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News January 7, 2008 Issue

SEC Releases RAND Report on Advisers and Brokers

There were no eye-popping surprises in the long-awaited RAND IA-BD report, released last week by the SEC.

In fact, the reportís conclusions were somewhat predictable: The advisory and brokerage industries are quite diverse, with firms offering a wide variety of services. Most retail investors donít know whether their financial expert is a broker or an adviser, much less the difference between the two. And most investors are pleased with their personal financial expert, even though they may be unsure of the capacity in which their expert is acting or the fees they are paying.

Nor does the report offer policy recommendations for regulatory reform. And, in spots, the authorsí inexperience with the industry shines through (see, for example, footnote 16).

What the report does do, explained Investment Adviser Association executive director David Tittsworth, is provide a "well-researched," "credible," and "objective" overview of the advisory and brokerage industries. "Itís a significant report," he said. Although he acknowledged that IA-BD reform is unlikely in 2008, given the current political climate and focus on the subprime crisis, "if you get to that point where somebody is ready to do something, then this is the definitive report," he said. "Itís sitting there now."