Imagine an astute bargainer at the table for the biggestnegotiation of his life.

His counterpart makes the first move—and gives the bargainer 95percent of what he’d like, plus a 10 percent bonus he neverexpected!

And that’s the counterparty’s opening position! How should theastute bargainer react?

The more I read into the DOL’s proposed conflict-of-interest (aka“fiduciary”) rule, the more I think the brokerageindustry is in the position of this astute bargainer.

Now, don’t get me wrong. I realize the DOL’s re-proposal of its fiduciary ruleearlier this year is not its opening bid, but it might just as wellbe.

As many now believe, under its current language, in exchange forthe addition of boilerplate disclosure language in their contracts,brokers will be in a position to continue to utilize that portionof their business model which charges conflict-of-interest fees foradvising clients to buy mutual funds that pay 12b-1 fees,commissions, and revenue sharing (see “DOL Fiduciary Rule as Proposed May Not StopInvestor Losses as Claimed,” FiduciaryNews.com October6, 2015).

About the only thing the current draft actually outlaws arealternative investments of questionable liquidity.

Sure, this might be the bread and butter of some brokers’business, but, really, IRAs have traditionally prohibitedinvestments that remove assets from the trust in order to invest innon-exchange-listed entities.

That’s why, until very recently, commodities, collectibles, andeven real estate represented forbidden IRA investments. That’s the5 percent of the deal the brokers aren’t getting.

In terms of everything else, including theirconflict-of-interest fees, any enterprising brokerage firm will beable to successfully retain those.

The “Best Interests Contract Exemption” (BICE) is the vehiclethat permits this.

Initially, many felt the BICE prohibited the continuation ofthese fee arrangements. But, upon careful review of the proposedwording, the BICE, perhaps as an unintended consequence, results,ironically, in institutionalizing conflicted advice.

We won’t know this for sure until we see the results of theinevitable arbitration decisions (since this is where the DOLexpects enforcement to occur), but let’s be honest, how many timeshave clients been victorious in arbitration?

Violating the BICE will be hard to proove because, as we allknow when it comes to investments, just because it loses moneydoesn’t mean that it wasn’t an appropriate investment at the timeof purchase.

The only clear situation where conflict-of-interest fees mightbe easily shown to violate the client’s best interest is in thespecific case of index funds, where the returns of funds withconflicted fees can be compared to the return of funds withoutconflicted fees.

But even that is not a slam dunk.

It could be those “conflicted” fees may be reasonably close tothe value of the non-conflicted fees, meaning the net return to theinvestor is the same.

So, what’s the bonus the brokerage industry receives in exchangefor jumping through these additional disclosure hoops?

They can now, by virtue of the good government’s seal ofapproval, call themselves “fiduciaries.” What’s not to like aboutthat?

Returning to the astute bargainer, what’s his likely responsewhen given almost everything he wants and then some?

Why, it’s to complain the offer is unfair and ask forsignificantly more.

Meanwhile, deep inside and hidden from the negotiation table,the astute bargainer is laughing all the way to the bank.

Read more on the DOL fiduciary rule