What You Need to Know
- The PRO Act could cause independent financial advisors to be considered employees.
- It passed the House by a 225-206 vote.
- SIFMA, FSI and IRI are fighting for senators to add an exemption for financial advisors.
Industry trade groups expressed their “strong concerns” to lawmakers Tuesday on H.R. 842, The Protecting the Right to Organize (PRO) Act, which passed the House by a 225-206 vote the same day and changes the definition of “independent contractor.”
The Financial Services Institute is “disappointed in the House’s vote to pass the PRO Act without providing a carve-out for independent financial advisors,” Dale Brown, FSI’s president and CEO, said Tuesday in a statement. “These advisors, many of them leaving an employee advisor model, choose the independent model because it allows them to better meet the needs of their clients and operate their own business. Independent financial advisors are small business owners and entrepreneurs.”
Essentially, FSI explained, “the PRO Act expands who is considered an employee for the purposes of forming/joining a union, and it sweeps independent financial advisors into that group.”
Rep. Bobby Scott, D-Va., who wrote the bill, says the PRO Act is intended to stop companies from misclassifying employees to deprive them of the right to form unions and that it would not “mean the end of freelancing or restrict workers’ flexibility,” according to MarketWatch.
FSI, along with the Securities Industry and Financial Markets Association and the Insured Retirement Institute, argued in a letter to House Speaker Nancy Pelosi, D-Calif., before the vote that “By effectively reclassifying independent contractors as employees, the PRO Act would create unintended consequences for the industry, and specifically insurance producers and independent financial advisors.”
SIFMA and FSI told House lawmakers that the PRO Act needed an exemption for independent advisors, but such a carve-out was not included.
“While securities laws and regulations require oversight of independent financial advisors by their affiliated broker-dealer, the independent financial services industry has a long history of appropriately classifying affiliated financial advisors as independent contractors,” Brown stated.
The PRO Act now moves to the Senate.