PRO Act opponents target new bill that could curtail independent advisers

The bill, drafted by Senate Finance Committee Chair Ron Wyden, D-Ore., is aimed at reforming the unemployment compensation system, and could restrict use of the independent contractor classification. However, the proposed legislation lacks bipartisan support.

Opponents of the Protecting the Right to Organize Act, a unionization bill that could threaten independent financial advisers, feel good about defeating it, but they’re worried emerging legislation could also jeopardize independent contractors in the financial industry.

Trade associations representing financial advisers have coalesced to defeat the bill, including a provision that would make it harder for employers to classify workers as independent contractors. The groups say the provision would disrupt the business model for independent broker-dealers, financial advisers and insurance professionals.

The Democratic-majority House approved the PRO Act earlier this year. But it has stalled in the evenly divided Senate, where Republicans can stop most legislation with a filibuster. The Senate GOP is united against the bill, which also is opposed by a handful of Democrats in the chamber.

“At this time, it’s hard to see a path forward on the PRO Act,” David Bellaire, executive vice president and general counsel at the Financial Services Institute, told reporters on Tuesday from the group’s OneVoice conference in Orlando, Florida.

But that hopeful outlook is tempered by another bill that is being circulated by Senate Finance Committee Chairman Ron Wyden, D-Ore., that would reform the unemployment compensation system.

One of its provisions would require states to use the so-called ABC test instituted in California to determine whether a worker is an employee or independent contractor.

That test could force independent financial advisors to be classified as employees of an affiliated brokerage, registered investment adviser or insurance company because those firms supervise the advisers for compliance with federal securities and insurance laws, according to a June 16 letter sent from 13 financial industry trade groups to Wyden and Sen. Mike Crapo, R-Idaho and ranking member of the Senate Finance Committee.

The original California law was modified to include a carve-out for the financial industry, which FSI said it helped secure. It was one of many exceptions California granted. Bringing the law up again in the unemployment bill is creating worries for independent financial advisers.

“We haven’t had the chance to ask questions — [of] Democrats or Republicans — to find out why you would take the California model and impose it on all 50 states, given how chaotic the implementation of the California model has been,” said Christopher Iacovella, chief executive of the American Securities Association. “This is a solution in search of a problem as it relates to the financial industry.”

A Wyden spokesperson was not immediately available for comment.

Like the PRO Act, the unemployment bill lacks support across the aisle, Bellaire said. “There’s still a lot of work to do on this issue,” Bellaire said. “I’d say our team is cautiously optimistic.”

But FSI worries that portions of the PRO Act or Wyden’s unemployment reform bill could find their way into must-pass legislation, such as a budget bill, a debt-ceiling measure or the $3.5 trillion climate-and-social spending bill that congressional Democrats are going to try to pass through a parliamentary maneuver that sidesteps the filibuster.

“We’re on guard, cultivating the relationships [with lawmakers], building our case and [staying] vigilant to try to prevent that from happening,” said FSI chief executive Dale Brown.

HYBRID ONEVOICE CONFERENCE

The coronavirus pandemic forced FSI to reschedule its OneVoice conference from last January to this week. It was conducted as a hybrid event, with 300 people attending in-person in Orlando, and another 200 participating online.

The organization, which represents independent broker-dealers and financial advisers, said OneVoice drew less than half its normal in-person attendance but is going well despite the disruptions caused by the pandemic.

“We have really good energy,” Brown told reporters during Tuesday’s media call. “I think people are really excited to be back meeting in person. And we understand a lot of folks are not ready to do that yet. We also have parallel a very successful virtual experience.”