From Allstate Financial's "good hands" to a Merrill Lynch ad about putting "your needs front and center," an investor advocate group is taking issue with how brokerage firms advertise themselves.

The Public Investors Arbitration Bar Association (PIABA) claims that brokerage firms are misleading clients into believing that their financial advisors have a fiduciary duty to their clients. It's a charge that turns up the heat on opponents of a proposed national fiduciary standard and puts additional pressure on regulators to act -- now.

Next month, the Department of Labor is expected to unveil a proposal on a new fiduciary standard for retirement advisors. Meanwhile, the SEC is working on its own rule proposal under 2010 authorization contained within the Dodd-Frank Act.

On Wednesday PIABA, an association of attorneys who represent investors, issued a report that claims brokerage firms advertise themselves and their advisors as fiduciaries, yet argue in arbitration cases that they are not to be held to that standard. The group argues that because arbitration records are largely private, it allows brokers and their firms to present one face to the public and another in arbitration.

The authors of the report argue that the firms' actions underscore the importance of adopting a national fiduciary standard, urging regulators to swiftly implement one.

NOT AS ADVERTISED

"Because the firms and advisors are selling themselves as being held to the highest standards, they should be legally held to the highest standard," says Christine Lazaro, director of the Securities Arbitration Clinic at St. John's University in New York.

In their report, the authors singled out nine firms: Merrill Lynch, Fidelity Investments, Ameriprise, Wells Fargo, Morgan Stanley, Allstate Financial, UBS, Berthel Fisher and Charles Schwab.

A spokeswoman for Schwab says in an email that "an important public decision about advice in financial services should be based on facts and not misrepresentations."

The spokeswoman notes Schwab is a dually registered broker-dealer and investment advisory firm, adding that Schwab is clear about its responsibilities, pricing and compensation.

"Whenever we provide fee-based investment advice, we do so as a fiduciary. In any client dispute regarding a non-fiduciary service, we also point out what our obligations are and are not. Our marketing is unambiguous on these points," she says.

A Morgan Stanley spokeswoman says the wirehouse "has explanations available for clients that make clear the differences, including the rules that govern advisory and brokerage accounts."

Spokespeople for the other firms either declined to comment or were not available to comment at the time of publication.

CALL FOR IMMEDIATE ACTION

The impassioned debate on whether or not to adopt a national standard has not been limited to industry insiders and regulators like FINRA, which are often little known among the general public. Political figures like Sen. Elizabeth Warren (D-Mass.) and even New York City's comptroller have weighed in.

Also on Wednesday, Comptroller Scott Stringer said that in lieu of a national fiduciary standard, New York State needs to adopt a disclosure rule to require brokers to inform clients that they are not held to a fiduciary standard.

While it isn't clear whether a proposed law will be introduced, Stringer's actions highlight the notion that for some fiduciary proponents, there is a troubling lack of clarity regarding compensation for the services advisors provide and to what legal standard they are held for those services.

"The truth is that… most people don't know the difference between a discretionary and non-discretionary account. That's why we are advocating for this national fiduciary standard," says Joseph Peiffer, attorney and current president of PIABA.

Peiffer points out that, unlike civil court cases, most of the information available in FINRA arbitration cases is not made public. Bringing attention to the discrepancy -- how firms and brokers market themselves yet deny a legal fiduciary obligation -- is a tactic with mixed success, Peiffer says.

"We do raise this issue in arbitration and it is sometimes successful, sometimes unsuccessful. It depends on the panel. And that's why we need a good strong fiduciary rule," he says.

The authors are hopeful that a standard will be implemented soon.

"We've waited long enough. Dodd-Frank was passed in 2010," says Jason Doss, an attorney and past president of PIABA. "The time to act is now."

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