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 had been a fine line distinction in the way brokers and advisers dealt 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 online about securities.

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.

However, under Dodd-Frank, the Securities and Exchange Commission wants to make brokers more responsible for information they give, treating them as fiduciaries. That may dry up that source of information.

On the other hand, advisory charges can amount to 25% and more of your investment income each year when you pay fees of 1½% or so on assets managed.