The Advantages of the "Hybrid" Model (No, We're Not Talking Cars)

There has been a recent flurry of discussion in regards to the place for Hybrid, or Dually-Registered Advisors due to the recent publication of a Pershing-sponsored, Moss Adams report on the subject. In short, the Hybrid model is firmly entrenched in the financial planning landscape and is not going anywhere soon. And why should it? For those who implement the model correctly, it can be the best of both worlds.

To be "dually-registered" means to be both registered with the NASD and the SEC (and all the supervisory issues that those agencies entail). According to Kristin French's March 2006 article in Registered Rep magazine, "this hybrid has emerged as a popular, and profitable, model in its own right. As more traditional brokers turn to advisory business, some of them are straying across the line to the RIA side. Many of these brokers still do substantial commission business, however, and would like to keep it up."
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And the numbers don't lie. According to the Moss Adams report, there are 5,612 hybrid firms (RIAs) with $716 billion in assets under management with $6 billion in revenue. Additionally it estimates that about 2,000 brokers leave to set up RIAs each year. So what is it that makes the hybrid so appealing?

1) CHOICE. By dually registering, a broker has more flexible menu of options to show their clients at the financial planning table. They have the freedom to choose what products, services and fees are the best for their clients. This flexibility allows them to work with smaller clients and open the door to cultivate the high net-worth clients of tomorrow.

2) YOUR NAME. You've been investing equity in your business and have been developing your own "brand" amongst your clients and community. The hybrid model can help you more easily establish & maintain your corporate identity and provide a sense of true independence and objectivity to your clients. After all, it's your business, not your broker-dealer's.
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3) SUPPORT. By working with both a custodian and a broker-dealer, you have more choices in your outsourcing services and technology. By using the best both platforms and integrating them successfully, you can increase your efficiency and have more time for your clients.

4) COMPLIANCE. Dual registration allows planning to be viewed separately from brokerage activities, thus reducing your supervisory concerns. Many broker-dealers in this space are willing to take on the additional compliance oversight to help make you a successful advisor.

So, is becoming dually-registered the right move for you? I don't know. Do you want to offer more choices to your clients but still keep your Series 7 license (who wants to take that test again?)? Do you want to invest equity in your business instead of your broker-dealer's? The key to success in this arena is the integration of the two platforms and finding a broker-dealer who knows how to do that well. About 75% of broker-dealers allow some form of dual registration, according to a survey by the Financial Services Institute and some offer more flexibility than others. Other broker-dealers are following suit.
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For more information on whether "going hybrid" or "going independent" is right for you or for help finding a new broker-dealer that is friendly to this hybrid concept, please call Turning Point, Inc. at 727-725-8876 and we will be happy to assist you.

Mitch Vigeveno is the CEO of Turning Point based in Safety Harbor, Florida. He helps brokers and other financial consultants find independent broker dealers that meet their requirements and the needs of their clients. Call Mitch at 727-725-8876 or go to http://www.goingindependent.com and request a copy of his free "Guide to Moving Your Book." Mitch founded Turning Point in 1994 to provide recruiting, executive search, and consulting services to the financial services industry.