Trade groups step up fight against bill they say threatens independent advisers

Trade associations representing financial advisers are stepping up their campaign to defeat a bill that could force independent broker-dealers, financial advisers and insurance sales professionals to become employees of the financial firms with which they're affiliated.

Prior to a Senate hearing Thursday on the legislation, the Protecting the Right to Organize Act, 16 trade groups sent a letter to lawmakers expressing concern that the measure would change the definition of “independent contractor” and threaten the status of independent broker-dealers, financial advisers and insurance agents.

The organizations zeroed in on a provision that would make it harder for companies to classify workers as independent contractors. The letter said the policy change would scuttle agreements financial advisers have with brokerages, insurance companies and advisory firms that allow them to offer more products and services to clients while remaining independent.

“By effectively reclassifying independent contractors as employees, the PRO Act would create unintended consequences for the industry, and specifically insurance producers and independent financial advisors,” the letter states. “The PRO Act’s [provision] could eliminate the choice a majority of practitioners have made to serve clients independently. In turn that could drastically reduce clients’ ability to access high quality advice for their insurance, investment and retirement security needs.”

The letter was sent to Sens. Patty Murray, D-Wash., and Richard Burr, R-N.C., who are the chair and ranking member, respectively, of the Senate Health Education Labor and Pensions Committee, which held the Thursday hearing.

The letter was signed by the chief executives of the American Council of Life Insurers, the Financial Services Institute, the Securities Industry and Financial Markets Association, the American Securities Association and the National Association of Insurance and Financial Advisors, among others.

A spokesperson for Murray was not immediately available for comment.

The Democratic-majority House narrowly approved the bill earlier this year mostly along party lines. It is stalled in the Senate, which is evenly split between Democrats and Republicans.

Democrats have a Senate majority by virtue of the tie-breaking vote of Vice President Kamala Harris. Republicans can kill most legislation through a filibuster, a parliamentary maneuver that requires bills to achieve 60 votes for passage.

Democrats could try to include the PRO Act in an upcoming budget bill that is on a path to be considered under so-called reconciliation, which bypasses the filibuster.

“The PRO Act’s reclassification of independent contractors as employees would have a direct negative economic impact on risk-taking entrepreneurs, small businesses, and working families saving and investing for a better future,” American Securities Association chief executive Chris Iacovella said in a statement. “We are partnering with our industry colleagues to ensure this bill doesn’t move forward—either through reconciliation or any other legislative vehicle.”

Congressional Democrats say the bill would empower workers by making it easier for them to form unions and providing other workplace protections.

“[W]e know our economy is stronger when working families are stronger, and working families are stronger when unions are stronger,” Murray said in a statement. “That’s why I reintroduced the PRO Act earlier this year—and am pushing hard to get it across the finish line.”

On another front in the tussle over independent contractor status, the Department of Labor earlier this year withdrew a Trump administration rule that would have clarified the tests used under the Fair Labor Standards Act to determine whether a worker is an independent contractor or an employee.

The rule had been backed by FSI, which has joined a lawsuit filed against the DOL for killing the regulation.