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XYPN co-founder Alan Moore RIA news XYPN Sapphire
XYPN co-founder Alan Moore

XYPN Launches Corporate RIA With Six Inaugural Advisors

Alan Moore says XYPN’s new corporate RIA ‘Sapphire’ will be easy to join, and easy to leave. “I never wanted to build a platform that used handcuffs and scare tactics to keep people.”

XY Planning Network, the now 10-year-old professional network for fee-only financial planners, has launched its own corporate RIA.

The RIA is built for advisors who don’t want to run their own firm, hire staff, or deal with compliance and multiple state registrations, according to XYPN executives.

XYPN co-founders Alan Moore and Michael Kitces floated the possibility of creating a corporate platform at the organization’s fall conference; a brochure for “XYPN Sapphire” was added to its Form ADV on Feb. 1.

A month later, six advisors have joined the pilot version of the firm.

“I think this is a good natural progression,” said Cerulli Associates Senior Analyst Stephen Caruso. “I think it's going to be something that extols the benefits of fee-only financial planning and helps folks that want to be aligned with that mission and vision and gives them access to the resources they'll need to grow in that manner.”

Sapphire is a fully owned subsidiary of XY Planning Network, a membership-based technology and resources provider suited for young practices likely to fly under the radar of large industry platforms. Launched in April 2014, XYPN had grown to nearly 700 members by early 2018 and today includes some 1,800 members, most of whom are solo practitioners.

Moore recently spoke with about the launch, and whether current XYPN members could see it as competition.

The following conversation has been edited for brevity and clarity.

WM: What prompted the launch of Sapphire?

AM: I would say the final straw was when we started getting emails from registered advisors in Washington who were being told they could no longer use Pontera because it was triggering a state ethics regulation. (Edit note: Washington securities regulators have said state-registered advisors using Pontera to manage clients’ 401(k) assets may violate rules around workplace retirement plan user agreements.)

But it's been years of things leading up to this. Our director of compliance was probably asking about it every six months, and I kept telling him it wasn’t the right time. So, when I finally called him and said I might be ready, he pulled up a Google doc that he’s had open on his browser since 2021. He had put a ton of time and energy and thought into what this needed to look like for our members, where the pain points were, and what we could help them solve.

WM: How does Sapphire help advisors wanting to use Pontera?

AM: The beauty of the corporate RIA is we're SEC-registered.

Pontera in Washington is a very minute example, but we’re seeing more and more variation between the states in terms of what they will allow advisors to do and what they will not. They used to be more uniform but are becoming very fragmented, and that creates a lot of challenges for state-registered advisors with clients in multiple states.  

Some state regulators have told our members it would be better to have ADVs in each state, and that's like running multiple businesses in one. That's a mess.

For the advisors who want to continue to stay state-registered, they'll have that option. But the corporate RIA is SEC-registered, which means one consistent set of rules. We may not agree with every rule, but it's consistent.

WM: Tell me about your pricing structure and value proposition. How is that going to differ from your membership network?

AM: With membership, we charge a flat fee of just over $500 a month. And then, there's additional services that they can add on, like compliance, coaching, our TAMP or bookkeeping. With the corporate RIA, we tried to take an all-in approach.

I got a fee sheet from another corporate RIA when we were evaluating fee models, and it was like 12 pages of fees. It was intense; it was like they were going to bill you if they needed to print something for you.

We wanted more of a bundled solution.

We still have a monthly platform fee of $1,500. That covers all the technology costs, the additional compliance, a built-in TAMP and all those sorts of things that allow them to offload the responsibilities of running the business. And then we charge 20% of their revenue on investment management, financial planning or anything they are running through our RIA.

Most corporate RIAs charge basis points or a percentage of assets, and we found that put us in conflict with some of our members who want to charge a flat fee. So, the overall fee structure is $1,500 a month plus 20% of revenue.

WM: How did have to rethink your technology stack to support a corporate RIA?

AM: We evaluated all the tech out there in the space and did a lot of research. We leveraged a lot of the technology research on what systems our firms are using and actually like, and then we had to think about things like whether we really wanted to force a CRM migration for every advisor who signs up. Probably not. 

We already had a lot of existing relationships with our third parties, like RightCapital and eMoney and Orion, that we were able to extend. We were also able to bring on some new partners that we hadn’t been able to make work for our previous business model. For example, isn’t really something you would need as a solo but is very useful for the document management needed as a corporate RIA.

It's also meant to be easy to join and easy to leave. This has been part of our philosophy from day one; I never wanted to build a platform that used handcuffs and scare tactics to keep people. We don't need to do forgivable notes and five-year contracts and threaten you with who owns your client list and all these things. There’s enough of that in this industry.

By aligning our tech stack with what we call XYPN Emerald, which is our continuing premium membership model, nothing will change about that. We want to make it easy for someone to decide the corporate RIA isn’t for them and transition to their own RIA. We have that platform. We can help them get registered and move their data and systems over at any time.

WM: What kind of response have you gotten from your members?

AM: Initially, I got a lot of advisors telling me this is what they were looking for when they joined us two or three or four years ago. Some are now in a position where they don’t need it, and others maybe haven’t grown to where they’re hitting some of those pain points.

We’ve already had over 70 advisors submit an interest form. I’ve probably talked to just over 40, and only a couple weren’t a good fit for this kind of service. The vast majority are experiencing some of the same issues with compliance, oversight and those kinds of headaches that drive people to join a corporate RIA.

Being audited seems to be a trigger for reaching out for help from a corporate RIA. One of the first advisors I talked to is registered in three states and got audited by all three states in the same year, which can happen.

WM: Are you seeing more interest from any demographic? You have a pretty young community of advisors.

AM: The median age of an XYPN member is about 42 years old. They very much sit at the intersection of Gen X and Gen Y.

There are probably two buckets. The smaller one, probably less than 20% of the advisors I’ve talked to, are just launching and don’t want to run their own firm; they want us to help them from day one.

The other 80% are folks who have established practices and client lists and/or existing RIAs that want to be able to partner with a platform. Generally, these are advisors who want to stay solo. They don't want to manage people; they don't want to hire staff; but they're hitting some capacity constraints where they're doing a lot of administrative work they don't want to be doing. They’re looking for that support to be able to stay solo but still scale their business. We’re finding that's really the sweet spot for what we’re offering.

WM: Where exactly are you in the process?

AM: We’ve been onboarding our first wave of advisors. I’m not ready to share names yet, but we have six initial advisors who have signed on. Two are brand new—they're still in the registration phase. Another advisor already had clients he’s trying to bring over from a prior firm. Two others are around $50 million in AUM and 50-75 clients. Three needed an RIA, and three already had one. We’re in the process of transferring about $100 million in total assets over to our relationship with Schwab and getting them set up on the technology, and then we want to take it slow.

We want to grow as fast as we feel like we can and still support that growth. But when you have an ecosystem as large as ours, you don't have to move a large percentage for it to be very successful. All six were already members.

WM: Do you expect to see more movement from XYPN to Sapphire, or do you think Sapphire might become a launchpad for new advisors?

AM: Initially, we have enough demand inside the membership—even just 5% would be 100 advisors. We want to serve those members first to be sure we’re able to support them and what they’re trying to do.

Second, we have a couple of members who leave each month because they just really don’t enjoy running a business, and we see this as a way to retain some of those advisors.

The third group is going to be those advisors who call us up today already thinking we’re a corporate RIA. There’s a huge market of advisors looking for a platform.

WM: How are you thinking about equity ownership and affiliation models?

AM: It’s something we tossed around. Ultimately, all of our XYPN team members are owners through an ESOP program that owns a portion of the company. We make contributions to that annually in the form of stock.

Sapphire is a wholly owned subsidiary of XYPN and a separate, SEC-registered entity. Because of that, having a separate ownership structure, a separate cap table at that level versus the parent company is challenging at our size and is just more complexity than needed.

And candidly, the advisors still own their own business. They’re not giving up ownership to join us; they're retaining ownership and then leveraging our platform. So, we're not anticipating any type of co-op or shared ownership model but, in the end, it's all about providing the expected service and value for the price we’re charging.

WM: Is there any sense that your members might see Sapphire as competition?

AM: We have no intention of ever having a client-facing presence. We are not out there trying to build the XYPN Sapphire brand to drive leads to our advisors. They will each have their own brand; they’ll have their own website, their own logo, their own name. They will just become a DBA of our firm.

In the 10 years we've been in business, we've never done anything that was competitive to our members and don't intend to start now.

WM: Can dually-registered advisors join Sapphire?

AM: No, we are fee-only. XYPN has been fee-only from day one, and we do not have a broker/dealer affiliation. If they're at a broker/dealer, they are welcome to move over but they can't bring any of their commission trails with them. We can work with them to convert any brokerage over to the RIA side, if that's something they're interested in.

WM: Do you have a growth goal in mind?

AM: We're not out there raising capital; we’re not making promises to investors. It's just me and Michael and the team asking ourselves how far we think this thing can go. If we end the year with 10 advisors, I'll be thrilled. And, if we double or triple that next year and go to 20 or 30, I think that'll be a wildly successful corporate RIA, and we're going to learn a lot to build that foundation.

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