“They didn’t have a way to bill it,” Kitces said. “Advisors were charging planning fees and collecting hundreds of physical paper checks.
"Small advisors needed a part-time staff person to keep up with the work, while larger enterprises might have needed an entire department, and broker-dealers weren’t doing it because they didn’t have a way to do it.”
While several digital hourly fee payment processing systems exist, AdvicePay was the first to comply with the SEC. Regulations prevent advisors from drawing hourly or retainer fees directly out of client bank or credit card accounts without accepting custody of the clients’ assets.
AdvicePay creates a buffer between the advisor and the information within client accounts, and allows the client discretion to refuse or discontinue the payment of fees.
“We made it impossible for advisors to just jack money out of their clients’ accounts without approval,” said Kitces. “We also made it easy for clients to go in and immediately terminate their payments on their own. I think we’re all familiar with things like gym-membership-style deals where it’s easy to sign up but impossible to leave. We wanted to make sure the consumers were protected.”
After the tool’s launch in 2018, larger enterprises, including some broker-dealers, requested a version of AdvicePay that they could use, putting Kitces and Moore on the path to building AdvicePay Enterprise.
According to Kitces, the pair decided to crowdfund their software’s expansion because they were skeptical about using venture capital.
“While we believe the opportunity is very good, we didn’t set out to make the next PayPal. We just wanted to make a good solution by advisors, for advisors,” said Kitces. “We didn’t think that venture capital investors really cared about the advisor marketplace at the end of the day, and that wasn’t a comfortable fit for us,” so Kitces made an appeal to the advisor visitors on his “Nerd’s Eye View” blog.
“When we started the conversation with advisors, they were immediately able to understand the opportunity. Venture capital would have made it difficult to remain focused on advisors, so we decided to raise capital directly with advisors.”
AdvicePay Enterprise includes expanded features, tools and functionality designed for firms with large numbers of advisors and more complex compliance needs, including a dedicated home office portal to allow firms to centrally manage billing and payment processing while retaining the flexibility for greater levels of local control at the advisor level.