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What is a Hybrid RIA?

What Does Hybrid Mean?

These days both investors and advisors have options when choosing who to align with.

One of those options being a Hybrid RIA (Registered Investment Advisor), which means adopting a dual approach to compensation and services. Working with a Hybrid RIA combines the best of both worlds for clients and advisors. It means that the client gets the personalized attention and tailored advice of a fee-based advisor, ensuring their interests come first. At the same time providing access to a broader range of financial products and services, including those that may involve commissions.

This hybrid model provides greater flexibility in serving both the advisors’, and more importantly, the clients' diverse needs and preferences allowing both client and advisor to choose the most suitable options for each client’s unique financial goals, creating a well-rounded approach to financial planning.

Broker-Dealer

A broker-dealer is a financial entity (wirehouse, bank, regional or independent firm) that engages in buying and selling securities on behalf of clients, often providing investment advice and services while earning commissions or fees for transactions.

RIA

An RIA (Registered Investment Advisor) is a financial professional or firm that provides personalized investment advice and financial planning services to clients, solely under a fee-based or fee-only compensation structure.

Hybrid RIA

A Hybrid RIA model combines both the capabilities of an RIA and a Broker/Dealer relationship, providing the advisor full control of their fee-based, fiduciary business through the RIA, without restricting their ability to sell commission-based products through a Broker/Dealer.

Hybrid Advisor

  A Hybrid Advisor is a person who is a representative of both a Registered Investment Advisor (RIA) entity and a Broker/Dealer (BD). A Hybrid Advisor can provide commission services through a Broker/Dealer as well as leverage an RIA or establish a Hybrid RIA firm that they own, brand and operate for all their fee-based business.

Why Work With a Hybrid Advisor?

The financial services landscape is constantly evolving. As the industry evolves, so must the advisor. Hybrid advisors or “dually registered advisors” operate as investment advisor representatives, typically charging fees for some clients, and as securities brokers, typically charging commission for others.

In 2016, the Department of Labor became focused on drafting legislation to require advisors to act in the best interest of their clients. However, Registered Investment Advisors have long had a fiduciary duty to always act in the best interests of their clients. 

WHAT ARE THE BENEFITS TO YOU, THE CLIENT?

 Streamlined Convenience

Clients can consolidate all their financial needs under the guidance of a single advisor, eliminating the necessity to engage with separate broker-dealers and RIAs. This unified approach allows comprehensive management of their individualized financial plan from the advisor that knows their financial situation best.

 Tailored Personal Service

Hybrid advisors possess enhanced flexibility in customizing product options to align precisely with a client's individual requirements. Freed from the constraints of an overarching firm's policies, they can provide clients with an extensive array of product options, ensuring a personalized and unbiased approach to meet their unique needs.

Cerulli Associates (a financial services research firm) projects the Hybrid RIA channel to control nearly one-third (31.2%) of intermediary asset market share by 2027, up from the 16.8% in 2007 and the 26.7% they controlled as of 2022.

Every client is different. As such, a client's advisor requires the flexibility to provide the products and services necessary to help them work towards their financial planning goals and objectives. Flexibility is key. Choosing a hybrid RIA advisor offers a unique blend of benefits, combining the comprehensive services of both commission-based and fee-based models. This flexibility allows for a personalized approach to financial planning, tailored to individual goals. Hybrid advisors provide fee transparency and strive to reduce conflicts of interest and foster trust. With access to a diverse range of investment products and integrated technology platforms, working with a hybrid RIA advisor can increase efficiency, transparency and a trustworthy approach to approaching financial success.

Investors

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Advisors

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