Summit Brokerage Services, Inc. Logo

Hybrid Advisors - Frequently Asked Questions

What is the definition of a Hybrid Advisor?

Simply stated, a Hybrid Advisors is an individual registered with both a registered investment advisor and a broker-dealer. This allows the advisor to maintain a fee - and commission-based practice, or what's known as a "hybrid" practice.

Why would an advisor want to be an IAR?

  • Ability to offer clients both commissions and advisory-based products
  • Outsource RIA compliance to the IBD
  • Leverage the IBD's infrastructure and support
  • Maintain their independence

Why would an advisor want to be a Hybrid RIA?

  • Ability to offer clients both commissions and advisory-based products
  • Complete control over the advisory products they offer their clients
  • Maintain their independence

Is there a trend of wirehouse advisors considering alternative affiliations?

Yes. According to Cerulli Associates, the fastest growing segment of the advisor channel is the Hybrid channel. Conversely, the wirehouse channel is forecasted to continue to shrink over the next several years. As more and more wirehouse brokers see themselves successfully transition to one of these models, we will continue to see the Hybrid space grow.

Is this business model more profitable? Does it help develop a more robust wealth management practice?

According to the Rydex Advisor Benchmarking study, the average hybrid RIA practice makes about $30,000 more per year than the fee-only RIA. Approximately 20-30 percent of the revenue generated by these hybrid RIAs is from commissions. One can conclude that clients are now looking for ways to access non-correlated markets and in the hybrid model, there is access to the IBD's lineup of commission-based alternatives, which clients can use.

What is the cost to starting your own RIA?

To form an RIA, the cost can range between $5,000 - $10,000, depending on if you use a consultant. This however, does not include the time needed to smoothly run the RIA. There will be intangible costs that includes non-client related issues such as: creating ADVs, writing wrap brochures, dealing with outside auditors, developing written supervisory procedures, maintaining a code of ethics, performing continuity planning and hiring a chief compliance officer.

Are there any disadvantages to starting your own RIA?

There are several disadvantages to starting your own RIA, including: the upfront costs to starting the RIA and the ongoing costs to maintain your RIA. In addition, you will not have the luxury of relying on a corporate RIA when handling all the potential issues which arise when dealing directly with the SEC.

If an advisor wants to be dually registered, what broker-dealer would be a good fit?

The advisor should be looking for a IBD that embraces the hybrid RIA relationship and doesn't try to get you to use their RIA platform. Only the advisor knows what's best for their clients not a broker-dealer. In addition, the advisor should look for a IBD that can provide a high level of support from compliance, technology and practice management with a culture which matches your firm's.

What are the challenges with being a Hybrid RIA?

The IBD should be able to service your particular business model based on where you decide to custody your clients' assets. We would ask you to speak with other advisors that are dually registered to make sure they support those advisors and do not try to influence them to pick their RIA platforms. Lastly, make sure the IBD will be able to supervise your RIA business on the custodial platform that you choose.