Independent financial advisors are one step closer to seeing long-sought changes to how they receive compensation after the House Financial Services Committee unanimously advanced the bipartisan Clarity for Compensation Act.
The legislation, sponsored by Rep. Zach Nunn, R-Iowa with Rep. Gregory Meeks, D-New York, would permanently allow registered representatives to receive commission payments through their personal services entities rather than requiring payments to flow directly to individuals. The bill was among several measures approved during the committee’s June 30 markup.
The Financial Services Institute (FSI), Finseca and the Association of African American Financial Advisors (Quad-A) praised the committee’s unanimous vote, saying the measure would modernize outdated payment rules while giving advisory firms greater flexibility to invest in their businesses, develop employees and improve client service.
“We thank the House Financial Services Committee for advancing this important legislation that aligns commission payment rules with modern business practices,” FSI President and CEO Dale Brown said in a statement. “Independent financial advisors are business-owners serving clients in their communities across the country. The Clarity for Compensation Act eliminates operational inefficiencies, supports succession planning and helps attract the next generation of financial advisors – ultimately strengthening Americans’ access to professional, objective financial advice.”
Finseca CEO Marc Cadin said the legislation builds on the Securities and Exchange Commission’s recent no-action letter addressing advisor compensation practices, providing the profession with greater long-term certainty. The letter provided temporary regulatory relief for certain compensation arrangements.
“Modernizing how advisors are paid is not just a technical fix – it’s a commonsense update that reflects how today’s advisory teams actually operate and will help attract, train, and retain the next generation of diverse financial security professionals,” Cadin said.
In a separate statement, the National Association of Insurance and Financial Advisors, which has also advocated for the measure, likewise applauded the committee's unanimous support.
"Independent financial advisors are small business owners who deserve the same flexibility afforded to other professionals," said NAIFA President Christopher Gandy, referring to the longstanding ability lawyers, accountants, and insurance agents had to receive compensation through their own business entities.
"Removing these outdated barriers will help advisors spend less time navigating unnecessary regulations and more time serving the individuals, families, and businesses that rely on their guidance," Gandy said.
The legislation now awaits consideration by the full House of Representatives. As of July 1, House leadership has not announced when the bill will receive a floor vote. Once scheduled, the measure would need approval by the House before moving to the Senate for consideration.
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