I’ve finally recovered from jet lag, my voice has returned to normal (from “Darth Vader”), and I’m caught up on sleep. Let’s review USAA’s answers to your biggest reader questions.

Doug and JJ talking money

DigitalMilEx is USAA’s annual conference for military influencers. We’re bloggers, personal-finance experts, and entrepreneurs. Many of us are veterans, and some of us are servicemembers. (A few of us might be a big deal on the Internet.)

We cover the age groups from Millennials to Baby
Boomers. I was invited as one of USAA’s sponsored guests while others applied for the opportunity.

USAA shares information on their programs and services while we attendees give presentations on skills like entrepreneurship, blogging, social media, and public speaking. I even recorded a short podcast episode with J.J. Montanaro.

But first, let’s get the blogger disclaimer out of the way. The Federal Trade Commission wants you to know that my objectivity and credibility may be suspect because USAA paid for my four nights in a nice hotel, most of my meals, and all of my coffee.

I got a bag of very cool swag (especially from the Innovation Lab!) and a chance to share The Military Pocket Guide To Financial Independence And Retirement with 120 other attendees. The rest of this post will help you draw your own conclusions on whether I’ve turned into a USAA fanboi.

You can read an excellent summary of those events in Spencer’s post at Military Money Manual.

I’ll review the conference events later.  (Best DigitalMilEx ever!)  In this post, let’s dive straight into the questions.

USAA Business Checking

The most frequent reader question by far: What’s USAA’s plan for business checking?

I’m sorry to report that as far as I can tell, the answer is:

• Navy Federal Credit Union
• Citibank
• Chase Military

The last official update that I heard from USAA was late 2015, and back then the plan was “three years.”  So far, none of USAA’s banking execs have volunteered a 2016 update.

Over the last five years(!) USAA has shared a lot about the challenges of business checking. There are significant regulatory and compliance expenses, and those burdens are growing every year. USAA’s programs have to fund themselves (no loss leaders), and the banking execs are not visibly confident that members will pay the expenses of the service. (Despite extensive feedback from military spouses who want portable business checking.)

I could go on for another thousand words about the obstacles.

We’ve heard enough about “Business checking is hard.” I asked them to reframe the discussion: “What does ‘Yes!’ look like?”

What would USAA need to do and how much would it cost?

I’ll let you know when I hear more.

Yeah, I’m disappointed too. I’m not a potential customer for a business checking account with anyone, but I’d welcome a more helpful analysis of the subject. I’d understand if the corporate decision was “No thanks, too high an expense for too low a benefit” but right now it’s hard to tell that USAA is working the question.

Personalized Debit Cards

It turns out that many of you have multiple USAA accounts, but the Visa debit cards all look the same. On a personal note, us older presbyopian members have trouble telling the difference between one gray USAA Visa card and another bank’s gray Visa card.

USAA is working on it! Until then, one member marks their card with a Sharpie while another uses cartoon stickers.

Until then, one member marks their card with a Sharpie while another uses cartoon stickers.

The Phone System

We read a lot of hate mail feedback on the quality of USAA’s “interactive” voice response system. Other members pointed out its practice of directing calls based on the area code of the caller’s phone number. This might have been a good idea in 1995, but area codes are meaningless on today’s mobile phones.

One USAA manager was refreshingly frank on the issue: USAA is getting fewer phone calls per member.

Instead of replacing (or upgrading) the voice response system, they’d prefer to move to e-mail, social media, and online chat. If there’s a new voice response system in the member service call center, it’ll be much smaller.

USAA agrees that there will always be a need to talk to a human, and they’ll work on a 21st-century system. In the meantime, they’ll take a look at the area code routing.

Budgeting and Banking on the Mobile App

One member had a long and detailed list of bugs in the mobile app. More importantly, they’re a financial counselor who meets with a lot of military clients who could be USAA members. I forwarded her comments straight to the mobile app team, and they’ll get in touch with her.

Better yet, the Innovation Center is opening the discussion with all 11.8 million members in USAA Labs.  Log into your member account, acknowledge their disclosure statement, and review the programs and services that they’re developing!

You can sign up for pilot projects, send your feedback on their current products, and request new features. We see these cool demonstrations in the Innovation Center every year, and now you can share the experience on the website.

Member Widows and Widowers

One reader was told that widow(er)s of servicemembers & veterans were not eligible for USAA membership if the servicemember was not already a USAA member when they died.

USAA membership is open to “All who served honorably, and their families” but the interpretation of this policy causes confusion even among some of the staff. I asked about this situation, and I learned a new interpretation of the member policy. Here’s an update from Rich Johnson on the Property & Casualty Insurance Communications team:

“Hi Doug,

I worked with our eligibility team and I got this statement, this is specific to widow/widowers of those who died while actively serving.

STATEMENT:

In 2014, USAA extended membership eligibility to widow(er)s of military service members who either retired or died while actively serving; even if the military service member did not join USAA prior to their death.”

If you have any doubt about your USAA membership eligibility (or a family member), then please call them. If you’re not happy with the answer, then feel free to contact me.

Inappropriate Investments

A financial counselor told me that a USAA financial advisor had put a servicemember into an annuity inside an IRA. (You other financial advisors know that this is totally inappropriate for 99% of investors, let alone for someone on active duty.) The counselor and the servicemember tried to discuss the issue with USAA’s member service representative. They also wanted to speak with a USAA CFP, not just a “financial advisor,” but USAA’s digital shift made that difficult.

If there’s any good news here, it’s that USAA has a Member Advocacy team to review these situations. I took the counselor’s report to the USAA Communications team, and they connected me with the right people, who I introduced to the counselor. The two groups are discussing it now and I hope to hear an update soon.

While I appreciate USAA’s focus on customer service, this should never have happened. In my personal opinion, one contributing factor is the investor’s relative lack of investment knowledge. When you use words with a financial advisor like “extremely conservative” or “absolutely safe,” then you’re boxing yourself into a risk category which may be totally unsuited to your retirement planning. You’ll also end up an asset allocation that’s more suitable for an 85-year-old than a military Millennial.

The best solution is education. Do your own reading from the resources on this site, and start with a simple summary like the Bogleheads Wiki. Understand the investing vocabulary and try to balance your demographic risk profile with your emotions.

One you’ve figured out how much investment risk you’re willing to live with (and sleep comfortably at night) then choose an asset allocation to get you to your goals. Only after you’ve done this self-assessment are you willing to talk to a friendly financial advisor. I’d recommend a fee-only CFP who’s committed to the fiduciary standard.

If that last paragraph seems like a daunting challenge, then contact me or ask a question on the Facebook groups Personal Finance For Military Service Members And Families, Military In Transition, or Military Money Questions And Answers.  They’re run by fee-only CFPs and financial counselors who have been in the military for decades and understand your concerns.

Rate hikes (“the GEICO debate”)

I get a ton of questions about rate increases on vehicle insurance, and most of them point out that GEICO is a cheaper alternative. Why won’t USAA match GEICO’s prices?

I hear you. I own stock in Berkshire Hathaway (the parent company of GEICO) and that qualifies me for a discount. (I’ve also learned a lot about the insurance industry from Warren Buffett’s annual letters.)  I regularly compare GEICO’s coverage to USAA. In our case (driving “Hawaii beaters” under 3000 miles/year with no collision or comprehensive insurance) there’s not enough of a price difference to make it worth switching.

Another challenge behind rate increases is 50 sets of state laws (plus Guam, Washington DC, other U.S. territories, and military duty stations around the globe). This chaos only makes sense to the state regulators. USAA and other insurers are experts at navigating these tangled legal systems, and many times their rates are only an estimate of what those state laws could cost the company in an accident. It might also be based on your driving record or experience, but it’s more about the corporate expenses of insuring hundreds of thousands of drivers in that state.

The most frequent answer to “Why did my vehicle insurance rates go up?!?” is moving to a new location with new rules. When another insurer is cheaper in that same location, they might have a different set of clients (with different expenses to the insurer) and they’re willing to take different risks than USAA.

Even if you’re still in the same location, your insurance renewal might be affected by changes to state laws or new information about insurance risks to your vehicle model/year. Your insurance company might simply have decided that they’ve insured too many drivers in your area, they have a higher risk profile than they projected, and they’re boosting the premiums to make up for the new risks.

In short, it might not be about us or our 25+ years of loyalty. It could be several other factors.

These “other factors” are the reason that USAA won’t try to match another company’s quote over the phone. Their underwriting department put a lot of analysis into that pricing algorithm, and they may be willing to review your situation with a supervisor, but they base their prices on their corporate risk profile for that area. They’re not willing to compete for market share if their overall risks could end up costing millions in payouts.

But their corporate policy doesn’t help you with your rates– it helps minimize expenses for USAA and the rest of its members.

The best answer for your situation is shopping around. Make sure that your USAA policy is correctly displaying your vehicle & driver info, and then contact other insurers. Most of them regularly collect rate data on each other, so they’ll know how to undercut USAA’s quote. If another company is willing to take a loss on you then maybe it’s worth the savings to leave USAA.

Make sure you compare your policy to exactly the same coverage from another company. (I think insurers all use different numbers just to make this impossible.) Does the other insurer offer the same liability limits? Can you get even more discounts for adding more coverage like home, personal property, or umbrella liability?

Be careful with assessing customer service. Does the other insurer’s app have USAA’s features? What’s their customer-service rating? Do they understand military customers and do other servicemembers recommend them? Can you file a claim from the accident scene with your smartphone camera and the app? How fast do they pay claims? Will they reduce your premiums if you garage the car while you’re deployed?

And finally, are your savings matched by convenience? If you have all of your banking and investments with USAA as well as insurance, is it worth adding another insurer and a new bill to your life?

Caution: if you move to another insurer then don’t close your USAA account. Keep some insurance with them, or a few hundred bucks in a checking account, or some other product that retains your membership. 6-18 months after the switch, your new insurer is going to review your policy. They might decide to convert you from a loss leader to a revenue center by jacking up your rates to the standard pricing. Or you might have an unhappy experience with their customer service and be ready to give USAA another try.

What’s next?

I’m over 2000 words into this topic, so I’ll wrap up the rest of the Q&A in a second DigitalMilEx post.

You might have noticed that I sneaked in a bunch of general information about insurance and investing. I’m writing a book about making good decisions with military insurance, and it’ll be full of this type of discussion. There are no easy answers for these highly individual decisions, but I’ll provide plenty of considerations and reader stories for you to apply to your situation.

Please let me know if you have more advice and personal stories to contribute to the book! I’m going to donate all of its royalties to military-friendly charities (just like my first two books), and if your contribution is in the next book, then you get a vote on which charity benefits from the revenue.