Even though Senate Banking Committee Chairman Christopher Dodd, introduced his financial regulatory reform bill earlier this month without a key provision on the fiduciary standard, some industry observers who support a more stringent standard are cautiously optimistic that tighter reforms will be implemented.

It was Treasury Secretary Timothy Geithner’s speech Monday at the American Enterprise Institute, a conservative think tank, that raised the hopes of some in the industry. He said that the Obama administration will only pass a financial reform bill that provides strong protection for consumers and reigns in the risk taking that has run rampant on Wall Street in recent years.

David G. Coffaro, chief fiduciary officer at Wells Fargo [WFC], said in an interview Thursday that whether or not a fiduciary standard is legislated for broker/dealers, financial advisors can use the fact that they are fiduciaries to speak to investors about how a fiduciary standard benefits investors.  

“I think it’s on the advisor to find a better way to tell their story,” he said. “A fiduciary philosophy is grounded in prudence and risk management. To the extent that fiduciaries can say, 'here’s the way that we think and here is how we approach this environment to further your financial goals,' then it’s about a philosophy that can benefit an investor regardless of economic conditions.”

Coffaro said that advisors need to be proactive at seeing the opportunity of fiduciary responsibility and discussing with clients about what’s in their best interest.

“By asking clients what are their goals and objectives, then in the context of the environment create the right recipe for a portfolio that will meet the objectives for this person in the long haul, an advisor is taking a fiduciary approach,” he said.

But Coffaro was clear about one thing: “Let’s not confuse putting a client’s interest before your own with working pro bono. We are not philanthropists. It means that when it comes to prioritizing stakeholders the number one stakeholder is the client.”

When an advisor puts the client's interests first, Coffaro said, the reward is repeat business and referrals to other clients. “It’s not a transaction anymore it’s a relationship,” he said.

The struggle for a stricter fiduciary standard is not going to end with Dodd’s bill. Sen. Tim Johnson, D-S.D., has proposed that a study be conducted by the Securities and Exchange Commission “to determine appropriate obligations of brokers, dealers, investment [advisors] and their associated persons relating to the provision of personalized investment advice about securities to retail customers.”

After the one-year study the SEC will decide the rules around advisor and broker/dealer oversight.

In the long run, Knut Rostad, chairman of the Committee for the Fiduciary Standard, an investment advisor group, said in an interview that he doesn’t think the Dodd bill and its study provision will stand in the way of moving toward a higher fiduciary standard.

“The movement toward a fiduciary standard is not going to stop,” he said. “We’re going to continue to see strong support for it throughout the industry. It’s not clear just how much this bump in the road this is going to be.”

For Coffaro, the question is, “How do you legislate doing the right thing?”

“That’s always the challenge,” he said. “I think the push for a fiduciary standard is about trying to find a new recipe to better address the needs of the investor.”