Financial Advisor IQ (July 27, 2015) -- The Department of Labor’s proposal to impose the fiduciary standard on brokers managing retirement accounts has ruffled many feathers. By the end of the comment period, July 21, several industry groups and large financial institutions had attacked the proposed rule as unnecessary and too costly to smaller clients. But these attacks stem from several fictions the brokerage industry conveniently chooses to favor over facts, arbitration attorney Joseph Peiffer writes in The Hill.

Peiffer, president of the Public Investors Arbitration Bar Association, argues that the brokerage industry’s arguments are self-interested and ignore the underlying facts of the matter. For instance, he writes, investors do not at all understand the difference between the services of a broker and that of an investment advisor, as some opponents of the proposed change have maintained.

In fact, three quarters of investors don’t understand there are different rules applied to the two types of financial professionals, according to a 2010 survey by the Consumer Federation of America, AARP and state securities regulators cited by Peiffer. And a 2015 study suggests most retail clients think all financial advisors are fiduciaries, regardless of channel. Neither are investors happy with the status quo, Peiffer writes, particularly as data comes out about the cost to investors of conflicted advice, citing a February study by the Council of Economic Advisers that estimates the annual loss from conflicted advice at $17 billion.

Also false, argues Peiffer, is the idea that the current suitability standard is sufficient to protect investors. Otherwise, he says, brokers who end up in arbitration wouldn’t be so eager to claim they have no obligation to uphold the fiduciary duty.

As far as smaller investors getting priced out as a result of the rule, Peiffer points to a 2013 fi360-ThinkAdvisor survey that concludes applying the fiduciary standard to brokers wouldn’t price out investors from obtaining financial advice. On the contrary, the study says, it would save them money in the long term.