arkansasbusiness.com (September 28, 2015 11:00 pm) — Ethel Sprouse, a real estate appraiser and former mayor of Cedar Bluff, Alabama, has become the poster child — or, rather, the poster senior citizen — for the type of investor who proves the need for the expanded fiduciary rule proposed by the U.S. Department of Labor.
She appears in a video posted on the DOL website, and her story was told in a white paper published earlier this year by the Public Investors Arbitration Bar Association, which favors the rule.

In the video, Sprouse describes trusting a retirement adviser who was a personal friend who understood her situation: Her husband has Alzheimer’s disease, their daughter is mentally handicapped, and they couldn’t afford to lose any principal.

“He would have been the last person that I thought … would have mishandled my funds,” she says. “And likewise the companies that he was involved with, I would have never believed that they would have allowed it.”

Sprouse and her husband eventually took Allstate Financial into arbitration — mandatory in their contract — over losses of $400,000 in what they claimed were risky, unsuitable investments. Allstate, famous for its “You’re in good hands” advertising slogan, responded by pointing out a fact the Sprouses had not realized when they handed over their life savings:

Allstate “owed no fiduciary duty to Claimants, and, therefore, no such duty was breached.”

Sprouse is not alone in assuming that someone she was paying to provide retirement advice was naturally looking out for her, which was the point of the PIABA’s white paper: The brokerage industry uses advertising that “creates the illusion of a fiduciary duty” only to disclaim any such duty when clients are dissatisfied.

Allstate’s “good hands” was only one of the ads by nonfiduciary advisers that PIABA tagged as misleading:

• UBS Financial Services Inc. aired an advertisement that said “we will not rest” until “my client knows she comes first,” but in arbitration relied on the fact that “a broker does not owe a fiduciary duty to his customer in a nondiscretionary account.”

• Morgan Stanley advertised “a more personalized plan for achieving success,” but in arbitration pointed out that “there is no fiduciary duty where … the client maintains a nondiscretionary brokerage account.”

• Ameriprise Financial said on its website that its advisers are “ethically obligated to act with your best interests at heart” and told the Securites & Exchange Commission that it supports the imposition of a fiduciary duty. But in arbitration, like the others, Ameriprise has used the fact that it legally owed no fiduciary duty to clients as a defense.

• PIABA documented similar conflict between advertising and legal position for Merrill Lynch, Fidelity Investments, Wells Fargo, Charles Schwab and Berthel Fischer.