NEW YORK (MONEY Magazine) - So my colleagues at MONEY think analysts still matter. Sorry, fellas, I'm not buying it.

Not only do I think analysts no longer matter, I'll take it a step further: They're an out-and-out impediment to sound investing. We'd all be better off if the full-service firms simply abolished their research departments. Come to think of it, the firms would be better off too.

When New York Attorney General Eliot Spitzer released those embarrassing Merrill Lynch e-mail messages that showed analysts internally scoffing at Internet stocks they were touting to the public, he laid bare the core corruption of modern securities analysis, with its built-in conflicts and pressures to put banking deals ahead of investors.

He also showed how untenable the profession has become. Once upon a time, analysts -- at least most of them -- really did put investors first. The wall separating them from investment bankers was real. Analysts regularly gave a thumbs-down to banking deals their firms wanted to do, simply because they thought the outcome would not serve the investing public.

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The reason analysts could act like this was not just because they were pure of heart. It was much more fundamental: Research, all by itself, made money for the full-service firms. Then, as now, institutional investors rewarded good analysts by steering trades to the brokerages that employed them.

Prior to 1975, when brokerage commissions were still fixed by regulators, research was highly profitable. But once commissions were deregulated -- and institutions began paying pennies per share for trades -- research became a losing proposition.

And that's why the wall tumbled. Analysts became adjuncts to the investment bankers -- too often selling investors down the river in the process -- because that was the only way analysts could justify making seven-figure salaries.

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The full-service outfits all understand this, which is why they scream so loudly whenever anyone proposes spinning off research departments -- as Spitzer did with Merrill. But it raises a second question: Who even needs analysts anymore?

When you think about it, investment bankers don't really require analysts to "vet" IPOs and other deals -- that's a vestige of an earlier era. All the current system does is leave the firms vulnerable to the continuing charge that their analysts are willing to sell out their investors while promoting bad deals.

What the brokerages say in response, of course, is that research remains an important service to investors -- indeed, it is one of the ways they justify the fact that they continue to charge individual investors high commissions, even in this era of deregulated rates. To which the only appropriate reply is: Who do they think they're kidding?

Individuals are best served by investing for the long term. What we really need to know is: What are a company's prospects three, five, even 10 years out? But most modern stock research is short term. Analysts care more about getting the next quarter's earnings guesstimates right -- itself a form of game-playing -- than they do about understanding the long-term health of the business. (Enron, anyone?)

Their upgrades and downgrades are also short-term noise. Really, there's little that today's research analyst does -- in the way of research -- that has relevance to the way most of us want to invest.

Why? Because, again, we're not where the money is. Research at the big shops still caters to institutional investors with the same short-term mentality. Plus, the good institutional investors all have their own in-house analysts who do the real work internally. They use outside research -- the kind available to you and me -- for specific purposes.

They'll know that this semiconductor analyst has good sources in Taiwan and can often foresee a downturn. Or they'll know that that telecom analyst is plugged into various managements, so when he or she talks about those companies, his or her words have special weight. Do you know that kind of information? Of course not. And you never will.

Besides, thanks to 2000's Regulation FD, you don't really require an analyst to get the corporate details you need to make an informed judgment on a stock. You can now listen in on the conference call, just like the analysts, and you have access to the same facts and numbers. It's hard work figuring out which stocks are worth your money -- but it's always been hard work. Analysts haven't made it any easier for you, not for a long time. Thanks to their short-term mentality, they've probably made it harder.

Look, I'm not saying there aren't good analysts at the big firms. There are. But there are fewer of them than there ought to be, and so long as research continues to be unprofitable, that'll remain the case. If you want good research, seek out boutiques where research is the main game and customers are charged a small fortune for it. Otherwise, well, you know what they say: You get what you pay for.