I don't usually watch PBS. It's not that I'm not cultured, I just don't watch TV in general. But when PBS ran the special remastered version of the Beatles' Magical Mystery Tour, complete with a new documentary, you knew I'd be glued to the set.

Turns out I turned the TV on a little early and caught the tail end of some financial advice show. I'd never seen it before and didn't recognize the guy hosting it. But my ears perked up when they asked the audience, “Does Wall Street provide a service or make products?” My attention caught, I waited until a voice boomed the answer.

“The business of Wall Street,” the deep voice convincingly bellowed, “is to create and sell product, not to provide a service.”

I nearly threw my Sgt. Pepper's novelty mug at the large LCD array in front of me. But, for the sake of my son's video game career, I held back, figuring the columnist's pen is mightier than the ceramic tankard.

This singular statement reflects all that is wrong with nation's view of the financial industry. That it appears on PBS suggests our society's “sophisticates” aren't really that sophisticated at all. It's no wonder they hate the banks. Not that there's anything wrong with that, it's just they hate them for the wrong reasons. But I digress. In truth, the financial services industry provides both products and services.

The concept of “product versus service” cuts right to the heart of the fiduciary standard debate. It's this simple: If you're selling a product, you have no fiduciary obligation to the buyer. You do have an obligation not to sell a lemon. The product must perform as advertised (by “perform” I don't mean investment return), but you are under no obligation to determine if the product is appropriate (only “suitable”) for the client.

If you're providing a service, particularly investment advice, you do have a fiduciary duty to your client. That means you're always, and only, acting in the best interests of the client. It means you get paid a fee, not a commission (or “trailer,” or “12b-1” or any other euphemism the brokerage industry has concocted). It means you're not selling an investment to the client; you're buying an investment in the sole interest of the client. That an investment is “suitable” for a client is not enough. It must also be appropriate.

The world was once that simple, two planets living comfortably in the same universe.

Today's financial world presents more complications to even refined buyers (how else would you explain all those rich socialites duped by Madoff?). Since the late 1990s (the same era Washington allowed mortgage regulators to loosen credit standards and began requiring housing lenders to lend to people who otherwise couldn't afford loans), financial regulations have allowed the proliferation of “dual registration.” In the past, a financial professional either sold a product or provided a service. Now they can do both.

Where has that left us? The public, or at least PBS, doesn't see Wall Street as providing a service. To the elite class that has money to invest, a financial professional is just another used car salesman.

We have ourselves to thank for that.

Instant Insights /

An idiot&rsquo;s guide to fiduciary duty

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An idiot’s guide to fiduciary duty