Transition: Leaving Your Position with an Existing Firm to Start Your Own Fee-Only Firm

Leaving a position as an Investment Adviser Representative “IAR” for an existing firm can be a scary, yet rewarding, process. Being an IAR at an established firm tends to bring about a level of comfort grounded in the idea that as long as the advisory revenue continues to be generated, then consistent income will follow. As a Registered Representative of a Broker Dealer, oftentimes a rep may be paid a salary that is derived from pooled commissions and sales of insurance products, combined with advisory revenue and sales incentives. Alternatively, in a more traditional compensation structure, a Broker Dealer Rep may be compensated directly from commissions paid on the purchase and sale of securities.

Being an appointed agent with an insurance company, while offering less stability from an income perspective, can still be reassuring from a compensation standpoint. Reason being, stiff competition among insurance companies for sales of annuity and insurance products makes the job market full of sales opportunities across various companies. Still, these compensation methods are generally consistent, and therefore income from these revenue sources is fairly predictable.

Income consistency and job-security are major concerns for advisers leaving their existing position within the financial services industry to start their own firm. Here are a couple of key points to consider when contemplating this transition.

1. Your Existing Firm most likely does not benefit from your departure – As an IAR of an established firm, the firm’s revenue is often dependent upon the sales revenue generated from your advisory clients. Therefore, it is in the best interest of the firm, should you decide to terminate your employment with them, that they retain your clients. Therefore, many firms will have non-solicitation, or non-compete clauses in place, to prevent you from taking your clients with you when you leave. As a result, it is important to review any such agreements that you have executed with your existing firm, to ensure that your intentions are not in violation of these agreements. If you review an agreement and you are unsure, it is advisable that you seek legal counsel.

2. Your Existing Firm has a Compliance Program – When beginning the process of registering a new firm, it’s easy to place your existing firm’s compliance program on the backburner. This is never a good idea. Whether you are associated with a Broker Dealer, RIA, or Insurance Company, there are compliance implications to starting your own firm.

If you are a currently employed by a Broker Dealer or RIA, then your current employer will have a compliance department that is responsible for your supervision. That firm will have access to your profile via FINRA Firm Gateway,  which is the same system that you will use to register your new firm. As you are in the process of registering your new firm, IN MOST CASES, your current firm will not be subject to notification until you file your Form U4. The Form U4 is the Uniform Application for Securities Industry Registration or Transfer. Representatives of broker-dealers, investment advisers, or issuers of securities must use this form to become registered in the appropriate jurisdictions.

When you file the U4 for your new firm, your existing firm will usually receive an alert, notifying them that you are starting your new firm. You may, at that point, be terminated.

However, some firms, as a part of their review of outside business activities, will search all of their representatives on the Secretary of State website to see if they are listed as officers, directors, managing members, or owners of any other business. This would usually occur during a branch audit, or an audit being conducted by regulators. If you have already listed your new firm with your State Secretary of State, then you are already exposed to the potential that your current employer may discover your intentions.

If you are appointed with an Insurance Company in order to sell annuity products for your Broker Dealer or RIA, then the above outlined potential for employer notification is the same. However, if you actually work for an Insurance Company in the capacity of an insurance salesman, and you are not an IAR or Registered Representative, then your exposure is significantly decreased by the fact that there may not be an existing U4 on file for you.

3. “It’s all About the Benjamins” – Figuring out how to maintain the ongoing stream of compensation and fee revenue is the most challenging part of the transition. As previously stated, your existing employer usually has no financial interest in helping you create a new revenue stream for your firm while decreasing the profitability of theirs. Therefore, it is imperative that the transitioning adviser create a feasible and coherent exit strategy before going out on their own. Here are some points:

Know your current Compensation Structure – Having a thorough understanding of how you are currently compensated is critical. If an adviser has a book of clients by which 65% of their compensation is revenue from commissions or insurance trails, then moving to a fee-only structure where this revenue source will be completely eliminated, requires some planning. Likewise, if an adviser is paid quarterly bonuses at their existing firm, and is in need of those funds to launch their own practice, then this factors into the timing involved in making the transition.

Do the Math – Run reports based on your current client revenue. Separate the revenue out into various categories for evaluation so that you have a clear picture of what the future could entail in your transition to fee-only.

Know your Clients – Particularly working within the BD structure, you will find that your current employer operates within many channels of the financial services industry. For instance, one of your clients at Wells Fargo Advisers may also have a Wells Fargo Mortgage, Credit Card, Checking Account, Savings Account and Car Loan. Anticipate the strong possibility that a client that is heavily invested in a large institution, utilizing them for multiple services, may not come with you when you start your firm. It’s almost certain that the Broker Dealer is going to make efforts to retain that client when you leave.

Also, don’t count on taking clients with you, if they were clients of the firm before you began working for the firm, unless you know them personally outside of your professional relationship. Those clients tend to exercise loyalty to the firm over the the individual adviser.

Evaluate your Personal Financial Situation – Before you make the transition, it’s important to do a household budget and make sure that you have enough in savings to sustain your lifestyle through this process.

4. Don’t try to Micromanage the Timeline of the Transition – The timeline for RIA Firm Registrations are unpredictable, particularly for state registered firms. Rarely, if ever, can anyone communicate with certainty, how long the process will take; so be financially and operationally prepared for at least a 4-week period between leaving your previous firm, and starting your new firm. Likewise, your existing firm has 30 days to file a Form U5 (termination) for you. In states that don’t allow dual registration, a compliance officer that is slow to terminate an IAR could create an additional unanticipated delay. So, in a nutshell, the adviser does not, and cannot, control the timeline of the transition.

In Conclusion, starting your own firm is extremely exciting. After working within the strict confines of existing rules and regulations, many which seem outdated and illogical, there is nothing more freeing than going into business for yourself. It can also be stressful, but by following the steps outlined here, you can begin the road to a smooth and successful transition.


Scott GillAbout the Author: Scott Gill is the Director of Keeping Us Compliant here at XY Planning Network. Outside of the office, Scott enjoys watching sports, exercising, and operating the charitable organization he created upon his father’s passing. You can connect with him on LinkedIn.

Communicating with your Clients About Compliance



Compliance vs. Convenience

Inevitably, there will come a time when maintaining your compliance policies will create some sort of inconvenience for your clients. Perhaps the adviser sent the client the wrong form to have them sign, and they will have to sign the correct form in a separate sitting. Or maybe the client received the correct paperwork, but they failed to initial in the appropriate location.

Another common occurrence, is for the client to be in a bind and in need of an expedited service that requires their signature, and they aren’t “near a fax machine”, or they are in a location that “doesn’t have access to email” for them to receive and return needed documentation. Although these occurrences can’t be completely avoided, there are a few things that can be done to more effectively prepare clients for compliance obligations, so that the compliance program doesn’t incur unnecessary risks.

Managing Producers

It can be suggested that the most intense conflict surrounding this subject lies with Managing Producers, or individuals within the firm that operate in both the capacity of Financial Adviser and Principal simultaneously. Anytime a client is inconvenienced as a result of a mistake of the Adviser, it is embarrassing for the adviser to have to go back to the client to admit that mistake in order to correct it.

Oftentimes, multiple mistakes tend to occur with the same client, resulting in diminishing goodwill and a decrease confidence in the adviser. In many cases, when this conflict exists, it is common for the adviser to “err on the side of revenue”, and cut corners on the compliance piece. That is because most Advisers get into the business to be service providers, not compliance officers. This can cause a problem for the compliance program.

3 Best Practices to Minimize Compliance Inconveniences for Clients

So what are some ways to minimize conflict when operating in this dual capacity to be effective on both sides of the fence? Here are some ideas.

1.) Clearly communicate compliance policies to clients upfront by spending time making sure clients understand documentation – When initiating client relationships, there is a point of commitment when the client is signing the advisory agreement. It’s easy to get excited, want the documents signed, ADV and Privacy Policy delivered, and suitability data gathered so that the adviser can start servicing the client.

But taking a bit of extra time during this period, to review these documents with the client will establish a precedent with the client that the adviser will pay attention to detail on compliance matters going forward. The client may not immediately seem engaged in the process of combing through the initial compliance documents with a fine-tooth comb, but in the long term, this practice will increase the probability that they will respond more positively to small compliance inconveniences going forward.

From a sales perspective, this practice can also make the adviser appear to be more detail-oriented and precise than previous advisers the client may have worked with, instilling confidence in the client that this will also be the approach taken to service their needs.

2.) Remind Clients of Compliance Items along the way – After the precedent has been initially established that the adviser will be thorough in compliance items, continue to reinforce this idea over the course of the relationship by reminding clients of such items whenever the opportunity presents itself. For instance, when requesting a copy of a client’s Driver’s’ License to open an account at the Custodian, remind them that it is against compliance policy for them to email such information without encryption, and provide a secure alternative for them to submit it.

Another example may be taking an extra step to review client suitability information while they are executing an item that doesn’t necessarily require this information to be updated and documented, based on your conversation with them. If the client mentions a college event for a child in common conversation, the adviser can take the time to see how that may impact the suitability profile, as opposed to simply breezing over that item in the conversation. Activities like this will serve as a constant reminder to the client that compliance is a priority for the firm.

3.) Give the client access to resources when they are displeased with inconveniences – Despite how diligent an adviser is, a client will inevitably become annoyed at some point with a compliance obligation. It’s a part of the business. When this occurs, one option is to treat it as an educational opportunity. The client will initially become annoyed with the adviser or the firm, because this appears to be the source of the inconvenience.

They rarely think of the regulatory agency that is creating and enforcing these policies, as being the immediate source of their frustration. Therefore, when the client becomes frustrated, is the appropriate time to remind them of this. By letting the client know that the adviser is on their side, and the “regulators” are the source of the frustration for both of them, the client may feel that they have a compliance advocate, as opposed to an offender. This process is most effectively executed by providing the client proof of the source of their inconvenience… The Regulations!

Give the client access to the regulatory guidelines that are creating their inconvenience. If the adviser can screen-share and review a quick item from the regulator’s website, this is best. If the client is the type that wants to dig through pages on their own, then the adviser can provide a link to the regulation and point out the sections that are relevant to their circumstances. This may prevent the client from feeling “victimized” by the firm.

The nature of Compliance is such that it only functions through documentation. This documentation, often time-consuming and burdensome, creates inconveniences for both advisers, and clients. However, by utilizing these best practices, advisers can begin to minimize the negative impact these inconveniences create for their clients.


Scott GillAbout the Author: Scott Gill is the Director of Keeping Us Compliant here at XY Planning Network. Outside of the office, Scott enjoys watching sports, exercising, and operating the charitable organization he created upon his father’s passing. You can connect with him on LinkedIn.

Calculating Your Assets Under Management



Every year, Registered Investment Advisory firms must calculate their Assets Under Management as a part of their annual ADV Update. For firms that focus on Financial Planning, this can pose an interesting dilemma. Where is the line between providing advice on investments, and actually managing the assets? While that line may not always seem clearly defined, the SEC has provided guidance to help firms understand the distinction clearly.

Why is it important to disclose Assets Under Management?

From a regulatory perspective, many RIAs charge fees that are based on a fixed percentage of Assets Under Management. Therefore, it is important for both regulators, and investors to be able to understand how those assets are calculated. Also, from a performance perspective, AUM disclosure allows investors to adequately evaluate the asset manager’s true performance over time.

What Constitutes Assets Under Management?

When completing the Form ADV Part 1, the SEC provides guidance through their instructions document on how to interpret certain key terms that are important to understand as it pertains to AUM.

Securities Portfolio – An account is a securities portfolio if at least 50% of the total value of the account consists of securities. For purposes of this 50% test, you may treat cash and cash equivalents as securities. You must include securities portfolios that are:

  • your family or proprietary accounts;
  • accounts for which you receive no compensation for your services;
  • accounts of clients who are not United States persons.

When thinking in terms of the traditional billing practices on Assets Under Management, this concept makes perfect sense. For instance, most commonly, the fee is assessed by applying the percentage fee, to the market value of the account based on the last day of the previous quarter. Included in that market value, is both securities and cash which is presumably set aside for future investments.

Value of Portfolio – Include the entire value of each securities portfolio for which you provide continuous and regular supervisory or management services. If you provide continuous and regular supervisory or management services for only a portion of a securities portfolio, include as regulatory assets under management only that portion of the securities portfolio for which you provide such services.

Again, this ties back to the previous item. The value of the portfolio is derived by taking the total value of cash and securities that the firm manages, provided those assets are held in a category as described in the definition of securities portfolios.

Continuous and Regular Supervisory or Management Services – You provide continuous and regular supervisory or management services with respect to an account if:

  • You have discretionary authority over and provide ongoing supervisory or management services with respect to the account; or
  • You do not have discretionary authority over the account, but you have ongoing responsibility to select or make recommendations, based upon the needs of the client, as to specific securities or other investments the account may purchase or sell and, if such recommendations are accepted by the client, you are responsible for arranging or effecting the purchase or sale.

There is a rather important distinction to point out on Continuous and Regulatory Supervisory Management Services. Many firms that provide financial planning services, will provide investment advice as one aspect of the financial planning engagement. Perhaps the adviser reviews the client’s 401k Statement, and makes asset allocation recommendations. Or, maybe the adviser reviews the client’s brokerage account statement, and provides commentary on performance of individual securities or the performance of third-party asset managers. But according the SEC’s regulatory guidelines, to constitute Continuous and Regulatory Supervisory Management Services, the adviser must have the ability to select or make recommendations, AND if the recommendations are accepted by the client, the adviser must be responsible for arranging the purchase or sale.

In other words, simply making a recommendation does not constitute assets under management, unless the adviser is also responsible for implementing that recommendation. A logical interpretation therefore, is that only advising a client of an asset allocation change in a 401k Account, or only advising on securities purchases or sales in an investment account, does not constitute AUM, because it is the client’s responsibility to arrange the purchase or sale.

How are you compensated?

Another item that to be considered when calculating AUM, is how the firm is compensated on the relationship. On the advisory contract, it should stipulate if the adviser provides ongoing portfolio management services. However, this can be tricky based on how the services are framed in the ADV Part 2 and the Advisory Agreement. Theses documents may list services as “Investment Advisory”, “Investment Management Services”, or “Portfolio Management Services”. Regardless of which label is applied, it’s important to go back to the definition of continuous and regulatory supervisory management services, when evaluating the activities performed as outlined in the advisory contract.

Under more traditional financial planning arrangements, if the firm is compensated based on a monthly retainer, quarterly or hourly fee, or an upfront fee with an ongoing monthly, this usually doesn’t constitute Assets Under Management. However, in some cases, continuous and regulatory supervisory management services may be included in a single fee that also encompasses financial planning services. In this instance, assets in securities portfolios should included in AUM.


Scott GillAbout the Author: Scott Gill is the Director of Keeping Us Compliant here at XY Planning Network. Outside of the office, Scott enjoys watching sports, exercising, and operating the charitable organization he created upon his father’s passing. You can connect with him on LinkedIn.

Handling Compliance Items that Inconvenience Your Clients



There is an undocumented struggle between compliance and convenience that every Chief Compliance Officer must come to terms with.

Many times, a client will need to sign an additional document or resign a document you already executed. Or maybe a client may be forced to receive a disclosure or a document that they are not interested in reviewing.

And in some cases, there may be types of investments that the client wishes to add to their portfolio, but these investments are either not suitable for the client or are unreasonable from investment management perspective.

So how should you handle compliance items that inconvenience your clients? Consider these factors to help you decide what to do.

Why Is Compliance Easy to Overlook in Client Meetings?

It helps to understand why advisors may try to skirt compliance rules when it comes to enforcing them on clients.

If the sales pitch isn’t sufficient enough to get the client to sign the advisory agreement, then rather or not the form is filled out correctly is a non-factor.

If the prospect is meeting with you to decline the engagement proposal, then the ADV and Privacy Policy delivery requirement is a moot point.

So it’s completely natural to prioritize production ahead of compliance and believe that the former is more important to your RIA than the latter. Simply recognizing that this conflict exists between compliance and convenience is the first major step to overcoming the hurdle.

Reputational Risk of the Advisor or Financial Planner

One big incentive for advisors to try to circumvent compliance policies and procedures is reputational risk. It’s embarrassing to go back to the client to ask them to sign a form again, especially if it’s because you omitted a minor detail.

And mistakes happen. They’re understandable. You have so many other items to cover in a client or prospect meeting. The pressure of signing a new client or maintaining an existing client can outweigh the perceived importance of having the client initial in every requested location on a form or document.

Compliance is often not the most important thing at the time of a client interaction.Therefore, the only way to combat this is to make a concerted effort to make compliance a priority in client meetings.

Here are a few tips to make it happen:

1. Thoroughly Review All Forms and Documents Prior to the Meeting

You already review aspects of the client’s investment profile, current investment performance, recent money movements, and to research anticipated investment recommendations. But you also need to set aside some time prior to the client meeting to review any outstanding compliance items and make sure those items are covered as well.

2. Prepare Documents Requiring Client Signatures

Use those handy “sign here” stickers to make sure you are having the client sign in all appropriate locations on the first try. If possible, use a highlighter on the documents to further reduce the chance that a signature or initials will be missed.

3. Check with Your Compliance Officer

It’s easy to make assumptions about what documentation is needed from a compliance standpoint. But there can be small nuances in relationships, account types, services provided, and so on that may merit additional signatures or client acknowledgments.

If you are the compliance officer, then double check your compliance manual and the regulatory background on what you are doing for the client to make sure all bases are covered.

4. Clearly Communicate Compliance Expectations

Most everything is easier for clients to deal with when they are notified up front of what to expect. If your clients know that they will be receiving your ADV and Privacy Policy Annually, then they are less likely to complain about “junk mail.”

If your clients understand they need to sign a separate form each time they want to execute a wire transfer, or open a new account at the custodian, then they will be prepared to fulfill this request.

Dealing with Dissatisfied Clients

It’s very easy to drop the compliance ball when a meeting concludes with you sitting across from a dissatisfied client.

Perhaps the investment portfolio is underperforming the benchmark. Maybe a failed money movement request caused the client a delay in a particular transaction. Or maybe husband and wife get together in the room and they simply can’t agree, causing an uncomfortable environment for everyone.

It is at this time, when it seems the slightest inconvenience to the client could cause significant damage to the relationship, that compliance issues tend to drop off advisors’ radars. To address this, practice removing yourself from the client’s temporary emotional state.

Empathy is a key component to an effective relationship. But the ability to separate yourself emotionally is sometimes equally as important. It is a good practice to stand firm on compliance needs in order to maintain stability in both volatile markets and volatile client relationships.

As unfortunate as it may be, compliance is by nature inconvenient. There are numerous things that a compliance officer can do to minimize this inconvenience for the firm. Setting up the right expectations can make the biggest impact.

Becoming effective in communicating compliance requests confidently and clearly should be a priority for both compliance officers and financial advisors.


Scott GillAbout the Author: Scott Gill is the Director of Keeping Us Compliant here at XY Planning Network. Outside of the office, Scott enjoys watching sports, exercising, and operating the charitable organization he created upon his father’s passing. You can connect with him on LinkedIn.

The RIA Business Model You Need to Serve Next Generation Clients


It’s time to address something all financial advisors know to be true, but most don’t usually admit. The financial planning industry is slow to change and slow to adopt new practices, new technology, and new marketing techniques.

It doesn’t matter if you look at investment management, insurance sales, or true financial planning. In any view, it’s easy to see that we’re stuck in old ways of doing things simply because that’s the way it’s always been done. One only has to look to other industries to see just how far behind we are.

There are many reasons why we’re stuck. We haven’t needed to change, since our businesses are profitable. We haven’t seen the technological innovations that many other industries have experienced, because advisors typically don’t purchase new tech. Neither businesses nor individuals invest much in technology designed for running financial planning practices.

Not to mention, ours is a highly regulated industry. That regulation and strict requirements to stick to existing standards tends to slow technology innovation from the get go. It certainly slows individual advisors and firm owners from taking risks by adopting that new technology, too — especially if there are any regulatory gray areas that the industry hasn’t yet resolved.

Additionally, we have an aging generation of advisors. While this older group of of advisors created what financial planning is today, they’re still operating the same way they ran businesses and served clients a decade or so ago. And little wonder: technically, it’s been working.These advisors and their firms have been making money, so why push change? Why push for progress when the same old thing seems to keep bringing money in the door?

These advisors and their firms have been making money, so why push change? Why push for progress when the same old thing seems to keep bringing money in the door?

But we’re starting to see many things happening at once in the financial planning industry. The landscape is changing, whether individual advisors and their practices are okay with it or not. The profession as a whole is evolving from where the industry began.

Next Generation Clients Want Advice, Not Products, from Advisors

When financial planning began as a profession as discussed earlier, advisors were product salespeople. We were insurance agents or stock brokers. And we did some financial planning because it was a good way to demonstrate the need for the products that we had to sell, but sales remained our focus.

Young people today increasingly are looking for financial advisors. They take the title literally and actually expect advice. They’re looking for help planning their financial lives.

Products are something that they can buy online themselves, but advice is something Gen X and Gen Y clients seek out from a human being they can have a conversation with; a website can give us information, but it can’t tell us how to apply it to our lives.

Next-generation clients are often savvier in general because of their comfort level with technology and their native knowledge on how to find the information they want. We’re starting to see clients come to us who know how advisors charge and how much money financial planners make.

They know the difference between commission and fee-only. They’re more educated and can ask more probing questions about fiduciary standards and whether or not you’ll work for them under that standard. Of course, not all clients are this well educated.

But the information is out there and available, and distinctions in the industry are no longer reserved as insider information as they once might have been.

Gen X and Gen Y clients are also looking for a specific kind of advisor. They know they’re looking for financial planning and comprehensive financial advice, not just insurance sales. Younger clients are looking for advisors who speak their language and understand their life stage. They want specialists to serve their specific interests, needs, and goals.

The Power of Niche Marketing Your Services

Let’s consider the craft beer industry as an analogy to better understand these ideas.

Consider how big, corporate players used to dominate. There was no room on the shelves for small-time operations between products from Budweiser, Coors, and Miller. But in recent years, there’s been a huge demand — especially among Gen X and Gen Y demographics — for what’s known as craft beer.

Younger generations tend to prefer locally made, locally sourced, specialty beers, and shun products from bigger, national companies that are generic, plain, and mass produced. Today’s consumers want unique and different offerings from the beer industry, and they’re interested in very specific kinds of tastes and flavors.

This move away from big, broad, and general products with a corporate feel and toward smaller, niched-down, and personal is happening in financial planning as well. It’s driven by the desires of the same consumer segment who want to feel like the companies they work with and give their money to actually care about their experiences and needs.

They don’t want faceless corporations or to feel distant from their service providers.

Consider, from a sales perspective, what happens if we create a specialty beer (or a specialty service) that has a really unique profile that only appeals to a really small subset of people — but the people that it does appeal to are raving fans because it’s perfect for them.

This is what’s possible right now. You can develop a niche and reach a specific group of people that don’t need to be sold on your offering, because they’re naturally attracted to it and they know it’s what they want.

The RIA Business Model That Allows You to (Profitably) Serve Gen X & Y

Creating a service model to serve Gen X and Gen Y clients requires rethinking and completely restructuring the way your firm generates revenue.

Instead of looking at existing business structures and trying to make it fit for the next generation, go back and ask this question: “If we were building this from the ground up, how would we design a fee structure to work with Gen X and Gen Y clients?”

Assets under management or AUM is simply not an option if you want to serve this demographic profitably. We can do the math to see that, ultimately, you can’t generate revenue on an AUM basis if you’re working with clients that don’t have assets. Most next-generation clients don’t have assets — and if they do, those assets are usually tied up in 401(k)s or equity in their homes.

Ready to learn more about the monthly retainer model and how to implement it in your firm? Click here to download a sample chapter of Alan Moore and Michael Kitces’ guide to using this RIA business model to profitably serve next generation clients!

Even if someone in their 20s, 30s, or 40s has a net worth that makes them look like a viable client, they may not have enough liquid assets in an investable account for you as the advisor to manage and deduct 1% of fees to run a profitable business.

And you should get paid to serve these clients. No one is asking advisors to work pro-bono. We don’t run charities. It’s not sustainable to try and build a business around serving “poor” clients today in the hopes they’ll be “rich” someday in the future.

It is perfectly fine to charge for the services that you’re rendering and get paid to do that work. But that means you must find a model that balances both sides of the equation: you can serve Gen X and Gen Y in a way that is affordable to them, and in a way that’s profitable for you.

Why the Monthly Retainer Model Works for Next Generation Clients

Charging assets under management worked for clients with assets to manage. It made sense and worked well for all parties. But this model fails with next generation clients who have the income to pay for advice, but not the assets on which the advisor can charge a commission on.

When advisors say, “I can’t work with younger clients because they don’t have any assets to manage and therefore they aren’t profitable to my firm,” what they’re actually expressing is that the existing service model and fee structure designed for different types of clients with assets does not work for clients without assets.

And we agree! We can all do the math to understand that as a business owner, you can’t profitably run your firm by serving clients that have an average of $50,000 in an IRA when you charge 1% AUM.

But this isn’t a client problem. It’s a business model problem. If we could be free from the expectations and the history — and the “way things have always been done” mindset — we could then openly ask questions like:

How can we build a fee structure to serve younger clients? How does that fee structure function so clients can afford the services and advisors can make a profit?

We asked these questions and landed on the monthly retainer model as the answer. No, this isn’t the way it’s always been done. No, business has not normally been done this way. But the monthly retainer model works both for next generation clients and for the advisors who want to serve them while still running a business that can generate revenue.

You can get the full guide to implementing a monthly retainer model into your RIA to profitably serve the next generation of clients. The Monthly Retainer Model in Financial Planning is now available on Amazon!

Your Complete Guide to XYPN16


There’s no shortage of things to look forward to at this year’s XY Planning Network National Conference, #XYPN16. And with so much going on, it’s easy to feel like you might be missing something.

That’s why we compiled this guide to walk you through all things conference content, parties, receptions, events, contests, and more!

Get the Basics

Here are some of our frequently asked questions and the improtant information you need to feel confident before arriving at #XYPN16.

Where is everything happening? We’ll be at the Sheraton San Diego Hotel & Marina. Most conference events will take place on site, whether inside or on the grounds. San Diego means lots of opportunity to use the outdoor space we have!

Do I need to arrange a shuttle from the airport to the hotel? You don’t need a shuttle, taxi, or Uber if you fly in. You can walk from the airport!

What should I wear? Whatever you want. This isn’t your typical, stuffy conference — and in fact, you may be more out of place if you wear a suit than you would be if you wore shorts and flip flops. Come as you are and dress the way that makes you comfortable and confident.

How should I meet up with people? If you’re part of one of our communities, either as an XYPN member or an XYPNRadio VIP, drop a line in the forums or the Facebook group. That’s a great way to coordinate meetups. But it’s not necessary — we have a lot of opportunities lined up to mix and mingle, network, and hang out with fellow attendees. (See below for what’s going on!)

What should I expect, in general? What’s the vibe like? Think more informal than formal, more casual than strictly professional. Everyone is friendly, approachable, and open — and most importantly, we’re here to help each other. Don’t hesitate to walk up to folks, start conversations, ask questions, and make new friends.

What if I need help at the conference? The entire XYPN Team will be on site and available to help you should you need anything. We’ll also be highly active on Twitter, so this is a great way to reach us if you can’t track a human in an XYPN tee down. Tweet @XYPlanning and use the hashtag #XYPN16.

Get all the info and tips you need to succeed straight to your inbox. Click here to sign up for our Advisor Newsletter.

Know Which Sessions Are Right for You

#XYPN16 will feature 4 main content tracks. We’ve divided sessions and speakers into these categories so you can easily determine which presentations you’ll get the most value out of.

Hear from experts in each of the following tracks:

  • Practice Management: featuring panel discussions from industry leaders and top financial advisors
  • Continuing Education: get CE credit and the information you need to perform better as an advisor and RIA owner
  • Sales & Marketing: hear from the pros on how to gain visibility and generate more leads so your firm can scale and grow
  • Start My Firm: this is the content track for you if you’re looking to launch or are in the process of starting your own RIA

In addition to our content tracks, the conference features 5 keynote presentations:

  • Presentations from Alan Moore and Michael Kitces, co-founders of XY Planning Network
  • Keynote session from Heather Jarvis, student loan expert of
  • Keynote session from Pat Flynn, online entrepreneur, blogger, and podcaster from Smart Passive Income
  • Keynote presentation from Clark Howard on the importance of fee-only financial planning for consumers

To see all the sessions and speakers, head to the XYPN16 Agenda.

Check Out Breakouts, Roundtables, and More

Our expo hall will be rockin’ on Monday. Meet up with vendors and conference sponsors, grab some swag, and catch the tech demos that will happen throughout the day.

And our excellent vendors aren’t the only things to see and do in the expo hall on Monday. You can also enjoy a number of roundtable workshops, including:

  • Influencing, Not Selling, Millennials
  • Socially Responsible Investing
  • Writing Business and Operation Task Lists
  • Transitioning from the BD World to the Fee-Only World
  • Using Betterment in Your Practice
  • Divorce Planning
  • XYPN Radio VIP Roundtable Meetup
  • and more!

Plus, we’ll have a special area set up in the expo hall where you can meet up with other attendees and members of Team XYPN. Look for the XYPN Chill Zone (and note that this is where you can also get super early bird tickets on next’s year’s event — and sponsors can grab their space at a discount, too!)

Feel free to network with your fellow finanical advisors and conference attendees in the Chill Zone or just hang out and, you know, chill.

Don’t forget to make plans each morning to attend one of our group workout sessions, too! We’ll have members and attendees leading a Zumba class one morning and yoga the next.

Many of our attendees will also be bringing their families and small children with them. We’ll have a designated room set up for parents and children to go as needed for nursing and other needs throughout the day. (Please note the conference does not provide any adult supervision; parents should accompany children throughout the venue.)

Check out the full schedule to get the lineup of tech demos, roundtable workshops, and more.

Don’t Miss the Inaugural FinTech Competition

We’re hosting our inaugural FinTech Competition to find and showcase new players in the industry who are creating tech solutions to help financial advisors provide better financial planning to Gen X and Gen Y clients.

The competition will showcase 6 companies that offer software solutions and tech tools to financial advisors serving Gen X and Gen Y, in an effort to get them in a marketplace where they’re desperately needed.

Finalists were chosen for a combination of what we thought was relevant and useful tech for the advisor, and how differentiated the product was from existing solutions.

Get ready to see these finalists compete for the grand prize at #XYPN16:

These companies will be judged by Michael Kitces, Tom Kimberly of Betterment Institutional, and Ben Welch of TD Ameritrade Institutional. Bill Winterberg of FPPad will host the competition.

Party On with Your Favorite Financial Pros

We’re excited to host a number of parties, get-togethers, receptions and networking opportunities for our conference attendees this year. Here’s where we’ll be hanging out each day:

  • September 18, Sunday Night: Join us for our opening reception at 7pm on the Garden Terrace
  • September 18, Sunday Night: Keep the party going from 9pm to midnight in the Sunrise and Sunset Suites
  • September 19, Monday: Enjoy a food truck lunch, San Diego style, from 11:30am to 1pm
  • September 19, Monday Night: Participate in our pizza party in Habor Island Park starting at 6pm
  • September 19, Monday Night: Sunrise and Sunset Suites will be open again from 9pm to midnight
  • September 20, Tuesday Night: Don’t miss our closing party at Parq starting at 8pm. This will be a private event just for XYPN attendees. Join us in the Sunrise and Sunset Suites again until midnight, too
  • September 21, Wednesday Afternoon: Help us close out the conference and gear up for FinCon at the PB Ale House #XYPN16 Afterparty!

Play and Win at #XYPN16!

If all the events, parties, networking opportunities, and conference content isn’t exciting enough, maybe a chance to win a prize or two will help you perk up.

On Monday, you can be entered to win 1 of 3 iPads we’re giving away! All you need to do to earn your entry is visit each expo hall booth. Winners will be announced Monday afternoon.

You can also engage with us and join the fun on social media. Here’s a list of the contests we’ll run and how you can get involved:

#XYPN16 Superlatives: On Sunday before the conference starts, we’ll be checking Twitter to see who we can crown “Most Pumped Up for #XYPN16”! Prize: $50 Amazon Gift Card

Share your takeaway from Heather Jarvis’ pre-conference workshop on Twitter with the hashtag #XYPN16. Prize: $50 Amazon Gift Card

On Monday, tweet us your favorite photo with an exhibitor. We’ll choose the best (think: funniest, most creative) and our photo prize winner will score a new FitBit!

We also want to know what conference content you’re most excited about. On Monday, share the session you’re most excited to see and why. Use the hashtag #XYPN16. The winner will receive a free pass to XYPN17!

And finally, our big social media contest and grand prize… We’ll have a scavenger hunt on Monday. The first person to tweet us all of the following with the hashtag #XYPN16 will win a new GOPRO camera! Here’s what you need to find and send in:

  1. Photo with your favorite vendor in the expo hall
  2. Photo of you hangin’ in the XYPN Chill Zone
  3. Photo from a roundtable session
  4. Photo of someone in an XYPN tee (can be anyone, including yourself!)
  5. Photo of your favorite expo hall swag and who it’s from

The only rules for the above contests: you need to tweet all your entries to @XYPlanning and include the hashtag #XYPN16. That’s all you need to do to win!

Need Help or Have Questions? Here’s Where to Go

If you’re still looking for more information on #XYPN16, make sure to visit the main conference website at

Have specific questions? Make sure you visit our FAQ page to see if we’ve already answered them for you.

From there, you can check out the following resources and pages:

And of course, be sure to view who will be sponsoring #XYPN16. Our sponsors make the conference possible, and we wouldn’t be able to provide you with all of the above without them. Swing by their websites, social media, and of course their expo hall booths to say hello and check out what they have to offer attendees.

We can’t wait to see you in San Diego!

What an RIA Owner Should Know About Communicating with Regulators

RIA Owners


Every RIA owner must have a designated individual who serves as the primary compliance contact. This person is usually referred to as the firm’s compliance officer, or Chief Compliance Officer (CCO).

And if you’re the RIA owner and the sole person in the business, that means you.

The primary responsibilities of a compliance officer are to make sure the company complies with regulatory requirements and adheres to the firm’s set policies and procedures. In order for the compliance officer to do the job effectively, they must be familiar with regulatory requirements.

These requirements will be what internal policies and procedures are based on and amended as needed. Therefore, one of the most vital aspects of being a successful compliance officer is knowing when and how to communicate with your regulators.

Here’s what RIA owners need to know to ensure these communications are effective and productive:

Know Your Documents

The best way to put your compliance questions or concerns into context is to first review your regulatory documents. Before framing your question, double check your most recently filed ADV, Compliance Manual, and Advisory Agreement to make sure you are familiar with these items.

Not only will this help you ask the right questions the first time around, but it will prepare you for any follow up questions that you may receive from the regulators.

Know Your Regulations

After reviewing your internal compliance documents, access the applicable regulations to your questions to make sure that there are no existing conflicts in your firm’s compliance program. Most state regulators provide online access to their regulatory statutes.

You can also access plenty of resources via the SEC website if your firm is registered with the SEC.

Most RIA owner anxiety over contacting regulators is the fear of “raising red flags.” If you’re familiar with your internal documents and they tie out to the regulations, then you can eliminate this anxiety before contacting the regulators.

Prepare Your Interpretation of Your Documents and Regulations

Many compliance topics live in grey areas. Sure, there are regulatory statutes that are drafted in black and white — but the interpretation of those regulations is up to the individual who is reading them.

There will be times when you read and review a regulation, but it doesn’t specifically answer your question. At this point, you should contact the regulators to get their interpretation.

But note that by being confident in your own interpretation, you’ll likely experience more success in being able to frame the regulation in a manner that is conducive to the growth and success of your firm.

How an RIA Owner Can Interpret Regulations

This is much easier than it may seem, but it has to be done methodically. In my opinion, each regulation can be interpreted in many ways along a continuum.

At one end, the regulation can be interpreted to be so strict that it constricts the growth of the firm. On the other end, the regulation can be interpreted to the extent of appearing pointless, with virtually no impact on the firm.

The regulator’s interpretation will usually be somewhere in the middle, which is where your interpretation should be as well. Therefore, in order to form your interpretation of regulations, evaluate the most conservative and the most liberal view that you can conceptually imagine.

Then, locate that middle ground that allows flexibility for the firm but also remains compliant with the rule. Present that interpretation to the regulator when you contact them, and stand strongly upon it.

Interpreting regulations is a complete grey area for RIA owners. You may contact your regulators and get different interpretations of the same regulation from two examiners in the same office. Let this give you confidence that you are as capable of interpreting regulations as anyone else. In addition, it is important to note a best practice of documenting your conversations with regulators in case your receive a deficiency resulting from a different interpretation during an audit.

Try to keep track of the name, phone number, and if possible, email address of the regulator that you communicated with.

When an RIA Owner Should Communicate with Regulators

Compliance officers should reach out to their regulators when all other resources have been leveraged but a compliance question still exists. In most cases, a thorough review of your compliance documents along with a review and comparison with the regulations will yield the answer that you need.

If you follow these steps but are still a bit hesitant about how to proceed, you can document your review of the regulation just as you would document a conversation with a client. Then present that information as apart of your audit.

That is to say, that if you don’t want to contact the regulators but you are diligent in your research of regulations, then you can stand upon your own interpretation and wait until your audit or examination to have that discussion.

Communicating with regulators can be a nerve-racking for any RIA owner. The concern for the CCO is that they will inadvertently notify regulators of an existing deficiency that will cause a compliance burden for the firm. That may happen.

But if there is an existing deficiency, the earlier it is identified, the less damaging it will be in an audit. Regulators will probably catch it later anyway, so the CCO may as well reach out to the regulator proactively to get in front of the issue.

Once this method has been utilized once or twice, the benefits will be immediately recognized and hopefully any feelings of anxiety or worry will dissipate.

Remember, regulators aren’t out to get you. They are a resource and their goal is to help you keep your firm compliant.


Scott GillAbout the Author: Scott Gill is the Director of Keeping Us Compliant here at XY Planning Network. Outside of the office, Scott enjoys watching sports, exercising, and operating the charitable organization he created upon his father’s passing. You can connect with him on LinkedIn.

XYPN16 Sneak Preview: The Next Challenges For Advisory FinTech



FinTech is a difficult space in which to gain traction if you’re a small software provider. Large firms that negotiate enterprise contracts tend to be extremely demanding — and it often isn’t feasible for startups to reach larger firms in the first place.

Going to independent advisors can prove just as difficult. The market is extremely scattered and fragmented, and it’s hard to gain a foothold that’s sustainable and scalable.

Startups offering products for the side of the financial advice industry that operates independently and focuses more on comprehensive planning services instead of investment management as a primary driver of business often get stuck in the chicken-and-the-egg scenario.

You need visibility to get on with large firms or to successfully negotiate an enterprise contract that gives you the backing you need to grow. And you need backing to gain the visibility needed to earn the attention of those large firms.

Disrupting the Cycle

The FinTech Competition at XYPN16 will break that problematic cycle by providing a platform for FinTech software providers to gain visibility for their products.

We will bring startup tech companies to a large community of financial advisors who are likely to adopt those solutions. The immediate audience? XYPN16 conference-goers, a tech-savvy crowd hungry for solutions that address their problems and needs, and industry leaders and innovators who are excited to try out new FinTech that can improve their practice.

Finalists in the competition will also find their visibility getting a boost via valuable media coverage, both at the event and after through XY Planning Network’s various platforms and communities, including the Advisor Blog, XYPN Radio, social media channels, and Nerd’s Eye View from Michael Kitces.

Serving Gen X and Gen Y Clients

The overwhelming majority of technology for advisors right now is built entirely around the investment management value proposition. There are countless options for portfolio management, reporting, portals, and so on.

But there’s very little innovation around all of the other aspects of providing financial advice and delivering personal financial planning to clients. And advisors back up the investment management products with their wallets, finding it easier to pay more for portfolio-related software than any other tech tool.

One standout feature of XYPN16’s FinTech Competition is that it aims to support the growth of financial planning-centric solutions and tools for advisors, not just more investment related technology.

We support innovators who want to create more tools that allow advisors to bring better financial planning to Gen X and Gen Y on a monthly retainer business model.

The opportunity is here for both parties: advisors can reach more consumers with the monthly retainer model because it’s more affordable and accessible than a strictly AUM model. The caveat of the approach for the advisor is that they must run an extremely tech-efficient business.

For solo, independent advisors serving “small clients,” technology efficiency is crucial. And that’s where the opportunity for FinTech startups comes in: currently, there is very little software that’s made for independent advisors, particularly around helping advisors serving younger clients that don’t necessarily have assets but do have a diverse set of planning needs.

Better Tech Means Better Financial Planning

XY Planning Network is known as an industry disruptor. We want to continue making positive changes to our industry by making it easier and more feasible for advisors to serve young clients.

That gives more people access to the professional financial advice they deserve (before they amass wealth). It also creates more job opportunities for financial planners when you have a larger market of clients to serve.

We see FinTech innovation as an essential underpinning to expanding the market for financial planning in this space. Better tech makes advisors more efficient and empowers them to actually deliver a better value proposition to their clients through that efficiency and innovation.

The advisor does a better job, gives better advice, and provides a better client experience. At the end of the day, we all win.

Let’s Get Ready To Rumble!

XY Planning Network’s national conference, XYPN16, will play host to an exciting new event designed to generate more innovation in the technology space for financial advisors.

We’re hosting our inaugural FinTech Competition to find and showcase new players in the industry who are creating tech solutions to help financial advisors provide better financial planning to Gen X and Gen Y clients.

Traditionally, technology has only been provided by very large companies that focus more on investment management solutions. Some individual advisors innovated for themselves and created software solutions based on the problems they experienced in running RIAs.

They might have sold their software to a few peers and eventually ran a small software company on the side. But it’s hard for small players to gain visibility in the industry without investment from major companies — and it’s hard to generate investment without visibility.

XY Planning Network wants to help FinTech innovators overcome these and other challenges in order to bring truly unique, groundbreaking, and practical tools to the marketplace. The competition will showcase 6 companies that offer software solutions and tech tools to financial advisors serving Gen X and Gen Y, in an effort to get them in a marketplace where they’re desperately needed.

How the Inaugural FinTech Competition Found Its Finalists

18 companies met the competition criteria from all entries we received. Finalists were chosen for a combination of what we thought was relevant and useful tech for the advisor, and how differentiated the product was from existing solutions,

We tried to qualify a wide range of software solutions in the finalists — we didn’t just pick 6 financial planning software packages. Part of our goal in choosing finalists was to recognize new types and categories of software for advisors that aren’t being considered in the marketplace today.

That’s part of what makes this competition so exciting. It’s a showcase of new tools that work completely differently than anything else available.

So who are the six companies that will be competing on the FinTech stage at XYPN16?

Meet Our 6 FinTech Competition Finalists


Ambitient offers Team On-Demand, designed to simplify and consolidate various means of communication while offering additional functionality that streamlines the client interaction process. It is a single tool that combines and simplifies phone, video conference, text and email, while tying into an advisor’s real time calendar availability.

College Affordability

EFC PLUS from College Affordability is the first comprehensive college funding decision support system. Similar to the solution TurboTax provides for the IRS process, EFC PLUS generates the same customized answers for students and parents in the college funding and financial aid process.

Data Points

Predicting Wealth™ is a behavioral finance platform from Data Points that analyzes client behaviors that have been scientifically proven to impact wealth accumulation over time. The platform gives advisors powerful analytics to strategically help clients improve behaviors to build wealth, and provides clients with personalized, developmental reports.


RightCapital provides cutting edge financial planning solutions designed to enable financial advisors to efficiently and profitably produce customized financial plans. Their software includes specific functions like  budgeting, cash flow analysis, and debt management to help advisors serve next-generation clients.

Snappy Kraken

Snappy Kraken offers referral automation software. They provide advisors with a single source for customizing, deploying, managing and tracking key business processes and referral generation campaigns.

Totum Wealth

Totum helps human financial advisors bring risk clarity to their wealth management practice, delivering fully-customized portfolios via an interactive visual interface. They company is democratizing tools previously available to only the largest institutional investors.

Join Us at XYPN16 for the FinTech Competition!

The FinTech Competition will be hosted at XYPN16 by financial advisor tech guru, Bill Winterberg. Bill is the creator and host of FPPad, and is an undisputed leading source of news, insight, and thought leadership on financial planning technology.

Our competition sponsors will also be in attendance, and we want to give a special thank you and recognition to both Betterment Institutional and TD Ameritrade Institutional for supporting this event. We’re grateful companies like these are as invested as we are in the future of tech innovation in our industry.

You can attend this event yourself when you purchase a pass to XYPN16. The conference takes place from September 18 to 21 in San Diego, California. To learn more and to purchase your pass for just $399, head to


Understanding RIA Custody of Funds or Securities


RIA Custody

If you run your own financial planning firm, you need to understand the compliance rules and regulations around RIA custody. This is even more important for financial advisors running a monthly retainer model in their business, as the lines can easily blur and staying compliant with current rules can pose a challenge if you’re not educated on the topic.

Registered Investment Advisors who have the ability to withdraw funds or take possession of securities — specifically stock certificates — from clients accounts are required to safeguard those assets according to the SEC’s custody rule.

This rule was designed to protect investors and provide safeguards against theft or misappropriation from investment advisors.

Here are a few things you should know about the custody rule to ensure you remain compliant around RIA custody of funds or securities, and maintain the safety of your clients investments.

What Is RIA Custody?

According to the SEC, “custody by investment advisers means holding client funds or securities, directly or indirectly, or having the authority to obtain possession of them.”

This includes any situation where an adviser has access to funds, the ability to sign checks on a client’s behalf, withdraw funds, and even dispose of assets for any purpose outside of authorized trading.

How the SEC’s Custody Rule Affects RIAs

As previously mentioned, the custody rule was put in place to protect clients against theft and/or fraud. As a protective measure, the SEC imposed a number of requirements that registered advisers were expected to follow to avoid any conflicts.

For example, an investment adviser is required to maintain client funds and securities with a “qualified custodian.” The custodians must maintain client funds and securities in a separate account for each client either under that client’s name, or under the name of the adviser acting as agent or trustee for the client.

The investment adviser must also provide the contact information of the qualified custodian, and detail the manner in which funds or securities are maintained. In addition, the firm must keep records for each client account showing deposits and withdrawals.

The custody rule also requires that firms send quarterly or more frequent itemized statements to each client that shows all disbursements for the custodian account, including the amount of advisory fees. Your RIA must notify clients in writing of how the funds are maintained and when accounts are changed.

Finally (and in my opinion, the most burdensome of all of these requirements), is that the advisory firm must arrange an annual unannounced visit from an independent public accountant who must then file a report verifying the amount of client funds and securities in custody.

Since there is a significant increase in your compliance responsibility for those firms that have custody of client funds or securities, it’s critical that you consider these additional items when determining whether or not your firm will have custody.

You can find more information on the Custody of Funds/Securities of Clients by Investment Advisers by visiting the SEC website.

Deducting Fees from Client Accounts

Due to the fact that a part of the definition of custody involves having the authority to obtain client funds, issues of custody arise whenever an RIA is authorized to automatically debit the client’s account for payment of fees.

If the instance of custody is limited only to this process, then most regulators will refer to this as “limited custody.” Firms that have limited custody are often relieved of some of the above mentioned compliance responsibilities.

In order to be protected under the safeguards of limited custody, the RIA firm must:

  • Send a copy of its invoice to the custodian at the same time that it sends the client a copy.
  • Attest that the custodian will send at least quarterly statements to the client showing all disbursements for the account, including the amount of the advisory fee.
  • Make sure that the client will prove written authorization to the firm, permitting them to be paid directly for their accounts held by the custodian.

Let’s evaluate each of these items a bit more closely:

Send copies of invoices to custodians and clients: Many firms have commented on how it is redundant, and operationally inefficient to generate and send invoices when the custodian is already doing so.

But regulators insist that this practice is a requirement. In a regulatory exam, an RIA is often not permitted to transfer responsibility of invoicing to their custodian, nor is the firm permitted to utilize the custodian’s invoices as evidence of having generated their own.

Regulators want to see that the firm is checking behind the custodian. In financial planning engagements that don’t involve a traditional custodian, the bank can be considered the custodian, and the notification to the bank can be made via electronic payment processor (this is still open to regulator interpretation).

Attest that the custodian will send at least quarterly statements to the client: Most custodians understand their responsibility to send statements at least quarterly, so this is rarely an issue for RIA firms.

Make sure that the client will prove written authorization to the firm: This can be completed in numerous ways. Firms can incorporate a check box, initial box, or signature line on their advisory agreement that is specifically designed to capture this authorization.

If the firm intends on relying on documentation provided by a custodian or an electronic payment processor, then the firm should make sure they know exactly what documentation the client will sign, and how that fulfills this part of the regulation.

Finally, as a general best practice, firms should make sure they are familiar with the functionality of any payment systems that are being utilized. Regulators reserve the right to question how payment amounts, and/or terms and conditions may be changed within the system, and whether or not those changes require client authorization.

An electronic payment processing system that allows for changes to these items without client authorization is an immediate red flag, and could cause the firm to unknowingly violate custody regulations.

When you run an RIA, you need to understand and act on these rules around custody of client funds and investments. It can be a tricky issue to resolve, but that doesn’t mean there are no solutions.

The best action to take when you serve as your own CCO? Continue educating yourself, seeking resources, and asking questions. Remember that XY Planning Network provides compliance services, support, and communication for members. If you want additional help and information, consider becoming a member and allow XYPN to help you start, run, and grown your own RIA.


Scott GillAbout the Author: Scott Gill is the Director of Keeping Us Compliant here at XY Planning Network. Outside of the office, Scott enjoys watching sports, exercising, and operating the charitable organization he created upon his father’s passing. You can connect with him on LinkedIn.

RIA Compliance: Updating Language in Your ADV Part 2

RIA Compliance

Inevitably, every firm will be faced with ADV Updates. Inherent in the growth of your business is change, and with those changes come the regulatory obligation to make updates to your ADV Part 2.

Here are a few quick tips to help you confidently navigate what you need to know about RIA compliance and serving as your own CCO.

What Is Form ADV Part 2?

According to the SEC website, “Form ADV Part 2 requires investment advisers to prepare narrative brochures written in plain English that contain information such as the types of advisory services offered, the adviser’s fee schedule, disciplinary information, conflicts of interest, and the educational and business background of management and key advisory personnel of the adviser. The brochure is the primary disclosure document that investment advisers provide to their clients.”

First, let’s break down three critical sections of this definition.

1. Narrative: When we think of a “narrative,” we think of a story or some written account of connected events. This is exactly the approach to take when updating your ADV Part 2.

Regardless of which item you update within the document, make sure that the changes you make connect to the rest of the document to make a coherent picture of how your firm operates.

Write your ADV Part 2 as if you are writing a story about your firm.

2. Plain English: It seems counterintuitive, but many advisers tend to explain things verbally differently than they explain things in writing. Using “Plain English” can help bridge the gap between verbal and written explanations.

The ADV Part 2 should center around the use of proper grammar, without slang or colloquialisms. Focus on turning your conversational tone into plain English for the purposes of drafting or updating this document.

3. Disclosure Document: A major part of the regulatory scrutiny surrounding ADV Part 2 documents is the level of disclosure. With this document, the more detailed the firm is regarding the information input in each Item, the more effective the document from a regulatory perspective.

When disclosing information about items such as fees or services offered, ask yourself, “If I were a prospective client of my firm, what questions would I have for the adviser before I sign the advisory agreement?”

Then, simply answer those questions along the way as you update the document.

Incorporating Language into Existing Documents

Incorporating new language into an existing ADV is a common requirement with RIA compliance. For instance, if you change or add a custodian or recommended broker dealer, you may be required to update your ADV Part 2 to reflect that change.

In this case, the most important thing to remember is to maintain the integrity of the document. Adding something to your ADV Part 2 doesn’t mean you have to delete something else that is already in the document.

If you are still using the previous custodian, and you are adding an additional custodian, then there is no reason to remove language from the previous custodian. The same is true if you are adding a third party asset manager.

Just add the new language and review the entire document to make sure that it reads coherently (remember the “narrative” part from the section above).

Updating Language Pertaining to Fees

In some cases, you may need to update language in relation to a change in fees. It’s easy to update the numerical amount, but it’s a bit more challenging to update other fee-related items, such as termination and refund clauses, or methods of payment.

When doing so, simply be as descriptive as possible.Try to cover all possible scenarios in your verbiage.

Please note that you will need to update your Advisory or Financial Planning Contracts along with any changes to Fees and Compensation on your ADV.

Stay Calm and Keep Compliant

The last thing to address when you update the language in your ADV Part 2 — and perhaps the most important thing — is the psychological aspect of this process.

For many of us, just looking at long and detailed regulatory documents is stressful. As a result, we immediately begin to doubt our abilities to draft or make updates to the document.

Don’t allow yourself to be defeated by an unsubstantiated lack of confidence. Before beginning the process, take a deep breath and say, “I CAN DO THIS.”

It may sound silly, but half of the battle in updating this type of document, is diving in head first and working through it confidently. Good Luck!


Scott GillAbout the Author: Scott Gill is the Director of Keeping Us Compliant here at XY Planning Network. Outside of the office, Scott enjoys watching sports, exercising, and operating the charitable organization he created upon his father’s passing. You can connect with him on LinkedIn.