PALM DESERT, Calif. - Paul Schott Stevens says his organization isn't advocating the establishment of personal retirement accounts as a solution to the looming Social Security shortfall, but the Investment Company Institute president has heard quite enough of what he calls "misleading" and "pessimistic" rhetoric.

To open the ICI's 2005 Mutual Funds and Investment Management Conference here yesterday, Stevens also addressed the growing debate over mutual fund disclosure, but it was his remarks to critics of personal accounts that were most pointed.

Although he did not name any person or organization specifically, Stevens was clearly admonishing groups like the AFL-CIO and the Democratic National Committee, which have characterized President Bush's proposal to allow people to put 4% of their earnings into a mix of stock and bond funds as "a risky scheme" and tantamount to "gambling away workers' futures."

"Rhetoric like that simply misses the mark," Stevens said in his first address to the ICI since he was elected its new president nearly a year ago.

"History demonstrates that investing, equity investing in particular, is the best way to accumulate wealth," he continued, noting a recent Wharton Business School study that the real return on equity investments for the last two centuries has been higher than 7%. "If you invest efficiently and at reasonable cost, if you diversify, if you look to the long term--hallmark values of mutual funds--you have every expectation of good returns."

Arguments over Social Security reform that portray investing as gambling also discourage people form taking grater control over their futures, to plan for their financial security, and to save and invest for their retirement, Stevens added.

"Finally, the argument betrays a deep pessimism about America's long-term economic prospects, a pessimism that is simply misplaced," said Stevens, a lawyer and former Charles Schwab executive who also served in the Reagan administration.

"Everyone in an industry like ours should understand these points. We have an obligation to communicate them," he said.

Stevens also urged the gathering of mutual fund executives to re-examine how they communicate to shareholders. While he acknowledged that the Internet will play a key role in this era of heightened disclosure, Stevens interestingly noted that there are larger cultural factors that merit consideration.

"We need to insert new and broader perspectives into this important policy process," he said. "For example, we should draw upon the expertise of social scientists, educators, psychologists and behavioral economists who might be able to provide valuable insights into how people absorb information and use it to make decisions. In my judgment, we need to take time to craft a better approach to fund disclosure, to get the job done right, while maintaining the industry's robust competitiveness."

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