Financial Advisor News & Information

Investment Advisor Best Practices for Recurring Fees Billing

Written by Alan Moore, MS, CFP® | Aug 7, 2018 4:10:00 PM

When it comes to financial planning business models, the monthly retainer is the equivalent of a style icon or musician ahead of their time. While charging recurring fees for investment advice responds creatively to the current needs of a younger financial market, it might feel as though other parts of the industry have not quite caught up. As a result, deciphering how to ensure that your billing remains compliant with local regulation can be challenging. There are good reasons for regulators wanting to be cautious when it comes to billing methods. Their aim is to protect investment advisors’ clients from potential abuse. The struggle comes in when you as an honest, transparent financial advisor are looking to charge for your services and seem to find cul de sacs at every turn.

Dead-ends for recurring fees billing

Let’s take a  look at some of the most common obstacles that investment advisors come up against when searching for ways to bill their clients with the retainer model:

  • Credit Card Payments: You may have already asked the question of whether your clients can pay you via credit card. The answer? Probably not. Credit card companies, as well as most banks, are reticent when it comes to working with financial advisors. The issue of custody is a pivotal one here. To remain compliant, it is advisable that you as an RIA using the retainer model steer clear of taking custody over your clients’ finances. Credit card payments allow you access to your clients’ funds that you probably do not want if your goal is to ensure you stay in the regulators’ favor.

  • Generic Payment Processors: If credit cards don’t work, then surely payment processors should do the trick? The answer, in most cases, is no. Companies such as Paypal, Intuit Quickbooks and other processors don’t want to touch the finance industry. Many payment processors specifically steer away from financial services when it comes to the kinds of transactions they allow.

  • Broker-Dealers:
Another obstacle you will find is with your relationship to broker-dealers. If you are making use of of a broker-dealer in your business, you will find that they are more than likely not willing to accept payment on a monthly basis.  

It may feel at this point that you are in a bit of a quandary. It makes sense to use the retainer structure but billing for this model seems impossible.The good news is that the industry has already managed to find a solution that will work for you.

The Solution

AdvicePay is a payment processor that specifically takes care of the needs of investment advisors and their clients. The system was built to avoid triggering custody completely, ensuring that you can rest easy when it comes to compliance. AdvicePay’s easy-to-use system was born out of a need to make the retainer model work for financial planners and their younger client base. Following the latest trend in financial planning models can be simple, if you know how.

Read more about the financial advisor business plan for retainers here.