About a decade ago a national conference organizer invited me tospeak at a big industry event in Washington DC. I had been makingthe chicken circuit rounds on the heels of receiving an award foran academic research paper I had authored. It was back in thepre-FiduciaryNews.com days, but my head was already inthat zone. I had been asked to speak about index funds – the manyyears have evaporated the memory of the exact topic.

Related: The subject no investment professionalwants to discuss

In fact, the only reason I remember the event was because of aconversation I had with an attendee immediately after mypresentation. It had the potential to become a heated discussion,but I checked my ego and let the other guy have his stay. Here’swhat happened.

Somewhere in my talk – and for all I remember I think wasmoderating a panel, but I was tasked with doing the intropresentation – I made an offhand comment about whether one couldjustify charging a management fee for a portfolio of index funds.It was literally a throwaway line. It wasn’t critical to the maintheme of my delivery. But that’s what this guy remembered.

Related: Why do 401(k) sponsors still pay 12b-1fees?

I bring this up because of another throwaway line. This oneappeared in the DOL’s recently released FAQ (see “Did DOL Fiduciary Rule FAQ Just Fire Warning Shotat Target Date Fund/Index Fund Fees?”FiduciaryNews.com, November 1, 2016). To better grasp thesignificance of the DOL’s apparently overlooked statement, we needto return to what transpired in that post-presentation conversationI had back when everyone still thought Madoff was a brilliantinvestor.

So this adviser comes up to me to talk about how, despite mycomment about fees, he can confidently say his clients are quitehappy with his 1% AUM management fee. I didn’t think twice. That’sa fairly typical fee for portfolio management services. But then hetold me what he invested in – index funds. That’s where thediscussion could have become heated.

There I was, working my tail off, trying to find 25-35 stocks tobuy for my clients’ portfolios. This guy, bragging about doingnothing with a “set-it-and-forget-it” portfolio of index funds, wasgetting paid just as much as I was.

Now I can reveal why I kept my mouth shut: I didn’t want todisclose my competitive secrets. At the time I was offering 3(38)fiduciary services. That meant picking and monitoring mutual funds (at that time they were all activefunds).

I knew, in the unlikely event I would ever go head-to-head withthis guy, I could easily undercut him on fees. By a lot.

You see, I knew what it cost to pick and monitor individualstocks versus what it cost to pick and monitor mutual funds. I alsoknew the relative effort when scrutinizing actively managed funds(which is rather intensive) versus index funds (which is actuallyquite easy).

I priced my services accordingly, and that meant substantiallylower fees to the 401k plan sponsors that required me to providecontinuous management on their mutual fund investment optionscompared to what individuals paid me to construct, monitor, andupdate customized portfolios of individual stocks and bonds.

Which gets us to the implication of the DOL’s FAQ statement. TheDepartment actually cited a report on AUM vs. commission fees fromFINRA. In of itself, the FAQ doesn’t offer a definitive answer, butit does open the up the question as to whether traditionalasset-based fees might be inappropriate when the investmentsinvolve “set-it-and-forget-it” type funds like target-date fundsand index funds.

There are certainly ways advisers can justify traditional fees,but there are also certainly ways class-action attorneys canjustify the inappropriateness of traditional fees. We won’t knowthe answer until the judges rule on the eventual trials.

One thing we do know for sure: No one will be bragging aboutcharging standard AUM fees for doing nothing.