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Regulation and Compliance > Federal Regulation > SEC

Kitces Addresses Concerns on XY Planning's Rapid Growth

By Janet Levaux

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Last week, platform provider XY Planning Network hosted its national conference, drawing about 500 advisor members and other guests. The group also launched some new services to help members of its network grow their practices. 

The organization, which also is suing the Securities and Exchange Commission over Regulation Best Interest, says it has more growth plans on the horizon. But the group’s growth is not a threat to its current members services or independence, insists co-founder, planner and blogger Michael Kitces. 

Specially, members voiced concerns about the firm’s growth pace, if it might need outside capital or possibly risk letting service standards weaken. “We fielded these questions,” Kitces said, “and as one of Inc.’s 5,000 fastest-growing firms are very cognizant about growth and service. It’s a top priority to not let our standards slip.” 

Plus, XYPN is not looking to bring in outside capital and aims to keep its independence. “We’ve been on a deliberate path of reinvesting for sustained growth … since day one,” Kitces explained. 

The network now has about 1,020 advisor members, it says. It was founded about five years ago.

These and other issues were discussed during “Ask Me Anything” sessions at last week’s conference, Kitces adds. 

What’s Next? 

The group recently announced new services for members, such as a three-week intensive sales and marketing program as well as advanced coaching; compliance coaching and reviews of compliance programs; more financial planning and process consulting; and white-label tax services.

XYPN says it expects to prepare about 1,000 2019 tax returns for clients of advisors using its network. 

“We are a turnkey financial platform and are here to provide financial-planning support and services, like tax solutions, to advisors. We are not a [turnkey asset management platform or] TAMP,” Kitces explained. 

That said, XYPN does “offer investment solutions alongside … other back-office services,” he noted.  

Kitces explained that many of the advisors relying on the network have younger clients (Gen X and Gen Y) who are more focused on issues tied to paying off student loans than portfolio matters.

And what might change about the platform itself?

“We’re looking at more direct administration [services], like virtual assistants and paraplanner solutions,” he said. “Our members are at a capacity crossroads. They can’t do it this alone … . Staff support is the next wave of solutions … along with a wide range of coaching and consulting services around [work] processes and consulting, which are remotely based.”  

SEC Lawsuit

Meanwhile, XYPN is suing the SEC over its issuance of the Regulation Best Interest rules.

Asked why the firm chose to make this legal move, Kitces said: “At the end of the day, we think Reg BI is just fundamentally not consistent with the Investment Company Act of 1940 and Dodd-Frank [legislation].”

In addition, Reg BI “lets brokers continue to deliver financial planning without being subject to the advice standard,” he explained. “We see that as fundamentally anticompetitive and in violation of the Investment [Company] Act and Dodd-Frank and are challenging the SEC on that basis.”

XYPN filed its suit in the Southern District of New York. Its case is separate from that of several states. “We are making different arguments against Reg BI than what the states are claiming,” Kitces said.

The blogger also wrote about the matter extensively online this week, explaining: “Ultimately, though, the purpose of the XYPN lawsuit against the SEC is not to undermine the ability of broker-dealers to engage as such; instead, the issue is simply that Congress has repeatedly prescribed that the delivery of financial advice must be delivered under a fiduciary standard of care, either by lifting the standards for brokers when providing such advice, or by requiring such advice to be delivered as a registered investment adviser in the first place.”

— Related on ThinkAdvisor:

Janet Levaux

@Think_JanetL

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