In the past week, there has been a lot of press about the SEC's stalled efforts to impose a fiduciary standard on brokerage firms. A January 10th letter for Chairperson Mary Shapiro revealed that the SEC is still working on a proposed standard and has delayed again to further investigate the cost-benefit of a regulatory change. They have been struggling with a standard that would require brokers and their representatives to be held to the same standard as registered investment advisors (RIAs) and put retail clients' interests above their own.

No surprise here that they are struggling with a solution! First off, let me state that I firmly believe that both fee structures and business models are necessary. Do I think the SEC will come up with a workable standard? Not anytime soon.

When product compensation is heavily front loaded, there will always be instances where the broker/rep interests are above that of clients. That does not mean that brokers/reps cannot and do not act in the best interests of clients. While investor confusion is often cited, the SEC continually skips over the obvious. There should certainly be standards for those providing advice and products, but it is imperative to start with the client and not with the financial professional.

What can be controlled is simple and basic disclosure statement about compensation options for investment advice and the potential conflicts of interest that are inherent in all models (and Yes, the RIA model has conflicts of interest too!). This was figured out in the mutual fund world several years ago. A simple fee analysis goes a long way.

Prior to any investment sale or advisory contract, a financial professional should be required to provide a statement of fees that provides a "plain-English" summary of the various fee structures and the potential conflicts associated with each option. The statement should be based on a standard investment amount (i.e, $10,000 or $100,000) and detail the potential costs in various fee structures. This transparency is a healthy discussion regardless of the business model. Financial professionals need to get more comfortable discussing the value they deliver. Further, "Suitability" vs. "Best Interest" can be extremely subjective. Disclosure of the math is much more telling.

We do look forward to the outcome of the fiduciary debate and the implementation of some ground rules, but there is no need to leave investors blowing in the wind in the interim. There are simple steps to take that will demonstrate to your clients that you are their "trusted advisor".