To be, or not to be, a fiduciary. That is the question the SEC must consider. Whether 'tis nobler in the mind to suffer the slings and arrows of an outrageous double standard, or to take arms against a sea of lobbyists and, by opposing them, end it.

Currently, financial advisors registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940 have a fiduciary duty to the clients they serve. Brokers, however, are not subject to this standard if they provide advice that is "solely incidental" to the conduct of their business as a broker. The result is that we have a double standard for financial advisors who provide personalized investment advice to clients.

Recently, Congress took a stab at rectifying this situation, but under withering pressure from a sea of lobbyists, fell short of accomplishing the goal. Instead, legislators directed the SEC to study the issue for six months. They also gave the SEC authority to eliminate the double standard and establish a universal fiduciary standard for financial advisors who provide advice to clients.

The SEC has solicited public comment on this issue and is now getting a reprise of the same siren songs that so befuddled Congress when it tried to straighten this mess out earlier this year. I, too, have tried to sort through the arguments on both sides, and it strikes me that the debate always seems to start in the wrong place.

Why don't we start by asking this one simple question: Should it ever be all right for a financial advisor offering personalized advice to not put his client's interests first? Instead, the debate seems to center on the impact that a universal fiduciary standard would have on the financial services firms subject to it and the unfairness of the current situation to those advisors now held to a higher standard.
This debate should be about the clients, not the advisors and the firms that employ them. If we started there, this discussion would be over in a heartbeat. If your mother walked into a broker's office with all her money and asked for guidance, wouldn't you want that broker to be subject to a fiduciary standard? And if you want it for her, why don't you for every man, woman and child who entrusts his savings to a financial advisor? 

The brokerage community squawks about the excesses of government and how they are already sufficiently regulated by a suitability standard (in other words, regulated for the suitability of the products they offer). But this argument is designed to shift the focus from clients, where it should be, to the emotionally charged topic of "big government." The fact is that the fiduciary standard is nothing new and does not represent some new power play by the feds. A large segment of the financial advisor community has been living with the fiduciary standard since at least 1940 and has been doing just fine. In fact, if I read the industry statistics correctly, that segment is growing faster than the other one.

Some of the comments the SEC has received suggest that the new fiduciary standard would create a burden on small businesses and claim that the excess costs of complying with it will be passed on to clients. First of all, the vast majority of firms that have lived with the fiduciary standard for years are small businesses themselves and, as I said before, they seem to be doing pretty well. And what exactly are the added costs of complying with the fiduciary standard anyway? Even assuming there were added costs, what client wouldn't trade a few extra dollars for the peace of mind in knowing his financial advisor had put his needs first?

Brokers say the fiduciary standard would generate too much litigation-and that the costs of it would then be passed on to clients. This is quite an audacious argument considering that there's already a lot of litigation involving brokers' failure to comply with the suitability standard they're bound to now. Maybe brokers should be relieved of that one as well to save their clients even more money.

But even those in favor of a universal fiduciary standard get lost in the rhetoric sometimes. They point mainly to the public's confusion-to the fact that most investors don't even realize there's a double standard for RIAs and brokers. Or they claim it's unfair that RIAs must take on more legal responsibility. These are both valid points, but they could just as easily be used to make the case that all financial advisors should be subject to the suitability standard alone rather than to the higher fiduciary standard.

I say we simplify this debate by creating a universal fiduciary standard that applies to all financial advisors offering personalized investment advice. There is simply no logic in this day and age, if there ever was, for the double standard. Clients should be able to place their full trust and confidence in their advisors. Advisors who cannot adapt to a world where they have to put their clients' interests first should exit the industry.