Regulatory reform will see the fiduciary standard of care applied to advisors at broker-dealers, predicts Boston-based consulting firm TowerGroup in a new research report.

The report, entitled Broker vs Advisor Regulation: It’s the Principle of the Thing, says clients find little distinction between paying a commission and a fee. Therefore, TowerGroup predicts that new regulations will specify that any time an advisor-client relationship moves beyond the sale a specific investment product, “the nature of the relationship irrevocably becomes fiduciary.” Under a fiduciary relationship, the advisor must put the interests of his clients first. Under current regulations, registered representatives at broker-dealers only have to provide “suitable recommendations” to their clients.

“For the broker-dealers, a regulatory move to a fiduciary standard will have a minimal impact on compliance costs but could represent a real increase in liability risk if consumers are allowed to pursue grievances in the courts rather than arbitration,” said Matthew Bienfang, senior research director in brokerage and wealth management at TowerGroup.

The firm also expects a cooperative effort by the SEC and FINRA to better regulate and supervise both broker-dealers and RIAs, and for the regulators to enforce a mix of rules-based and principles-based regulation.