A uniform fiduciary standard won’t change anything

Next, there is the argument of compensation in which I revert back to my previous statement. Regardless of how an advisor is compensated, I feel it is their "moral responsibility" to put the clients' interest first. There isn't a compensation model available today that eliminates biased advice. Commissioned advisors may be biased by offering insurance products and/or investments that pay them a higher commission. However, fee-only advisors provide recommendations that may be biased as well. For example, advisors have certain insurance products and investment vehicles that they prefer to offer their clients based on past performance, familiarity with the product, and their own personal preferences. The manner in which they are compensated does not deter them from favoring certain insurance and investment vehicles in their financial plans for clients. Therefore, their advice lends itself to bias because of their own personal preferences. 

How do we protect ourselves and minimize the risk of being the victim of fraudulent activity? Become more aware! In most cases when we think of crime, we protect ourselves with things like neighborhood watches and self-defense classes. We watch shows and read articles on crime prevention. Why? We are afraid of physical harm. However, when it comes to our money, Americans find themselves less than prepared to protect themselves. With skyrocketing debt-per-household numbers and bankruptcy filings in American, it is clear that we are not holding ourselves accountable. According to a financial literacy study titled "Study Regarding Financial Literacy Among Investors" conducted by the SEC in August 2012, they discussed the existing level of financial literacy in the U.S.

As stated in the findings: "Studies reviewed by the Library of Congress indicated that U.S. retail investors lack basic financial literacy. The studies demonstrate that investors have a weak grasp of elementary financial concepts and lack critical knowledge of ways to avoid investment fraud."

Dare I say that we have a financial literacy epidemic on our hands? A uniform fiduciary standard doesn't change the fact that an investor may not even know if an advisor is working in their best interest (even if they were) because he or she may lack elementary knowledge of financial concepts and critical knowledge on how to avoid investment fraud as stated in the study findings.

Perhaps if we better educate the average investor by providing sound and unbiased financial education, we can better equip investors to be able to identify potential investment fraud and empower them to select the type of advisor that is appropriate for their specific needs. In my opinion, there needs to be a cultural shift in the country rather than a legislative movement to clean up the industry.

There is no easy answer to the problems plaguing the financial industry and America, but as an industry, all sides must come together to make any substantial progress and stop casting blame.

For more from Todd Greider, see:

• The trusted advisor: Are you one and how do you prove it?
• 4 bad habits that stunt your business growth
• Anatomy of a successful advisor