The financial markets are famous for taking a new piece of data and almost instantaneously incorporating it into security prices. But when it comes to the way market participants operate, change comes much more slowly. Even so, once a change is set in motion, it is hard to fully reverse and the consequences are often far reaching.

We are seeing that dynamic play out now with an Obama-era regulation, known as the fiduciary rule, which the Trump administration is attempting to delay or alter.

That rule would require investment professionals giving retirement advice to put the interest of their clients ahead of their own financial interests. It is aimed, in particular, at the lucrative market for IRA rollovers from the 401(k) plans of baby boomers who are turning age 65 at the rate of 10,000 a day.

Going beyond appropriate

Under current rules, advisers can recommend a mutual fund, for example, that has higher fees and expenses or lower performance 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 proposed rule, "appropriate" would be replaced by a "best interest" standard and an adviser would be prohibited from recommending a fund for which they receive a commission unless they disclose the fee and the client agrees.

A common fiduciary rule standard was first proposed in 2010 and a "final" rule issued by the Obama administration's Department of Labor, giving the industry more than a year to get ready. A group of industry trade associations had earlier failed in a lawsuit trying to block the rule. Trump's Department of Labor (DOL), responsible for enforcing the rule, earlier this month said it plans to delay implementation 60 days from an April 10 start date.

Some observers anticipate a countersuit by those favoring the rule that would argue the delay is too late and inappropriately applied, but that shoe has yet to drop. While this legal wrangling complicates the landscape, market participants have begun repositioning themselves. Perhaps the most far-reaching and significant change promises to transform the way mutual funds are sold.

Costs can be tough to track

Currently, the way an investor purchases a mutual fund, and visibility into what it costs, is a complicated affair. Bear with me.

Many mutual funds are sold with an upfront "load" of up to 5 percent that is a sales charge or commission taken at the time of purchase. Some may have a "back-end load" charged when shares are redeemed. And funds can charge an annual marketing fee of up to 1 percent, called a 12b-1 fee. All these fees are collected by the fund company and a portion is paid to the broker or adviser selling the fund. And those fees can vary for the same fund, depending on whether it is for a large 401(k) plan, a major pension fund or a small investor.

Many funds advertise themselves as "no-load" funds and, if you buy them directly from the fund company, you pay no sales charge. But often they are purchased through a "no transaction fee network," such as Schwab or Fidelity, which is also paid by the fund company to distribute its funds. That cost is also borne by the investor in the annual operating expenses of the fund.

Clean shares

Against that backdrop, when the DOL rule was put forward the Capital Group, parent of the American Funds, weighed in. The Los Angeles-based company is the third-largest mutual fund company with more than $1 trillion in assets and sells its funds primarily through financial advisers. As they contemplated the DOL rule's impact and intent, they argued this arrangement, where the fund company collects the fee and pays brokers, had to change. They would rather focus on managing investment portfolios.

They asked the SEC to allow them to offer "clean shares" eliminating the confusing alphabet soup of share classes, front-end loads and 12b-1 fees. Brokers could sell these "clean shares" at whatever commission the brokers chose, just the way they sell individual stocks and ETFs (exchange-traded funds).

And they pushed for the change to apply to nonretirement investors as well, arguing that "the standard created by the DOL rule will become the de facto standard for all account types." The SEC agreed earlier this year, issuing a "no action" letter, opening the way for clean shares. If other companies also put their own clean shares forward, the mutual fund landscape will change forever to the benefit of individual investors, all as a result of a rule that may never be fully implemented.

In future columns, I will look at how the fiduciary rule has affected the way investment advisers have positioned themselves and how consumers think about investment advice.

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