The Securities and Exchange Commission has accused the San Diego-based financial talker of misleading investors to think that his strategy helps retirees “generate inflation-adjusted income for life.” They are seeking an order that would prevent the wealth manager from making such claims.
Lucia calls his investment strategy “Buckets of Money” on his Business Talk Radio Network-syndicated show. Lucia is a Certified Financial Planner and Registered Investment Advisor.
Lucia promotes his fee-based investment program at seminars held at resorts throughout the country. Some of those seminars are co-hosted by financial columnist and actor Ben Stein, who has called Lucia “the best wealth manager I know.”
Regulators accused Lucia of falsely claiming that his investment plan had been thoroughly tested and would help retirees safely generate income for decades, without jeopardizing a nest egg that could be left to their children. He advises listeners to divide retirement funds into three buckets: cash, safe investments and risky investments.
But the SEC said Lucia and his company, Raymond J. Lucia Cos., “performed scant, if any, actual back-testing of the Buckets of Money strategy.”
“Lucia and RJL left their seminar attendees with a false sense of comfort about the Buckets of Money strategy,” said Michele Wein Layne, director of the SEC’s LA office. “The so-called back-tests weren’t really back-tests and the strategy wasn’t proven as they claimed.”
Lucia’s seminars are free and used to find new clients who would be charged fees for his investment advice, the SEC said. During the seminars, Lucia is accused of showing misleading slides that indicate investors who set aside $1 million in 1973 would have generated $60,000 in income each year until 1994 while their nest egg grew to more than $1.5 million, reports Bloomberg/LA Times.
The investment scenario failed to account for advisory fees and included other faulty assumptions, the SEC said. When using historically accurate inflation rates, the 1973 investor would run out of money by 1989, according to the agency.
The SEC said Lucia failed to maintain adequate records of his testing as required by federal law: “Lucia and RJL have admitted during the SEC’s investigation that the only testing they actually performed were some calculations that Lucia made in the late 1990s–copies of which no longer exist–and two two-page spreadsheets.”
The SEC’s order seeks financial penalties and “other remedial action” to be determined by an administrative judge.
Lucia’s attorney, Michael Perlis, said his client did nothing wrong and expects to be vindicated. He noted that there are no allegations that investors lost money:
“I’m a big supporter of the SEC. Every once in a while the SEC goes off the tracks and it has this time,” he told Bloomberg/LA Times. “And Mr. Lucia is going to fight.”