In the last month, two pieces of writing have appeared reminding us about the issues underlying the fiduciary duty debate. One was the op-ed about Goldman Sachs penned by Greg Smith for The New York Times on March 14, 2012. The other was a March 28, 2012, letter to the Securities and Exchange Commission, signed by seven consumer and financial advisor associations, that outlined a way to end the stalemate on implementing a fiduciary standard under the Dodd-Frank Act. I was trying to decide which item should be the focus of this column. Then I realized that both share a common, central theme-"discernment," or the lack thereof.

I often use this term in training to define the ability of a person to judge wisely and objectively and, more specifically, to know the difference between rules and principles. You define rules when you believe a person is unable to discern the differences between right and wrong or that he or she may easily succumb to the temptation to do the latter. However, don't be misled to think that you can improve behavior by defining more rules. Just ask any teenager.

Principles are more appropriate when you believe a person has the capacity, ability and willingness to judge wisely and objectively. Discernment and principles are key elements to an understanding of a fiduciary standard of care. A person who is unable or unwilling to judge wisely and objectively should never serve in a fiduciary capacity; no extra rules or compliance and supervisory procedures will be able to overcome this deficiency. You can no more legislate a fiduciary standard than you can legislate morality.

With that as a background, let's go back and examine the two commentaries, starting with the Goldman Sachs op-ed. Would you ever ask or want Goldman Sachs to serve in a fiduciary capacity?

The editorial was not a surprise, at least not in its content. Since the economy's downturn, Goldman Sachs has been severely criticized for its role in selling toxic packaged products to its clients. On April 27, 2010, seven current and former firm executives were grilled by the U.S. Senate Permanent Subcommittee on Investigations about Goldman's "14 Business Principles," specifically, about why these were inconsistent with the firm's conduct. Several months later, Goldman released a new code of business conduct and ethics. Had the firm learned its lesson? Apparently not: The new code contained a provision that allowed any employee or executive to request a "waiver" from it. "Yes, the interests of our clients come first-except when we decide to waive that principle."

Goldman Sachs has a flawed corporate ethos: Its stated principles are inconsistent with its leadership's behavior and decision-making process. Goldman takes pride in its ability to hire the best and the brightest, but it has not demonstrated that it will reward and promote people who can discern and act on the needs of clients and place their interests ahead of the firm's.

The 16-page letter to the SEC by the consumer and financial associations, meanwhile, starts with this graph:

"We write as organizations that strongly support extension of the Investment Advisers Act of 1940 fiduciary duty to all broker-dealers when they offer personalized investment advice about securities to retail customers. Moreover, we support the general approach to accomplishing this goal outlined in the Section 913 Study issued by the Commission staff in January 2011: the adoption of parallel rules imposing a uniform fiduciary duty on broker-dealers and investment advisers consistent with Congress's grant of authority under Section 913 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Properly implemented, this approach would provide badly needed and long overdue protections for individuals who receive investment advice from broker-dealers without imposing undue regulatory burdens on brokers and without disrupting transaction-based aspects of the broker-dealer business model."

The letter was signed by the Consumer Federation of America, Fund Democracy, the Certified Financial Planner Board of Standards, the FPA, the Investment Adviser Association, NAPFA-and, in a significant coup, AARP. The addition of the last one is good news. One concern I have, however, is that the two opposing sides to the fiduciary debate might now settle into trench warfare to argue over the remaining points in dispute; and the letter, rather than facilitating a speedy compromise, may now only prolong the battle.

"Discernment" may be one way to resolve some of the impasses. I don't believe Dodd-Frank was intended to paint every broker with a fiduciary brush. Individual brokers will need to decide whether they are willing to be subject to a fiduciary standard. But even if a broker is willing, it doesn't mean the broker-dealer should allow him or her to serve in a fiduciary capacity. Broker-dealers will have the ultimate responsibility for deciding who has the capacity to wisely and objectively judge the needs of a client and who does not. In many cases, I believe broker-dealers will stop their brokers from serving as fiduciaries.