LPL-AdvicePay deal shows embrace of fee-for-service planning

Trader Talk

LPL Financial is providing financial advisors access to AdvicePay, a payment processing technology developed by XY Planning Network founders Michael Kitces and Alan Moore to help them directly invoice clients and accept online payments for financial planning services.

Advisors can use AdvicePay to collect one-time and hourly fees for services beyond asset management, or set up an ongoing retainer model subscription billing. Clients can pay using a credit card or bank account using Automated Clearing Housing (ACH), eliminating paper processes that come with processing physical checks sent in the mail.

The 16,000 advisor pool on LPL’s platform makes this the biggest deal AdvicePay has struck since Kitces and Moore first began licensing the software outside of the XYPN 14 months ago. Now, along with Cetera, Ladenburg Thalman and HTK, AdvicePay reaches a total of 30,000 advisors, demonstrating a rapid adoption of the fee-for-service business model among mainstream practitioners.

“In general, the industry still thinks this is a fringe offering, but it is gaining steam,” Moore says.

Not long ago, charging a flat fee for financial planning, instead of collecting commissions or charging a percentage of assets under management, was widely criticized as unprofitable and unsustainable. When XYPN launched in 2014 for fee-only advisors, Moore says, many called the move crazy.

“Even board members of NAPFA were not convinced that XYPN’s monthly fee-for-service model would work,” Moore says, adding that he still receives pushback from advisors about the viability of the model.

Fueling the sea change are financial institutions seeking new revenue as traditional sources dry up. Advsiors are increasingly embracing AUM fees over commissions, but the AUM model can only serve the wealthiest of people, limiting the pool of potential clients and revenue, Moore says.

“When your revenue is tied to AUM or commissions, by definition you can only do financial planning for someone who needs to buy a product or has a pile of money to roll over,” adds Kitces. “Maybe 7% or 8% of the population can engage with an advisor on the AUM model.”

The mass market — those who want advice but either don’t have enough assets for AUM-based advisors or don’t want ongoing portfolio management — remains underserved. There is a “giant blue ocean” open to advisors who can serve these clients with fee-based planning services, Kitces says.

At its Focus conference in September, LPL CEO Dan Arnold said the firm was striving to support more fee-only advisors.

“More advisors are adopting planning in their practices to be able to expand their value with clients, by providing a holistic view and solving their clients’ more complicated problems,” said Pettman, LPL Financial executive vice president and of investor and investment solutions, in a statement. “With an expanded role comes an even greater need for technology to drive their practices.”

Beyond AdvicePay, LPL has also integrated popular financial planning technology like MoneyGuide and eMoney into ClientWorks, its technology dashboard for advisors.

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