Allowing investors to pursue class actions against advisors, broker-dealers and insurance companies under the Labor Department’s controversial fiduciary standard rule is almost certainly the loudest objection voiced by its foes in the industry. Consequently, that critical issue warrants close attention, Skip Schweiss, managing director of advisor advocacy and industry affairs at TD Ameritrade Institutional, tells ThinkAdvisor in an interview.

The firm, strongly in favor of the rule, has been immersed in the fiduciary debate on behalf of independent advisors and investors for more than a decade. Today it remains in the thick of the discussion, talking with legislators and regulators, and meeting with trade associations and other groups.

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In studying potential revisions to the rule — at President Donald Trump’s directive — Labor is perhaps focused most heavily on the component that lets investors join class action suits, according to Schweiss. Scrapping it would likely mean dispute resolution by arbitration only.

Full implementation of the rule is due Jan. 1, 2018; but, in view of Trump’s order, that date probably will be pushed back.

Meantime, some legislators continue to fight for the rule’s repeal. For example, the House Committee on Education and the Workforce passed legislation in July approving the Affordable Retirement Advice for Savers Act, introduced by Rep. Phil Roe, R-Tenn. The bill now goes to the House floor.

At the other extreme, the state of Nevada passed legislation to apply a fiduciary standard to advisors on all investment accounts, effective July 1, 2017. And the Certified Financial Planner Board of Standards has proposed an addition to its Standards of Professional Conduct that extends a fiduciary standard to financial advice — on top of financial planning.

ThinkAdvisor recently interviewed Schweiss, who, concurrent with his role in advisor advocacy, serves as president of TD Ameritrade Trust Company. By phone from his Denver office, he noted an early effect of Labor’s rule: brokers moving, increasingly, to fee-only compensation. Here are highlights of our conversation:

THINKADVISOR: Is the fact that the DOL rule allows investors to join class action suits one reason that some firms and industry groups are calling for its repeal?

SKIP SCHWEISS: That may be the reason. And it could be the major factor that the Department of Labor looks at with regard to possible revisions of the rule: Should it allow investors to join class action suits, or should it [require] arbitration with the mandatory dispute resolution mechanism? This will be the area to watch most closely in coming months.

So people opposing the rule focus on that issue a great deal.

Yes. In a lot of the comment letters, discussion and speeches, that’s been an issue, if not themajor issue of concern expressed about the rule from broker-dealers [and others].

Do you think the full implementation date will be pushed back from Jan. 1, 2018?

That’s likely. The DOL would like to do the work that President Trump has asked it to do in terms of taking a fresh look at the rule. The industry will have a lot of input as to what should happen, and that will take time [to discuss].

Exactly where does the DOL stand right now?

No. 1: We have a comment period that’s asking to delay the Jan. 1 compliance date. No. 2: Should there be other changes to the rule? I think there’s a high probability there will be. But I do think that, in some shape or form, the rule is going to be with us.

So you don’t believe it’s in jeopardy, even though some are still trying to kill it?

It’s already partially implemented. Yes, there are movements afoot on various fronts, primarily legislative, to stop or kill it. But I don’t think those will succeed.

One of the arguments, from the beginning and which persists today, is that the rule will hurt small investors. What’s your opinion?

I don’t feel that way. We know that RIAs are typically serving higher-net-worth investors, and they often have minimum account sizes that are quite a bit larger than smaller investors’ accounts. But brokers can still serve the $50,000 investor just as they do today — the rule doesn’t ban commissions. Brokers can still charge those for their advice. And there are also the robo-advisors out there, most of which have very low account minimums.

Is the best-interest contract exemption (BICE) a loophole for brokers who receive commissions?

I wouldn’t call it a loophole. It’s designed to be an exception to the rule that the department granted to allow brokers [to receive] commissions. Labor said it has nothing against commissions and that in fact many consumers are better off paying for their advice that way versus a flat fee. That’s why they carved out [BICE] because ERISA [the Employee Retirement Income Security Act] didn’t allow for commissions to be received by fiduciaries.

Are most registered investment advisors taking the rule seriously, or do they brush it off?

I’ve done dozens of talks with advisors around the country in the last year, and most are taking it seriously. We’re filling rooms every time. People are taking lots of notes, asking lots of questions. There’s the isolated shrugging off; but for the most part, they’re taking it seriously. They know that in the IRA rollover recommendation, there are processes they need to go through to make sure that that recommendation is in the client’s best interest. So they need to pay attention.

Does the rule present an opportunity for RIAs or other types of advisors?

It’s an opportunity for RIAs because the compliance burden is far lower for them since they’re already fiduciaries. There are also opportunities for them to take on new advisors or new partners in their firms who are coming over from the broker-dealer world. The rule is possibly accelerating that movement.

Any other opportunities for RIAs brought by the rule?

They have more opportunity in advising retirement plans: Broker-dealers are talking about walking away from the small retirement plan marketplace. So RIAs are really well positioned.

Do you think there’s any chance that broker-dealers will absorb RIAs and that consequently they’ll be regulated by the Financial Industry Regulatory Authority?

No. You’re going to see more changes in the broker-dealer world than in the RIA world. In fact, we’re seeing many more brokers — probably most who are a blend of commission and fee — accelerate their movement toward the fee-only world.

Why wouldn’t it be good for RIAs to be regulated by FINRA?

Most advisors tell me they wouldn’t prefer that option. FINRA is much more of a rules-based regulatory regime. Advisors are much more of a principles-based regulatory regime under the Investment Advisers Act of 1940, which says that you put the client’s interest first. There isn’t a huge rules book as under FINRA. It would be difficult to overlay a rules-based regime on top of a principles-based regime, and most advisors don’t seem to be in favor of it.

Are RIAs concerned that brokers will now be able to call themselves fiduciaries in advising on retirement accounts?

Some of them are because brokers can communicate with their clients and prospects [about being a fiduciary]. But they’re in favor of the rule in general because most believe that investors should get a fiduciary standard of care.

For some time, the Securities and Exchange Commission has been working on its own fiduciary rule that would apply to all investment accounts, not just retirement accounts. What’s taking them so long?

Seven years ago Dodd-Frank gave the SEC authority to pass a rule applying a uniform fiduciary standard to brokers and advisors. The SEC continues to say that it’s important and that they’re working on it, but they have yet to finish it.

How come?

It’s more complicated for the SEC [than for the DOL] [to propose a rule] with their three-part mission, including protecting investors and maintaining efficient capital markets; whereas, the DOL has a one-part mission: to protect workers. So it was simpler for them to proceed. The SEC chair [Jay Clayton] is now telling us how complicated this is. We’ll see if it goes anywhere.

Do you think applying a fiduciary standard to all types of investment accounts eventually will be required?

If for no reason other than consistency’s sake, we hope it would go in that direction. We’d prefer one set of rules over many rules. But predicting it will go that way is hard.

Who are the winners and, if any, losers because of the DOL rule?

I agree with Morningstar’s analysis that in this new world, some firms and products will face headwinds — broker-dealers, insurance companies, annuities, alternative investment products, higher cost investments. They’ll have some struggles under the rule. On the other side, RIAs stand to benefit. They’re in a better compliance position since they’re already fiduciaries, as I’ve said. And the major discount brokers and RIA custodians will benefit as well.

Are robo-advisors in favor of the rule? They’re RIAs.

Betterment seems to have led the way here. They came out very strongly for it.

What’s your take on the concept of the bionic advisor: digital advice plus human advice?

I think it will be a trend, and Vanguard is proving that. It says, essentially: “We have this digital advice platform, but we also have certified financial planners that you can call for more specific guidance or more complicated challenges in your financial life.” So I think you’re going to see more of that.