Have you heard about “clean” shares? They’re the coming thing (see“What a Fiduciary Should Know: Down and Dirty with‘Clean’ Shares,” FiduciaryNews.com, October 10,2017).

You can’t turn to a financial magazine or retirement industry media site without readingabout “clean” shares. They’re everywhere! They’re everywhere! Infact, chances are you’re afraid you may have missed the train onthis one.

Don’t worry. You haven’t. Here’s what they’re not tellingyou.

It’s not that the train has left the station – it has. Onlything is, it left the station years ago. Decades ago.

On the face of it, “clean” shares are being touted as the waveof the future. The fact is, they’re as much a part of the future assteam locomotives are. Here’s why.

If we are to accept the strictest definition of “clean” shares,then we’re talking about mutual funds that have no loads, no 12b-1fees, and no revenue sharing. In an industry that’s dominated bythe sales culture (not that that’s a bad thing), it’s rare to finda mutual fund that isn’t tainted by the stain of any one (or all)of these three titans of conflict-of-interest fees.

The entire mutual fund biosphere is predicated on the existenceof these fees. They're woven into the very fabric of thetraditional retirement plan infrastructures, and service providersthroughout the realm have learned to survive (and thrive) withbusiness models predicated on these “unclean” fees.

If that sounds judgmental, don't blame me. Blame the promotersof “clean” shares. For in order to sell the concept of “clean”shares, one must presuppose that the current world contains“unclean” shares.

But this essay isn’t about what makes a share “unclean,” it’sabout that proverbial train. The one I mentioned earlier. That onethat left the station sometime in the last century.

This is about those mutual funds that already have “clean”shares. They’re real, but they might as well be ghosts. It’s aviolation of their ethos to do what is necessary to join theirsoiled brethren at the table of retirement plan products. For oncethey breach that vow against conflict-of-interest fees, it becomesa slippery slope upon which there is only one direction: down.

Here’s where the real temptation lies: Of the three legs uponwhich the conflict-of-interest stool rests, two of them are easilyavoided.

Many funds have found a way around commission loads and 12b-1fees. Historically, the loads left the table first. It’s takenlonger, but today fewer than 10% of retirement plan funds have12b-1 fees. So, it’s relatively painless to remove these twolegs.

It’s the third leg, though, that has proven most diabolical.Such a temptress it is that even the SEC has yet to definitivelyaddress its very presence. On the pages of every mutual fundprospectus, the SEC requests plain English disclosure of commissionloads and 12b-1 fees. What’s missing? Revenue sharing.

Revenue sharing is the devil that eludes even the most diligentof fund analysts. Its very existence is either hidden or, worse,not mentioned at all.

It is, as we all know, what drives platform fees that allowbrokers to provide “free” custody of funds and recordkeepers tooffer “low” or “no cost” services. It is the price every mutualfund must pay to play in the playground of retirement plans.

It is a price today’s true “clean” share mutual funds haverefused to pay.

That’s why you don’t see them in retirement plans. That’s whyyou don’t see them on mutual fund platforms. That’s why you don’tsee retirement professionals offering them (and, in fact, why theymight not see them to begin with).

The worse thing for the broader mutual fund industry is for theconcept of “clean” shares to go viral. This is ironic given it’sthe biggest players in the mutual fund industry that have toutedthe possibility of “clean” shares.

Here’s what I predict: Very soon, some enterprising young kidwill create a database of existing “clean” share mutual funds. Thiswon’t be very popular among retirement plan specialists becausethese existing “clean” share mutual funds won’t be on anyrecordkeeping or custodian platforms.

At the same time, or shortly thereafter, we’ll begin to see a“clean” share rating be assigned to all mutual funds. That’s when“clean” shares will begin to become relevant to retirement planplatforms.

Class-action attorneys will begin to use these ratings the sameway they used 12b-1 variations among different classes of the samefund to identify vulnerable class action targets. Litigation willbecome easier when the inevitable academic research, inconfirmation of earlier research, starts to show a correlationbetween a high “clean” share rating and higher fundperformance.

In the end, in all but isolated circumstances, mutual fundbusiness models predicated on conflict-of-interest fees will nolonger be sustainable. They will ultimately disappear, joining thelikes of buggy whips, Walkmans, and VCRs in the museum of productsfrom a bygone era.

And all this will occur with or without a fiduciary rule.