FSI Raises Concerns at New Jersey Hearing on Proposed Independent Contractor Rule

Today, the Financial Services Institute (FSI) voiced concerns about New Jersey’s proposed independent contractor rule during a public hearing held by the New Jersey Department of Labor and Workforce Development.

In his testimony, FSI Executive Vice President & General Counsel David Bellaire emphasized the significant unintended consequences the proposed rule could have on the independent financial services industry and the investors it serves. Specifically, the rule, as proposed, could result in independent advisors being forced to classify as employees because efforts to comply with securities supervision requirements could be misconstrued as employer control under the ABC test. The change would cause advisors to lose flexibility in the products and services they provide independently.

Key points from David Bellaire’s testimony:

• By rigidly applying the ABC test across multiple laws, the rule would force the reclassification of professionals who clearly do not belong—or wish to be—in an employer-employee relationship.
• Nine in 10 independent financial advisors would exit their current business model rather than be forcibly reclassified.
  • Independent advisors want to serve their clients, not answer to a corporate chain of command.
• Ultimately, the rule will harm investors by shutting out ordinary people from the advice they need to plan for retirement, save for their kids’ education, or care for aging loved ones.
  • Independent advisors say they would need to raise account minimums, increase the fees their clients pay and stop serving some of their existing clients – including middle-income families, young investors, or retirees with modest portfolios.
• The ABC test, especially as applied here, is too sweeping to be fair or functional. The rule’s framework is broken.
  • It disregards legitimate independent work. It overrides the preferences of New Jersey residents who choose to work independently.

Read David Bellaire’s full oral testimony.