Will Wall Street ever raise its weak standard to serve clients?

What if you went to a supermarket where the greengrocer picks various fruits and vegetables for you. Some are ripe, some not. Some are too soft. But all of it, the greengrocer says, is "suitable" enough to meet your order.

But what if you went to another food store where the greengrocer handpicks your requested fruits and veggies to deliver the best available?

The different level of service here is at the core of a critical slice of financial reform under debate in Washington. The good-enough grocer is meeting the "suitability standard" generally endorsed by giant investment firms. That means their brokers generally are obligated only to provide "suitable" investments, even if they are not the best available or just happen to generate high fees for the brokers.

The best-available grocer meets the higher "fiduciary standard" followed by certified financial planners and other advisers. They are committed to providing best possible investment advice, taking into account such factors as underlying fees and taxes.

This double standard, which most people have never heard of, is one of Wall Street's more perverse jokes on U.S. investors. People assume brokers operate on the fiduciary standard and, to be fair, some try to do so. But in fact, they need only legally adhere to the suitability standard.

It's a secret to many that Wall Street hopes to maintain. At least for a while longer.

As Congress weighs the details of a major financial reform package, big brokerages are lobbying hard to assure the suitability standard remains the Wall Street norm.

On Monday, some Florida financial planners who are eager to see a greater adoption of the fiduciary standard argued that the recent Goldman Sachs controversy is a clear case of a brokerage favoring a big institutional investor at the expense of its retail customers.

That conflict of interest is why the Florida planners were assembled by a national group called the Financial Planning Coalition. It wants Congress to pay more attention to the merits of a fiduciary standard.

Carolyn McClanahan, a doctor before turning financial planner 10 years ago, says seniors are more vulnerable to making poor decisions on complex financial products like annuities aimed at the elderly. An "across the board" fiduciary standard would help minimize misleading the elderly, she says.

Other planners, like Paul Auslander in Orlando and Dan Moisand in Melbourne, worry that brokers increasingly cloud the standards issue by adopting titles like "financial adviser" or "wealth management representative." Such titles sound more ethical but carry no responsibility to adopt a stronger standard.

"When Wall Street goes from calling people brokers to calling them financial advisers, it creates a whole different set of expectations" to the public, says Scott Smith of the Boston research firm Cerulli Associates.

Smith says more brokers are leaving big brokerages in favor of independent investment firms and, sometimes, higher standards. And they are taking their clients with them. In 2009, about $180 billion in investment accounts left the big brokerages in this manner, says Cerulli.

But Wall Street seems eager to keep its standard low enough to cut corners and sell so-so investment products when necessary.

How suitable is that?

Contact Robert Trigaux at trigaux@sptimes.com.