The Independent Advisor Model Should Not Be Treated Like a Loophole 

Independent financial advisors are not employees. Period. Our financial advisor members are business owners who chose a model built on their own control and accountability and the opportunity to create lasting enterprise value. 

At FSI, we see that reality every day. Our members are not trying to fit themselves into a loophole. They are operating businesses, serving clients and making decisions that affect their employees, their families and the long-term value of the firms they have built. 

That distinction sits at the center of the Department of Labor’s latest proposal on independent contractor classification. In a recent comment letter, we outlined our support for rescinding the Department’s 2024 rule and restoring its 2021 framework. In our view, that shift would bring needed clarity to a question that has become unstable, costly and disconnected from how independent advisors work. 

The 2024 rule created a broader, less predictable standard that made it more difficult for workers to establish legitimate independent status. That risk becomes especially acute in financial services, where the line between business oversight and regulatory compliance is sometimes mistaken for signs of an employment relationship. 

Oversight Is Not the Same as Control 

Our financial advisor members understand their regulatory supervision and compliance obligations and often welcome them because they help protect clients and show the public that the industry takes its responsibilities seriously. 

But those requirements should not be used against them. When a firm requires an advisor to follow rules designed to satisfy legal, regulatory or supervisory obligations, that is not the same as controlling how the advisor runs his or her business. It is part of operating in a regulated industry, and it should not put an advisor’s independent status at risk. 

This point is especially important for FSI members because our industry is built on both independence and accountability. Those ideas are not in conflict. In fact, they are part of what makes the independent model work for so many advisors and clients. 

The Independent Model Is a Deliberate Choice 

That distinction becomes important when you consider how many of our members arrived at this model in the first place. Many began their careers as employees at wirehouses or other large institutions. They understood the captive model, lived within it and chose something different. 

In many instances, they wanted greater control over how they serve clients, structure their practices and build the value of their firms. In other words, they did not leave one employment model in search of another. They left to become business owners. 

The 2024 rule failed to give that choice enough weight. By applying a broader and less predictable standard, it risked treating independence as something suspect, rather than recognizing it as a deliberate business decision made by professionals who understood the tradeoffs going in.

The Economics of Ownership 

Those tradeoffs show up in how independent advisors operate every day. They lease office space, hire staff, manage expenses, select technology, develop client relationships and make decisions that shape the future of their firms. 

They benefit when those decisions work and absorb the loss when they do not. That is not the economic profile of an employee. It is the reality of business ownership. 

Reclassification would also threaten what many of our members have spent decades building. For many, the value of their firm represents years of work and serves as a gateway to retirement. It also supports succession planning, business continuity and the ability to transition client relationships on their own terms. Weakening the ownership model would undermine all of that. 

That is why this issue matters so deeply to us. Our members have created businesses that support clients, employees and communities. Those businesses should not be put at risk because regulators fail to distinguish between compliance obligations and employer control.

What Misclassification Would Cost 

The consequences of misclassification and revoking advisors’ independent contractor status would not stop with advisors or firms. The fallout would include higher legal, compliance and staffing costs, all of which would force many of our members to make some difficult choices. 

Some advisors would leave the industry rather than operate as employees. Others would raise fees or account minimums to absorb added expenses. Either way, financial guidance would be harder to access at the very moment Americans need more of it. 

The Department of Labor now has an opportunity to restore balance. Rescinding the 2024 rule and returning to the 2021 framework would protect workers without treating legitimate independent businesses as suspect. It would also respect the choices our members have made, the firms they have built and the client relationships that often span decades. 

We are not asking for special treatment. Our members are asking for a standard that reflects the businesses they own, the risks they take and the clients they serve.