The Hill (June 6, 2017) - The first time you hear the term “fiduciary rule,” it sounds like some hopelessly complex and technical thing that only a lawyer or a policy geek could love. When you are told that it’s a safeguard to ensure that financial advisors put customers’ interests before their own, it still may not sound like something that you should necessarily be concerned about.

But the truth is that the fiduciary rule is all about “real people” — tens of thousands of American retirement savers and investors who lost $17 billion last year because the fiduciary rule was not in effect and who will lose billions more in 2017 if the rule is reversed or killed.

When newly-inaugurated President Trump issued his Feb. 3 memorandum addressing the fiduciary rule, it became clear that his administration would try to overturn the rule. Although the Department of Labor (DOL) has announced that the fiduciary rule will go into effect this Friday, DOL made it clear that it will still study the rule and could seek to overturn it.

Meanwhile, Congress has taken steps to attack the fiduciary rule from another angle. The Financial CHOICE Act, which is now headed for a full vote in the House, would stop the fiduciary rule in its tracks, requiring that the Securities and Exchange Commission (SEC) start from scratch on a rule of its own to govern the conduct of financial advisors.

Lawmakers still face a decision, and so it’s more important than ever as we try to understand why the fiduciary rule is worth saving. Consider the case of Bill and Susan, a retirement-age couple from the Midwest. Susan is 69 and Bill is 71 and continues to work as a facilities manager. Bill and Susan were introduced to their broker, Bob, by fellow church members.

Initially, Bob reviewed the couple’s retirement accounts and told them that they were being badly mismanaged, that they should sue their old broker and that they should trust his professional management. The retirement accounts were transferred to Bob’s management. Over the next five-and-a-half years, Bob eviscerated Bill and Susan’s savings through a pattern of excessive trading.

Susan’s individual retirement account (IRA) was worth over $700,000 when it was handed over to Bob. It ended up at just over $250,000 — a loss of $450,000. Bob earned almost $230,000 in commissions. Bill’s IRA was worth just over $250,000 when it was transferred to Bob. At the end, his IRA was down to just $40,000 — a loss of over $200,000.

Bob earned $130,000 in commissions on Bill’s account. In total, this typical Midwest couple lost over $600,000 of their retirement funds, while Bob pocketed nearly $400,000. America’s cities, small towns and rural areas are filled with thousands of stories like those of Bill and Susan. If you think that there are sufficient safeguards already in place against such abuses, think again.

How does our current system permit conflicted advice that costs investors roughly $17 billion each year? Here’s how it works: Currently, brokers are governed primarily by FINRA self-regulatory rules and state laws (which vary widely across the country). For example, the FINRA suitability rule requires that a broker only have a “reasonable basis” for making an investment recommendation and that the recommendation be “suitable” for the investor.

Under this so-called suitability standard, a broker can sell a high-priced mutual fund to an investor rather than a low-cost S&P 500 Index fund if the broker determines that the higher-priced fund is also “suitable.” The broker is not required to disclose to the investor that there were other lower-cost options available or that there were conflicts of interest (e.g., higher commission) that may have influenced the broker’s recommendation.

The notion that "caveat emptor" — the principle that the buyer alone is responsible for checking the quality and suitability of goods before a purchase is made — will somehow get the job done does not recognize the reality of how financial services are sold to people like Bill and Susan. Every year, investors file thousands of cases against brokerage firms. The most frequently asserted claim in these cases is of breach of fiduciary duty because investors believe almost uniformly that their financial advisor is a fiduciary.

Investors believe this because firms continue to mislead them, representing brokers as trusted advisors. In reality, the brokers are usually nothing more than salespeople. It is not until the brokerage firm files its answer in the arbitration that firms finally inform investors of the true nature of their relationship with their broker. In the end, investors who do not fully understand the relationship continue to put undue trust in their brokers.

Who can blame small savers and investors for being confused?

The brokerage firms that work with retirement investors have presented themselves in their advertisements and on their websites as trusted counselors and advisors for years. Indeed, to enhance this image, the individuals working for the firms are bestowed with impressive titles such as “Financial Advisor,” “Financial Consultant,” “Retirement Consultant,” and “Wealth Manager.” Based on the perception carefully crafted by the firms, investors believe the individuals they are dealing with will act in their best interests.

Small investors have a right, and more importantly, a need, to be protected. In retirement, the vast majority of these individuals have no choice but to rely on whatever they have managed to save to fund their retirement years, have little or no tolerance for risk and cannot afford to lose money due to a broker’s conflicted advice.

These investors are also at a disadvantage because, if they do lose money, they may not be able to obtain any meaningful recovery against the financial professional or the firm. Indeed, investors in small cases do not fare as well as other larger-sum investors in FINRA arbitration, averaging approximately a 10-percent lower win rate.

Now that it is going into effect on Friday, the fiduciary rule should not be frozen or repealed by the Trump administration or by Congress. When financial professionals pilfer those $17 billion in excessive fees from savers and investors, they are directly diminishing the quality of retirement for tens of thousands of Americans.

This attack on the golden years of middle-class Americans needs to stop. Ask Bill and Susan. They will tell you that the cost of going forward without a fiduciary rule is way too high a price for Americans to keep paying.

Marnie C. Lambert is a Columbus, Ohio attorney who has spent the past 10 years representing investors across the country in securities disputes with their brokerage firms in both FINRA arbitrations and in court. Lambert is the president of the Public Interest Arbitration Bar Association (PIABA), an international bar association whose members represent investors in disputes with the securities industry. Currently, there are members from 44 states, Puerto Rico and Japan.