XYPN's Kitces and Moore raising money but not looking to cash out

XY Planning Network CEO and co-founder Alan Moore wanted to address the elephant in the room — are he and fellow co-founder Michael Kitces looking to cash out?

The network of more than 1,550 fee-based financial planners hired Raymond James to help raise outside capital, according to an October report by Citywire that led to speculation that Moore and Kitces were ready for an exit. During the opening keynote of the group’s annual XYPN Live conference, which was held in-person this week in Denver and streamed virtually, the co-founders addressed the rumors head-on.

Moore clarified that XYPN is not raising money from Raymond James, but is instead working with the firm’s investment bank to explore fundraising possibilities. Specifically, XYPN has retained the services of Liz Nesvold, whose firm Silver Lane Advisors operated for 12 years as an independent investment bank specializing in RIA deals before joining Raymond James in 2019. 

“I want to be very clear, Michael and Alan are not going anywhere. We are not retiring; we’re not leaving; we’re not selling; we’re not cashing out,” Moore said. “We have not agreed to raise money. We’ve simply begun the process of exploring and understanding what our options are.”

The goal is to raise capital XYPN can spend on marketing its services to both advisors and consumers, build out more proprietary technology and roll out new services to member advisors, he added.

For example, XYPN would like to offer health benefits to its members. Lack of access to affordable health insurance can be one of the biggest barriers for entrepreneurs starting businesses, Moore said, and it’s something he would like to make easier for advisors launching new firms.

“We don’t have something locked in, but it is something we’re working very hard on,” Moore said.

The network is also looking to make it easier for advisors to get started. The average XYPN member traditionally struggled to make much revenue in the first three years of a firm before experiencing a pop in the fourth year, Kitces said. The typical member makes more in their fourth year than they do in the first three years combined.

“That’s just part of the reality of how long it takes to get known, liked and trusted, that people are willing to do business with you,” Kitces said.

However, members that have joined the network more recently are growing faster, which Kitces attributes to improved training programs and more XY planners focusing on niche clients.

XYPN is piloting a program to provide small and solo planning firms with practice management assistance so they can avoid cutting into early growth by hiring additional employees. The virtual assistant program, which will be offered to a handful of members in 2022, will provide client meeting support, email management, administrative marketing support, investment operations and data entry.

Over 50% of XYPN members are looking for this kind of additional support, Moore said. Beyond relieving members from having to hire, the virtual assistant can free up advisors to focus on revenue-generating tasks and achieve better work-life balance, Moore said.

“Can you really remember the last time you turned off work for an entire week?” Moore asked the XYPN audience. “One of the greatest things that the people in this room are missing is the ability to really turn off work. Because a vacation is not really a vacation if you check your email.”

Finally, Moore detailed XYPN’s vision to develop more exclusive technology for members, such as the custom-built member dashboard it launched last year. Going forward, the focus is on integration and building an infrastructure that lets advisors more easily plug in their choice of wealthtech.

Members are overwhelmingly happy with the individual applications they use but are very unhappy with how they all work together, Moore said. To begin, the XY membership portal provides single sign-on access to billing and payment wealthtech AdvicePay (which is also owned by Kitces and Moore), financial planning software RightCapital, compliance provider SmartRIA and the Wealthbox client relationship management (CRM) tool.

But hiring a team able to offer the kind of support and technology XYPN envisions will require some additional funding, he said. Hence turning to Nesvold’s services at Raymond James.

“There are lots of things we want to do, and we will need outside capital,” Moore said. “Building technology is expensive.”