president and COO, was promoted to chairman and CEO in 1992.

First Command Bank opened for business on April 21, 1997. In less than six months, the bank was posting more than 100 new deposit accounts and 50 new loans weekly.[7] In 1998, USPA&IRA went “private,” transitioning from a C Corporation to an S Corporation and later, in 2002, become 100% employee owned.[6] USPA&IRA launched a tax services program and changed its name to First Command Financial Planning in 2001.[6] 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.[8]

SEC investigation and settlement

On 15 December 2004, the U.S. Securities and Exchange Commission (SEC) determined that First Command had "willfully violated" Section 17(a)(2) of the Securities Act of 1933,[9] which deals with fraudulent activities by mail. In a fifteen-page document the SEC described how First Command had "offered and sold systematic plans by, in part, making misleading statements and omissions".[10] The key areas highlighted by the SEC centered around marketing, comparisons with other funds, the availability and effectiveness to military personnel of TSPs,[11] and the ability of a large front-end load to keep people committed to the systematic plan.[12]

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".[13][14]

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.[15] 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.[16]

Corporate governance

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."[17] 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.[18] 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.[19]

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.

First Command’s Board of Directors is the governing body of the company. The Board selects the senior executive team, which is charged with the ethical conduct of the company's business. The Board acts as an advisor and counselor to senior executives, monitoring their performance and ensuring that high ethical standards are reflected in the corporate culture. Outside directors include Mark Brickell, Chief Executive Officer and a board member of Blackbird Holdings, Inc. in New York City; Logan Dickinson, president of The CSG Companies, a comprehensive group of employee benefit planning, consulting and brokerage firms headquartered in Fort Worth, Texas; and Robert E. Kramek, a retired U.S. Coast Guard Admiral who served as Commandant of the Coast Guard before his retirement in 1998.[20]

Current operations

In the mid 2000s, First Command expanded beyond the military to serve federal employees and other consumers.[21] It then began to serve small business owners,[22] REALTORS,[23] and women.[7][24]

In anticipation of an SEC ruling requiring that all firms whose primary business is financial planning must become a Registered Investment Advisor (RIA), First Command filed with the SEC to become one in the spring of 2005. This requires their agents to obtain additional training and certifications. As RIAs, the agents could now use the term "Financial Advisors" as compared to "Registered Agents", with the former being held to a higher ethical standard.[25] The higher standards require agents to document every client interaction in great detail and apply due diligence to all investment recommendations to ensure they are in the best interests of the client. [26] The company no longer offers the controversial systematic investment plans.[2]

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."[27]

In January 2007, First Command Board of Directors announced that they were separating the Chairman of the Board and CEO functions. Lamar Smith, who had held both positions since 1992, relinquished the Chairman of the Board and remained Chief Executive Officer. Jim Lanier, a former President and COO and 20-year board member of First Command, became the Chairman of the Board. [28] In April 2007, the First Command Board of Directors announced that CEO Lamar Smith was departing to become Chairman Emeritus. Chairman of the Board Jim Lanier assumed the role of interim CEO and Scott Spiker took over as the company’s new Chief Executive Officer on Sept. 1, 2007. Spiker had held top leadership positions at Norwest Corp., RBC Dain Rauscher, Definity Health, Stanton Group and Destiny Health. [29]

In April 2007, The Secretan Center announced a strategic initiative to assist First Command in the "continuing, expansive transformation" of the organization. The Secretan Center is a global consulting practice specializing in cultural and leadership transformation. First Command contracted with The Secretan Center for research, coaching and other services designed to "help achieve a cultural transformation that will raise the level of inspiration of all clients, financial advisors and employees and implement sought-after corporate changes and outcomes." Dr. Lance Secretan, founder of The Secretan Center, said:

We are excited and inspired to accompany First Command Financial Services on its journey of organizational change. First Command is regenerating itself, moving assertively in a bold, new direction. The Secretan Center is committed to helping them in every way we can because their values and their hearts are in the right place.[30]

Also in 2007, First Command introduced Tailored Professional Services, a fee-based planning program. [26]

Affiliated companies

First Command Financial Planning, Inc. is an affiliate of First Command Financial Services, Inc., a life insurance general agency licensed to sell in all 50 states, the District of Columbia and Guam. In certain states, First Command Financial Services, Inc. is registered as a separate domestic corporation; it does business in California as “First Command Insurance Services.” First Command Financial Services, Inc. offers liability, property and casualty insurance; life insurance; long term care insurance; disability income insurance; and annuities. First Command Financial Services, Inc. is also the parent company of First Command Bank, a federally chartered savings and loan association regulated by the Office of Thrift Supervision and a member of the Federal Deposit Insurance Corporation (FDIC).[2]

Other

  • In 2006, First Command introduced long term care and property and casualty insurance. [26]
  • In December 2006, First Command announced it had signed on as a corporate partner with the Bell Helicopter Armed Forces Bowl. [31]
  • On July 4, 2008, ABC’s Good Morning America featured a story on a First Command sponsored charity the Package Brigade that sends care packages to troops serving in Iraq and Afghanistan.[32]
  • In September 2007, Samantha Hilliard, First Command district advisor was featured in Newsweek. Hilliard received the 2007 realLIFEstories Client Service Award for her service to the widow an Army officer killed in Iraq. The award was presented by the Life and Health Insurance Foundation for Education (LIFE), a non-profit group dedicated to providing the public with information and education on life, disability, long-term care and health insurance. [33]
  • In summer 2008, the U.S. Department of Defense and the National Committee for Employer Support of the Guard and Reserve honored First Command with the Patriotic Employer Award, which is presented to companies and individuals for contributing to national security and protecting liberty and freedom by supporting employee participation in America’s National Guard and Reserve force. [34]

Notes

  1. ^ First Command website About Us accessed 4/13/2007
  2. ^ a b c d First Command.Description of Services: First Command Financial Planning Inc. Accessed 6/19/07
  3. ^ About First Command First Command Financial Services at a Glance Accessed 1/6/09
  4. ^ a b SEC p. 2.
  5. ^ History of First Command Accessed April 22, 2009
  6. ^ a b c d e f g “Dream Boldly: First Command Financial Services Celebrating 50 Years of History” Designed by Anniversary Press, Copyright 2008 by First Command Financial Services
  7. ^ a b c d “In Pursuit of the American Dream: First Command celebrates 50 years of commitment to American families” Spring 2009 Journey magazine
  8. ^ Spring 2001 issue of Independence (the company's monthly magazine now known as First Command)
  9. ^ The statue reads It shall be unlawful for any person in the offer or sale of any securities or any security-based swap agreement (as defined in section 206B of the Gramm-Leach-Bliley Act [15 USCS § 78c note]) by the use of any means or instruments of transportation or communication in interstate commerce or by use of the mails, directly or indirectly-to obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading"Section 17 of the Securities Act of 1933
  10. ^ SEC p1
  11. ^ the military's equivalent to a 401(b)
  12. ^ SEC p 10. The company targeted senior enlisted personnel (E-6s and above) and officers as their target clientele. Smith, p. 3.
  13. ^ NASD
  14. ^ Henriques, Inquiry Stymied
  15. ^ SEC p. 12.
  16. ^ Karen Jowers. First Command lawsuit ruled a class action September 27, 2007. Accessed 1/7/08
  17. ^ Araujo, Adan. Questions and Answers. First Command Magazine Summer 2005.
  18. ^ Speakers Roundtable Access June 18, 07
  19. ^ Business Editors. Financial Profiles, Inc. Hosts Bill Bachrach Seminars Nov 7, 2001. Accessed (sicsic) June 18, 07.
  20. ^ First Command corporate governance Corporate governance Accessed 1/7/09
  21. ^ First Command Press Release. First Command Financial Planning Expands Services to Wider Market Accessed April 22, 2009
  22. ^ First Command Press Release. First Command commits to serving small business owners, self-employed Accessed June 17, 2007.
  23. ^ First Command Press Release. First Command promotes benefits of long-term financial planning at 2006 REALTORS Conference & Expo Accessed June 18, 2007
  24. ^ First Command Press Release. First Command rolls out new Web resource for women Accessed June 18, 2007
  25. ^ Financial job titles clarified by ruling, licenses The Arizona Republic. April 15, 2007. Accessed June 18, 2007.
  26. ^ a b c “The New Age Of Comprehensive Financial Planning.” First Command Financial Services. May 2008.
  27. ^ 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.
  28. ^ First Command Press Release. First Command Financial Services Announces Shift in Board Leadership January 29, 2007. Accessed January 7, 2009
  29. ^ First Command Press Release. First Command appoints Scott Spiker as new CEO August 15, 2007. Accessed January 7, 2009
  30. ^ Business Editors. The Secretan Center Announces Strategic Initiative with First Command Financial Services April 10, 2007. Accessed January 6, 09.
  31. ^ First Command Press Release. First Command Bank partners with Armed Forces Bowl December 12, 2006. Accessed January 7, 2009
  32. ^ Good Morning America The Package Brigade: one woman’s effort to boost her brother’s spirit started a movement July 4, 2008. Accessed January 6, 2009
  33. ^ First Command press release. First Command Advisor receives 2007 realLIFEstories Client Service Award September 5, 2007. Accessed January 7, 2009
  34. ^ First Command Press Release First Command named ‘Patriotic Employer’ by Department of Defense August 7, 2008. Accessed January 7, 2009

References


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