Eight financial industry trade groups and independent broker-dealers (IBDs) have sent a joint letter urging the leadership of the U.S. House and Senate tax writing committees to make investment advisors and other financial advisors eligible for the 20% pass-through deduction created by the 2017 Tax Cuts and Jobs Act.

The joint missive was penned by industry association powerhouses like the Investment Adviser Association, Financial Planning Association, National Association of Personal Financial Advisors, Financial Services Institute and leading IBDs including Commonwealth Financial Network, LPL Financial, Cetera Financial Group, and Raymond James. The issue unites a cross-section of groups within the independent advisory space, including organizations that clashed several years ago during the debate over the Department of Labor's proposed fiduciary rule, which was ultimately aborted by the Trump administration.

“The current statutory language unfairly and unintentionally disadvantages financial advisors, financial planners and investment advisers and diminishes their ability to invest in and build their businesses,” the group said.

In contrast, both insurance and real estate brokers are able to use the 20% pass-through deduction. The vast majority of RIAs and IBD reps are either self-employed business owners or independent contractors or both.

The joint letter asking tax-writing committee chairmen and ranking members to even the score for advisors was sent to House Ways and Means Committee Chairman Richie Neal (D-Mass.), Ranking Member Kevin Brady (R-Texas), Senate Finance Committee Chairman Chuck Grassley (R-Iowa) and Ranking Member Ron Wyden (D-Ore.).

“Right now, real estate brokers and insurance brokers are able to enjoy the benefit of the 20% passthrough deduction. While we recognize that financial advisors, financial planners and investment advisers are regulated differently than real estate and insurance, as small business owners, they face the same burdens and challenges,” the group pointed out.

“Congress should not pick winners and losers. In addition to being drivers of the economy, financial advisors, financial planners and investment advisers are a vital solution to the retirement savings crisis that America is facing. Therefore, we urge Congress to approve clarifying legislation to confirm that they shall not be considered “specified service trades or businesses,” the industry leaders wrote.

The Tax Cuts and Jobs Act created a 20% deduction on “qualified business income” for owners/shareholders of passthrough businesses, such as S corporations, partnerships, and sole proprietorships.

However, owners and shareholders of certain types of businesses – the “specified service trades or businesses” – are limited in their ability to apply the 20% deduction if their overall taxable income exceeds certain thresholds.

Financial advisors, financial planners and investment advisors currently fall under this definition and are excluded, the group said.

“We believe it is sound policy to allow these hard-working business owners to fully benefit from this new deduction in whole,” the groups said in the joint letter.

“We urge Congress to resolve via clarifying legislation that financial services professionals such as broker-dealers, financial planners and investment advisers shall qualify as “qualified trades or businesses” and shall not be considered “specified service trades or businesses,” they added.

Advisors “employ thousands of individuals across the United States and are community leaders, supporting millions of clients. They also provide assistance on a wide range of issues, dealing with challenges such as how to create a savings plan, and how to plan for family transitions,” the group said.