Executive Recruiting
The Advantages of the “Hybrid” Model
(No, we’re not talking cars, but rather, Dually-Registered)
By Mitch Vigeveno, CEO Turning Point, Inc.
February, 2010
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 FINRA and the SEC (and all the supervisory issues that those agencies entail). 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. In fact, not doing commission business in the first year or two after they “break away” from a wire house could be a substantial financial mistake. Why not keep ALL the tools in your bad?
According to a recent Investment News interview with Mark Tibergian, CEO of Pershing Advisor Solutions, “there are currently 23,000 RIA firms, with many of them equal in size to small or midsize broker-dealers.” Additionally it estimates that about 2,000 brokers leave to set up RIAs each year. Fidelity Investments has helped a record 185 brokers leave wire houses and join RIA’s and independent broker-dealers in 2009 (vs. 105 in 2008).
Furthermore, according to a 2007 Moss Adams study “Uncharted Waters: Navigating the Forces Shaping the Advisory Industry,” assets under management for the average SEC-registered investment adviser are expected to grow 256% by the end of 2012 and was an early notice to RIAs to manage their growth effectively.
So what is it that makes the hybrid so appealing?
1) CHOICE. By dually registering, advisors have a more flexible menu of options to show their clients at the financial planning table. They have more flexibility to choose what products, services and fees are the best for their clients. This also allows them to work with younger 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.
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 of both platforms and integrating them successfully, you can increase your efficiency and have more time for your clients.
4) COMPLIANCE. Dual registration allows financial planning to be viewed separately from brokerage activities. Many broker-dealers in this space are willing to take on the additional compliance oversight for a reasonable fee and will help make you a successful fee-based advisor.
So, is becoming dually-registered the right move for you? You’ll have to make that decision based on your own situation. 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. 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.
©Turning Point Inc, All Rights Reserved
About the author:
Mitch Vigeveno is the founder of Turning Point, Inc., a privately held recruiting and executive search firm that was founded in 1994 to provide quality, independent recruiting, executive search and consulting services to the financial services industry. Mitch has experience on both the insurance and securities sides of the business. He has been a life insurance agent and built a general agency for a mutual insurance company. Mitch has been a regional vice president for a company providing support services and products to broker-dealers. Prior to founding Turning Point, Inc. he was vice president of branch development for a major national independent broker-dealer. Mitch is frequently interviewed and quoted in a variety of industry periodicals such as Registered Representative, On Wall Street and Investment Advisor Magazine, and Investment News. Mitch can be reached at 727-725-8876 or at mitch@tpisearch.com. Company website: www.tpisearch.com.