Independent advisers are not gig workers

Let’s hope that by skillful lobbying, thoughtful consideration or through sheer dumb luck, financial advisers can stay independent.

Financial advisers — as well as others who want to remain independent contractors and not become employees — should be free to choose the work model they prefer. That’s our message to the Department of Labor after it published a proposed rule in the Federal Register on Oct. 13 that would make it more difficult for employers to designate workers as independent contractors.

As InvestmentNews’ Mark Schoeff Jr. reported, Labor Secretary Marty Walsh said the regulation is designed to combat the misclassification of employees as independent contractors, which “deprives workers of their federal labor protections, including their right to be paid their full, legally earned wages.”

It’s commendable and understandable that the Labor Department wants to protect workers who are performing the same work under the same conditions and following the same mandates as company employees, but whom employers deem independent contractors. It’s obvious to everyone except lawyers and lobbyists that most of the independent contractors in that position would rather be employees but continue working as independent contractors because they have little alternative; the companies employing them won’t hire them because they wish to save money on benefits and to show investors how lean they are.

Financial advisers should be free to choose the work model they prefer.

But what about workers who don’t want benefits, who don’t want to be employees, who have the freedom to come and go as they please and do their work in any way they choose, and want to keep it that way? In short, why impose employee status on those who truly want to remain independent contractors?

The DOL proposal wouldn’t take away those freedoms directly, but it would rescind a Trump administration independent-contractor rule that was upheld by a federal court when the Biden administration tried to vacate it. As reported, the Trump approach gives greater weight to whether a worker exercises control over job duties and profit and loss of the operation. The Biden proposal would “restore the multifactor, totality-of-the-circumstances analysis” to determine whether a worker is an independent contractor under federal labor law, according to a DOL statement. Those in favor of maintaining the current rule believe the change would lead to greater restrictions on workplace choice.

In the past, when independent-contractor rules were the subject of legislative and regulatory discussion, advisory industry trade groups including the National Association of Insurance and Financial Advisors and the Financial Services Institute were able to negotiate carve-outs for independent financial advisers. They will try to do so again. Legal action against the Department of Labor is not out of the question either.

The issue probably will wind up bouncing back into the hands of Congress, where agreeing on something in a commonsense way is never easy. In today’s hyper-partisan world, where compromise is seen as moral weakness, getting Republicans and Democrats to agree on a subject as arcane to most of the public (including members of Congress) as independent registered representatives is probably impossible.

Let’s hope that by skillful lobbying, thoughtful consideration by everyone involved or through sheer dumb luck, independent financial advisers can stay that way.