A Consumer Perspective of the Investment Services Market

Some thirty million American consumers pursue their financial objectives through individual participation in the stock market. They clearly view the stock market as a savings alternative which offers at least normal returns to persons outside the circle of professional investors. In the absence of data reflecting the performance of personal portfolios it is difficult to assess the validity of this view. However, as an initial step this paper evaluates the performance of the market servicing individual investors. The evidence indicates that noninstitutional investors have reason to question stock brokerage pricing, service and sales practices. Moreover on the basis of more than 1,000 sampled investment recommendations, it appears that investment publications directed at individual investors have failed to identify superior investment alternatives.