FSI Submits Comment Letter Underscoring Issues with New Jersey’s Independent Contractor Proposal

Today, the Financial Services Institute (FSI) submitted its comment letter to New Jersey’s Department of Labor and Workforce Development regarding the department’s proposed worker classification rule. The letter recommends that the department withdraw the proposed rule.

The comment letter highlights several key concerns, including:

• The proposed regulation exceeds the agency’s rulemaking authority and represents a significant departure from established precedent interpreting the ABC Test.
  • The proposed rules improperly expand the definition of “control” under Prong A of the test to include oversight required by law, such as federal securities laws.
  • The proposal improperly expands Prong B of the test to include any geographical location in which a business may have a touchpoint.
  • The proposed regulation creates a rigid and unduly arbitrary standard under Prong C.
• The proposed revisions to the ABC Test would require independent financial advisors—who have proactively and affirmatively chosen to forgo the employer/employee work model—to become employees of financial services firms.
• The proposed rule would create significant uncertainty, and ultimately higher costs, for independent financial advisors and independent financial services firms.
  • This will reduce the availability of high-quality investment advice and other financial, tax and estate-planning services—particularly for underserved communities, including minority and rural communities—in New Jersey. Specifically, a recent study by FSI and Oxford Economics found that 65% of independent financial advisors in New Jersey would consider relocating their business out of the state.
• The independent financial services business model is successful because the key relationship is the one between the client and their independent financial advisor—not the relationship between the financial advisor and their affiliated independent financial services firm.

“We appreciate the opportunity to provide our comments and outline our serious concerns about this proposal,” said FSI President & CEO Dale Brown. “The comment process provides an important opportunity for stakeholders to inform regulators of their concerns regarding a proposal. In this case, New Jersey’s proposal would have the unintended consequence of harming independent financial advisors and the Main Street investors they serve. Independent financial advisors are business owners helping families plan for retirement, save for their children’s education, and achieve other financial goals. By revoking advisors’ choice to operate as independent contractors simply for complying with existing securities regulations, the proposal threatens the businesses advisors have built and could limit access to affordable, trusted financial advice—especially in underserved communities.”

Read FSI’s comment letter here.