Olympia – The Department of Financial Institutions (DFI) has published an investor bulletin on how investors can improve their chances of selecting brokerage and investment advisory services that meet their needs. The investor bulletin can be viewed online. The bulletin also gives investors access to a report from DFI’s broker-dealer examination program on fee-based brokerage accounts offered by some broker-dealers.
The U.S. Securities and Exchange Commission published a study it commissioned from the Rand Corporation on how investment advisers and broker-dealers market their products and services and how well the investors understand the differences among those financial products and services. The Rand Corporation investigators found that even experienced investors did not understand the differences between investment advisers and broker-dealers.
DFI’s investor bulletin gives investors tools to lessen the confusion investors feel, as documented in the Rand report, when faced with a wide array of investment products and services. It gives investors questions to ask themselves about their needs and trading history as well as questions to ask a potential investment adviser or broker-dealer about the services they offer. In particular, it explains how investors can evaluate pricing structures on financial services to determine which pricing structure is most cost-effective for them.
DFI’s broker-dealer examiners have done an extensive review of broker-dealers’ fee-based account programs. The examiners concluded that many Washington investors pay much more in such programs than they would if they had traditional commission-based accounts. The NMFBA report can be viewed online. Today’s investor bulletin explains how investors can evaluate such programs to avoid paying fees for services they are not likely to use.