A proposed change by New Jersey's Department of Labor to the rule defining whether a worker is an employee or an independent contractor is drawing criticism from the financial services industry.

According to InvestmentNews, a joint study by the Financial Services Institute (FSI) and Oxford Economics warns that the proposal could cause a significant exodus of financial advisors from the state, reducing in-person access for investors. According to the study, 65 percent of New Jersey-based advisors say they would consider relocating if the rule takes effect, while 4 percent would opt for retirement. Only 8 percent would consider becoming employees. Nearly all respondents (94 percent) reported high satisfaction with their independent contractor status, with many citing it as key to serving clients effectively and running their own businesses free from corporate constraints.

Advisors also expect the change to negatively impact clients. InvestmentNews reports that ninety-one percent of advisors believe clients would be harmed, with two-thirds predicting a drop in service quality and 62 percent expecting fewer investment options. Three-quarters anticipate higher client fees, and 69 percent foresee increased account minimums. Respondents further warned that higher operating costs and advisor relocations would disrupt client relationships and reduce personal service.

According to InvestmentNews, the study estimates the state could lose 4,670 workers tied to independent financial advising, a group that currently contributes about $470 million to New Jersey's GDP and supports 3,500 jobs.

InvestmentNews reports that state-level rules like New Jersey's proposal remain a challenge for independent advisors. A similar federal rule proposed by the U.S. Department of Labor was paused in 2024 and is expected to be formally rescinded.

Financial Advisor Transitions consults advisors nationwide to explore employment transition options and to preserve and protect their practice in any transition that they make.