The Financial Services Institute (FSI) submitted a comment letter to the Department of Labor (DOL) regarding the Department’s proposed independent contractor classification rule. As the organization representing independent financial advisers and independent financial services firms, FSI has expressed serious concerns about how the proposed rule would affect independent financial advisers’ independent contractor status and its ultimate impact on advisers’ ability to continue to own and operate their businesses and serve clients within their communities. FSI urges DOL to withdraw the proposal.
“We appreciate the opportunity to weigh in on the proposal and share our insights on its impact on not only the independent financial advice industry but also the Main Street Americans our members serve,” said FSI president and CEO Dale Brown. “Our members, inspired by the entrepreneurial spirit, have chosen to be independent contractors — many switching from an employee-based model — with the desire to build their own business, develop their own staff and provide high-quality, personalized service to their clients,” said Brown. “Despite the DOL’s claims, the proposal would create uncertainty regarding many financial advisers’ independent contractor status. It would also impose burdensome costs on independent financial services firms and, ultimately, impact access to objective, professional financial advice for hard-working Americans. We will continue to engage with the department on this proposal to preserve advisers’ independent contractor status.”
The letter also warned that getting rid of the clarifying “core factors” framework of the existing rule from 2021, the proposed rule would not achieve regulatory clarity, is inconsistent with the Fair Labor Standards Act, contravenes Supreme Court precedent, and violates the Administrative Procedure Act.
The comment letter highlights several other key points and issues, including:
- The Department’s cost-benefit analysis significantly underestimates the proposed rule’s costs by neglecting to consider costs from wage cuts and layoffs, payroll taxes, disruption of specific industries, increased litigation, shifting operations, and recordkeeping.
- It also would significantly harm the independent financial services industry by creating an environment where the industry would face increased litigation costs from accusations of misclassifying financial advisers, reduce advisers’ flexibility to change their affiliations with firms, and increase client costs.
- It would inflict economy-wide ramifications by introducing significant uncertainty into worker classification and failing to account for the myriad ways that businesses and contractors structure their relationships and the long-term investments made based on these arrangements.
In summary, the legal uncertainty created by the DOL’s proposed rule would chill vital economic innovation and stifle innovation of new work models.
Read the entire FSI comment letter here.