Investment Adviser and Broker Regulations

Investment advisers are regulated by the Investment Advisers Act of 1940. Brokers are regulated by the Securities Act of 1934.

There is a fine line distinction in the way brokers and advisers deal with clients. Years ago, brokers were more likely to give advice than they do today. Commissions are much lower these days. And so much information is available about securities online. The line between brokerage and advice gets that much thinner.

Additionally, in theoretical terms, investment advisers are expected to have a broader view of the investment picture. After all, much of broker training has to do with securities law basics, rather than investment research. I find that in practical terms, investors ought to treat the differences academically, but also cynically.

Despite the regulations, you can get into trouble if the advice is corrupted or poor. Even when the advice is excellent, the charges for advisory services you can perform on your own, will be more costly than you may think.

Advisor charges can amount to 20% and more of your investment income each year when you pay fees of 1½% or so on assets managed.