AdvicePay Financial Advisor Community Blog

Investment Advisor Compliance When Charging for Recurring Fees

July 31, 2018 By Alan Moore, MS, CFP®
Alan Moore, MS, CFP®

Financial Advisor Compliance When Charging Recurring FeesIn your role as an investment advisor, remaining compliant is more than likely at the top of your to-do list. It’s important  to conduct business in a manner that stays in line with best practices and adheres to the stipulations of industry regulations in your specific location. Adopting a monthly retainer model for your financial planning business does not have to be at odds with your legitimacy. As long as you keep yourself informed of the prerequisites governed by your particular jurisdiction, there are ways you can charge recurring fees and still remain completely compliant.

The financial industry is in the middle of a paradigm shift where old models of financial management do not necessarily fit in with the needs of today’s younger clientele. While revolutionary solutions are being adopted that take the nature of a digital generation with a new set of needs into account, parts of the industry still have yet to catch up to the advancements currently being made. As with any revolution, there are players caught on both sides of the Then vs. Now divide. The issue of compliance is no different.

Where you are matters

New regulation is needed to respond to the needs of a new and changing f market. Currently, however, regulation also straddles the old and new. While some states are up to speed on  the latest developments in the market and have adjusted compliance demands accordingly, others are still treading in past waters. As a result, it is part of your job as an investment advisor to research the requirements of your specific location to find out how you can operate within the retainer model while also remaining compliant.

Compliance from a regulator’s perspective

Thank goodness for regulators. These entities protect  the interests of the public when it comes to making use of financial services. If it weren’t for them, the industry could become an open playing field for those wanting to abuse the system. Regulators ensure that financial service providers remain accountable and reasonable, curbing situations where customers can be taken advantage of.

In the past, regulators have been wary of the retainer model because of the  potential for investment advisors to take money from clients without offering a fair exchange of services in return. Perhaps even more troubling is the potential for abuse when financial service providers have custody over their clients’ money. It follows, then, that to maintain compliance with the retainer model, it is vital to  take these two concerns into consideration:

  • Prioritize transparency of the services you provide to  your clients in exchange for your fee.
  • Avoid having custody over your clients’ finances.

If you are able to adopt these core principles in your business, maintaining compliance will not be difficult. By using AdvicePay as your payment processor, much of this work is already done for you in  the billing phase. Because AdvicePay is aimed specifically at financial planners, the issues of compliance are taken into full consideration in the payment pipeline. This allows you to focus on providing your services in a transparent manner, knowing that your payment processing is taken care of in a way that regulators will approve.


Posted by Alan Moore, MS, CFP®

When life hands you limes, make margaritas. Alan’s entrepreneurial journey began in 2012 after he was fired from his job as a financial planner and decided to start his own business. With his undergrad and M.S. in Family Financial Planning, Alan quickly put his business-building smarts and experience to work in helping other advisors start, run, and grow their own financial planning firms to serve NexGen clients. In 2016, he launched AdvicePay with partner Michael Kitces to operationalize the fee-for-service business model with technology that makes sense for the specific needs of financial planners. When he’s not starting companies, Alan lives openly as a self-proclaimed CrossFit junkie and dedicated snowboarder, a skill he is already passing along to his four-year-old son.

Topics: Compliance, Retainer Model