AdvicePay Adds Financial Plan Compliance Tool

AdvicePay launched a new tool on its payment processing platform for advisors that it said Wednesday centralizes compliance reviews of financial plan deliverables to streamline the process and make it more efficient.

The new tool, called Deliverables, enables enterprises to systematically track, report and manage the financial planning deliverables their advisors produce, to ensure quality control and compliant advice recommendations, as well as ensure financial plans are delivered when clients are engaged in project, subscription or retainer financial planning fee models, according to AdvicePay.

Deliverables makes the financial plan review process more efficient by creating a centralized hub and one place to submit all fee-for-service business, AdvicePay said.

Who It's For

The new tool is targeted at multi-advisor, large RIA and broker-dealer firms — primarily hybrid BD and RIA firms, Michael Kitces, AdvicePay co-founder, told ThinkAdvisor.

Smaller RIA firms likely won't have a need for Deliverables because they have much smaller staffs and, in many cases, the person charging the fee at such firms is the same person who writes the financial plan and reviews it, he explained.

Deliverables was tested by Cetera Financial Group and several other mid- to large-size broker-dealer firms during a private beta for about two months and then went live in early April, Kitces told ThinkAdvisor. Cetera is expected to be the first firm to go live with Deliverables.

"We're building for some very internal processes," Kitces said. "Every firm does it a little bit differently and so we had to kind of set the roadmap of what will the standardized process look like."

There are "a lot of firms actively in the pipeline now that are working on both rolling out the mobile check deposit [feature] to get rid of all the paper checks and the overnighting of checks, which we launched last month, and now getting ramped up on Deliverables as well," he said. He didn't identify any of those other firms.

Other than Cetera, AdvicePay clients include LPL Financial and the Advisor Group divisions that were acquired from Ladenburg Thalmann last year, Kitces told ThinkAdvisor.

AdvicePay is seeing "a lot of firms that were not using AdvicePay for payments but now actually are talking to AdvicePay about Deliverables because they may not charge separately for plans … but the home office needs to review the financial plans for quality control purposes and just to make sure they're being done properly," he said.

Regulatory Scrutiny

Explaining why AdvicePay saw a need for Deliverables, Kitces noted that regulators have brought an increased focus over the past decade on ensuring that clients are getting value for the fees advisors charge them, particularly when it comes to subscription and retainer fee models.

There is an expectation that firms document their financial advice activities and validate a financial plan was actually delivered to the client in exchange for the fee charged, he said. Regulators want to make sure that advisors are not engaged in "reverse churning," Kitces noted, referring to the practice of collecting fees from clients but not really doing anything for that money.

Now that fee-for-service financial planning is growing, it is not surprising that regulators are scrutinizing what clients are receiving for the upfront or ongoing financial planning fees that they are paying, he said.

AdvicePay anticipated that reaction, so it started working to release Deliverables as a "best practices approach to help large enterprises manage this review process, by extending" the company's payment processing technology to "provide a systematic and automated system for enterprises to scale their fee-for-service financial planning in a compliant manner," Kitces said in the announcement.

Currently, most large advisor firms have not been able to systematize and automate the record-keeping requirement and have to instead resort to complex, error-prone spreadsheets with manual updates, according to AdvicePay.

By providing the key validation to regulators that a financial plan was delivered by an advisor for the fees that were charged, Deliverables enables enterprise firms to avoid regulatory fines and negative headlines for "fee-for-no-service" claims, according to AdvicePay.

"From the very beginning, we designed AdvicePay to be so much more than just a payment processing platform," Alan Moore, who co-founded AdvicePay with Kitces, said in the announcement. "The wealth management industry is always evolving, with business and regulatory requirements changing constantly, so our nimble, agile, and flexible technology foundation is once again proving its strategic importance with the release of Deliverables."

AdvicePay will continue working with enterprise clients to "further tailor and customize the platform so they can continue to grow, compete and succeed in an ever-increasingly complex and competitive industry," he added.