Congress is moving forward on adding an amendment to the three-decade-old Employee Retirement Income Security Act (ERISA) that could have a significant impact on the way registered representatives do business.

The main issue for brokers is who can give investment advice and what they can say. A House and Senate conference is considering two bills. Both groups have something to say on the subject, which has been bandied about for years, but this time a compromise is seen as getting somewhere—reaching President Bush’s desk for his signature next month.

The House provision H.R. 2830—more commonly called the “Boehner bill” after its author John Boehner (R-Ohio)—would likely be a windfall for fund companies who could then ditch third-party advisors and begin earning revenue through their own field force.

The Investment Company Institute, the largest trade association for the $9.2 trillion mutual fund industry, has long supported the Boehner bill and recently announced that this is one of its top priorities given the national focus on retirement security issues. “With appropriate safeguards, we must widen the circle of financial intermediaries who can provide advice to plan participants,” ICI Paul Stevens told attendees of its Mutual Funds and Investment Management conference in Phoenix on Monday.

But the Boehner bill has stalled in the last few years due to the dust-up over conflicts of interest and suitability on Wall Street. In other words, the fund companies could be pitching their own funds to plan participants as opposed to recommending what’s best for the clients.

The Senate bill, S 1783, sponsored by Sen. Jeff Bingaman (D- N.M.), takes a different tack on the investment-advice issue. Bingaman’s bill would continue to prohibit fund companies from dispensing advice but would make it less risky for them to hire other investment advisors by insulating them from employee lawsuits.

The bill would allow only third-party advisors such as registered brokers and investment advisors to give advice. Provided the employer does due diligence and makes the appropriate disclosures, the employer would be safeguarded from liability if they hired an independent advisor not affiliated with fund companies or brokerages that manage. Numerous studies have shown that employers who do not offer investment advice cite potential legal liability as the determining factor. Pension consultants strongly favor the Senate bill.

The Financial Planning Association and other special interest groups like the AARP, which lobbies for retired people, have thrown their support around the Senate bill deeming a “superior,” albeit not ideal, proposal. “H.R. 2830 would turn back the clock and replace ERISA’s prohibition on conflicts of interest with a weak disclosure model,” writes AARP chief executive William Novelli in a letter to the House.

The passage of either piece of legislation, as they are now written, would be a boon for financial advisors who are currently allowed to provide advice to any individuals on everything except defined contribution plans. “It would probably open up opportunities for brokers,” says Ted Benna, chief operating officer of Malvern Benefits Corp., a retirement-plan administrator and founder of the first 401(k) plan. But he believes that investors are moving away from advice, as evidenced by the proliferation of target-date retirement funds that let investors set it and forget it. “As those funds continue to emerge, the need for advice is decreasing.”

While it’s too soon to tell what the compromise between the Senate and House would entail, some industry insiders suggest that a compromise may include increased protection from lawsuits and heightened responsibility for employers in overseeing those advisors. “It’s a coin flip right now,” says Rick Meigs, president of 401khelpcenter.com. Those who are concerned about the fund companies getting access believe that even the slightest concession will open the flood gates. Adds Meigs, “It amazes me that they want to open Pandora’s box.”