On June 17, President Obama released his five-point financial services reform plan, which included a recommendation that all advisors providing investment advice be held to the fiduciary standard. I've seen a number of commentaries and discussions on the likely impact such a standard would have on the industry. I've also seen a fair amount of misinformation and misplaced speculation. Let's separate some of the facts from the fiction.

Fact or Fiction: Fiduciaries are boring.

This is mostly a fact. First, I'll introduce myself: I've been writing, teaching and speaking about fiduciary responsibility for more than 22 years. As passionate as I am about the subject, I will be the first to admit that many people find it pretty dull. But it doesn't have to be that way. You can get to a fiduciary destination through numerous routes-by talking about industry best practices; the leadership characteristics of successful investment advisors, trustees and investment committees; by illustrating fiduciary concepts with the indigenous wisdom of Native American tribal leaders; and when a light touch is called for, even through Saturday Night Live characters. If you don't believe me, stand by for future columns.

Fact or Fiction: Under the fiduciary standard, I won't be able to sell proprietary or commission-based products.

Fiction. The cornerstone of any fiduciary standard is the requirement that decision makers demonstrate their procedural prudence and show the details of their investment process. No investment or strategy is imprudent on its face. It's the way an investment is used, and how decisions about its use are made, that must be examined. Using proprietary and commission-based products can meet the standard if arrived at through a sound, objective process. But even the most conservative no-load product may not measure up if it lacks a sound process. And the use of proprietary or commission-based products will likely heighten scrutiny of your process.

Fact or Fiction: A fiduciary process is a drag on performance.

Fiction. The economic crisis has only reinforced the maxim that superior investment returns are the result of developing a prudent process or strategy, and sticking to it. I believe clients whose advisors employed a fiduciary process fared considerably better than clients whose advisors did not, though I haven't seen the research. If there were a "fiduciary performance index," it would tend to trail the performance of top-quartile money managers and top-performing asset classes. But it would rarely, if ever, be in the bottom quartile of a performance universe. Therein lies the secret to long-term success—staying out of the bottom quartile. Consistent good performance-not occasional greatness—achieves superior long-term results.

Fact or Fiction: A fiduciary standard will affect all brokers.

Fiction. A fiduciary standard will likely only affect brokers who provide comprehensive and continuous investment advice—not those who merely execute transactions or sell products. Actually, this isn't new and doesn't require changes in legislation or regulations. What is dramatically changing is how the rules and regulations will be interpreted.

Fact or Fiction: It will take an act of Congress to make me a fiduciary.

Fiction. Even if there are no changes to the current regulatory scheme-and that's highly unlikely-a court or arbitration panel can rule that your conduct gave rise to fiduciary status, despite the fact that you don't acknowledge that status in your services agreement.

Here's the classic example: A broker gains a new client, who signs a traditional brokerage agreement. The relationship starts with the broker executing a few transactions. Over time, the broker gains the client's trust and the client asks the broker to manage his entire portfolio. The broker provides the client a well-thought-out investment strategy, including a select list of funds and money managers to implement the strategy, and periodically meets with the client to review the portfolio's performance. The broker is doing everything a seasoned professional should be doing.

The problem is that when the broker began providing the client comprehensive, continuous investment advice—not just executing transactions-the broker's requisite standard of care shifted from suitability to fiduciary. As long as the client is happy, all is fine. But if the relationship becomes adversarial, you can bet that the opening salvo from the client's legal counsel will be that the broker breached his fiduciary responsibilities.

Fact or Fiction: Fiduciary liability is tied to investment performance—if I lose any of my client's money, I'll have to make the client whole.

Fiction. Fiduciary liability is tied to process, not performance. It's not whether you win or lose; it's whether you can demonstrate how you played the game. This should give you great comfort. You can't control the volatility of the markets, but you can control the quality of your investment process. Your value proposition to clients will be that you provide a sound, objective, disciplined investment process. That's a promise more easily kept than performance.