Financial Advisor IQ (January 23, 2017) – Prominent consumer advocate groups are telling the public there’s a mismatch between how financial firms market themselves to clients and how they describe themselves in legal challenges to the DOL rule.

In a white paper released Jan. 19, the Consumer Federation of America and Americans for Financial Reform complain that in marketing material broker-dealers call their registered representatives “financial advisors.” But the industry that has launched legal challenges to the Department of Labor’s fiduciary rule — on behalf of broker-dealers — characterizes those same reps as salespeople.

The white paper, called “Financial Advisor or Investment Salesperson? Brokers and Insurers Want to Have It Both Ways,” targets big-name brokerages such as Morgan Stanley and Wells Fargo for, they say, casting their reps as financial advisors who routinely put their clients’ best interests first.

Yet when trade organizations that represent firms including Morgan Stanley and Wells Fargo filed legal challenges to the DOL’s fiduciary rule – which requires that brokers put clients’ interests first when dealing with their retirement accounts – the suits referred to the brokerage reps as “registered representatives” and “insurance agents” who can’t be regulated as advisors and should not be seen as providing advice, according to the report.

Among those organizations using the sales rep terminology in their suits are the Securities Industry and Financial Markets Association, the U.S. Chamber of Commerce, the Financial Services Institute, the Financial Services Roundtable, the Insured Retirement Institute, the American Council of Life Insurers, and the National Association of Insurance and Financial Advisors, the report says.

The consumer groups say they analyzed the websites of 25 brokerages and insurers and found their reps aren’t described as salespeople but rather as financial advisors or other similar terms. The assumption the consumer groups make is that the brokerages are implying they put the clients’ best interests ahead of their own.

While declining to address these claims head-on, Sifma head Kenneth Bentsen tells FA-IQ in an email his organization “has long supported a best interest standard for broker-dealers across all retail investment accounts, not just retirement accounts. None of the arguments made in our meritorious lawsuit against the DOL suggest otherwise. We continue to believe that the SEC, not the DOL, is the right agency to create a best interest standard to protect retail investors, and we will continue to advocate to make that happen.”

The Consumer Federation report also says that in 2015 the Public Investors Arbitration Bar Association found a dichotomy between how brokerages market themselves and how they represent themselves in arbitrations with customers. That analysis led PIABA to call for a fiduciary standard for the industry.

As well as Morgan Stanley and Wells Fargo, the analysis also covered the websites of Janney Montgomery Scott, Stifel, Wells Fargo Advisors, Raymond James, Ameriprise, Edward Jones, UBS, Morgan Stanley, Signator Investors, Lincoln Financial and Schwab, among others.

Against the likes of Sifma and other organizations opposed to the DOL fiduciary rule , the DOL itself has scored three major victories in the courts.

But the rule still faces various challenges.

Chris Paulitz, senior vice president of membership and marketing at FSI, tells WealthManagement.com that the report misses the fact that most advisors work at dually registered firms — that is, they work on both brokerage and RIA platforms.

But Barbara Roper, an author of the report and head of investor protection at the Consumer Federation, rejects dual registration as an argument against the “hypocrisy” she perceives.

“The legal argument behind the lawsuits is that reps are merely salespeople and therefore shouldn’t be held to an higher standard. So why remind people you’re dual-registered as an advisor?” Roper tells FA-IQ. “The lawsuits are based on a fiction.”

A spokeswoman for Morgan Stanley said the wirehouse would not comment on the Consumer Federation’s white paper, while Wells Fargo Advisors did not reply to requests for comment.

While both firms may be members of trade organizations suing to block the fiduciary rule, the wirehouses have nonetheless already announced their plans to comply with the DOL rule.

Both Wells Fargo and Morgan Stanley have decided to keep offering commission-based individual retirement accounts – regardless of what happens to the rule – by adopting the rule’s best interest contact exemption provision, which allows brokers to collect commissions on some products after signing a contract with their clients.