Sometimes you gotta wonder – are regulators working for thepeople they're supposed to protect, or the lawyers that seem tofind a way to use imprecise language to discover ways to protectpeople, albeit for a modest percentage, of course.

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The DOL’s new “Conflict-of-Interest” Ruleseems more the latter. In fact, you could probably call it theDOL’s new “Interest-of-Conflict” Rule. In other words, certainparties are bound to have a pecuniary interest in the conflicts theDOL sought to purge but ended up venerating the very thing. Howcould this be so?

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One word: Gray.

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Not black. Not white. Just gray.

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We call things either “black” or “white” meaning they representclear, unambiguous concepts. Something that is “gray” remainssubject to interpretation. Once we enter the realm of gray, thereis no certainty. There are no right answers. There are no winners.Except the sophists.

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Read: Which type of vendor is best suited to adviseon plan design?

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I’ve written earlier about the problems with the fuzziness ofthe term “best interest.”

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Yes, the DOL’s new rule contains that phrase, but thericher tort bar potential lies in the words “reasonable” and“excessive.” Ask 10 people to define those terms and you get 12answers (see “‘Excessive’ 401k Fees Often in the Eye of the FundHolder,” FiduciaryNews.com, April 26, 2016). That’s aripe environment for some of our favorite class actionattorneys.

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The ultimate definitions will likely be decided in some futurecourt case. That means any “facts” will matter less than theeloquence of the argument. That’s lawyer territory, not adviserterritory. Advisers like numbers. Lawyers like words. The art ofregulation remains in the domain of words. Advantage: Lawyers.

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So, how do they do it? I’m not a lawyer, and I haven’t stayed ina Holiday Inn Express recently. So I’m basically a nobody when itcomes to legal theory. But I am a reporter, as in “I report whatother people say.” I can tell you, the simple heuristic here:“excessive” means “high fees;” “reasonable” means “low fees.”

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Notice three aspects about this rule of thumb. First, the feephrases are in quotes because these “fees” are based on qualitativemeasures, not quantitative measures. The second deals with the ideathat “low” is better than “high.” Finally, this canon focusessolely on one dimension: fees. Let’s address each of thesecomponents and the prevailing view the might fuel future courtcases.

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In a world of confusing subjectivity, people seek clarity.Numbers offer the most reassuring comfort in this regard.

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Wait. Didn’t I say “fees” are more about feelings thanscience?

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Yes. But the fact is “fees” are represented by numbers, andnumbers are very easy to compare. One number is always eithergreater than or less than another (different) number. Thatcomparison might not have any significance, but it is as clear as abell.

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Which leads us to the issue of “high” versus “low.”

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We’ve touched on this before. Are higher fees bad if theyproduce better returns than lower fees? The prevailing view is thathigh fees are bad, regardless of the any other considerations. Thisis obviously not definitively true, but it’s not hard to convincepeople it’s generally true. Together, these first two parts of thefamiliar heuristic represent the low hanging fruit for trialattorneys.

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Yet, it is the third part that might just make the day for thedefense. The truth hinges primarily on the term “reasonable.” Thisword implies inclusiveness. It broadens the single dimension offees and extends it to include value. It happens to be the antidotefor “high” versus “low.” It forces the analysis to look not merelyat the number associated with the fee, but the value derived bythat fee.

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As the DOL once said about fees (during discussions concerningthe 2012 mutual fund fee disclosure rule), that sometimes high feesare better than low fees. Never forget that.

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Christopher Carosa

Chris Carosa has been writing a weekly article and monthly column for BenefitsPRO online and BenefitsPRO Magazine since 2011 and is a nationally recognized award-winning writer, researcher and speaker. He’s written seven books, including From Cradle to Retire: The Child IRA; Hey! What’s My Number? – How to Increase the Odds You Will Retire in Comfort; A Pizza The Action: Everything I Ever Learned About Business I Learned By Working in a Pizza Stand at the Erie County Fair; and the widely acclaimed 401(k) Fiduciary Solutions. Carosa is also Chief Contributing Editor of the authoritative trade journal FiduciaryNews.com and publisher of the Mendon-Honeoye Falls-Lima Sentinel, a weekly community newspaper he founded in 1989. Currently serving as President of the National Society of Newspaper Columnists and with more than 1,000 articles published in various publications, he appears regularly in the national media. A “parallel” entrepreneur, he actively runs a handful of businesses, including a small boutique investment adviser, providing hands-on experience for his writing. A trained astrophysicist, he also holds an MBA and has been designated a Certified Trust and Financial Advisor. Share your thoughts and story ideas with him through Facebook (https://www.facebook.com/christophercarosa/)and Twitter (https://twitter.com/ChrisCarosa).