In quantum physics, there exists states beyond “black” or “white” that includes the state of being both “black” and “white.”

Read: A fiduciary rule only a class-action lawyer could love

That’s why quantum physics isn’t easy-to-understand. When you are forced to use an analog language to describe a digital reality, well, let’s just say things can get messy – and downright weird. That’s how you get Schrödinger’s cat being both alive and dead at the same time.

If your mind hurts now, just wait for the rest the story – the Conflict-of-Interest duality of the DOL’s new fiduciary rule.

As described (see “DOL Fiduciary Rule’s Conflict-of-Interest Split Personality,” FiduciaryNews.com, May 10, 2016), while the new Rule is intended to discourage self-dealing conflict-of-interest fees, it simultaneously provides several avenues for the continued use of these fees.

This allows proponents of the Rule to rightfully claim it satisfies their goal of “eliminating” conflict-of-interest fees. At the same time, the same Rule permits opponents to correctly state they can remain in compliance while still charging conflict-of-interest fees.

If your mind doesn’t really hurt by now, then either the paradox is too baffling or you work for the DOL. How can a Rule purported to dissuade self-dealing conflicts-of-interest fees simultaneously sanctify them?

Sure, there are risks to service providers who use these fees and fail to jump through the proper hoops. On the flipside, there are risks to those hiring service providers who mistakenly believe the Rule provides a form of protection it really doesn’t. The reign of caveat emptor persists, despite the promises of the regulators.

So, just who does the DOL’s Rule protect?

Perhaps we should ask the question the other way around. Who isn’t protected by the Rule?

Certainly, as we’ve said before, plan sponsors and retirement savers (i.e., those hiring service providers) aren’t protected. They’re still responsible for conducting the proper due diligence before hiring and risk paying a price (beyond merely “high” fees) for making the wrong choice.

The Rule does offer some protection to those service providers by spelling out some specifics in terms of compliance. Still, there are too many empty holes (mainly through implied yet unspecified limits) that expose service providers to increased liabilities. We won’t know the extent of that exposure until the first few court cases.

Well, we’re narrowing it down now.

Unfortunately, the two primary players in this drama are not protected by the new Rule. In fact, many who are wiser than me can argue the new Rule actually increases the dangers to these two constituencies.

Who’s left?

Let’s see. There are the attorneys, both prosecuting and defense. The Rule doesn’t really protect them as much as it enables them.

On the prosecuting side, the DOL has now broadened the potential class from just 401(k) plans and participants to all IRA holders. That’s a much larger market.

For the defense, the new Rule has created a demand for increased speaking opportunities, more reasons to engagement clients, and, ultimately, a rise in billable hours. But, as stated, this is promoting the interests of attorneys, not necessarily protecting them.

That leaves only one more major group who the new Rule can protect. The Rule allows this assemblage to have its collective cake and eat it, too.

But, who could this group be? What individuals benefit most from saying they have a Rule that “protects” retirement savers, yet concedes enough to the industry to reduce the likelihood of troublesome lawsuits?

Who indeed?

Instant Insights /

DOL conflict-of-interest rule: Somebody&rsquo;s having their cake and eating it, too, but who?

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DOL conflict-of-interest rule: Somebody’s having their cake and eating it, too, but who?