Practice Management

Michael Kitces, Alan Moore to sell payment tool for hybrid advisers

New version of AdvicePay focused on businesses with large number of advisers

Jan 23, 2019 @ 4:18 pm

By Ryan W. Neal

Alan Moore and Michael Kitces are bringing their adviser payment processing tool to hybrid broker-dealers and large registered investment advisers.

Mr. Moore and Mr. Kitces, who also co-founded the XY Planning Network, launched AdvicePay in January 2018 as a compliant tool for fee-based financial planners to bill clients and collect payment through a credit card, bank or brokerage account.

After the first year, 700 advisory firms are using the tool, Mr. Moore said. After introducing a less expensive version of AdvicePay for firms with less than 10 clients, the two are turning their sights on the other side of the adviser market with AdvicePay Enterprise.

The new version of the tool has expanded features, functionality and tools built specifically for firms with a large number of advisers, such independent broker-dealers with a corporate RIA.

"[These firms] have a unique pain point," Mr. Moore said.

(More:XY Planning Network leads charge to help furloughed workers during shutdown)

While solo RIAs can always accept a check from clients, broker-dealers have a complicated workflow between the client, the home office and the financial adviser. For example, the enterprise version of the payment software has a dedicated portal for home offices to centrally manage and control billing, while allowing for some flexibility at the adviser level.

"For an adviser to get paid to do financial planning, it can take 45 to 60 days to see their money," Mr. Moore said. "But a lot of these corporate RIAs attached to broker-dealers are doing a ton of financial planning work. Some are doing several million dollars worth."

The struggle to collect fees is a major obstacle preventing broker-dealers from embracing fee-for-service compensation models, he said. Older advisers may not care about changing their fee structures, but firms interested in hiring younger advisers, they need to be able to support this model.

To build AdvicePay Enterprise, Mr. Moore and Mr. Kitces eschewed traditional venture capital and instead they crowdfunded $2 million from other financial advisers. This allowed the company to focus on building a product that is "for advisers, by advisers," Mr. Moore said.

(More:Want to attract millennial investors? Time to rethink AUM pricing)

The duo turned to Mr. Kitces' "Nerd's Eye View" blog to get the message out and the pair reports it gathered the funds in less than two months.

"We chose the innovative approach of crowdfunding with advisers versus going the traditional venture capital route to ensure that we would be able to stay focused on serving the needs of our core target market of financial advisors," Mr. Kitces said in a statement.


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