In the end, Lynch and others think it's possible that plan sponsors-the companies that sponsor 401(k) firms as opposed to plan providers-may decide to work only with advisors who are not associated with selling products in any way.
Wohlner and others also said advisors to 401(k) participants should disclose all fees.
"Advisors and their affiliates should be required to disclose all fees and forms of compensation from both giving advice and any other related revenues they make off of the plan," he said. "Full and complete disclosure with no loopholes or exceptions."
New Rules On Using Computer Models
Of course, some of the details are devilish and confusing. Take the rule that lets advisors use computer models to give investment advice under certain conditions.
The proposal tightens up the rules on such advice, said C. Frederick Reish, an attorney with Reish & Reicher.
"Under the withdrawn regulation, if an advisor gave advice to a participant, but the participant asked for more advice, the advisor could give his advice, that is, non-computer model advice. Under the new proposed regulation, the advisor cannot give his personal advice in any circumstance."
The rule also says that if an advisor uses a computer model, it needs to be certified as objective and unbiased. But advisors aren't clear on what that means and how it will be enforced.
What's Past Is Past
Likewise, advisors are confused about a proposed provision that disallows the use of historical data.
"Clearly historical data should not be the criteria for fund selection in and of itself," said Wohlner. "But ignoring it totally, or any other aspect of fund data such as expenses, relative risk, risk-adjusted performance, and the like is a mistake. I love index funds, but they are not the right answer in all cases."
Campbell and others agree. "I am very concerned that the Labor Department is considering defining 'generally accepted investment theories' and mandating or prohibiting investment practices," Campbell said.