AdvicePay, a payment processing company for financial advisors that could facilitate a fee-for-service model in the industry, has closed an initial round of funding that raised $500,000.
The company was co-founded by Alan Moore and Michael Kitces, the co-founders of XY Planning Network. They initially developed the payment processing system in 2016 so that XYPN’s more than 500 advisors could charge monthly retainer fees without triggering custody audit requirements. It also gave their advisors the ability to bill and collect financial planning fees directly from a client’s credit card, or bank account via an automated clearinghouse.
Like other payment processors, AdvicePay will also have a client portal where they can manage their billing information and review invoices.
Moore and Kitces, who are popular industry influencers and frequently speak at conferences throughout each year, realized that a broad audience of advisors were looking for a similar solution to what they had created for XYPN.
Moore believes it’s the only payment processing company focused on the profession. Before now, the fee-for-service business model required clients to write paper checks, which is inefficient for advisors charging recurring retainer fees.
They also hope AdvicePay will help grow the fee-for-service model in the industry and encourage advisors to work with clients in need of planning.
Moore recalled that when he started his own RIA, a client making more than $500,000 per year approached him and needed financial planning, but the client had no investable assets at the time, which would disqualify him from working with many other advisors. A person like that is a perfect candidate for an advisor to take on as a client and charge a retainer while they build assets.
The fundraising was led by Goodworks Ventures and Front Street Capital, both based in Missoula, Mont. But the majority of the money raised in the seed round came from advisors who are enthusiastic about a payment processing solution focused on them and flexible enough to fit everchanging rules across states and at the federal level.
“It was very humbling and exciting that FAs were willing to put money into this,” Moore said.
The capital will be used to build out AdvicePay’s development and customer support teams and expand the payment processing solution to financial advisors outside XY Planning Network.
Moore said the goal is for the payment processor to be available to advisors outside their network in early 2018.
