John Bogle, Vanguard founder and the creator of index funds for the masses, said, "Whether markets are efficient or inefficient, investors as a group must fall short of the market return by the amount of the costs they incur."

Jim Christian, a Lakeville financial planner argues that when it comes to cost of investing, however, the devil is very much in the details. He points out that there are only three ways to pay for financial service advice: a flat or hourly fee, as a percent of assets under management or a commission on the purchase of an investment and "every adviser should offer all three options."

Bogle's simple math underlies the logic behind the fiduciary rule issued by the Obama Department of Labor (DOL). The rule sought to align the way all financial advisers operate when offering retirement investment advice, eliminating the financial incentive for some to recommend higher cost investments that, as Bogle and others would argue, hurt investors. While attempts by industry groups to block implementation through the courts have failed, the rule is in limbo while the Trump administration considers changing or scrapping it altogether. But as I've written in previous columns, it's already set in motion changes across the financial advice industry. Jim reached out in response to a recent column and had a lot to say.

Under existing rules, advisers can recommend a mutual fund for example, that has higher fees and expenses than an alternative fund but for which they receive a sales commission, as long as it is deemed "appropriate" to an investor's situation. Under the stalled DOL rule, "appropriate" would be replaced by a "best interest" standard where an adviser would be prohibited from making a commission-compensated recommendation unless they disclosed their fee arrangement and the client agreed.

In response, some mutual fund companies are introducing new share classes that either have no sales charge (clean shares) or a flat 2.5 percent sales charge (T shares) that is viewed as "DOL-compliant." In addition, many firms are moving away from sales-oriented, commission-based client relationship to compensation based on a percent of assets.

"It's a money grab," Christian said, pointing to a recent Wall Street Journal article describing how large firms such as Merrill Lynch and J.P. Morgan are moving an asset-based model. This approach, the Journal points out, allows these large firms to better compete with smaller independent advisers who provide more personalized financial planning and advice. More importantly for investors, an asset-based pay model can be more profitable for an adviser over time than a commission-based account, both Christian and the Journal point out. That is particularly true for a smaller "buy and hold" investors who don't rebalance their portfolios, according to Morningstar Research.

Christian has a much different take on how the industry should respond, arguing that "complete transparency" over fees would be a better approach than herding advisers into one fee structure. While nothing had prevented advisers from being transparent in the past, Christian acknowledged that past practices of some brokers, including excessive trading or "churning" to earn extra commissions, has tarnished the reputations of financial advisers generally. Even though the DOL rule is on hold, he said he'll change the way he offers IRO rollover advice, presenting "a list of investment alternatives, pros and cons of each option and the one we recommend." In the past, he would have done this analysis but not necessarily shared it with clients.

More important to Christian is the increased risk of class-action litigation he believes advisers face under a common fiduciary standard. Even complaints resolved in an adviser's favor would remain on their record, potentially harming their reputations. While some industry observers have argued the class-action concern is overblown, they point out the risk of losing arbitration cases is increased.

Critics of the proposed DOL rule have also argued that moving away from commissions would leave smaller investors without access to financial advice, since a percentage fee on a small account would not justify an adviser's time. Christian said about half his client accounts pay based on a percent of assets, 45 percent are commission-based and only 5 percent are hourly. His largest accounts average more than $300,000 and "receive service commensurate with their fees." He also has a few dozen small accounts, averaging $10,000 that receive "basic" level of service.

He is concerned that an increased risk of litigation would cause many advisers to "orphan" these smallest investors. While saying he is committed to serving all his clients, if compliance risk increases on small clients he joked: "I'll have to resign and send them to [Obama's Secretary of Labor] Tom Perez."

Editor's note: This is the third column about how about how the financial advice industry is responding to a delayed Obama-era rule. The next column will look at how individuals are becoming more sophisticated consumers of financial advice.

Brad Allen is a freelance journalist and former investor relations executive for companies including Imation Corp. and Cray Research. His e-mail is