Citing drawbacks for middle-class investors, the Financial Services Institute, an advocacy group for independent broker-dealers, urged the House Financial Services Committee Tuesday to apply a new universal standard of care to broker-dealers as well as investment advisors under the Investor Protection Act of 2009, which is currently being considered in Congress.

“Adopting an opaque fiduciary duty as the standard of care for those dispensing investment advice” does not make it any clearer to investors over the difference between investment advisors and broker-dealers, Dale E. Brown, president and chief executive officer of FSI, said in a statement Tuesday. Brown also says that upholding the standard could increase costs for advisors, making it more difficult for them to serve middle-class investors. Instead, FSI supports the creation of a new “universal standard of care” for both registered investment advisors and broker-dealers geared toward middle-class investors.

The organization also once again voiced its belief that investors “will be best-served by the creation of an industry-informed, self-funded regulatory authority dedicated to the effective supervision, timely examination and vigorous enforcement of both RIAs and broker-dealers.”

In response to President Barack Obama’s white paper calling for reform of the financial services sector, the Treasury Department presented Congress with draft legislation on July 10 called the Investor Protection Act of 2009. The legislation would allow the Securities and Exchange Commission to make fiduciary duty the standard for any broker-dealer or investment advisor who gives investment advice about securities.

 A bevy of advocacy groups in the financial services industry have lauded the White House’s call for enhanced reform of the industry. Several, however, have expressed concern over who must adhere to the fiduciary standard of care—as well as who will have the authority to enforce such a standard. Investment advisors are already subject to a fiduciary standard, which requires them to always act in the best interests of the clients. Meanwhile, Series 7 registered reps, on the other hand, must only meet a “suitability” standard, requiring that they recommend products suitable for clients.

One particular concern voiced by the industry is the possibility that the Financial Industry Regulatory Authority (FINRA) could be given the authority to oversee enforcement of such a standard. FINRA currently oversees Series 7 licensed registered reps who are subject to a different standard than Series 65 licensed investment advisors.

The Financial Planning Association, for example, has voiced concern that FINRA would water down the fiduciary standard of care to which investment advisors must adhere. The North American Securities Administrators Association, the group of state securities regulators, also supports requiring all broker-dealers to be subject to the fiduciary standard. But it too has expressed concern about FINRA taking the regulatory lead. “We believe that ‘harmonization’ is code for a lowering of the standard,” Denise Voigt Crawford, incoming president of NASAA, said in an interview with On Wall Street on Sept. 10. “The standard should be that you put your clients’ interests first and then case law can give guidance on how that operates.”

FINRA, however, believes the SEC does not have enough resources to regulate the industry should such a uniform standard arise. “The SEC has stated that it only has the resources to examine around 9% of SEC-registered investment advisors in 2009 and 2010. That is compared to 55% of broker-dealers that will be examined by the SEC and FINRA this year and next,” a FINRA spokesman said in a formal statement.

The Financial Planning Coalition, comprised of The CFP Board of Standards, The National Association of Personal Financial Advisors and the FPA believes the planning profession should be regulated as a profession, like accounting and law. Like their peers, the group also recommends uniform regulation of the planning profession. And while the Coalition supports President Obama’s reform proposal, it believe it will fall short of addressing all the current gaps in regulation of financial advice.