One term used in the investment advice section (Section 601) of the new Pension Protection Act of 2006 is worth some consideration.

It is “generally accepted investment theories.” Let’s call it GAIT.

The term appears in the section of the act that allows pre-certified computer models to provide personalized investment advice to plan participants and IRA holders. According to the law, such models must apply such theories.

Did you ever hear of this term?

You may have, if you are a benefits expert conversant with ERISA and various Department of Labor missives. You also may have heard the term if you are an investment professional steeped in modern portfolio theory or modern investment theory, to which the term is often linked, or if you are affiliated with an advisory firm or broker-dealer that keeps staff up to speed on such things.

However, the non-financial people I know have never heard the term. They can’t learn much about it on the Web, either.

To be sure, there are several Web references to the term from the Department of Labor, which has used the term elsewhere. Other websites tie the term to ERISA’s prudent man rule regarding investing, or they link it to modern portfolio (investment) theory.

A few sites even offer fuzzy definitions. And one website lays out some standards for “generally accepted investment principles,” not theories. (These principles at least give some good pointers, such as: have an emergency fund, put retirement investments in stocks and long-term fixed income securities, reduce the stock exposure with your age, etc.).

But that is it.

A similar search of financial books yielded even less information.

This is a problem for consumers, and also for the financial industry. Here’s why:

Chances are strong that the term “generally accepted investment theories” will find its way into 401(k) consumer education and marketing materials that describe the plan’s “pre-certified” computer model.

Chances are also strong that other financial professionals will use GAIT terminology as well, just to show they are up with the times, if nothing else.

However, if there is no prevailing understanding of the term, and if there is no easily accessible definition or explanation of the term, the good that could come from using the term (and applying the theory) will be lost upon consumers.

“What are these theories, anyway?” people may ask. “How do they affect me?”

Some may ask nothing at all. They’ll see the term as one more reason for feeling “snowed” by financial jargon.

Here’s another problem: Specialists who are familiar with the term do not always agree on what it means. Or, they dicker over fine points (e.g., the percentage allocation to different asset classes, etc.).

Naturally, this will put another communications burden on benefits specialists and financial advisors who will soon be seeing GAIT referenced in their marketing and sales materials. They will need to be able to explain it to uninformed employers, confused plan participants, and probably even retail clients who start sporting the term without comprehension.

It will put a similar burden on financial providers that offer, market and promote pre-certified computer models used with their 401(k) plans, and on providers that incorporate the term in various other materials to keep up with the times.

New laws and regulations, changing social currents, and economic advances continually combine to create words, terms, and concepts that businesses then incorporate. These enter the public consciousness, usually over several years.

For instance, 25+ years ago, “401(k)” was but a number for a new paragraph in the Internal Revenue Code. Now, it is an everyday term, and retirement plan, for millions of Americans.

So, confusion over GAIT will likely clear up in time.

Still, the businesses that use the terms need to take responsibility for making them clear, using whatever guidance the government provides. This will help reduce complexity and improve disclosure.

The new pension act, in TITLE VI, Subtitle A, Section 601, does help a bit. Like other DOL statements, it says generally accepted investment theories “take into account the historic returns of different asset classes over defined periods of time.”

Now it is up to financial professionals and providers to give that meaning. It would be best if this gets worked out now, before the term finds its way into product materials, literature and contracts–and before sharp-eyed clients (and their attorneys) start fishing around.