President Obama's massive plan to overhaul the rules governing U.S. finance includes a proposal to apply the fiduciary standard of client care on broker-dealers offering investment advice.

And that's good news for some members of the advisory community. "It recognizes that if you're providing the same services and advice, they should be doing it under the same standards," says Dan Barry, director of government relations at the Financial Planning Association.

The FPA, along with the Certified Financial Planner Board of Standards Inc. and the National Association of Personal Financial Advisors, released a joint statement on Thursday applauding Obama's regulatory reform proposals, particularly when it comes to the fiduciary standard. Other groups--such as the Investment Adviser Association--also supported calls for implementing the fiduciary standard, as well as other issues.

"We also commend the administration's proposal that would require hedge fund managers to register with the SEC under the Investment Advisors Act," IAA executive director David Tittsworth said in a statement.

Also of interest to the advisory community, Obama's plan aims to clarify and simplify disclosures affecting the client-advisor relationship, prohibits conflicts of interest and sales practices against the best interests of investors, and prohibits mandatory arbitration clauses in advisory accounts.

The proposed reforms ratchet up the stakes in the long-simmering debate over whether all financial advisors--registered investment advisors and broker-dealers--should be held to the fiduciary standard. RIAs registered with the Securities and Exchange Commission are governed by the fiduciary standard that requires advisors to act in their clients' best interests. Broker-dealers registered with the Financial Industry Regulatory Authority are held to the suitability standard that requires them to make recommendations that fit a client's risk tolerance, objectives and financial status.

Organizations representing RIAs maintain that broker-dealers who hold themselves out as advisors should be held to the fiduciary standard. Groups representing broker-dealers don't buy the argument that differing standards on the investment advisor and broker-dealer sides need to be reconciled. They say there are legitimate reasons why the suitability standard is appropriate for broker-dealers.

Attempts to reach a couple of broker-dealer trade groups by press time were unsuccessful. But a day following the proposal, SEC Chairman Mary Schapiro hinted the SEC may need to allow some exemptions for brokers.

Regardless, the debate will continue. "Since it [the overall regulation overhaul plan] touches so many aspects of the financial sector," Barry says, "there will likely be a lot of hearings on these issues."