The Financial Services Institute (FSI) intensified its campaign to protect independent financial advisors in New Jersey, submitting written testimony on Thursday to the state Senate Budget and Appropriations Committee in favor of S2782. The bill, sponsored by Senators Gordon M. Johnson and Paul A. Sarlo, would exempt broker-dealers, investment advisers, and investment adviser representatives registered with the New Jersey Bureau of Securities or the SEC from the state's newly codified ABC test for worker classification.
The ABC test, adopted last month by the New Jersey Department of Labor and Workforce Development and set to take effect on October 1, uses a three-pronged standard to determine whether a worker is an independent contractor or an employee. The New Jersey Business & Industry Association (NJBIA) previously criticized the rule as a disappointment, with President and CEO Michele Siekerka calling for revisions to preserve jobs. FSI argues that the test fails to account for the unique regulatory environment of financial advisors, who must comply with federal securities supervision requirements that could be misinterpreted as employer control under the first prong of the ABC test.
Under S2782, any licensed professional operating under a written agreement designating them as an independent contractor would not be classified as an employee for any state-law purpose, and would not need to satisfy any additional test, including the ABC test. The bill applies retroactively to agreements entered into before or after its effective date, providing a legal backstop for existing arrangements. FSI President and CEO Dale Brown stated, "Our members rely on their independent contractor classification to provide flexibility in the products and services they offer, allowing them to better serve their clients."
The stakes are high for New Jersey's independent advisory community. A 2025 survey by FSI and Oxford Economics found that only 11% of New Jersey independent advisors would accept employment with a financial firm if they lost their independent contractor status. Worse, 65% said they would consider relocating their businesses out of state if the rule took effect as written, and 91% expected clients to face reduced services, fewer investment options, or higher fees. The state is home to 494 federally registered investment advisory firms, according to SmartAsset's analysis of SEC Form ADV filings.
The New Jersey debate mirrors a broader national conversation. In February, the federal Department of Labor moved to rescind the Biden-era independent contractor rule, proposing a return to an "economic reality" test that many in the industry view as more workable. New Jersey's rule, however, moves in the opposite direction, codifying a stricter standard that the independent financial services sector has consistently opposed. FSI's testimony emphasized that "an overly rigid application of the ABC test is not well suited to properly classifying financial advisors."
For advisors and their clients, the outcome in New Jersey could set a precedent. The independent contractor model allows advisors to build their own businesses and offer tailored advice, but the ABC test threatens to upend that flexibility. As the state legislature considers S2782, the industry is watching closely. For more on how independent platforms are adapting, see our coverage of LPL Financial Recruits $2B Team from PNC Private Bank. Meanwhile, broader market shifts, such as the April PPI surge, add to the economic pressures facing advisors.
