Growth of a Hybrid Registered Investment Advisor

Growth of a Hybrid Registered Investment Advisor

Growth of a Hybrid Registered Investment Advisor

Published February 14, 2018

I can recall the days 10 years ago when there was much noise about the hybrid advisor being a stepping stone for an independent advisor on his or her path to complete independence (i.e.: dropping FINRA licenses and doing fee-only business). Simultaneously, insurance firms were launching broker-dealers to try to push their agents to conduct more advisory and brokerage business, the wirehouse firms were developing fee platforms as their headcount and assets continued to drop, and custodians were touting the benefits of fee-only advice and supporting firms like NAPFA.

For independent financial advisors who were conducting both brokerage and advisory business, the hybrid model seemed like a nice place to stay until a further destination was determined. The hybrid channel opened new possibilities for designing the client offer. There were different options for compliance management. And, with respect to overall economics, different hybrid choices offered different cost and revenue structures.

RIA Historical Growth

But there were naysayers with regard to the hybrid model’s longevity. Even though from 2004 to 2009, net headcount at dually registered hybrid firms grew at a compound annual growth rate (CAGR) of 14.7 percent, nearly three times that of RIA-only firms, which grew at a CAGR of 5 percent. During the same period, headcount in nearly all broker-dealer (BD) channels experienced flat to negative growth. Also, during the same period, both dually registered and RIA-only firms experienced strong asset growth of 9.5 percent and 8.3 percent CAGR, respectively.* But according to Cerulli’s predictions at that time, the theory was that most would sidestep the hybrid channel altogether, choosing the fully independent advisory RIA model.

It’s been over a decade since that research was reported and as a hybrid RIA, we can confidently say, we see the growth trajectory continuing. Private Advisor Group has grown at an astonishing pace largely due to recognizing the needs of independent advisors who wish to serve their clients in a multitude of capacities leveraging a variety of products and solutions. Our job is to provide advisors with the greatest support we can while allowing them to thrive in a brokerage or advisory capacity.

A recent story in Financial Planning Magazine sums up our historic growth and our value proposition. Read the article and call us if you think we can be of service to you and your clients.

*Cerulli Quantitative Update: Advisor Metrics 2010. Cerulli Associates, 2010.