Subject: File No. S7-25-99
From: Frederick H Miller, Jr
Affiliation: CEO, Sensible Financial Planning and Management, LLC

September 8, 2004

The crux of the matter is the original exclusion of a broker from the definition of investment adviser as including any person who, for compensation, engages in the business of advising others . . . as to the value of securities or as to the advisability of investing in, purchasing or selling securities . . . but does not include . . . any broker or dealer whose performance of such services is solely incidental to the conduct of his business as a broker or dealer and who receives no special compensation therefor.

The statute implies that a broker or dealer would naturally be considered an investment adviser - one who advises others about securities - except that the brokers primary business is selling securities, that is, primarily an intermediary function rather than an advisory function. In contrast, the investment advisers primary business is advice.

Advisers are regulated as fiduciaries - required to act in the best interests of their clients.

Brokers are regulated as intermediaries - required to ensure that customers do not hurt themselves.

To allow advisors who work for brokerage firms to be regulated as intermediaries has two deleterious effects:
1 Customers of broker advisers are not well
protected by regulation. An adviser whose only
obligation is to ensure that customers do not hurt
themselves is extremely well positioned to take
advantage of them.
2 Consumers are confused by the different standards
applying to advisors depending upon the legal
structure under which they work. They trust
broker advisers too much - relying on intermediaries
for fiduciary care, and trust investment advisers too
little, in effect because they cannot be certain
whether they are dealing with an intermediary or a

The solution is clear - return to the original intent of the legislation and regulation. Regulate investment advisers who work for brokers as investment advisers. Hold them to the same standard as other advisers. This is the best way to ensure that consumers are well protected, and well informed.