Progress for advisors and investors: A state of advocacy as 2026 begins

Advocacy wins are not always dramatic. Most of the time, progress is made quietly as a proposed bill dies at the end of a legislative session, rules are revised to reduce risks and provide clarity for stakeholders and advisors gain more certainty about how to serve their clients.

Looking back as 2026 begins, the independent advice profession saw several long-running debates begin to move in more constructive directions, along with a few clear wins.

There is still work to be done, but the direction matters: clearer rules that help protect Main Street investors and help ensure that advisors of all sizes can remain in business and continue to provide personalized guidance.

Protecting advisor independence

One of the biggest issues last year was worker classification. At the federal level, while we awaited a decision in our case challenging the Biden-era independent contractor rule, the government announced it would not enforce its revised independent contractor rule, leaving in place standards that have supported the independent business model for decades.

That was welcome news for many advisors who are small-business owners who lease offices, hire staff, and maintain long-term client relationships within their local communities. State-level activity, however, kept the issue front and center.

In New Jersey, regulators put forward a proposal that would significantly narrow the definition of independent contractor, effectively making many advisors employees of their firms. This change would not only impact advisors, it would also have a devastating impact on Main Street investors in the state.

A study we conducted with Oxford Economics found that 65% of financial advisors would consider relocating their businesses out of New Jersey if the rule were to go into effect. Meanwhile, 91% expect their clients to be impacted by either a reduction in services, a reduction in investment options or increased fees.

In response, we submitted a formal comment letter and testified at a state hearing, outlining concerns that the rule could force advisors into employment structures they did not choose, disrupt long-standing client relationships and raise costs for investors seeking personalized advice.

The New Jersey debate matters because its actions could encourage other states to follow suit. More than that, it reflects a broader challenge: labor frameworks, like other regulations, must account for the different business models in our industry. Rigid tests risk harming small businesses, limiting competition and failing to improve consumer outcomes.

Avoiding regulatory overlap

Another highly visible development last year involved the Department of Labor’s fiduciary proposal. After years of legal and regulatory back-and-forth, the department withdrew its defense of the most recent version of the rule. While we still await the district court’s final judgment, this was a positive development for advisors, firms and the clients they serve.

FSI has long opposed the 2024 rule, believing that investors already receive strong protections under Regulation Best Interest. Layering duplicative regulation offers little additional benefit and carries significant downsides. It risks unnecessary disruption to established client relationships and increases compliance pressure on firms without improving investor outcomes.

When taxes become a barrier to advice

Tax policy proposals also re-emerged at the state level last year. Financial transaction taxes and targeted levies on financial services periodically surface as budget offsets. While often aimed at institutions, these taxes ultimately fall on individual investors by increasing the cost of saving and investing.

FSI actively opposed such proposals, including efforts that helped stop financial services taxes in states such as Minnesota and Maryland. The concern is straightforward: any tax that discourages investment participation undermines long-term retirement security, particularly for middle-income households.

At the federal level, as Congress debated provisions of the One Big Beautiful Bill, the industry’s advocacy helped safeguard the pass-through entity tax deduction and the favorable tax treatment of retirement savings vehicles. These issues may not have captured national attention during the legislative process, but preserving these features provides continued tax relief for advisors, business owners and retirement savers.

From enforcement to transparency

Beyond individual legislative fights, last year brought increased attention to regulation by enforcement. When policy standards are developed through enforcement actions rather than transparent rulemaking, firms are left without clear guidance, compliance becomes reactive rather than proactive, innovation slows and consumer choice narrows.

During the year, we urged the SEC to pursue procedural reforms that emphasize public guidance and rule clarity over enforcement-driven policymaking. Clear expectations benefit everyone.

Advisors know the rules they must follow. Firms can invest with confidence. Investors benefit from a stable, transparent marketplace.

A balanced path forward

Across all these issues, the common thread is the need for balance. Investor protection and access to advice are not competing goals. They depend on each other. Well-designed regulation can raise standards while still preserving the business models that allow advisors to serve communities across the country.

Advocacy does not always grab headlines, but when it works, the outcomes are real: advisors remain independent, firms grow responsibly and investors retain access to the guidance they need.

Dale Brown is the president & CEO of Financial Services Institute.