Individual investors face a variety of hurdles, but for many, especially those getting started, the greatest challenge is often sorting through the hodgepodge of entities offering investment related services. Even to categorize the various service providers is a daunting task. The choices can be bewildering; brokers, investment advisors, insurance agents, trust departments, financial planners and various “money mangers” abound.
The Securities and Exchange Commission is currently weighing action that some claim would help clarify matters for investors. Until now, the SEC has considered stock brokers to be salespeople rather than advisors, so brokers have not been subject to the strict disclosure rules required of registered investment advisors. Thus brokers are claiming that any advice they provide is “solely incidental” to making a sale. Yet at the same time the industry’s marketing efforts are clearly aimed at blurring the distinction between brokers and advisors, by referring to their brokers as “financial consultants” or “wealth managers.” In April the SEC will decide if and under what circumstances brokers should be subject to the same rules as advisors.
Brokers are trying to have it both ways, but we will not weigh in on how regulators should do their job. Our own view is that informed consumers can make rationale choices on their own behalf. The challenge for investors is to be informed in order to avoid being “sold”, and to that end the Investment Guide is designed to provide our readers with sound recommendations at minimal cost; our advisory services follow the same formula.
Among the myriad firms offering investment services, AIS is unique. Our objectivity stems from the fact that we are wholly owned by the American Institute for Economic Research (AIER), a nonprofit “think tank.” AIS embraces the notion stated succinctly in AIER’s mission statement: “Experience suggests that information and advice on economic subjects are most useful when they come from a source that is independent of special interests, either commercial or political.”
Our revenues are derived only from our subscriptions and our advisory fee, which is based on the value of the portfolios we manage. We do not accept remuneration from any “third parties” including brokers or mutual funds. Our success or failure therefore hinges solely on the efficacy of our recommendations, rather than our ability to sell a product or service. Those recommendations are formed from the findings of AIER’s staff economists. In addition to their own empirical research that dates back to 1933, they are free to weigh the results of inquiries conducted by financial economists employed by colleges and universities, and by firms in the financial sector, such as Dimensional Fund Advisors. DFA is at the “cutting edge” of modern portfolio theory and their findings are based upon the most comprehensive publicly traded securities data base in existence, the Center for Research in Securities Prices.
Also in This Issue:
2004: The Year in Review
Emerging Markets Investing
The High-Yield Dow Investment Strategy
Recent Market Statistics
The Dow-Jones Industrials Ranked by Yield
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