Are stockbrokers fiduciaries who put their clients’ best interests first, or are they simply salesmen, like peddlers of used cars or vacuum cleaners?

It may come as a surprise, but they are salesmen that work on commission, same as the guy flogging vacuums door to door. A registered investment adviser, however, is a fiduciary and must put his or her clients’ interests first.

It’s a huge distinction and shapes the way investment advice is given by the roughly 300,000 stockbrokers and investment advisers now working in the United States. Unfortunately, the clear majority of Mom and Pop investors across America don’t understand this difference, and that is a recipe for trouble.

Simply put, the two different business models for investment advice are confusing the American investing public. A recent InvestmentNews article reported that a study by The Spectrum Group, a consultant to financial services companies, shows that more than four out of five investors believe that their adviser is a fiduciary who acts in their best interests. Yet most investors use a full service broker, who sells investments based on suitability, not on a fiduciary duty standard of care.

“People assume that their adviser is a fiduciary, whether he or she truly legally is,” according to the article, which quoted a Spectrum managing director. “They assume that [the adviser is] working in their best interests, even if they are not bound to that standard. They just assume [the adviser is] doing the right thing for them.”

Surprisingly, Puerto Rico has long had a fiduciary duty standard for brokers. Unfortunately, as investors such as those who were sold UBS Puerto closed-end bond funds have sadly learned, brokers were not looking out for their best interest.

This swirl of confusion about financial advice business models has come to a head. The Department of Labor and the Securities and Exchange Commission are working on rules and guidelines to clarify the matter.

Under a recently proposed Department of Labor rule, investment advice standards would be raised for brokers working with retirement assets in 401(k) and individual retirement accounts.

And Mary Jo White, the chairwoman of the Securities and Exchange Commission, recently announced that she planned to explore setting a higher standard for brokers in dispensing investment advice. The SEC is now girding for a fight with the financial service industry, which is opposed to the new higher standard claiming that it will result in higher fees and fewer choices for customers.

White was clear about her position in remarks at an industry trade group meeting in March, according to an InvestmentNews article. She said the SEC should “implement a uniform fiduciary duty for broker-dealers and investment advisers where the standard is to act in the best interest of the investor.”

This would likely be a new standard from the SEC and would cover all brokers, not just those who oversee retirement accounts.

There is a battle raging between the government agencies pushing for the move to a uniform fiduciary standard for the American investing public and the deep pockets of financial services industry. The SEC and the DOL need to stand their ground and make clear what should be obvious—the customer comes first. All 300,000 stockbrokers across America must adhere to the fiduciary standard of care to protect Mom and Pop investors.

Zamansky LLC are investment and stock fraud attorneys representing investors in federal and state litigation and arbitration against financial institutions.