Talk about going out and seeing America.

The Securities and Exchange Commission has just decided to spare small, Internet-based asset allocation companies the burden of having to register in all 50 states. Instead, firms that meet a handful of narrow requirements will be allowed to register with the SEC. The new rule is expected to save such companies, which are registered investment advisors, considerable time and expense.

But some say the rule, which will go into effect 30 days after it is recorded in the Financial Register, was written too narrowly and excludes too many companies. In fact, consultants and those who provide online investment advice said it was unclear which parties the rule would truly benefit.

"I'm not sure it's going to have a very big impact on the industry," said Jeff Maggioncalda, president and CEO of Financial Engines, an online advice provider in Palo Alto, Calif.

Asset-allocation companies such as Financial Engines offer interactive Web sites where investors can plug in information about their personal finances and get recommendations for how they should allocate their assets.

California to Maine

Before this month's ruling, Internet advisors that oversaw less than $25 million in assets had to register at the state level. Those firms could register with the SEC only if, in specific cases, the commission deemed state-level registration to be unfair or too much of a burden on interstate commerce. The rub was that, because users from California to Maine and everywhere inbetween were logging onto the sites, Web advisers found that they had to register with securities authorities in every state in order to operate legally.

"It can be a time-consuming and costly process," said John Nester, a SEC spokesman, of the state-level registration process. "It's expected that this will enable entry into the marketplace for additional Internet-only investment advisers."

But the SEC drafted the rule narrowly, allowing only those companies that provide advice primarily via Web sites to register with the commission. Even those that use e-mail to distribute advice will not benefit from the new rule. As a result, only 20 or so companies are affected by this change, Nester said.

Some say that the SEC's narrow definition of an "Internet investment adviser" misses the point. Lowell Smith, a 401(k) consultant based in Pittsburgh, said many companies that provide financial advice on the Web also do so via the telephone and e-mail, which means they can't take advantage of the SEC's concessions. "It's really going to affect very few organizations," he said.

Indeed, Maggioncalda said that, while ATM machines are a great convenience, most people wouldn't use a bank that provided only ATM banking. The same is true of online financial advice. "Multi-channel is the way to go," he said. (Maggioncalda's firm was unaffected by the ruling because it works with large pension funds and other clients that collectively hold more than $25 million in assets.)

In a comment letter to the SEC, Ron Peremel, the CEO of MyFinancialadvice of Denver, said his firm's business model "combines Web and telephone-based technologies that automate the consumer's process of finding ... financial advice from a network of prescreened independent financial advisers."

Still, the SEC approved the new rule with the hope that more companies that provide Web-based advice will spring up, Nester said. "There's a demand for such services as companies try to give more [investment advice] resources to their employees."

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