A day before the SEC approved its Regulation Best Interest rule, leaders from TD Ameritrade Institutional warned its top RIAs that the distinction between them and broker-dealers could be muddied.

“We do think there should be a heightened standard for the way brokers behave, but we’re very thoughtful around making sure the waters don’t get muddied,” said Tom Nally, president, TD Ameritrade Institutional, at the firm’s annual Elite Linc conference in Laguna Niguel, Calif., late Tuesday.

“You don’t want a situation where a broker who is really acting as a salesperson is positioning themselves as an advisor,” Nally said.

The SEC approved its "best-interest" rule for brokers and advisors at a meeting today in Washington, D.C.

“At the macro level, I’d say [Reg BI] is going to be a better thing,” said Tim Hockey, president and chief executive of TD Ameritrade.  “But it’s not as good for the RIA space. What I mean by that is the confusion consumers will have” in understanding the nature of the advice they’re getting.

Reg BI “is an attempt to find, frankly, a compromise solution” between the defunct DOL rule and a more workable solution, Hockey said.

The DOL rule was great in spirit, “but implementation was going to be a challenge” due to the complexity, Nally said. “Keeping it simple is going to be very important” for Reg BI.

The SEC is aware of the confusion and the potential for hat-shifting by hybrid advisors. The agency noted, for example, that nearly 80 percent of investment advisor representatives are also registered reps of broker-dealers, and that nearly 75 percent of total investment advisor assets under management are associated with investment advisors that have a broker-dealer affiliate.

But in proposing Reg BI, the agency said that it wanted to preserve broker-dealer business models that are distinct from investment advisors, and not limit customer choice.

A recent survey of independent RIAs conducted for TD Ameritrade Institutional found that 51 percent do not have strong opinions on Reg BI, 35 percent said they are in favor of it, and 14 percent were opposed.