The 'F' Word Stirs Up Controversy

In the wake of investor losses and devastating Ponzi scandals,the new power in Washington has shown a recent zeal for financial services regulation. They are focusing on the oversight of those who provide financial advice, and it's reigniting the debate surrounding the level of care that advisors should meet.

At the heart of this debate lies a contentious word: fiduciary. In essence it means that advisors who fall under the fiduciary standard, namely investment advisors who run a fee-based business, must always put clients' interests before of their own. This generally means recommending the lowest-priced product that meets the client's needs and disclosing all conflicts of interest. On the other hand, broker-dealer registered representatives must meet a "suitability" standard of care. As the name suggests, this standard requires the advisor only to make "suitable" recommendations to his clients. That means the product he recommends doesn't necessarily have to be the cheapest available, and he's free to choose a product based on the amount of commission he is paid for selling it, provided it is indeed suitable for the client...

On Wall Street: The 'F' Word Stirs Up Controversy