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The RIA Hybrid: Who’s a Fit? Who’s Not?

The RIA Hybrid: Who’s a Fit? Who’s Not?

Under the RIA hybrid model, a financial advisor is affiliated with a broker-dealer for their commissionable business and conducts fee-based business through an outside RIA. Maintaining a broker-dealer affiliation allows advisors to provide clients with commissionable products such as mutual funds, variable annuities, stocks and bonds.

As a part of an RIA hybrid, advisors can offer a variety of asset classes to meet the specific needs of individual clients who want a tailored plan or have complex financial needs.

Independent broker-dealers are the first to embrace the hybrid model, permitting their financial advisors to own their own RIA. The broker-dealer affiliation also allows the advisor to retain their series 6 or 7 securities licenses, among others.

Advisors anecdotally share the following benefits for transitioning into the RIA hybrid model.

  • I can become my clients’ one-stop-shop for investment products and advice.
  • I can provide high-wealth clients with customized investment strategies and attract clients from a diverse group of income classes.
  • I can leverage access to multiple custodian relationships.
  • I can provide aging clients with in-depth investment advice and customized strategies for their unique portfolios and goals.
  • I can offer alternative investments and insurance products.

Although the RIA hybrid platform is growing, it is clearly not an appropriate fit for every advisor.

Who shouldn’t consider practicing under the hybrid platform?

Advisors with the following concerns would not fit the ideal profile of a successful hybrid practitioner:

  • Finds juggling two regulating bodies and the overriding compliance issues not worth the time or effort which could be better spent prospecting for new clients
  • Does not want to spend time dealing with the on-going challenge of separate custodian and clearing firm relationships
  • Current product availability and services satisfies the overall majority of the advisor’s client base
  • Lacks the desire to own a business and all ownership entails
  • Present commission business represents the overall majority of the assets and revenue and is not expected to change in the future
  • Prefers to specialize in singular product or niche area

The bottom line: Think it through. Do your research.

Making a change for the sake of change is expensive and is much more than replacing the awning over the door.

TAGS: Careers
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