Independent contractor status has long been an integral part of the financial services industry. SIFMA supports efforts to protect an independent contractor business model for broker-dealers. 

Independent broker-dealers and the nearly 150,000 individuals that affiliate with them as independent financial advisors serve millions of clients across the U.S., reaching underserved communities and serving clients of various needs. They help their clients plan for retirement, pay for a child’s education, and protect against life’s unexpected events by advising on investment and other products. 

For financial advisors that choose this route instead of being an employee of a broker-dealer, independent contractor status allows them to own and operate their own small business (formed as sole proprietorships, professional corporations, partnerships, LLCs, or other legal entities) and control the manner and means of its operation while operating in a highly regulated industry. Our broker-dealer members handle their licensing and supervision in compliance with federal and state regulations and provide the platforms to effectuate and record their clients’ transactions. 

Recently, the traditional independent contractor model utilized by our independent broker-dealer members has been challenged by proposed legislation. This legislation proposes using the overly broad ABC test which will disrupt industries that have traditionally and successfully relied on independent contractors, including our own. Broker-dealers will be subject to significant uncertainty regarding the measures that govern the use of independent financial advisors and this, in turn, could adversely affect those individuals who have long enjoyed independent contractor status and serving their clients’ needs.