Hybrid RIAs serve a unique role in wealth management, combining fee-based advisory services with brokerage capabilities. That structure can help advisors accommodate legacy assets, commission-based business and products that don’t mesh well with a fee-only model.
The broker-dealer (BD) relationship is central to how these firms operate. The quality of that partnership can determine whether the hybrid structure functions as a seamless client-service model or becomes a source of operational and regulatory friction.
As Ed Swenson, President at RFG Advisory, put it, hybrid RIAs can meet “clients wherever they are in their wealth journey. A broker-dealer affiliation provides access to the full product spectrum and supports firms with legacy brokerage business, enabling a gradual shift toward fee-based advice without disrupting the client experience.”
The hybrid model is producing significant growth. Over the past decade, hybrid RIAs have grown their assets under management (AUM) at an annualized rate of 12.2% compared to 10.9% for independent RIAs, according to Cerulli.
“A meaningful partnership between an RIA and its BD creates growth opportunities for advisors and ultimately better outcomes for clients,” said Thomas Goodson, Founder and CEO of The AmeriFlex Group.
Strong Networking And Compliance Complexity
“Independent firms are at one of the most dynamic intersections in wealth management,” said Dale Brown, President and CEO of the Financial Services Institute. “They manage the complexity of advisor choice, client needs, new technology, supervision, flexible affiliations, and an evolving regulatory environment.”
“This makes engaging with peers essential to firm executives,” Brown said. “When leaders share their experiences and insights, they find solutions faster, avoid repeating mistakes, and can better explain industry needs to policymakers.”
Brown also noted that advisors should consider the complex compliance requirements of the hybrid model.
“Hybrid RIAs face the challenges of working within both advisory and brokerage rules,” he said. “The SEC and FINRA are constantly reevaluating their approach to industry oversight, and state regulators remain vigilant in ensuring strong investor protections in their jurisdictions. With evolving technology and client expectations, there’s opportunity for modernization of rules related to cybersecurity, e-delivery, AML, and technology oversight.”
Recruiting Advisors For Hybrid RIAs
Jodi Johnston, Senior Vice President of Business Development at Artisancap, said advisors looking to join hybrid RIAs are usually interested in providing complete, well-rounded services to their clients.
“Hybrid RIAs appeal to advisors who want flexibility to serve clients holistically, combining fee-based advice with commission products like variable annuities or other transactional business,” Johnston said. “The most attracted recruits are typically full-service, multi-product advisors rather than pure fee-only planners.”
Johnston said she recruited an advisor to a hybrid RIA because the advisor didn’t want to leave revenue on the table.
“Recently, I won over an advisor who initially favored an RIA-only model when they realized restricting themselves to a fee-only model meant losing certain client needs to outside reps,” she said. “Once they saw clients taking that business elsewhere, they recognized the hybrid model let them retain the relationship and revenue instead of ceding it.”
What Makes A Successful Hybrid RIA
“A successful hybrid RIA serves the whole client, recognizing that fee-based advice, while powerful, doesn’t fit every account,” said Craig Gould, Chairman and CEO of Binah Capital Group. “Smaller balances, annuities, and legacy positions are often better served on a commission basis. A strong BD partner supplies that capability, so no client is turned away for not fitting one model.”
Said Sander Ressler, Co-Owner and Managing Director of Essential Edge Compliance Outsourcing Services: “A successful hybrid provides services and products that cater to the individual and diverse needs of its clients. The ability to recognize and offer buy and hold vs. active trading; passive investing vs. active; managed accounts and alternative investments provides clients with the widest possible options with the lowest cost to maximize the value of professional services.”
Stronger Compliance Culture
Straddling dual registration may confuse clients, according to Ressler, who said that a unique challenge for hybrids is explaining the “different hats an advisor wears within the same conversation.”
He continued, “Each hat comes with its own special regulatory obligations, but the explanation is often confusing for a client. This confusion undermines the confidence and trust an advisor needs to persuade a client to act on the advisor’s recommendation.”
But Goodson believes working with BDs pushes the entire firm to excel at compliance.
“One of the benefits of partnering closely with a respected broker-dealer is the support it can provide on regulatory, compliance and legal matters,” he said. “We’ve found that a strong working relationship with our broker-dealer helps foster a culture of trust, accountability and a business-minded approach to compliance across both the advisory and brokerage sides of the business.”
Niche Position
Hybrids are “the fastest-growing segment of the wealth market,” Swenson said, citing Cerulli. “Hybrid RIAs have all the product options available to them and their clients within wealth management today and can offer truly holistic planning and product suite capabilities to UHNW (ultra-high net worth) customers.”
Gould said hybrid RIAs offer a way for advisors to best match products and services to the needs of their clients.
“Hybrids refuse dogmatic loyalty to any single model, staying open to whatever best serves the client,” he said. “Many investments simply can’t be actively managed or fairly billed on a fee. There’s also a growth edge: fee-only firms limit recruiting to fee-only advisors, while hybrids can hire the entire pool of dually-licensed producers.”
Wider Range Of Products
Through BDs, advisors gain access to a wider range of products and services, including higher-risk opportunities.
Ressler said that the best opportunities for hybrids are found in their ability to offer insurance products and alternative investments. “Clients are in need of diversification in different ways throughout the scope of their lives.”
Said Gould: “For HNW (high net worth) households, BDs also open access to private markets and alternatives; for business owners, retirement-plan services. Critically, RIA account minimums exclude smaller investors, and the hybrid model lets advisors serve them competently rather than turn them away.”
Ressler said the competition for clients is fierce, so BDs’ ability to offer more choice gives hybrid RIAs a distinct advantage in retaining clients.
“Every time the competition can offer a unique product or service, the current advisor has the potential to lose the client’s relationship,” he said, adding that the ability to offer both BD and RIA services increases client retention.
Thomas Lee, Senior Editor and Staff Writer of Wealth Solutions Report, can be reached at thomas.lee@wealthsolutionsreport.com.
