In honor of Memorial Day, The Motley Fool salutes current and former military personnel and their families with a series of articles addressing common financial issues they face. Check out all of the Fool's Memorial Day articles.

If you're in the military and you've been to an investment advisor, you've probably heard of systematic investment plans. These plans, sometimes called "contractual plans" or "periodic payment plans," went out of favor with the general public decades ago but had been aggressively marketed to military personnel for many years as a disciplined way to build wealth over the long term. I say "had" because last September, the President signed into law the Military Personnel Financial Services Protection Act. Among other things, the Act prohibits the issuance or sale of new systematic investment plans due to ongoing concerns about deceptive marketing practices. Ouch!

This prohibition came in the wake of several National Association of Securities Dealers (NASD) enforcement actions against firms such as First Command and Fidelity for being deceptive in their sales and marketing of systematic plans. Although the Act doesn't change the status of the hundreds of thousands of investors -- mostly current and former service members -- who are currently enrolled in one of these plans, it provides a good opportunity for those folks to take a look at their situation and explore alternatives.

So what are these things?
If you're in one of these plans, you probably already know the basics: A systematic investment plan is a contract that requires you to make regular (usually monthly) investments in a mutual fund over an extended period of time -- usually 10 years or more. These investments can be small -- sometimes as low as $50, much lower than the minimum investment required by most funds. But there's a catch: The fund company is (well, was) allowed to impose substantial creation and sales charges -- a super-sized load that could be (and usually was) as large as half of your first year's investment.

Proponents of these plans, especially the investment advisors who sold them, pointed to two supposed benefits. First, the hefty fees imposed discipline on the investor, because they'd need to stick with the plan over a long period to generate enough returns to overcome the fees, and second, the enforced adherence to a dollar-cost averaging strategy. To military members who often don't have the time or background to extensively evaluate investment opportunities, those benefits often sounded compelling.

The problems
As I pointed out a few weeks back, the benefits of dollar-cost averaging are either nonexistent or minimal for most investors. But there's a much bigger problem: With most of these plans, the performance just plain stinks, thanks in part to those gigantic creation and sales charges. In fact, performance has been so bad that several fund companies had to resort to misleading marketing materials and deceptive sales pitches in order to pull in new investors. First Command, for instance, paid a whopping series of fines (totaling over $12 million) to the NASD as a result of a whole host of misleading practices, including telling young service members that no-load funds were "speculative" investments with high costs unsuitable for most average people -- and telling disgruntled investors that complaints against their firm would violate military regulations.

Even Fidelity, normally a pretty responsible member of the investment community, put out a series of misleading brochures that played a bait-and-switch game with share classes on their Destiny Plans and emphasized (good) 30-year performance while downplaying (terrible) shorter-term numbers, all in violation of industry regulations. Fidelity will be paying a $400,000 fine to the NASD as a result, and will also be required to inform Destiny Plan participants that they can now invest in the two underlying Destiny funds -- since renamed Fidelity Advisor Diversified Stock Fund (formerly Destiny I) and Fidelity Advisor Capital Development Fund (formerly Destiny II) -- directly, without paying the Plans' creation and sales charges.

What do I do now?
If you're already in one of these plans, your best bet may be to finish out your commitment, even if you're tempted to stop investing. Often, missing a payment can result in termination, depriving you of the benefits you enrolled in the plan to receive. Review the plan documents to make sure you understand exactly what cancellation would mean, and ask for help (the Fool's discussion boards are a great place to get unbiased answers and advice) if you're not sure you understand what you're reading. In addition, read the NASD's Investor Alert on systematic investment plans, and note that if you're in a First Command plan, you may be eligible to receive a partial refund of your plan's sales charges as a result of the NASD's enforcement action.

Going forward, if you still want to make regular, periodic investments, consider the Thrift Savings Plan, which gives service members and civilian government employees many of the benefits of systematic investment plans, but with more investment choices and much lower costs. And for good, sound advice on planning for retirement generally, try a free 30-day trial of the Fool's Rule Your Retirement newsletter.

Fool contributor John Rosevear, whose Dad is a Navy veteran (hi, Dad!), wanted to join the USMC during college but was turned down because of a (minor, guys, minor!) medical condition, and he's still a little grumpy about it. He salutes those who are serving and notes that he owns none of the funds mentioned in this article. The Fool's tireless disclosure policy is deployed 24/7/365, ensuring the safety of all Fools everywhere.