Independent representatives and broker-dealers gained allies in the House leadership who will work with them to maintain their reps' status as independent contractors.
That is the assessment of Dale Brown, chief executive and president of the Financial Services Institute Inc., an advocacy group for independent broker-dealers and advisers. One of the FSI's top legislative priorities is to protect the independent-contractor tax status of financial advisers affiliated with independent firms.
The FSI opposes the proposed Fair Playing Field Act of 2010, which was sponsored this year by Sen. John Kerry, D-Mass., and Rep. Jim McDermott, D-Wash.
The legislation would revise the tax law that governs employment status determination, according to the FSI. It also would give the Internal Revenue Service authority to make employee classification determinations through regulatory guidance, an authority that it now lacks, according to the FSI.
Referring to the chances of the bill's being passed this year, Mr. Brown said: “If we get through the lame-duck Congress, we should be OK. With Republicans in charge of the House, there won't be as much support for independent-contractor issues.”
The issue is a priority for labor unions, which traditionally support Democrats, Mr. Brown said. Labor unions can't organize independent contractors, and they also view it as an issue to enhance the welfare of others, he said.
Tightening some loopholes on workers identified as independent contractors should be looked at, Mr. Brown said. But the proposal has “unintended consequences” for independent reps that potentially could harm them and their clients, he said.
In a letter last month to Mr. Kerry, Mr. Brown wrote: “We are concerned that the repeal [of current law] and allowing the IRS to issue industry-specific guidelines will lead to unnecessary and costly questioning of independent-broker-dealer worker classification status.” That would create uncertainty that would make it difficult for firms to make long-term business decisions, he wrote.
Reps at firms such as LPL Financial Services Inc. and Raymond James Financial Services Inc. are paid as independent contractors and are responsible for their own business costs. Reps at firms such as Morgan Stanley Smith Barney LLC are employees.
The independent model offers lower fixed costs for broker-dealers as it eliminates the need to pay rent on a branch office network or salaries to staff. These costs are borne by the reps in exchange for higher commission payouts.
E-mail Bruce Kelly at [email protected].
