AdvicePay Financial Advisor Community Blog

The truth about Compliance

I recently attended an NRS Compliance Conference in California and, as we like to do at AdvicePay, we brought some pretty cool t-shirts to give away. While I expected the “all you need is love and a good financial planner” t-shirt to be a popular choice, I was blown away by the popularity of the “bad a$$ financial planner” shirts. We ran out of them in record time and received requests for special-edition “bad a$$ compliance officer” tees. As we talk through what makes AdvicePay compliant in this post, just remember - compliance is bad-a$$!

COMPLIANCE MATTERS -- SO DO YOUR CLIENTS!

At AdvicePay, we understand that compliance is a top priority for advisors. We also understand that most financial planners were not drawn to the financial services industry because of compliance. Rather, it is a necessary aspect of the work you do in order to best serve your clients. AdvicePay was built specifically for financial planners as a compliant billing solution when implementing the fee-for-service model. When using AdvicePay, you can trust that you have a compliant billing solution, allowing you to spend more time serving your clients and less time on the complexities around billing.

Here’s a fun paradox for the financial advisor — while you spend your entire day planning other people’s finances, your own billing systems are some of the most challenging parts of your job. Like the therapist who is the most challenging client for other therapists, you need to seek solutions from those who may understand the intricacies of your profession. Central to the issue of why billing for financial advisors is so challenging is the task of finding compliant payment processing solutions. The retainer model is gaining popularity with financial advisors as a means of serving a new set of clientele that is not asset-laden. One of the key obstacles to this model is sourcing a payment processor that regulators are happy with.

As the shift toward a retainer model for financial advisors becomes more popular, broker-dealers have been presented with a new set of challenges. To remain compliant in a retainer model, they have to work with financial advisors to make sure the monthly fees that come out of their customers’ accounts every month transmute into valuable services. As a result, many broker-dealers have been hesitant to touch the retainer model. The reality, however, is that the industry is moving further in the direction of a monthly fee structure. This is particularly true when it comes to dealing with a younger set of clientele, where retainer fees for financial planning that have been extricated from asset management typically become a standalone service. Regulators in many states have already caught on to the trend, and those that haven’t are being pushed to do so. Broker-dealers are finding that they too have to follow suit, and are looking for methods to make the shift seamlessly.

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.

In 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.

Everyone knows trust must be at the core of every good relationship, and this is even more true when money is involved. As a general rule, nobody likes to worry about money, but it remains a top concern in our highly technological world due to the ever-present risks of credit card fraud, phishing, spyware, and identity theft.

There are many payment processor options out there, and when evaluating the best solution for your business, the differences aren’t always immediately apparent. As you compare AdvicePay with other systems, you may notice that some have lower monthly fees or transaction costs. However, while they all functionally can move money from point A to point B, there are distinct differences to consider.

One of the major advantages of AdvicePay is subscription payment functionality. Once you have set up a subscription payment for a client — whether it be monthly or quarterly — the client will approve that payment and those payments will then be made automatically moving forward. Clients are notified seven days before the money is deducted in order to meet various state regulations and the SEC's rule on annual disclosures of fees to avoid inadvertent custody. This happens automatically with each payment instead of once a year, but it will allow you to meet the requirements.