Why is This At All Controversial ?

Registered Investment Advisors (like me) are held to a fiduciary standard they are always under a legal obligation to put the customers interests first. Thus it seems to me quite amusing that those not currently held to that standard: stockbrokers and insurance agents would fight so hard against having that standard applied to them. I would certainly plead guilty to being biased but would reading this nyt article on the debate over this issue and financial services reform give one pause before choosing to work with a stockborker or insurance agent  ?  While we wait for financial reform from our legislators it's not a bad idea to give the book pictured above a good read.

My bolds my comments in blue

Struggling Over a Rule for Brokers

By TARA SIEGEL BERNARD

While most of the debate about financial overhaul legislation has focused on the impact on how big banks do business, one piece that would affect consumers directly has received little public notice: a requirement that stock and insurance brokers act in their customers’ best interest.
And that provision may not make it into the final overhaul plan.
The insurance industry, in particular, has been fighting the requirement......

At issue is whether brokers should be required to put their clients’ interest first — what is known as fiduciary duty. The professionals known as investment advisers already hold to that standard. But brokers at firms like Merrill Lynch and Morgan Stanley Smith Barney, or those who sell variable annuities, are often held to a lesser standard, one that requires them only to steer their clients to investments that are considered “suitable.” Those investments may be lucrative for the broker at the clients’ expense.
Over the years, it has become more difficult for consumers to understand where their advisers’ loyalties lie, especially as the traditional stock-peddling brokers have started to look and act more like financial advisers. The fact that some brokers can wear two hats with the same client — that is, provide advice as a fiduciary in one moment, but recommend only “suitable” investments in the next — only adds to the confusion, experts said.
So as part of the more sweeping effort to overhaul Wall Street, both houses of Congress included measures that would subject brokers to the tougher standard. On the surface, both the brokerage and financial planning industry appear to agree that advisers of all stripes should be subject to a consistent fiduciary standard. But behind the scenes, the groups are divided on how exactly it should work, while the insurance industry is opposed to a fiduciary standard altogether.....

.....(financial) planners, along with consumer advocates, support the proposal in the original draft of the Senate financial reform bill by Christopher J. Dodd, the Connecticut Democrat who is chairman of the Senate Banking Committee. That proposal would simply erase the brokers’ exemption from the Investment Advisers Act and require them to register as advisers, making them fiduciaries.
“The Dodd bill is broader and stronger,” said John C. Coffee, a professor of securities law at Columbia Law School. “In the full-scale House bill, you see how limited it is. The House makes a new limited fiduciary standard to broker dealers, but only when they are giving personalized investment advice” about securities to a retail customer.
Consumer advocates say the phrase “personalized investment advice” leaves too much room for interpretation. What is more worrisome, they say, is that the House version would also not require brokers to “have a continuing duty of care or loyalty to the customer” after providing that advice. That could lead to “hat switching,” they say, where the broker wears his fiduciary hat when giving advice, but changes to the suitability hat when recommending products. 

The position of the securities industry strikes me as indicating it doesn't have the consumers' interests at heart

“We certainly don’t want a watered-down standard,” said Kevin Carroll, managing director and associate general counsel at the Securities Industry and Financial Markets Association, a trade organization. He said the association preferred the House version.

So they don't want a watered down standard but they prefer a stnadard that doesn't require that the broker have "continuing care or loyalty to the customer". In other words a standard less than that of a registered investment advisor even though the broker's business card says "financial advisor" or something similar (no one calls themselves a stockbroker anymore in my experience). Any wonder why people dont trust Wall Street ?

As for the insurance industry they just want nothing to do with the idea of putting the customer's interests first:

The insurance industry, however, is opposed to any additional regulation. ......I
Mr. Bullard said the insurance industry was “apoplectic because if they sell a variable annuity and they are subject to fiduciary duty, that means they will probably have to fully disclose the compensation they are getting.” This, he added, “would make clear the excessive incentives they have to mis-sell the variable annuity, which has been the cause of regulatory problems in that area.”
Richard G. Ketchum, the chief executive of Finra, said there had long been problems with how brokers disclosed their conflicts and how they pushed products “and whether they push products because they have an employee incentive or if it’s a proprietary product.”
The House bill makes sense, he added, in that it outlines a fiduciary standard and then leaves it to the S.E.C. to define it

Bottom line: it seems that even with any proposed changes to regulations governing the financial services industry the standards will not be uniform and only registered investment advisors will be held to the highest standard of placing the clients interests first.