Whose interests does your financial adviser have at heart?

When Harley Lockhart started selling insurance in 1985, he used a system called the one-appointment sale.

"I knocked on the door, met the person for the first time, did a very quick analysis, made a presentation, filled out the application, collected the cheque and walked out," said Mr. Lockhart. "I made 100 sales in my first year, but I didn't sleep. I was worried about whether I was doing it for me, or whether I was doing it for the client."

So Mr. Lockhart, a 62-year-old doughnut shop owner and teacher, changed the way he did business. While he's still compensated through commissions on products he sells, he's now an accredited financial planner who provides client-focused advice.

Since the financial crisis peaked a year ago, advisers around the world have come under more intense scrutiny than ever and, in some cases, tougher regulation. We're just at the beginning of the process here in Canada, which means it's a good time to establish some basic points.

One: Some advisers are sales hacks in disguise. Blame them for the questions being asked about advisers right now, and blame the firms that quietly encourage this behaviour because it generates maximum profits.

Two: Some advisers are like Mr. Lockhart, which is to say that the advice business has something to build on if it chooses to put advising ahead of selling.

There has been some debate recently about whether advisers are fiduciaries, a term that basically means someone who has the duty to put clients' interests ahead of their own. The Canadian Foundation for Advancement of Investor Rights and York University's Hennick Centre for Business and Law staged a conference on this topic recently and the lack of consensus on the idea that advisers are fiduciaries was kind of sickening.

I asked Mr. Lockhart about this at the end of a recent professional development day for advisers in Kelowna, B.C., which was organized by Advocis, a trade and educational organization for providers of financial advice. (I was invited there to give a talk about what constitutes good financial advice). His reply was just what it should have been - unambiguously pro-client.

"Absolutely, no question about it," he replied when asked whether advisers should be considered fiduciaries. "There's no way that I can win unless my client wins first."

As an adviser, Mr. Lockhart describes himself as a "lone wolf," which is to say he runs a one-man office that isn't affiliated with any particular financial company. He has several credentials, including certified financial planner (CFP), Chartered Life Underwriter (CLU), which is an insurance-oriented planning designation, and chartered financial consultant (CHFC), an advanced planning designation. It says "Lock up permanent financial security with Harley Lockhart" on his business card.

"I don't tell any of my clients I'm going to make them rich," he said. "What I promise them is that I will relieve the stress of finance in their lives. When I meet with a client, my No. 1 measurement is that when they leave my office, they feel better about themselves and about their finances."

Mr. Lockhart's business is based primarily on the sale of insurance products that generate a commission for him. Commission-based advice raises a question - are products sold because they're right for the client, or because they pay the adviser well? The United Kingdom takes this potential conflict seriously enough to have announced that commission-based advice will be prohibited starting in 2012.

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The solution chosen by Mr. Lockhart is to insulate himself from the commission schedules for the products he sells. He said he's oblivious to the differences in commission from company to company, and to the key matter of whether he's selling enough product for any particular firm to qualify for higher levels of compensation (the more you sell with some companies, the higher the rate of commission you receive).

Mr. Lockhart said there are advisers who are in business to collect commissions and nothing more, but he doesn't agree that commissions themselves are the problem.

"It's not the method of compensation that causes someone to rip somebody off, it's their character," he said. "I think we're way too easy on how we evaluate the character of people coming into this business."

Like many of his peers, Mr. Lockhart thinks advisers already face too many regulations. For him, one rule will suffice in assessing the conduct of advisers. Are the recommendations they make in the client's best interest?

"I know that there are guys who say, what does that mean? If you have to ask that, you shouldn't be in the business."

It's encouraging to hear an adviser say it's a given that clients and advice come first. What would be even more encouraging would be to hear the heads of some advice-giving financial companies do likewise.

Fiduciary ABCs

What's a fiduciary?

Someone who must act strictly in the best interests of another individual based on the nature of the business relationship between them.

How would adoption of a fiduciary standard affect advisers?

They would have to recommend products and services that suit the client's needs.

What's the status quo?

Some advisers already meet the fiduciary standard, but others put a greater priority on generating commission revenue from the sale of products than they do on client needs.

What's the answer?

Canada is just starting to look at this, but the United Kingdom has already announced that earning commissions based on the sale of investments will be banned in 2012. In the United States, Congress has been looking at formally requiring advisers to be fiduciaries.