New Jersey Moves to Protect Independent Advisors From Employee Reclassification

Independent financial advisors in New Jersey may avoid a sweeping regulatory shift after state lawmakers advanced legislation that would exempt them from a controversial worker classification rule set to take effect later this year.

The New Jersey Senate Budget and Appropriations Committee approved the amendment in a 12-0 vote, with one abstention, carving out an exemption for broker-dealers, investment advisers and their representatives registered with state or federal regulators. The bill now heads to the full Senate and General Assembly for consideration.

The pending rule, scheduled to take effect Oct. 1, applies the “ABC test” to determine whether workers qualify as independent contractors or employees. Industry groups have argued that key elements of the test—particularly requirements that work be performed outside the usual course of a firm’s business—would effectively reclassify most independent advisors as employees.

The proposed amendment would allow advisors to retain independent contractor status if they operate under a written agreement explicitly defining that relationship.

Industry stakeholders warned that the unamended rule could disrupt established business models and reduce advisor availability in the state. Marlton-based advisor Mario Dilisciandro told lawmakers the rule could “threaten the successful and established business model” he has built and ultimately harm clients.

Data cited by the Financial Services Institute indicates 19% of New Jersey-based independent advisors would retire rather than shift to employee status, while 58% would alter their business model to avoid reclassification.

Firms including Raymond James, Cetera and LPL Financial supported the amendment after previously opposing the rule, citing uncertainty and operational challenges tied to its implementation.