The fiduciary standard is an ongoing debate in financial services. Who is a fiduciary, what is a fiduciary obligation, is it right for everyone and what happens if it’s cost prohibitive?

To understand the debate requires a bit of context.

Historically financial services were delivered piecemeal. Need to get your tax return filed? Call a CPA. Need insurance? Call an agent. Wanna buy stock? Call a broker.

All of these product providers have an inherent conflict of interest. The barber has an incentive to tell you your hair is too long just as the plumber to tell you your water heater is about to burst.

This isn’t to say a built in conflict of interest immediately translates into disingenuous dealings. The mere presence of a conflict of interest doesn’t preclude advice from being honest. Plenty of auto mechanics will tell you your brakes can last a while longer.

Nonetheless there’s been a clamor amongst customers for objectivity – to work with firms that provide services free from the incentives that place providers ahead of customers.

Similarly there’s been a consolidation movement. Customers increasingly seek one-stop shopping where their tax, investment, insurance, estate, cash flow, company benefits and so forth can be viewed in the context of their interdependencies.

Combining these movements gave birth to the financial planning industry. The CFP Board of Standards has fought to define and defend this objective, holistic approach through branding campaigns and setting the standard for when the term “planner” may be used.

In doing so the providers of product have sought to muddy the waters. Terms like insurance agent or stockbroker had such negative connotations they’ve been changed to “advisor” and “consultant.”

In understanding the difference it’s important to understand that an “advisor” or “consultant” does NOT have a fiduciary standard. Such people need NOT look at a customer’s complete situation nor must they act in the customer’s best interest. The standard is one of “suitability.” Does something make sense vs. is it in the customer’s best interest?

Conversely “planners” are fiduciaries and MUST focus on what’s in the best interest of clients.

Today we’re at a place where various regulatory bodies are seeking to better inform and protect customers. The damage from and fear caused by the credit crisis of 2008 gave rise to attempts to raise the standard to which all advice should be provided.

This movement has struck fear in the large product providers. They’ve worked hard to keep customers in the dark so, naturally, they resist the movement to shine a light on their practices.

There’s a reason if you’re Fidelity or State Farm or Merrill Lynch or (choose your favorite) that you spend millions on marketing. Cute TV commercials are an effective means to distract customers from the truth. These firms exist to make money regardless of whether what they sell is in the best interest of customers. They don’t put the customer first because they’re not required to do so. Attempts to imply otherwise are intellectually dishonest.

To fight back against the push towards a fiduciary standard they’ve spent heavily on lobbying efforts. They’ve told regulators that forcing a fiduciary standard onto these suitability folks would raise the cost of providing “advice” to customers and price many consumers out of the market.

A new survey by fi360 refutes the claim. A survey of 600+ mostly RIA customers found that more than 80% provided holistic fiduciary services priced at or below piecemeal suitability services. About 75% believe “advisor,” “consultant” and “planner” imply that a fiduciary relationship exists even though customers don’t understand the difference. Almost 85% said disclosures alone were not enough to manage conflicts of interest.

As always it’s up to consumers to do their own research and select professionals based upon needs and priorities.