Independent Firms Adopt Advice-on-Demand Billing Software
In another sign of the rapid shift in retail financial services, four independent broker-dealers with commission-based heritages are offering their dually-registered brokers and investment advisors fee-for-service billing software.The product, AdvicePay, automates billing for financial planning services so that advisors can charge by the hour, month or on a retainer basis, rather than through quarterly statements that charge transaction-based commissions or asset-based fees.
Michael Kitces and Alan Moore, the co-founders of the XY Planning Network who created AdvicePay in 2016, signed independent broker-dealer Cetera Financial Group as the fintech firm’s first “enterprise” client in March. Private Advisor Group, a super-OSJ affiliated with LPL Financial Services, and the Ameritas Investment Corp unit of Ameritas Life Insurance also subscribed in March.
In May, Ladenburg Thalmann Financial Services agreed to add the software to the quivers of services for its independent contractors. About six other firms are in the final stages of due diligence to licensing it, according to Moore.
Active users of AdvicePay have almost doubled since Cetera signed in March to 1,300, and the Ladenburg and Ameritas deals open the potential user base to more than 20,000, he said.
To be sure, the independent broker-dealers are only beginning to market and integrate the service, which Moore said is the only software of its kind and can be used only by registered investment advisers.
Cetera flaunted the new offering in July at its “Connect” national financial advisor conference, after beta testing it with about 20 brokers. About 200 are now paying to use it.
“The feedback has been really good,” said George Karris, Cetera’s head of strategy. “Advisors who are already doing this sort of business are really excited about streamlining it.”
He would not discuss what Cetera charges advisors for AdvicePay, but the fee is “greatly discounted off of the retail price,” Karris said.
Firms can choose from enterprise pricing plans that range from $10 to more than $2,500 a month, based on number of advisors, client accounts and range of services used, according to an AdvicePay website.
Moore said the software is on pace to process $25 million in billing transactions in 2019, with $100 million targeted for 2020.
AdvicePay is among a suite of new products Cetera is introducing as more brokers adopt financial planning approaches to attract new customers in lieu of traditional brokerage sales practices.
“This gives them access to a whole group of clients that they haven’t had access to before,” Karris said. “Think about the young professional who doesn’t have a lot of assets but has a decent income. Now you’ve got a way to provide access to advice.”