Whether we like it or not, we're in a world of increasing regulatory oversight.

Along these lines, the U.S. Congress this summer passed a law instructing the Securites and Exchange Commission to conduct a six-month study related to advisor and broker responsibilities with respect to their clients.

After conducting the study, the Commission is authorized to put in place rules to require a fiduciary standard of conduct for all financial and investment advisers. Under these rules, when providing personalized investment advice , advisors would be required to act in the best interest of the customer without regard to the financial or other interest of the advisor providing the advice. 

Defining  fiduciary responsibility

A fiduciary duty is the highest standard for conduct for any professional. Under this standard, advisors are required to act at all times for the sole benefit and interests of clients, cannot put their personal interests before those of their clients and can't profit from their position unless explicit consent is obtained.

The fiduciary responsibility imposes a significantly higher standard than the current level, under which advisors are merely required to provide advice that is consistent with client needs.

Operating in a skeptical world

Whether or not the proposal to impose this standard on U.S. advisors ends up being implemented   and then ultimately migrates to Canada, we are seeing increasingly higher levels of skepticism among consumers.

And that's not just true of the financial industry.

Look no further than the uproar when medical researchers suggested that the experimental "liberation" cure for multiple sclerosis needed much more study before being made broadly available.

In the past, Canadians with MS hoping for a cure would have accepted this verdict with resignation - but not this time. There was a grass roots rebellion, unrelenting pressure on Governments to aggressively fund research into this procedure - and widespread accusations that the researchers urging caution were conspiring with drug companies to suppress this new breakthrough.

And I saw it personally after one of my recent columns in the Globe and Mail, when I suggested that many investors would reduce stress and improve returns if they looked at their portfolios monthly or quarterly rather than weekly, daily or hourly. In response,  there were broad based online comments from readers that I was obviously a shill for the investment industry, trying to keep investors in the dark so that firms could maximize profits from unwary consumers.

A code of conduct

            Perhaps the single most respected U.S.financial advisor is Harold Evensky of Evensky & Katz in Florida, an industry pioneer who was recently rated among the 30 most influential members of the U.S. investment industry over the past 30 years.

            In August, Evensky suggested that American advisors shouldn't wait for the SEC to act.

            Rather, he suggested that advisors should post the code of conduct under which they operate on their website, for all existing and prospective clients to see.

            And here's his recommendation for what a code of conduct might look like:

1.     Always put clients' interests first

2.     Act with prudence - with the skill, care, diligence and good judgement of a professional

3.     Minimize the chances that clients will be misled, by  providing conspicuous, full and fair disclosure of all important facts

4.     Keep potential conflicts of interest to a minimum

5.     Where unavoidable conflicts occur, fully disclose them and manage in the clients' favour

            Chances are that this code of conduct won't be exactly the right one for you.

            But consider whether in an ever more sceptical world it makes sense to put on paper the standards under which you operate, to use as a starting point for conversations with existing and prospective clients about how you work.