So at one point we were talking about the nature of conflicts-of-interest and, how, to some extent, conflicts-of-interest have become confused with self-interest.

What do I mean by this? Have I suddenly rejected "best interest" as a modus operandi? (You might recall it wasn't sudden as I wrote about that subject a few weeks ago.) No. But let me offer an analogy to clear things up.

Think of it this way: A true conflict of interest occurs when the scenario becomes "win-lose." This will often result when one of the participants goes overboard with his self-interest. But self-interest alone does not automatically lead to a win-lose situation. Indeed, quite a few philosophies have maintained that self-interest regularly creates the opportunity for win-win situations.

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Consider this: The movie Finding Nemo. As you might remember, Nemo and his dad live in a sea anemone. As you might not remember, there's a reason why clownfish like Nemo live inside sea anemones. Clownfish are immune from the anemone's toxins. In other words, sea anemones are great hiding places for clownfish. It is therefore in a clownfish's self-interest to reside within an anemone. That's a win for the clownfish.

But the anemone enjoys its own benefits from the symbiotic relationship. The constant movement of the clownfish helps aerate the water surrounding the anemone, giving the tentacled creature a cleaner environment. Ironically, the anemone also benefits from the – er –droppings of the clownfish, which the anemone consumes. So, it's within the anemone's self-interest for the clownfish to live within its domain. That's a win for the anemone.

I know what you're thinking. You're thinking, "Where's the conflict?" and you'd be right to ask this.

Where is the conflict of these mutual interests? The DOL's new "Conflict-of-Interest" Rule implies the simple act of deriving a benefit from a relationship creates a conflict-of-interest. So, despite the mutual benefits, both the clownfish and the sea anemone have a conflict-of-interest.

Does that sound silly? Of course it does.

The best advisers create win-win situations that benefit their clients. But the mere fact that these advisers accrue some form of compensation (their part of the "win") creates a conflict-of-interest that the DOL now requires be disclosed. It doesn't matter if the compensation is or is not a self-dealing transaction, the DOL treats both the same.

Does that sound silly? Of course it does.

Peer-reviewed academic research points out that self-dealing fees generally lead to lower investment returns. It is this opportunity cost (and not the size of the fees themselves) that the DOL cites as the "cost to investors" resulting from conflicts-of-interest. There is no peer-reviewed academic research that I'm aware of that offers the same conclusion when it comes to non-self-dealing fees.

When compensation is aligned with the investor's self-interest, the adviser produces a win-win condition. Should that adviser be penalized if it's also in his self-interest to ensure the investor's self-interest is protected?