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Alan Moore Michael Kitces XYPN Live Photo by Samuel Steinberger
XY Planning Network founders Alan Moore (left) and Michael Kitces at the 2019 XYPN Live conference.

XYPN Founders Describe Vendor Negotiations, Pandemic Impact

Michael Kitces and Alan Moore led a wide ranging question-and-answer session addressing the addition of virtual assistants, Schwab's acquisition of TD Ameritrade and the pandemic's impact on membership.

As they concluded the annual XY Planning Network advisor conference last week, XYPN co-founders Michael Kitces and Alan Moore gave advisors a glimpse of what’s ahead for the organization, as well as how major events like the coronavirus pandemic and mega mergers in financial services have affected the group this year. In what’s become an annual tradition, the duo seated themselves (virtually) before XYPN advisors and took questions ranging from new business offerings to how the organization is negotiating agreements with vendors, to the impact of the pandemic on membership levels and turnover.

Intentional Business Offerings

Advisors overwhelmed with paraplanning tasks were happy to hear that the organization is exploring the addition of a virtual assistant offering. But the key factor to consider is how the organization’s head count would change with the addition of a virtual assistant program, said Moore.

If 100 members wanted assistants, it would equate to about 30 assistants and another 10 people to support those assistants. Adding personnel that quickly would grow XYPN by upwards of 80%, he said. “We have to be careful with that—we have to do it right.”

The co-founders are working on a program to transition advisor businesses from one member to another, they said. While one-to-one pairings might be harder to accomplish, it’s more likely that XYPN will develop a program that will allow solo practitioners to sell their businesses to mid- or large-size members, said Kitces. Those transitions might occur because of retirement or even an untimely death.

While less of a service and more of a benefit, the topic of health insurance emerged again at this year’s conference. Once again, it was dismissed. “Some of the startup costs for this are one of those things that have just been prohibitive up until this point,” said Moore.

The organization isn’t large enough, he added. “We’re getting a lot closer, but we aren’t quite there yet,” he said, pointing to the “state-based” nature of health care. “You need a lot of people in each state in order to make it happen.”

Mega Mergers and Vendor Negotiations

Kitces and Moore revisited advisor concerns over the impact of Charles Schwab’s closing on its acquisition of TD Ameritrade. Notably, the duo is not recommending that advisors leap from TD Ameritrade to Schwab prior to the integration of the two firms. Because the switchover is expected to be negative consent, nearly all of XYPN members should stick with the custodian they’re used to working with as the integration proceeds, said Kitces.

Even within the virtual chat function, some advisors were reassuring their fellow members worried about the transition. “Those who might have been with Schwab BEFORE and on TDA now and not Schwab, don’t be scared. They are MUCH better now,” wrote Tara Unverzagt, founder and chief advisor at South Bay Financial Partners, in Torrance, Calif. She has worked in financial services for over 25 years.

“Schwab is absolutely amazing,” added Silvia Manent, founder and managing partner of Manent Capital, in Boston. “The service team is incredible.”

While others echoed that sentiment, some advisors remained skeptical and XYPN indicated it was proceeding with caution. “We are talking to a lot of different platforms out there,” said Kitces, addressing a question on whether XYPN was looking to renegotiate its custodian partnership. “We still think Schwab's actually probably going to be a pretty good solution and we're not looking to get out of it. We're looking to make it work with them.”

“If it doesn't, we have a lot of other phone calls and lines of communication open,” he added.

Schwab isn’t the only firm hearing from the 1,300-member organization. Lisa Asher, managing director of XY Investment Solutions, is in the midst of negotiations with Orion over a portfolio reporting tool for members. By mid-November, Moore expects to have more information about the outcome, but it could mean that Orion isn’t the only option available for members.

“We’re still very supportive of Orion,” said Moore, “but we have been vetting other providers to understand what our options are.”

A fundamental disagreement on business models also came to light during the question-and-answer session. Asked if XYPN would consider adding Riskalyze to the member tech stack if it allowed monthly subscriptions instead of an annual contract, Moore said it would be worth consideration. But he was skeptical that Riskalyze would actually rework its business model.

“My main gripe with them is that they do annual commitments,” said Moore, adding that "I'm just not a big fan” of the cancelation policy around the trial period for the software.

COVID-19 and Its Impact on XYPN

One of the striking attributes in the second quarter of the year was the organization’s lowest-attrition quarter since it was founded in 2014, said Moore. That wasn’t necessarily because no one’s business failed that quarter, but because there wasn’t the usual churn of advisors testing out XYPN for a month or two and then sticking with or leaving the organization.

Overall, the organization has still seen growth this year, albeit slower than its founders would have liked. At the outset of the year, the duo began with about 1,100 members and wanted to hit 1,425 members by the end of the year. But new membership has dipped and will end the year off by an estimated 50 members, said Kitces.

With all the uncertainly of 2020, independence hasn’t seemed as attractive as it may have in the past, added Moore. “When you are thinking about starting a business, it’s like getting out of a warm bed into a cold room. Sometimes it’s necessary and you know you have to do it, but you are in a warm bed.”

“Let’s just say, most of you chose not to launch a business in 2020,” he said. “This was not the year to get out of the warm bed.”

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