They fail to distinguish between investment advisers, who are regulated under a 1940 law and broker dealers, who are governed by a 1934 statute. The former owe customers a higher, "fiduciary" obligation to avoid conflicts of interest, disclose any fees, and above all, put the client's interest ahead of their own. Brokers, who basically facilitate securities transactions, are held to a weaker "suitability" standard: not to recommend inappropriate investments, lie, deceive or commit fraud. Caveat emptor, not fiduciary loyalty.

The trick is recognising which one sits across the table. About 15 years ago, the dividing lines become fuzzier. Brokers began to portray themselves as trusted financial advisers who offered a panoply of investment products, many manufactured in-house and packaged to look like those of their adviser counterparts. As a result, few investors now grasp the opposing legal distinctions and titles have lost meaning. "Under today's standards, an investor can talk to two people, get a business card with the same title, and not know they are receiving different standards," explains Luis Aguilar, one of the five Securities and Exchange Commission (SEC) commissioners. However, if both card givers were subject to the same broad based fiduciary requirements, Aguilar adds, "One could call oneself 'The Grand Pooh-Bah' and it wouldn't matter."

Disclosing compensation is only one aspect of the current different discrepancy, and does not ensure that the investors get a better product. Commissioner Aguilar supports raising the standard for broker dealers who provide personal financial advice (versus only executing trades) to an affirmative fiduciary obligation. "If a broker dealer tells a client that investment A pays Y, and knows another investment B pays Y plus 2, and we can somehow prove the broker knew the investor would be better served by the second one, then the broker should go beyond disclosure of what he is being paid," Aguilar explains. Brokers still have an incentive to push their in-house products while advisers must discuss a full range of available options. If standards were elevated, "those brokers who give advice would even have to include competitors' products. That's the beauty of full disclosure!" says Aguilar.

A Shattered Life

In 1997, 47-year-old Vikki Vargas spent three months in a coma and became permanently disabled, after suffering brain injury from a ruptured aneurism.