Taking the ostensible "pro" side of the argument was Robert Plaze, formerly of the SEC division of management. On the "con" side was for SEC Commissioner Troy Paredes.

They spoke of having several lengthy discussions on the merits of the fiduciary standard during their overlapping tenure at the SEC.

Plaze claimed the two sides actually agreed on the bulk of the issue, with only about 5% of the "total issue" causing the disparity.

Paredes essentially confirmed this when he told the group he did not disagree with the fiduciary standard, he just couldn't make a decision until he saw a cost-benefit analysis.

Plaze went so far as to say there should be no changes to the fiduciary standard on the RIA side since decades, if not centuries, of common law had forged what we understand it to be.

On the other hand, he'd like to see the brokerage industry have the chance to experience its own "common law" evolution in terms of its standard.

It was immediately apparent both had the inside-the-beltway mentality. They based their arguments on a paradigm advocated by opponents of the fiduciary standard. As a result, they've missed the point. 

Here's the best example of what I mean: the so-called "cost-benefit" analysis focuses solely on the two competing business models.

It's an industry-centric point of view, not an investor-centric point of view.

This is embarrassingly ironic given the SEC's About page on SEC.gov is titled "The Investor's Advocate: How the SEC Protects Investors, Maintains Market Integrity, and Facilitates Capital Formation."

Now, to his credit, Paredes did mention the possibility that forcing the fiduciary standard on brokers might impede capital formation, but in doing so, he demonstrates a clear lack of understanding between the role of an adviser and the role of a broker.

Brokers act as the oil to the capital-formation engine. They bring the two complimentary sides (the buyers and the sellers) together. Their job is not to grow investments, but to facilitate capital markets.

Think of it this way, is a real estate broker paid to sell the property or paid for the amount the property appreciates?

Granted, brokers might tell buyers the asset the buyer is thinking of buying may appreciate in value, but the broker only gets paid on the transaction, not on whether the asset actually appreciates. 

The fiduciary standard is about only one thing: investor protection.

It is not about business models. It is not about how one gets paid (unless payment involves a prohibited self-dealing transaction).

This is what the centuries of common law Plaze refers to has resulted in.

Consequently, the debate concerning the fiduciary standard should not be "how much will adopting a Uniform Fiduciary Standard cost the industry" but "how much has the lack of a Uniform Fiduciary Standard costs the investor?"

(A quick answer: About $1 billion a month for retirement investors only.)

The current tact employed by those opposing Universal Investor Protection (oops! I meant, the Uniform Fiduciary Standard) is a huge FAIL when it comes to scoring debating points. (For those not in tune with the real world, debating points are not the same thing as political points. The former is measured in terms of logic, the latter in terms of PAC dollars.)

Of course, being a student of rhetoric, I often amuse myself by arguing both sides of any debate with equal fervor. Which leads me to the true Achilles' Heel of the fiduciary standard.

It begins with this undeniable premise: The government cannot indiscriminately favor one business over another within the same industry.

This has to do with everyone "being created equal," the consequent "equal protection under the law," and all that elementary school stuff you learned about the founding of America.

Today, we have, within the same industry (i.e., the investment advice industry) and two different businesses (more appropriately, business models, the Registered Investment Adviser and the brokerage advisor), unequal protection under the law.

Under the current regulatory regime, the government favors one business model (the broker advisor) over the other business model (the Registered Investment Adviser).

This wasn't always the case. In fact, it's a relatively recent phenomenon (say, within the last decade or so, when brokers were permitted to pursue the advisor business beyond the "incidental" exemption originally permitted under the Investment Advisers Act of 1940.)

Since we believe the government is morally obligated to treat all businesses in the same industry alike, and since it currently isn't, the government must either: 1) Adopt a Uniform Fiduciary Standard; or, 2) Remove the fiduciary standard now imposed solely on Registered Investment Advisers.

The debate comes down to leveling the playing field. Both options will accomplish this. And those options are the only options an honest (q.v., "political points") government should and must pursue.

So, you see, there is a reasonable and logical reason to oppose the fiduciary standard. But it only works if you remove the fiduciary burden wrought forth by the Investment Advisers Act of 1940.

Of course, this has dramatic consequences. It will remove a major element of investor protection that dates back to the Magna Carta.

Is the SEC willing to have investors pay this cost for the benefit of saving the broker advisor business model?