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Financial Planning > Behavioral Finance

XY Planning Founders Launch Compliant Payment Processing for Advisors

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Up until now, the fee-for-service business model has required clients to write paper checks.

AdvicePay Inc. — the newest venture from co-founders of XY Planning Network Alan Moore and Michael Kitces — is the first compliant payment processing solution built specifically for financial advisors to facilitate fee-for-service financial planning billing.

“We were surprised as well to find that there was not a payment processor that was going to work for financial advisors,” Moore told ThinkAdvisor. “As we got deeper into this, started designing it, building it out, we are very excited about what it looks like to have a system specifically designed for advisors.”

On Wednesday, AdvicePay announced that it had closed its seed round of funding today with $500,000, led by Goodworks Ventures and Front Street Capital, both based in Missoula, Montana. (Moore is based in Bozeman.)

The remainder, and majority, of the round’s funding came from fellow financial advisors who believe AdvicePay will power the future of the fee-for-service financial planning business model.

According to Moore, these advisors came from different types and sizes of firms.

“They really see the potential and really see the landscape shifting, the winds are blowing a different direction now for financial services, and we’re moving more and more toward advice and further away from product sales and investment advice being the core piece,” Moore said.

AdvicePay gives advisors the ability to bill and collect financial planning fees directly from a client’s credit card, or from a bank account via automated clearinghouse (ACH).

To ensure compliance with RIA custody regulations and avoid triggering custody audit requirements, AdvicePay also provides a portal for clients to directly enter and manage their payment information, review invoices and payments, and confirm any billing changes, while limiting advisors’ access to private payment information.

According to Moore, the problem with traditional payment processors is that the “vast majority” trigger custody audit requirements.

“Many of the systems out there allow advisors too much control and it triggers custody,” Moore said.

Some payment processors expressly prohibit financial advisors from using their payment processing system.

“Some systems just flat out deny financial services from using their system,” Moore explained. “No one has the exact reason for this, but what my understanding is all financial services — including crooks — get wrapped into this one bucket.”

Many traditional payment processors also don’t understand the needs of advisors and their regulators. “We have a very rapidly evolving regulatory environment,” Moore added.

According to Moore, that’s one of the big advantages of AdvicePay: It’s only for financial advisors.

“We have no intention of expanding AdvicePay outside of the financial advice industry,” Moore said. “We know this space, and when a regulator says we need to see this report or this functionality added or this functionality removed, we will respond to that. A big player and a big payment processor does not care what the state of Nevada regulator has to say. We do.”

AdvicePay is currently in live-beta mode, with more than 250 active users already on the platform processing financial planning fees, and is in the process of onboarding additional financial advisors from a waiting list.

Moore and Kitces initially rolled out AdvicePay to all of the XY Planning Network members in beta in July 2017. (AdvicePay is a totally separate company from XY Planning Network.)

There are currently a couple of dozen non-XYPN members on the system that offered to be beta testers as well.

Moore said the goal is to do a full launch to all advisors “hopefully” in January.

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