Compliance July 1, 2007

Committee to Suggest Financial Reporting Improvements to SEC

Securities and Exchange Commission (SEC) Chairman Christopher Cox on Thursday announced the establishment of an advisory committee to examine the U.S. financial reporting system with the goals of reducing unnecessary complexity and making information more useful and understandable for investors.
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According to a press release, Cox said the Commission will direct the SEC Advisory Committee on Improvements to Financial Reporting to conduct its work with a view toward removing practical and structural impediments that reduce transparency or unnecessarily increase the cost of preparing and analyzing financial reports to the detriment of the investor.
Issues on which the advisory committee will focus include:
  • the current approach to setting financial accounting and reporting standards;
  • the current process of regulating compliance by registrants and financial professionals with accounting and reporting standards;
  • the current systems for delivering financial information to investors and accessing that information;
  • other environmental factors that drive unnecessary complexity and reduce transparency to investors;
  • whether there are current accounting and reporting standards that impose costs that outweigh the resulting benefits; and
  • whether this cost-benefit analysis is likely to be impacted by the growing use of international accounting standards.
As part of its review, the advisory committee will consider how technology can help address accounting complexity and make financial information more useful to a greater number of investors. The committee will make recommendations to the SEC for making financial reports clearer and more beneficial to investors, reducing costs and unnecessary burdens for preparers, and better utilizing advances in technology to enhance all aspects of financial reporting.
Robert C. Pozen, chairman of MFS Investment Management in Boston and former vice chairman of Fidelity Investments, will chair the committee. Cox said he expects between 13 and 17 additional members with varied backgrounds to be named within the next few weeks.
The advisory committee will begin its work after additional members are named and the SEC staff files its charter with Congress.
Data & Research July 1, 2007

Top Financial Goal for Boomers is Lifetime Income

On average, baby boomers expect to retire by age 63; however, most are not planning for 30 or more years in retirement and nearly half (44%) have not calculated a target income goal.
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However, the vast majority (97%) of baby boomers responding to a recent survey by AIG SunAmerica cited income for life as a financial goal. Other top financial goals were protection against losses (96%) and continued growth of assets (96%), according to a press release about the survey.
Among Matures (age 60+) surveyed the highest rated financial goal was protection against losses (98%), the release said. Just over two-thirds of respondents in this group said they would consider a financial product that balanced growth potential with downside protection and income guarantees. Half said they would be willing to pay up to 2% of annual investment returns for the product.
Asked if they would consider an investment product designed to address all three goals, nearly three-quarters (73%) said yes, with two-thirds (66%) saying they are willing to give up 2% of their annual investment return for the benefits.
Nearly eight out of 10 baby boomers rated “a significant retirement income source, other than Social Security, that is guaranteed for life” as very or extremely important. More than three-fourths reported they would increase their holdings in the stock market if they knew their investment could be protected from loss.
Likewise, the majority (95%) of Matures said they consider a source of guaranteed income for life other than Social Security important, with 70% saying it is very important.
The average age of retirement for Matures was 60. With 85% of this group already retired, Matures expressed particular concern about the impact of rising health care costs and inflation on their retirement income planning.
The “America Speaks Out on Retirement: 2007 Investor Research Study” survey was conducted online within the U.S. by Harris Interactive on behalf of AIG SunAmerica between April 3-9, 2007 among 1,022 adults age 45 and over, of whom 512 were 45-60 and 510 were over age 60. Respondents had investable assets between $100,000 and $2 million (excluding 401(k) assets), and were financial decisionmakers.

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