WASHINGTON -- Supporters of a broader and more rigorously enforced fiduciary standard are rallying behind a set of best practices they would like to see advisors and brokers incorporate into their practices.

The Institute for the Fiduciary Standard, which is organizing a series of events this month to raise awareness about the issue, has released a report outlining a code of conduct for advisors working with retail clients, and is working to promote the cause with a new partnership with NAPFA.

NAPFA CEO Geoffrey Brown bills the partnership with the institute as an effort to drive education and public outreach on the fiduciary issue, saying the groups will collaborate "to advance our shared aim of establishing fiduciary best practices" and work "towards closing current gaps in consumer protection and education."

Knut Rostad, president of the institute, says that establishing a uniform fiduciary standard is a needed investor protection in light of "the increasingly dim and hard-to-detect line between sales and advice."

"Investors have misconceptions about what it is that brokers do, what it is that advisors do, what their services are, and what it is that they pay for their services," Rostad told reporters on a conference call. "I don't know that there's any question that there are huge misconceptions out there."

"Those misconceptions are harmful to investors," he adds.

'CLEAR, COMPLETE AND TRUTHFUL'

The institute's "Fiduciary September" is intended to call attention to the importance of codifying a uniform set of rules that would apply fiduciary obligations in equal measure to advisors and brokers at a time when observers see "sales practices drifting into the advice lane," as Chris Cannon, chief investment officer and a partner at the wealth management firm FirsTrust, puts it.

In its report, the institute is calling on fiduciary advisors to mitigate conflicts of interest, address compensation transparency, and ensure that their communications with clients are "clear, complete and truthful."

The future of a uniform fiduciary standard is anything but certain. The SEC, acting under a Dodd-Frank authorization, has been considering writing a rule that would extend the obligation to provide investment advice that's in a client's best interest to brokers, but critics both in industry and within the commission have warned of unintended and harmful consequences that such a rule could inflict on the brokerage model.

SEC Chairman Mary Jo White has repeatedly expressed concern that investors don't understand the different compensation models and regulatory obligations of brokers and RIAs, and has directed commission staffers to develop a set of potential policy measures to address that confusion.

BEST PRACTICES BOARD

In the meantime, Rostad and supporters argue that the investing public needs clearer disclosures about compensation from financial professionals, and should be made aware when an advisor or broker is in line for a commission from the sale of a specific product.

"The research and our practical experience anecdotally demonstrate that there's a wide, wide group of investing clients that don't have a clue what they're paying," he says.

In a bid to bulk up its fiduciary efforts, Rostad's organization is tasking a Best Practices Board, comprised of industry practitioners, to develop a formal set of criteria to be made available for public comment by the end of this year. Advisors who meet those guidelines, once formalized, could receive an accreditation from the institute.

Market Counsel CEO Brian Hamburger will serve as general counsel to the board, which plans to meet Monday in Washington. Vanguard founder John Bogle and Boston University law professor Tamar Frankel will head up an advisory council to offer guidance to the panel.

Kenneth Corbin is a Financial Planning contributing writer in Washington.

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