A changing regulatory environment is likely to create a new crop of advisors acting as fiduciaries, but that doesn’t necessarily mean all of them will adhere to the highest standard of fiduciary advice.

The Institute for the Fiduciary Standard, a McLean, Va.-based financial think tank, has weighed in on the matter by releasing a self-assessment tool that will allow advisors to evaluate their firms’ adherence to a best-interest, client-first standard.

“Our best practices test whether advisors offer objective, transparent and competent advice at a fiduciary level,” says Knut Rostad, president of the IFS. “These best practices stress the ethical side of fiduciary advice, like the importance of avoiding conflicts, being transparent and improving communications.”

With the Department of Labor announcing rules mandating that advisors act as fiduciaries when working within retirement accounts, and a business climate pushing more advisors toward fee-based revenue models, advisors need clarification on what the best-interest standard means, says Rostad.

“The Department of Labor’s conflict of interest rule has set off a new era; its importance can’t be overstated,” Rostad says. “It is a giant first step and the start of a journey consistent with law, logic and history.”

Rostad likens the fiduciary rule to the first shots of the American Revolution in Lexington and Concord, Mass.

The tool is intended to assist RIAs in gauging their businesses against the institute’s best practices, and to help brokerage representatives faced with acting as part-time fiduciaries navigate their conflicting standards for advice and compensation.

The institute developed the tool internally with input from the National Association of Personal Financial Advisors, establishing several areas of self-assessment for advisors.

The tool asks advisors to affirm that they adhere to those standards set forth in legislation, like the 1940 Investment Advisers Act, as well as those standards established through common law while working with clients, and to avoid conflicts of interest whenever possible.

Advisors are also required to provide written disclosures and statements of compensation.

The tool also asks for advisors to find a reasonable basis for their recommendations and to make their rationale available in writing, and to abstain from principal trading unless it’s initiated by a client upon explicit request.

Advisors are ordered to avoid gifts and entertainment unless they are minimal or occasional and to avoid third-party payments, benefits or indirect payments that do not benefit their clients and could be perceived as impairments to objectivity.

Eventually, advisors might be able to use the self-assessments to prove their adherence to the institute’s strict best practices and to demonstrate that they’re acting as fiduciaries to their clients.

“If an advisor has gone through the self-assessment and completed it in a reasonable manner, then it would certainly work as a guide or an aid for investors, assuming advisors made it available to investors,” Rostad says. “That would be one application.”

The institute’s best practices create a professional code of conduct that right now is voluntary, however, and Rostad says a new credential or professional designation surrounding the fiduciary standard might be developed.

The IFS is also considering offering third-party verification for advisors to confirm whether they meet its best practices requirements.

The institute is soliciting comments on the tool over the next 30 days.