Simply stated, a hybrid advisor is an investment adviser representative (IAR) registered with both a registered investment adviser (RIA) and a broker-dealer. This allows the advisor to maintain a commission- and fee-based practice, or what’s known as a hybrid practice.

• Ability to offer clients both commission- and fee-based products
• Outsource RIA compliance to the broker-dealer
• Leverage the broker-dealer’s infrastructure and support
• Maintain their independence

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

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.

According to the Rydex Advisor Benchmarking study, the average hybrid RIA practice makes about $30,000 more per year than the average 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 broker-dealer’s lineup of commission-based alternatives, which clients can use.

To form an RIA, the cost can range from $5,000 – $10,000, depending on whether you use a consultant. This however, does not include the time needed to smoothly run the RIA. There will be intangible costs that include 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.

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.

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

Your broker-dealer should be able to service your particular business model based on where you decide to custody your clients’ assets. You should speak with other advisors that are dually registered at that firm to make sure they support those advisors and do not try to influence them to pick their RIA platforms. Lastly, make sure the broker-dealer will be able to supervise your RIA business on the custodial platform that you choose.