Kitces and Moore staying true to XYPN's mission a decade after launch

A decade after launching the XY Planning Network, co-founders Michael Kitces and Alan Moore are trying to stay true to its original mission while avoiding becoming victims of their success. Their service, technology and compliance platform for independent, fee-only financial planners has topped 1,900 members. They had hoped to reach about 200 in 10 years, Moore said.

"If I told you I thought we were going to be anywhere close to where we are today 10 years ago I'd be lying," he said in an interview with Financial Planning. "Entrepreneurship is more about luck than skill. We came into the market at the right time."

After 10 years of an average annual membership growth rate of 57% with the firm's compliance team managing 1,000 state-level registered investment advisory firm registrations in the past five years and 1,000 annual Securities and Exchange Commission filings in 2024 alone, the company is still "there for the new startups" after it "got really good at how to start and launch firms," Kitces said. The number of client households with member firms is up to 80,000. 

Regardless, the merits of subscription pricing and other fee alternatives to the industry's traditional 1% of assets as well as serving younger clients and early-career financial advisors remain hallmarks of the firm, he said.

"No one was doing that. We put that model on the map," Kitces said. "You will see in the years to come more ways that we try to support members as they're growing their firms."

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XYPN occupies an influential position in the profession as an important source of fuel to the RIA movement — a channel of the industry that sets records in the number of firms each year. XYPN's advocacy for the fiduciary duty in financial advice and early adoption of anti-harassment policies at conferences highlight how the firm has taken on a larger and different role from RIA aggregators and independent broker-dealers that are also feeding into the movement through recruiting and M&A consolidation. Kitces and Moore don't plan to court private equity financing, and they argue the firm is upholding the principles of independent entrepreneurship amid a fierce debate about the meaning of those words for advisors, even within XY's ranks at times.

Many veteran advisors and wealth management professionals would likely agree with their argument. Despite the fact that there has been "a hockey stick of consultants and firms that can help advisors launch," XYPN enables startup RIAs to get off the ground at a decent cost compared to the expenses of other service providers, according to Carolyn Armitage, a longtime wealth management executive who is the founder of Carolyn Armitage Consulting.

"I love what XYPN has built. I think it fills a terrific void that really helps a new advisor launch an advisory firm with affordable infrastructure and guidance that's really hard to find anywhere else," she said. "That is a fabulous void that they're filling and will probably be a continued need for the industry."

XYPN's base fees for membership work out to be $505 a month — a cost that has risen from its original level of $397 at 3% per year, according to Moore. By the company's calculation, the average annual savings from member benefits amount to $7,824. Like a handful of other firms in wealth management that have shared the exact numbers behind their pitches to advisors, XYPN releases a yearly benchmarking study. The last one revealed that members notched a 20% median growth rate in client relationships during a historically bad year for stocks and bonds in 2022. If the firm can save its nearly 2,000 members about 50 hours each worth of technology demos, that would add up to 100,000 extra hours, Moore noted.

"What we're focused on is, how do we help the folks who want the autonomy of entrepreneurship, but they don't want to do it alone," he said. XYPN is "agnostic about if they want to grow really big or not" he said, noting that the ranks of planners includes "some advisors who are making millions of dollars" and others who have "that solo practice or that boutique practice."

"We built the next generation broker-dealer," he added. "We just stripped out the broker-dealer."

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The services offered by XYPN have expanded alongside the firm over the years. Two years after its launch, the company ramped up compliance services around RIA registration and tax management systems. Moore and Kitces' other venture, payment processing technology firm AdvicePay, started in 2016 as well. In 2018, the firm began providing bookkeeping and recordkeeping solutions. And earlier this year, XYPN launched a corporate RIA called XYPN Sapphire for planners seeking to outsource more administrative and compliance-related tasks. Planners on the corporate RIA can start their own RIA at any time, though.

XYPN's approach contrasts with many brokerages and RIAs that often prove litigious when it comes to the question of advisors switching their affiliations — whether as a W-2 employee or a 1099 independent contractor, Kitces pointed out. He compared the amount of new members of XYPN each year to the level of M&A deals across the industry.

"We alone are creating firms faster than the industry can consolidate them," Kitces said. "You actually do have autonomy. You literally own the entity that comprises the business."

And that holds true in the case of XYPN itself as well. Kitces, Moore and employees participating in a stock ownership program control 98% of the firm's equity, Moore noted. Despite many requests over the years and some exploration of deals for outside capital a few years ago, that won't be changing anytime soon, he said.

"I get 10 emails a week from folks who are looking to have conversations," Moore said. "I don't take any of them."

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They aim to stay "profitable and scalable without having to just go back to the capital pot" at the risk of being "driven away from our core mission" by an outside investor, he added. 

When firms grow faster than their staffing and operational resources, there is a concern that the "service falls off a cliff," Kitces agreed. In addition, the founders see no need for an acquisition binge that often follows a large capital infusion. 

"We have plenty of organic growth, and there's no one good to buy anyways," he said. "XYPN at its core is a service business. The core of what we do is serving and supporting members and creating a positive growth community for them."