How much investing jargon do you need to master while saving for retirement?

The word “fiduciary” is a good example. A Financial Engines survey released Thursday finds that only 18 percent of Americans are sure what the word means. That kind of ignorance can be expensive: U.S. financial advisors are divided between “fiduciaries” required to put your interests first (like a doctor or lawyer), and others like brokers, more akin to salespeople, required only to push “suitable” products that may profit them more than you.

Judy McChester-Nedd, a 59-year-old retired executive in Helena, Ala., didn’t know the difference when she hired an advisor unconstrained by fiduciary duty. She says she asked for a conservative strategy and ended up losing 14 percent last year in actively managed mutual funds. Ian MacGregor, 38, is a consultant in Dublin, Ohio, who also didn’t know the difference. His advisor kept steering him into mutual funds with upfront load fees of as much as 5 percent. (There's another nugget of jargon you should know: A load is a one-time charge to invest in a fund. In other words, front-end load funds are investments where you lose money the moment you buy them.)

Nonfiduciary advisors are free to recommend only the products that earn them the highest commissions, which can come from both load fees and annual fees. Because they get paid in so many complicated ways, it can be hard to tell how much they're making off you and what their incentives are. Fiduciary advisors tend to get paid in more transparent ways, often by charging an annual fee based on the assets they manage.

Of course, not all nonfiduciary advisors charge high fees or push lousy bets, and fiduciary advisors aren't all perfect. But it’s hard to invest when you’re not sure whom to trust.
“I’ve lost confidence,” McChester-Nedd says. “The government needs greater oversight over this because regular people are getting hurt.”

MacGregor agrees: “There’s got to be some way to protect the less-savvy investor from being taken for a ride.”

Well, they may get their wish. Despite years of resistance from Wall Street, the U.S. Department of Labor is expected to announce soon the final version of a rule that may force financial advisors to abandon the way they’ve done business for decades. For the first time, all advisors may need to act as fiduciaries, putting their clients’ interests first when handling retirement accounts.

The rule could clear up some confusion. According to the survey of more than 1,000 people paid for by Financial Engines (a fiduciary advisory firm), 46 percent of Americans incorrectly believe that advisors already “are legally required to put the best interests of their clients first” when dealing with retirement assets.

The majority of respondents, 54 percent, knew advisors weren’t under that requirement, but they sure weren’t happy about it. Overall, 93 percent said it’s important that all advisors put clients’ interests first when providing retirement advice.

Wall Street counters that a strong fiduciary rule will make it less profitable to offer advice to lower- and middle-income Americans.