Investors told Securities and Exchange Commission staffers that proposals that are supposed to help consumers understand if they’re working with a broker or a registered investment advisor are downright confusing.

Investors who attended investors roundtables in Atlanta and Washington, D.C., met directly with SEC staff to express their opinions on the SEC’s best interest and customer relationship summary proposals -- specifically to give feedback on whether the proposals are effective in helping them understand the different legal standards of care brokers and advisors must provide to investors. Brokers operate under a suitability standard while advisors are held to a fiduciary standard and must put their clients’ interests first at all times. Confusion and conflicts of interest inflicted by financial professionals have cost retirees some $70 billion in hidden fees, according to the General Accounting Office.

The specter of such conflicts and hidden costs bother Brian Smith, an AARP member and retired Naval officer from National Harbor, Md., who attended the SEC roundtable in Washington, D.C. Smith said the investor consensus at the meeting was the SEC proposals’ use of the term “best interest” to describe brokers’ standard of care is “very misleading and confusing.”

“There was significant concern over the SEC saying that brokers are acting in a customer’s best interest as opposed to an advisor acting as fiduciary,” Smith said after the roundtable. “That is very confusing and misleading, since using best interest implies a fiduciary relationship. Most people understand fiduciary, but saying someone is acting in your best interest when they may well be acting in their own best interest is just misleading,” Smith added.

“A lot of folks reiterated these points. No one disagreed,” he said of attendees at the roundtable.

Getting it right is critical for the SEC as retirees increasingly rely on their 40l(k)s and 403(b)s, according to Smith, who said it bothered him that conflicted advice costs retirees some $70 billion. “If instead that money was invested at a 10 percent return if would have doubled over 10 years. That’s so important to retirees who are trying to keep investments working for us and growing so we don’t outlive it,” he said.

“There are significant pitfalls out there where financial advisors may not place our interests above their own. For folks like me who don’t deal with these topics frequently but maybe engage a financial advisor -- to use a generic term -- once or twice in our lives, it’s critical we understand the legal relationship and all the types of fees,” Smith said.

He and other investors at the roundtable asked the SEC to ramp up fee disclosure, he said. “There was a lot of discussion asking the SEC to ensure there is full disclosure of fees, especially with regard to broker-dealer charges. … Even with things like trail commissions, where a broker advises you to hold on to, say, a mutual fund, he’s still being paid,” Smith said.

Asked if he thought the SEC would listen to the cacophany of investor concerns, Smith said: “One can always hope. I applaud them that they had a public meeting. I applaud them for receiving the information and hope it makes it into the final rule. We owe it to ourselves to maintain close scrutiny of the outcome of this,” he added.

AARP executives, who have been active in providing feedback to the SEC, have encouraged members like Smith to attend all of the SEC roundtables.

Cristina Martin Firvida, AARP director of financial security and consumer affairs, said investors who attended the first SEC roundtable in Miami had similar concerns.

“One investor who attended is an editor and is working with detailed documents day in and day out. And she said, ‘I don’t find forms useful and I can’t understand the difference between the standards,’” Martin Firvida said. “She was nice about it, but definitely said the forms need editing.”

Another AARP member who volunteered to attend the Miami roundtable has a legal background. “He said, ‘I have trouble discerning the differences [between brokers and advisors] and what you’re trying to tell me.’ We are very curious as to how these roundtables go,” Martin Firvida said. “We’re happy that the SEC is asking for public feedback. We think that’s good, but the retail investors who’d be recipients of these forms and glean info from them are just having a hard time figuring out what they’re trying to get from them,” she said.

The AARP is part of a consortium of 24 state regulators, financial planning and consumer groups that has asked the SEC to delay the August 7 deadline for commenting on the sales conduct proposals for 90 days so that the SEC can conduct expert testing and make results public.

“We’ve requested an extension and we continue to look every day for a response on that,” Martin Firvida. “But our expectation at this time is that we will file comments on the 7th. I don’t have any concrete info on how the SEC is testing the form. I have no particular insight into what the results would look like.”

The remaining two SEC investor roundtables are scheduled for Philadelphia on July 17 and in Denver on July 25.