Hybrid adviser model set to boost US advisory market: Cerulli

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Hybrid adviser model set to boost US advisory market: Cerulli

The ‘hybrid’ financial adviser model has become a viable career path in the US with many new advisers choosing the hybrid independent registered investment advisor (RIA) channel as a midway point to owning and operating an independent RIA autonomously.

Global research and consulting firm, Cerulli Associates, pointed that while the hybrid model was once a stopover to full independence, new data shows that the hybrid RIA channel has claimed its place as a veritable business model.

“The hybrid model is garnering staying power,” said Marina Shtyrkov, research analyst at Cerulli. “Among advisors who switched to the hybrid model in the past one to five years, only 23% would choose to drop their broker/dealer (B/D) affiliation and move fully to the independent RIA channel if they were to switch firms.”

‘Growing segment’
“There is a growing segment of advisors who will remain committed to the hybrid RIA model instead of using it as a stepping stone to the independent RIA channel. The difference between being a hybrid RIA—with the infrastructure and product support of a B/D affiliation—and an independent RIA is greater than it may initially seem. In addition, the appeal of commissionable product access can’t be underestimated, even in a fee-based environment,” Shtyrkov said.

Over the past decade, the hybrid RIA channel more than doubled its control of advisor headcount marketshare, from 4.1% to 8.8%, according to the report, with this advisor migration primarily from wirehouses and independent broker/dealers (IBDs).

Gateway
The hybrid RIA channel is appealing to advisors who see the infrastructure of the model as a gateway to growth, but it is also well positioned to absorb advisors who are either unprepared or unwilling to assume the responsibilities of managing a business in addition to working with clients.

“Advisors seriously evaluating the hybrid RIA model are primarily searching for autonomy with partial infrastructure, product access (commissionable and fee-based products), and growth support,” Cerulli added.

In addition, Cerulli’s latest report found that hybrid RIAs outperform their independent RIA peers in growth rate benchmarks. Across every assets under management segment, hybrid RIAs grew by a stronger five-year compound annual growth rate (CAGR) than their independent RIA counterparts from 2012 to 2017. Hybrid RIAs’ B/D affiliations afford them an advantage over peers in the independent RIA channel that lack the same support.

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