As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Securities and Exchange Commission issued a report January 21 on whether everyone providing personalized financial advice to consumers should be held to the same standard of conduct when giving that advice. The SEC’s answer? Yes, a uniform fiduciary standard is appropriate. And if you assumed that was already the case, you’re like most consumers, according to the SEC, which found that people are confused about the difference between a “registered investment adviser” and a “registered representative” working for a broker/dealer—especially when it comes to how customers’ interests are protected in each case.

Currently, registered investment advisers are held to a “fiduciary standard.” That means they are legally bound to put their clients’ financial interests above their own financial interests. Registered representatives of broker/dealers or insurance agents who sell securities-based products are held to a “suitability standard.” That means that the products they sell or recommend must be “suitable” based on the client’s risk tolerance, financial situation, and investment goals; however, the rep may take his or her own financial interests (i.e., commission) into consideration as well.

So what if registered reps will now be held to the more stringent fiduciary standard? According to Limra, it could be “a game changer” for the insurance industry, which had essentially been left alone by the Dodd-Frank bill. “I think many producers, especially those at the older ages, will stop selling variable products and mutual funds, which have to be sold through broker/dealers,” said Bob Baranoff, FLMI, LLIF, Limra’s senior vice president, member benefits. “Some may even take an earlier-than-expected retirement. Unless the current regulations regarding indexed products are changed, indexed sales may be the beneficiary.” In Limra’s recent 2011 Industry Predictions survey, financial industry executives were asked whether they agreed with the statement, “Many producers will drop their securities registrations” if a uniform fiduciary standard is enacted. Respondents were split, with 38 percent saying they agree and 38 percent saying they disagree. Ten percent said they “strongly agree” while 2 percent “strongly disagree,” and 12 percent weren’t sure.

Asked about potential effects on incentive contests and conferences, Baranoff said that “if a lot of producers become fee advisers, it could certainly alter the incentive landscape. Incentive conferences are designed to motivate producers to make more sales. If they are getting paid a fee by the client, instead of being rewarded by the company, the incentive trip would be meaningless. On the other hand, if producers simply stop selling registered products and shift their focus to fixed products, then incentive conferences are still very much in play.” As well, the SEC left room for the commission-based business model and a new uniform standard to coexist, in order to maintain that choice for consumers who prefer it.

So far there are many more questions than answers—and plenty of trade groups and other interested parties offering their input in the process. But it will be mid- to late 2012 before registered reps and investment advisers start operating under a single fiduciary standard—if they ever do, in the opinion of Richard Ketchum, CEO of the Financial Industry Regulatory Authority Inc. Finra could be the self-regulatory organization that oversees the new standard, if enacted, for both broker/dealers and investment advisers.

But there is one sure impact on meetings anytime new regulations come into play: Companies will need to educate producers about them and create strategies to deal with them, so look for a jump in business and training meetings on the topics of disclosure, consumer protection, and the definition of “fiduciary” in the coming 12 to 18 months.