What might be the most important item of financial reform for the average American is something they've probably never heard of. It doesn't centre on huge banks, powerful regulators, or freakish derivatives.
Instead, it's a battle that targets change on a more intimate level, between investors and the people who counsel them on their finances.
At issue is a U.S. reform that would require all those providing investment advice, including stockbrokers and insurance agents, to act in the best interest of their clients.
"Dealing with other people's money is a very important trust, not like selling Budweiser or Kraft cheese or diamonds," said John Bogle, founder of Pennsylvania-based Vanguard Group, and one of several high-profile U.S. investors agitating for the change.
It is proving a rocky road. The proposal has drawn fierce opposition from some in the brokerage and insurance industries, and faces an uncertain future as the financial reform package winds its way through Congress. The struggle demonstrates how difficult it will be to overhaul the financial system, even in cases such as this, where regulators agree the change is necessary and where they have sought new rules for years.
"If you're an average, Main Street investor, this is the single most important provision in the bill to benefit you," said Barbara Roper, director of investor protection for the Washington-based Consumer Federation of America. The fact that it might not end up in the final version "is emblematic of the influence that the financial industry still exerts in Congress."
The proposal aims to eliminate a double standard that currently prevails when dispensing personalized advice to investors. U.S. registered investment advisers, who usually provide their services for an annual fee calculated as a percentage of assets under management, are required to act as "fiduciaries" - to put their clients' interests first, disclosing all expenses and potential conflicts of interest.
When brokers and insurance agents give investment advice, on the other hand, they are obligated only to make sure that what they are recommending is "suitable" for the investor involved, a lower standard. Nor is there any requirement to explain possible conflicts.
All three groups at times call themselves "advisers." U.S. surveys have shown that individual investors - even highly sophisticated ones - find it hard to distinguish between them.
Critics say the current framework means brokers can recommend investments that enrich themselves and their companies at their clients' expense - for example, mutual funds or fixed-income products that result in higher commissions to the person selling them.
"We've developed a financial system in the U.S. and around the world where too many of us are serving two masters," said Mr. Bogle, Vanguard's founder. "One is the company for whom we work, and the other is the client you're pledged to serve."
In Canada, financial advisers and brokers are not required to act as fiduciaries. Instead, those who provide investment advice must hew to the looser requirement of recommending suitable products. (Last week, the Canadian Foundation for Advancement of Investor Rights sponsored a day-long conference in Toronto on whether a stricter standard is necessary.)
Mercer Bullard, a professor of securities law at the University of Mississippi, says that insurance agents who sell investment products such as variable annuities and brokers who receive fees from the mutual fund industry are the most opposed to the change.
For example, the brokerage firm Edward Jones received revenue-sharing payments of $125-million (U.S.) from mutual fund and insurance companies in 2009; its annual profit was $164-million. If the firm's brokers had to put their clients' interests before their own, explaining how such payments work when suggesting products, it's possible the end result would be fewer fees.
A spokesman for Edward Jones did not respond to questions about how a move to a broad fiduciary standard in the United States would affect its business. The company "supports legislation that enhances investor protection," he wrote in an e-mail, but reserved further comment until legislation is actually passed.
For now, opponents of the change - who also argue it would be burdensome to implement - have the upper hand. An earlier version of the financial reform bill included it, but the iteration now before the Senate does not. Instead, the text calls for the Securities and Exchange Commission to complete a study on the issue.
Ms. Roper of the consumer federation said the language in the bill comes directly from talking points provided by industry lobbyists. "It requires the SEC to waste time and money to study an issue they have already studied in order not to do anything about it," she said.
However, it's possible the reform could be reinstated in the horse-trading ahead of a final version of the bill.
Meanwhile, with two standards prevailing, some say the result is confusion for investors, and possibly worse. "It's a little 'buyer beware,' " said David Armstrong, an investment adviser based in Virginia who, together with his partners, left Merrill Lynch two years ago to found Monument Wealth Management.
For lawmakers hesitant about voting for the change, he said, "I'd like to ask them how they would feel if their mothers or fathers were being advised by someone who was not acting in a client's best interest."