US Department of Labor, House of Representatives and State Governments All Areas Where Victory is Essential for Future of Independent Wealth Management Channel
When we launched FSI in 2004, it was clear that the last thing the industry needed was another acronym. Instead, it needed a group that could achieve meaningful results for its members, Main Street investors and the broader independent financial services industry.
Over the last 18 years, there have been many ways we have accomplished this. It includes everything from writing comment letters, educating lawmakers and their staff and connecting our members with their elected officials to share their stories directly.
Another important tool in our advocacy toolbox is litigation. It is a tactic we do not take lightly. Yet, litigation can be the correct means to address legal issues and matters where the court is the appropriate venue.
We have successfully used litigation to produce meaningful results on issues threatening our members’ businesses and their clients’ access to their advice. Recently, we took on the Department of Labor in court to protect an essential component of the independent business model – advisors’ independent contractor status.
Major win for the industry
In the final days of the Trump Administration, the Department finalized a rule that would have clarified independent contractor classification under the Fair Labor Standards Act by implementing a common-sense “economic reality” test.
However, shortly after taking office, the Biden Administration delayed the rule’s implementation and ultimately withdrew the measure altogether. In response, we joined a coalition of partners across various industries in filing a legal challenge on behalf of our members, who cherish their independent contractor status and have no intention of being anyone’s employee.
Last month, a district court in Texas decided the case in our favor, finding that the Department violated the Administrative Procedures Act (APA) in the delay and withdrawal of the independent contractor rule. As a result of this decision, the Trump-era rule is effective. The decision stands as a significant win for every independent advisor working today, providing them with much-needed clarity and certainty.
This is not the first time we litigated a case to defend an important advocacy priority. In 2018, we were co-plaintiffs in a successful legal challenge against the DOL that resulted in the fiduciary rule being vacated.
In both instances, litigation came after engaging the Department constructively on the issues at hand and trying to educate them about the unintended consequences of the rules.
Meanwhile, threats to our members’ independent contractor status are not limited to the DOL. The House of Representatives last year passed the Protecting the Right to Organize Act (PRO Act), legislation that introduces a more strident ABC worker classification test under the National Labor Relations Act, which would make many advisors employees of their broker-dealers.
While the legislation is currently stalled in the Senate, we’ve continued educating lawmakers on Capitol Hill, stressing that our members choose to be independent contractors and have a long history of appropriately operating as such.
Whatever it takes
Our financial advisor members do not want to be employees of their broker-dealer, and they chose the independent model with their clients in mind. Their independence is central to serving their clients and running their businesses. So, we’ll continue to do everything we can to ensure they can operate that way.
We’ll do what is necessary to protect our members’ interests and ensure that all individuals can access competent and affordable financial advice, products and services.