July 30, 2002

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609

Attention: Mr. Jonathan Katz

RE: File No. S7-10-02/Comment Letter on Proposed Rule Regarding Exemption for Certain Investment Advisers Operating Through the Internet

Dear Mr. Katz:

This letter is written in response to the Commission's request for comment on its proposal to create an exemption from Section 203A of the Investment Advisers Act of 1940.

We, at MyFinancialAdvice, LLC, are in complete agreement with the Commission on the need to reduce barriers associated with conducting interstate advisory services via the Internet; however, we respectfully request that the Commission adopt a broader definition of an "Internet Investment Adviser" for the proposed rule in order to assist in the establishment of a very important new business model currently inhibited by the Investment Advisers Act of 1940 and the National Securities Markets Improvements Act of 1996.

It appears that the Commission has focused on one primary business model to determine its definition of an "Internet Investment Adviser." Our comments below will describe a new business model that delineates between an "electronic" investment adviser that conducts "all" of its business through an interactive website on the Internet and a "human" investment adviser that "consistently" conducts its business through an interactive website on the Internet. We will define the business model that is being affected below, its importance to mainstream American consumers and independent investment advisers, and how they are being affected by the current rules. We will also propose language to broaden the definition for the exemption. Furthermore, we will provide various comments on the specific topics that the commission has requested.

It is important to note that the human advisers who will use our service are in most cases "fee-only" and "independent," which would make it unlikely that they would qualify for the $25 million assets under managment test or advise a registered investment company to meet the statutory thresholds for registration with the Commission. Therefore, under the current rules and proposed exemption, investment advisers who would use our service would incur significant cost and administrative burdens having to register in multiple states and would make our service cost prohibitive to these advisers. This would in turn severely limit our company’s ability, and that of our competitors, from providing professional, affordable and objective financial advice to the mainstream consumer, which is the mission and purpose of our company. We request that the Commission use its authority granted by Congress to permit advisers who use services such as ours to register with the Commission given that the prohibition would be "unfair, a burden on interstate commerce, or otherwise inconsistent with the purposes of section 203A.9."

A. New Business Model: People-to-People eCommerce Information Exchange This business model behind our company is a People-to-People eCommerce Information Exchange that connects mainstream online consumers, who are currently unable to obtain objective, affordable and personalized financial advice, with independent professional financial advisers who cannot cost-effectively reach and service these middle market consumers.

The People-to-People service we are developing combines Web and telephone-based technologies that automate the consumer’s process of finding, qualifying, distributing, personalizing and billing for financial advice from a network of prescreened independent financial advisers. Consumers are able to easily search for the type of advice and advisers that they want, verify adviser credentials, evaluate advisers’ fees and services, determine whether they are available by phone, email or instant message, engage the adviser, collaborate via the system, and then pay for advice received on a per-use basis.

The service is designed to target the middle market consumer who may not have the net worth to afford the asset-based fee structures of typical financial advisory services or who want to avoid the potential conflicts of interest and costs of commission-based financial advisers. The advantage of our service to the consumer is to provide easy and affordable access to a national network of professional financial advisers with an efficient means to evaluate them and utilize their services on an as needed basis. Advisers in the network are able to reduce their marketing costs by accessing a national audience and the system will allow them to use their time more efficiently, thereby allowing them to cost effectively service the middle market.

Fundamentally, the middle market seeks unbiased advice at an affordable rate. Fee-only advisers have the right structure to provide this yet they are not effectively connected to the middle market, and in most cases do not have the tools to efficiently deliver this type of service. The Internet creates the appropriate venue to connect these two constituents; however, if the registration costs and logistics to connect to this national online marketplace are overly burdensome and prohibitive to the adviser, the middle market will continue to be excluded from the current expensive and biased financial advisory industry.

Our customer base is composed of middle market American consumers across all fifty states, as our service will be distributed through our website and those of our affiliates. Therefore, the registered investment advisers that use our service will be consistently conducting business in all fifty states. This would also seem to qualify advisers that use our service for the multi-state investment adviser exemption in rule 203A-2(e), as they would be conducting business in more than 30 states; however the new rule proposed with the suggested revisions below would clarify this gray area of the rule relative to investment advisers that use People-to-People eCommerce Information Exchanges to conduct business with clients throughout the country.

B. Definition of "interactive website" and Proposed Change

The Commission’s current definition of an interactive website in Section 275.203A-2 (2)(ii) is limited to "a website in which computer software-based models or applications provide investment advice to clients based on information each client receives through the website." The definition in Section I. Background, paragraph 3 adds, "computer-based-application or platform - an algorithm – process and analyzes the clients’ responses to generate personalized investment advice that is communicated through the website."

The service described above is a completely automated or "electronic" advisory service, whereas our service is a conduit for allowing human investment advisers to conduct business over the Internet on a national scale. The reality is that our service would allow many licensed financial advisers to conduct business through the Internet, which would make the possibility of having far more than the Commission’s currently estimated 20 Internet Investment Advisers to exist. As a point of reference, our model calls for 2,000 fee-only advisers for every 700,000 customers and there are already well over 300 financial advisers practicing through similar business models today (see general topic advice websites that that include financial planners, e.g., and

We suggest that proposed rule §203A-2(f) be revised as underlined below (note that the numbers below do not coincide perfectly with those in the paragraphs of §203A-2(f)):

(f) Internet investment advisers.

C. Definition of "substantially all"

The current language in §275.203A-2 (1)(i), defines an "Internet Investment Adviser" that provides "substantially all of its advisory business through an interactive website." The nature and design of our business model described above is such that an investment advisor would typically only use our service to supplement their local (non-Internet) advisory practices, and therefore would not meet the requirement "that 90% of their clients obtain advice exclusively through an interactive website." In fact, it is our assumption that less than 20% of their business will be conducted via our service (i.e. via the Internet). We believe defining a threshold of how much business that an investment adviser would conduct through a People-to-People eCommerce Information Exchange would be an impediment for the adviser to do business in this way, as they are typically using this service to supplement their income and to provide a valuable service to this underserved marketplace. Therefore, it would be unfair to the advisers who want to conduct business this way, as well as to the consumers that these advisers would service.

We suggest that proposed rule §203A-2(f) be revised as underlined below (note that the numbers below do not coincide perfectly with those in the paragraphs of §203A-2(f)):

(f) Internet investment advisers.

(2) For the purposes of this section:

In conclusion, we believe that the new business model described above is important to the average American financial consumer, the independent financial advisory industry, the online financial services industry, other People-to-People eCommerce Information Exchanges and the economy as a whole. And it is clear that the current language in the proposed rule exemption would not sufficiently clear the way for the establishment of this new business model. Therefore, it is our contention that this would be unfair, a burden on interstate commerce and inconsistent with the purposes of §203A. Therefore, we request that the Commission consider the above comments and revise the proposed rule changes to exempt this additional category of Internet Investment Adviser from multi-state registration requirements. Please feel free to contact me to discuss these comments. Thank you.


Ron Peremel
Chief Executive Officer
MyFinancialadvice, LLC