[Advisor] Best Practices: Annual Billing Alternatives

The AdvicePay platform is perfect for billing one-time invoices or monthly/quarterly/semi-annual recurring fees. However, depending on your Enterprise firm's settings, you may not see annual billing available as a subscription frequency because of current regulations in the industry. 

The reason for this is that when a client pays a retainer fee or more generally makes any prepayment of an advisory fee, there’s always some risk that the advisory firm could actually go out of business before it fully renders its services, creating a risk of loss for the client (of the unearned fee). 

As a result, the SEC requires that a registered investment adviser who receives a prepayment of more than $1,200 in fees more than 6 months in advance must provide an audited balance sheet of the business along with Part 2 of Form ADV, in addition to making further disclosures.

Here is an article by our co-founder Michael Kitces that discusses this rule in further detail: https://www.kitces.com/blog/regulation-of-financial-planning-subscription-and-retainer-fee-for-service/

You can also reference the SEC rule on p. 43 of this document: https://www.sec.gov/rules/final/2010/ia-3060.pdf

To help maintain full compliance and avoid time-intensive audits, we recommend the following as easy alternatives if your Enterprise firm does not permit annual billing:

1. Send out one invoice per year using our one-time invoice option. This requires creating and sending a new bill to clients on an annual basis. The client’s preferred payment information is stored within their client portal if they choose to establish an account during their first payment, so they would not need to enter payment information each time. 

2. Switch clients to semi-annual billing and use our semi-annual subscription frequency to charge planning fees every 6 months. Or, you may wish to bill quarterly -- or even monthly! -- instead. This allows you to fully automate your billing and move away from manual invoicing, resulting in more efficiency for your firm. (And because clients are on auto-pay, they love it for the convenience, too!) 

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