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Helping Veterans Succeed on the Financial Front

Today, there about 19 million U.S. armed forces veterans, and statistics show that many of them have encountered financial difficulty. They are more likely than the general population to be homeless, commit suicide, or get divorced—conditions that are often tied to financial problems, says Frank Molinar, a Scottsdale, Arizona, financial planner and author of Financial Dominance, a book of financial guidance for military personnel.

But veterans are not a monolithic group, Molinar continues, and the full picture is more nuanced. He has logged more than 4,000 hours of one-on-one counseling with military personnel, and “based on that experience, I have come to think there are more millionaires per capita in the military community than in the civilian community,” he says. “But I also think there are more military people in collections and financial trauma.” In short, veterans represent the full financial spectrum—meaning that producers have a variety of potential opportunities to work with them.

Where financial professionals can help

The veterans who struggle financially are often (but not always) younger people who may still be in their early 20s. “They are young kids, and they are trying to figure out their lives,” says Molinar. At the same time, they are often coming to civilian life from a world where they may not have had to think too much about buying clothes, making rent payments, or paying for groceries. “When they come out of the service, everything changes,” says Molinar. Thus, there is a real need for financial professionals who can “counsel people with their finances—help them manage cash flow, establish priorities, and set meaningful goals,” he says. Even if they aren’t struggling to figure things out, younger veterans can often use advice on long-term investment planning. So too can older veterans who might have a sounder financial footing, including those who have earned a pension.

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As they look for ways to help veterans, producers should also consider service members still in the military—the 2 million people who are tomorrow’s veterans. They’re important, because veterans’ post-service financial problems often begin with debt or poor planning while they are in uniform.

There are various opportunities to help this group. For example, military personnel might want to make investments in stocks or mutual funds. Or they may decide to participate in the military’s Thrift Savings Plan, a tax-deferred vehicle that works much like a 401(k). “Sometimes, they’re asking 18- or 19-year-olds to make decisions about these things, so they may need advice about taking full advantage of savings opportunities in the service,” says Stephanie Drake, a former Marine who is executive director of Houston-based NextOp Veterans, which helps veterans find employment.

Military personnel who serve for 20 years are often entitled to a pension. Here, producers can help service members understand how well their pensions will support their post-service goals, and whether they should supplement it with other savings—an especially important point, since a person who joined up right after high school might be retiring at age 38. “I have run across retired veterans who pretty much assumed that the pension would be more than enough for them to retire and live comfortably, but they were in for a rude awakening,” says Derek Merkler, a financial planner and former Army aviator in Stamping Ground, Kentucky. “That kind of long-term planning challenge can catch veterans by surprise.”

Often, military personnel who have around 10 years of service will wonder whether they should remain in for the full 20 years to collect a pension or leave and work in the private sector. “In that scenario,” says Merkler, “you can help them look at how much it would cost them in benefits to leave the military, versus the opportunities that may lay outside the military. You can quantify those things to help them make a decisions about these things, so they may need advice about taking full advantage of savings opportunities in the service,” says Stephanie Drake, a former Marine who is executive director of Houston-based NextOp Veterans, which helps veterans find employment.

Navigating the transition to civilian life

For most service members, making the transition from military to civilian life is a big step full of financial questions. To help, producers will need to understand how military compensation differs from civilian pay and benefits. For example, military salaries are typically relatively low compared to the private sector, but that is offset by several factors. In addition to salary, service members often get a housing allowance and a basic-needs allowance. “Those can make up perhaps 30% of the cash flow for a service member, and they are not taxed at the federal or state level,” says Merkler.

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This can lead to some misperceptions. For example, service members may be offered a civilian salary similar to their military salary and think it seems like enough because they are not taking into account the full military compensation picture. “A lot of people haven’t put any time into analyzing the benefits and compensation they’ll get in the civilian world,” says Merkler. “They don’t recognize that in addition to the gross pay they’ll get, they also need to consider the benefits packages and compare them between multiple companies to decide which one is the best option for them.”

The civilian cost of living can come as a surprise, as well. For example, many military bases in the U.S. are in rural areas where the cost of living is relatively low. Thus, when someone leaves the service and moves to a large city, they may be shocked by the difference in costs. “A lot of these things were taken care of for them when they were in the service,” says Drake. “Financial planners can help them understand what these costs will be when they leave the service” — such as the cost of living and how it differs in civilian life.”

Financial professionals should talk to service members to understand the depth of their knowledge about finances, Drake continues. “There are absolutely some very financially savvy service members and veterans, but I think they’re in the minority,” she says. “Helping them to identify and fill in financial blind spots is important,” she adds, because “they often don’t know what they don’t know.”

Meeting veterans where they are

While veterans represent an opportunity for producers, traditional marketing approaches may fail to reach them, says Molinar. That’s due largely to the fact that predatory lenders often focus on young, financially inexperienced service members. Military personnel, he says, “have been the target of a ton of scams and predatory practices—title loans, payday loans, and things like that. The military is the second most targeted demographic for these things, after seniors.” As a result, he says, “they often have a lot of sales resistance to financial services.”

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Overcoming that resistance will mean building trust. “Take the time to understand them and their culture,” says Molinar. For example, he says, producers might visit local American Legion offices to connect with veterans, or volunteer to help with credit, debt, or budgeting counseling through the military’s family programs offices, which provide a variety of support services for military personnel and veterans.

It may take time, but ultimately, working with active service members and veterans can be worthwhile—and a chance to do well by doing good. In the financial planning industry, says Molinar, “we strive to help productive people build wealth and peace of mind. That’s especially appropriate for military people, because they have dedicated their lives to preserving our country’s freedom and prosperity. Veterans should be reaping the rewards of that dedication.”


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