He uses his own skills in analyzing the risks and merits of an investment. In very limited circumstances, the investor might use a full service broker if he wished to avail himself of a particular analysts report. Most investors are far from sophisticated. A substantial bond of research clearly indicates that most investors, not only individuals but financial institutions, do not manage their portfolios effectively, That is, investors do not construct or manage their portfolios in a manner that reflects their attitude toward risk, nor do they recognize the likely financial consequences of disappointing investment performance. Defining investment objectives clearly and realistically, 2. determining an appropriate asset-mix strategy for achieving these objectives and 3. adopting operating tactics that will effectively implement the broad strategic plan.
Few investors do.
I believe the real issue in determining sophistication is to view the inherent knowledge of the broker, supervisor, expert witness AND the attorney or other individual presenting the case. This could be simply done by requesting that the individual provide a specific understanding of GNMA's and GNMA funds. Or to properly define diversification of single issue securities. I submit that few brokers or supervisors could provide accurate definitions on either subject and that such inadequacy on a highly touted conservative investment or essential statistic is indicative of a lack of basic knowledge. So since you do not have a sophisticated broker, you almost undoubtedly do NOT have a sophisticated client.