FSI Announces Findings of Study Examining Impact of the Department of Labor’s Independent Contractor Rule Proposal

January 17, 2023

Oxford Economics finds Main Street investors could lose access to financial advice and services due to advisor retirements and inflated fees and commissions

Study also notes that independent firms and advisors would potentially experience higher costs

The Financial Services Institute (FSI) today announced the findings of a study analyzing the potential impact of the Department of Labor’s recent proposal regarding independent contractor classification rules. The study was conducted with Oxford Economics, a recognized global economic forecasting and econometric analysis leader.

Overall, the study found that the DOL’s proposal would result in significant disruption if implemented, with scores of investors across the country likely losing access affordable and professional financial advice and services. Moreover, independent firms that have developed business models based on current and longstanding rules would face higher costs, as would their affiliated advisors – who freely choose and prize their independence.

“This study confirms our worst fears about the Department of Labor’s independent contractor rule proposal, which would harm millions of Main Street Investors across the country who rely on independent financial advisors and firms to save, invest and plan for the future,” said FSI President & CEO Dale Brown. “While our industry may not be the target of the DOL’s recent rulemaking, it’s clear that the potential fallout would be enormous. That’s especially the case for our financial advisor members, many of whom were once employees of wirehouse firms but willingly opted to go the independent route, believing that the model allowed them a better opportunity to provide clients with a great service experience. Based on the findings of this study, and consistent with our comment letter late last year regarding this issue, we urge the department to rescind this proposal.”

Study Highlights

  • Advisors value their independence so much that up to 20% of them would retire rather than be reclassified as employees. As a result, a significant number of Main Street investors would lose access to a trusted financial advisor. Naturally, it also means that the overall number of financial advisors would decline – an unhealthy development for an industry already facing a demographic crunch within its advisor ranks.
  • 78% of advisors expect account minimums to increase, restricting their ability to serve smaller accounts. This would be a particularly harmful development for less affluent investors, including younger individuals, minority households and those in rural areas.
  • 77% of advisors expect commissions and management fees to increase. 
  • Almost half (47%) of financial advisors reported that they believed the number and kind of investment products they could offer investors would decline.
  • When financial advisors were asked to pinpoint what percentage of existing clients could no longer be served because of increased account minimums or fees, the average answer was 31%.
  • Financial advisors who remain in the business will face higher costs for legal expenses and recordkeeping. If they choose to start or scale up their RIA business, they will encounter significant startup costs. Many independent financial advisors who perform pro bono work in their communities report that these increased costs would mean they would either do less or stop doing such volunteer work.

To access the report in full, click here.

To view the infographic, click here.

Recent History

In early 2021, the previous administration finalized a rule that included a common sense economic reality test when determining a worker’s employment status. It would have provided our members, along with the broader industry, much-needed clarity regarding their independent contractor status.

Upon taking office, however, the current administration delayed the implementation of that rule, only to later rescind it entirely, which prompted FSI, along with coalition partners in other industries, to sue the Department of Labor. While that effort was successful, the DOL came up with new independent contract rulemaking last October.   



To generate the results outlined in this report, Oxford Economics, in consultation with FSI, prepared and distributed an online survey to financial advisors affiliated with FSI members, and representatives at FSI member firms. The survey was in the field between December 7 and December 20, 2022. Responses were limited to one per IP address, the completion rate was 76% and the typical time spent was around five and a half minutes on the survey.

An initial question sorted respondents into a series of questions phrased for independent financial advisors or into a similar set of questions geared towards representatives of financial services firms. In total, 689 responses were received from financial advisors.

In addition, 14 responses were received from representatives at FSI member firms. The following steps were taken to arrive at that final set of responses: first we limited survey responses to individuals who reported that they represented an independent broker dealer or corporate RIA; next we deleted individuals who also responded that they were advisors or registered representatives; then we deleted responses from respondents who reported overseeing fewer than 20 independent affiliates; finally we deleted responses from individuals who reported representing a non-FSI member firm. In the remaining set of 16 FSI member responses we received three separate responses from one firm, so we selected the final response received.  

The survey questions were designed by Oxford Economics following a set of six interviews—three with representatives at financial services firms, and three with independent financial advisors. FSI was asked to provide input on the survey to help ensure the language used would be clear to respondents.


In preparing the survey questions and this report, Oxford Economics conducted three interviews of FSI member firms of varying sizes and specialties, and three interviews with independent financial advisors. The introductions were arranged by FSI. Discussions were wide-ranging, including both prepared questions, and an open-ended invitation to provide any additional information. The interviews were documented; however, anonymity was a precondition to the participation of those interviewed.