PROPOSED NJ INDEPENDENT CONTRACTOR RULE COULD HINDER RETIREMENT PLANNING

Rule Might Reduce Number of Independent Financial Planners, Insurance Agents

WASHINGTON, D.C. – A New Jersey proposed rule to change the definition of “independent contractor” could adversely affect consumers’ choice of financial professionals and retirement products and strategies, according to the Insured Retirement Institute (IRI).

The proposed changes to New Jersey regulations would negatively affect licensed financial professionals who provide retirement income planning services and products — like annuities — through independent financial professional firms, broker-dealers, and independent insurance agents.

In comments filed with the New Jersey Department of Labor and Workforce Development, IRI said that if the proposal moves forward, New Jersey will become an outlier, with state consumers potentially losing access to products and their choice of financial services professionals.

“Changing the independent contractor status for a broad range of New Jersey financial professionals will upend the business model and limit access to products and choice of advisors for consumers,” said Sarah Wood, Director, State Policy and Regulatory Affairs at IRI. “When a financial professional can act as an independent contractor, they can present a consumer with a variety of options to ensure that they can make a recommendation that best meets a particular consumer’s financial situation and needs.”

According to an analysis by the economic consulting firm NERA, independent contractors own and operate more than 2,300 financial and insurance services firms in New Jersey, collectively employing approximately 6,300 people – 25 percent of the industry’s workforce in the state. These firms generated $1.5 billion in annual output, or nearly 19 percent of the sector’s total. The proposed regulation would jeopardize those jobs, reducing consumer access to affordable financial guidance.

California enacted a law changing the definition of independent contractor but provided an exemption to organizations licensed by the insurance department and securities broker-dealers, investment advisers, and their agents and representatives.

“If New Jersey doesn’t withdraw this flawed proposal, then an exemption for insurance and securities financial professionals is appropriate to avoid disruption to the retirement income industry and the annuity marketplace in New Jersey,” Wood said.

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Contact: Dan Zielinski