Normally I stay away from financial jargon in these columns. But this column is about financial jargon.

With a debate raging in Washington about reforming the regulations governing the financial advice industry to better protect investors, there are some terms you need to understand.

The first term is "fiduciary." That means that a financial professional acts in the best interests of the client. A fiduciary must fully disclose how he or she is paid as well as any conflicts of interest he or she may have. Registered Investment Advisers (RIAs) are required to operate under this standard.

Then there's the term "suitability," which in this context means suggesting investment products that fit with an investor's goals. Brokers such as the ones employed by big hometown companies such as Ameriprise Financial Inc. and Thrivent Financial for Lutherans must abide by this standard. But brokerages can also be RIAs and financial professionals may be operating under the suitability standard or the fiduciary standard depending on the transaction.

Confused yet? Most investors are. A study commissioned by the Securities and Exchange Commission and released by the Rand Corp. last year found that many investors don't understand the meaning of "fiduciary" and can't describe the legal distinctions between brokers and investment advisers.

Here's an analogy to help, courtesy of Brett Bordelon, director of securities and franchise registration for the Minnesota Department of Commerce. A customer walks onto a car lot to buy a fuel-efficient car that costs less than $30,000. The salesperson mentions three models that meet that criterion and suggests a certain vehicle, which the consumer buys.

"The salesperson satisfies his or her duty to make a recommendation that was suitable to fulfill the buyer's needs. ... What the salesperson might not have mentioned, which would have been acceptable under this current duty, is that there was a sales competition and that the salesperson who sold the most of this particular model would win some sort of prize."

On the other hand, Bordelon said, if the salesperson were held to the stricter fiduciary standard, which requires working in the best interests of the car buyer, then certainly it would be necessary "to disclose to the buyer that he or she was in a sales competition" and would benefit from the sale of that particular model.

Some financial professionals argue that over the past decade, the financial services industry has evolved to a point where this analogy is outdated and that there are few differences between brokers and investment advisers.

"In my opinion, a lot of the heat, noise and light around this whole fiduciary issue dates back to a vision of the conflicted stockbroker selling product that doesn't exist today. ... As a practical matter, brokers who offer services, advice and products under a suitability standard are not acting that much different than brokers under a fiduciary standard," said John Taft, chief executive of RBC Wealth Management and incoming chairman of the Securities Industry and Financial Markets Association.

Differences with financial planners

Others, particularly the National Association of Personal Financial Advisors (NAPFA) and the Financial Planning Association -- disagree that brokers uphold as high a standard as their members who act as fiduciaries do. Those groups are dominated by certified financial planners who typically are paid fees for assets under management or for the financial plans they build for clients rather than through commissions for selling a product.

Now this isn't a column for picking sides or pointing fingers. This is for consumers, who have to live under the current standards, and should do so knowledgeably, until new laws are passed. All sides agree that the complex web of regulations is terribly confusing and needs to be streamlined to best protect investors.

"Shouldn't your readers have the same protections, the same rights, the same information at the same time regardless of the professional across that table that's offering them the investment advice," asks Bruce Maisel, vice president and general counsel for Thrivent Financial.

Maisel, who spends a lot of time on this issue, predicts that there will be new regulations in place early next year. Until then, what can you do to make sure you understand how your financial adviser is regulated?

First of all, you can ask your financial professional whether he or she is acting as your fiduciary. Questions about compensation and disclosure, rights and obligations should follow.

Consumers must "ask the tough questions upfront before they've committed into a relationship with the financial professional," Maisel said.

Investors also must pay attention to their investments, whether working with a broker or an investment adviser. "The consumer still needs to be diligent. They need to understand the reason for the recommendation, the 'whys' behind it," said Rick Epple, a Wayzata-based certified financial planner who has been involved with NAPFA's Focus on Fiduciary campaign.

And read the fine print. Disclosures are worthless if you don't bother to read them. While regulation is needed to protect consumers like you and me, we must make the effort to protect ourselves as well.

Kara McGuire. • 612-673-7293 or kmcguire@ startribune.com. Follow her on Twitter: www.twitter.com/kablog.

AN INVESTMENT GLOSSARY

Fiduciary standard -- This standard requires the adviser to act in the best interests of the client. This includes disclosure of how the financial adviser is compensated and any possible conflicts of interest. It is a higher standard than the suitability standard.

Suitability standard -- This standard requires advisers to offer their clients investments that are suitable for their investment profile. For example, an investment that ties up funds for many years, such as a real estate investment trust, might be suitable for someone in their 50s who is still working but unsuitable for an 80-year-old retiree living on a fixed income.

Why the confusion? Stockbrokers generally adhere to the suitability standard while certified financial planners and registered investment advisers are held to the fiduciary standard. Yet all are generically referred to as "investment advisers" or "financial planners."

What's coming? As part of the broader regulatory reforms working their way through Congress, there's an effort to come up with a single standard.