WASHINGTON -- One reason a new breed of fee-based accounts shouldn't be exempted from the

Investment Advisers Act

, consumer advocates say, is that many investors simply don't understand common investment firm practices. That's especially true for the many small investors new to the market in recent years, they say.

So what about that -- do people get it?

Frequently not, according to a recent survey of those you might think should know the most.

The

AARP

recently surveyed 827 investors aged 50 and over on the issue of broker compensation -- the key issue in the SEC's proposed rule. That age group has plenty of interest in investing (because they're in, or nearing, retirement) and those investors have had more time to learn the ways of the securities industry (because they've been at the game longer).

Among other findings, the 1998 survey -- taken before Wall Street's big firms began their fee-based programs -- revealed:

Only about a third (36%) knew that riskier investments often carry higher commissions, meaning that brokers could be more likely to steer them that way.

Nearly four in 10 (37%) didn't know that the term "load" refers to a sales charge.

Nearly half (48%) didn't know that the amount of commission a client pays is negotiable.

A quarter (24%) didn't know that firms offer incentives for selling products they have created or manage.

When told of various compensation practices, the group expressed strong disapproval, with 90% wanting to be told of such arrangements in advance. And yet, few said they had ever asked their brokers about how they're compensated.

Those responding weren't dummies, said Laura Polacheck, the AARP's legislative representative. It's just that without knowing what's going on, it's hard to even know where to begin asking questions, she said.

"It would not be intuitive for investors to think, 'This broker is recommending this to me because they'll be compensated more than for some other product,'" she said.

The solution?

"It's a question of disclosure," Polacheck said, echoing critics of the proposed SEC rule. But even at that, she said, "disclosure is the weakest form of consumer protection. It's not fixing the problem. It's just saying, 'Here's the situation.'"