Amid a spreading crackdown by federal and state securities and insurance regulators targeting abuses in the sale of financial products to elderly Americans, an industry group largely composed of major asset managers, insurers, and other financial services firms has unveiled a proposed "statement of principles" seeking to establish a code of best practices for marketing and selling retirement income products and strategies.
The Boston-based Retirement Income Industry Association unveiled the nine-point statement during its annual meeting on Monday in neighboring Cambridge. "It's very important that we don't mislead the client into thinking there is more accuracy [in sales and marketing presentations] than there really is," said Richard Fullmer, a Russell Investments senior executive and head of the RIIA's Methodologies Committee.
Fullmer said the statement of principles includes acknowledging to clients that "regardless of an individual's asset allocation or retirement spending, the future is inherently random and unpredictable" and that it is important to disclose various statistics or other measures of uncertainty when using Monte Carlo simulations.
The statement also warns against using models that assume that interest rates will remain constant and flat over long periods, as well as "conveying a misleading degree of accuracy" in presentations.
While the RIIA acknowledges its statement is "intended to supplement" its members' own compliance standards, the group plans to issue a set of guidelines for helping members adhere to the proposed code.
RIIA's members include Merrill Lynch, UBS, Wachovia, Bank of America, ING, Genworth, MassMutual, and MFS.