A study by the Financial Services Institute (FSI) and Oxford Economics warns that the New Jersey Department of Labor & Workforce Development’s proposed independent contractor rule could force a mass exodus of independent financial advisors from the state, reduce investor access to advice and weaken the broader economy.
According to the survey of 367 New Jersey-based advisors, 65% said they would consider relocating their business if the rule takes effect, while another 4% would retire from the industry altogether. Only 8% would consider becoming employees.
“This study makes clear what we’ve long known: independent financial advisors do not want to be employees,” said FSI President and CEO Dale Brown. “This proposed rule threatens not only the businesses advisors have built, but also New Jersey families’ access to the advice they rely on to navigate life transitions and achieve financial security.”
The report found the rule would likely increase costs for advisors, as 88% expected expenses to rise and nearly two-thirds foresaw higher legal costs. Further, respondents forecasted service cutbacks, with 67% of respondents predicting reduced client service; 62% anticipating fewer investment options; and most expecting higher account minimums and fees that could disproportionately affect lower-income investors.
FSI estimates the departure or retirement of independent advisors could remove $470 million from New Jersey’s GDP, eliminate 4,670 workers and reduce state tax revenues.
Michael Madden, Contributing Editor and Research Analyst at Wealth Solutions Report, can be reached at michael.madden@wealthsolutionsreport.com.
