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FSI Lobbies Senators for a Fix After DOL Kills Independent Contractor Rule

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What You Need to Know

  • The Labor Department recently withdrew a rule that would have clarified the independent contractor status of financial advisors, among other workers.
  • FSI is in talks with Sen. Patty Murray about advisors' independent contractor status and is reaching out to other lawmakers.
  • Eighty FSI member firms and their more than 130,000 affiliated advisors are affected by the rule's withdrawal.

While the Financial Services Institute is “very confident of the arguments being made” in its lawsuit against the Department of Labor for withdrawing its independent contractor rule, FSI is actively lobbying senators about a legislative remedy, David Bellaire, FSI’s general counsel, told ThinkAdvisor’s Human Capital podcast Tuesday.

FSI filed a lawsuit Thursday against the Labor Department for withdrawing its final independent contractor rule.

Labor repealed the rule on May 6, one day before its delayed effective date.

“In this case, the Department of Labor didn’t follow the requirements of the Administrative Procedures Act” in withdrawing the rule, Bellaire told Human Capital.

“Unfortunately we’re getting caught up, I think, in an effort by [Labor] Secretary [Marty] Walsh to address problems that don’t exist in our industry,” Bellaire said.

Advisors and the firms they are affiliated with are impacted by the rule’s withdrawal. “We continually hear from our financial advisor members how devastating the loss of the independent contractor status would be — not just to their business but to their clients as well,” Bellaire said.

FSI’s membership includes more than 80 independent financial services firms. Those firms have over 130,000 affiliated financial advisors who are independent contractors that are affected by the rule’s withdrawal.

FSI has already “been in to see” Sen. Patty Murray, D-Wash., chairwoman of the Senate Health Education Labor & Pensions, or HELP, Committee, to discuss seeking a legislative remedy to the Labor rule being withdrawn, Bellaire said.

FSI hopes a carve-out can be added to existing legislation “that recognizes that the regulatory supervision requirements of independent firms and independent advisors does not result in independent advisors being classified as employees.”

FSI is seeking more meetings with Murray and plans to hold roundtables with FSI members as well as with members of the HELP committee, Bellaire said.

Don’t miss the next episode of our Human Capital podcast Friday with Bellaire to hear about the lawsuit’s timing, how withdrawal of the rule is impacting firms as well as why FSI worries that Labor and the Biden administration may pursue a more stringent independent contractor standard.

(Pictured: David Bellaire, general counsel, FSI)

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