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5 Reasons why the hybrid RIA model may be a bigger deal than ever

Someday all advisors could be hybrid-like under FINRA

Thursday, January 14, 2010 – 6:39 AM by Brooke Southall
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Hybrid tomatoes have their advantages and so do hybrid RIAs

In the process of writing about Schwab’s decision to up its spending on technology that serves hybrid advisors, I began asking around about them. Fidelity, Pershing, LPL and Raymond James executives have been talking about serving dually-registered advisors for years.But had anything really changed that might have piqued Schwab’s interest – other than to try get ahead of all these capable competitors? I found some interesting answers – mostly thanks to Philip Palaveev, president of Fusion Advisor Network.

The idea of being a dually-registered advisor doesn’t suit everyone. After all it means operating under two sets of regulators with separate sets of requirements. Who needs it?

In spite of that drawback, the ranks of the hybrid crowd are growing like crazy and their numbers have never been higher.

Here are five reasons why becoming a hybrid RIA may be more appealing than ever – and why Schwab may be raising its game to serve this need, according to Philip Palaveev, president of Fusion Financial Network of Elmsford, N.Y.


1.) Advisors are walking a much finer line between profitability and unprofitability in their businesses in this economy. In prior years, it might not have seemed like a bad trade-off to drop a brokerage license in the name of cutting red tape. Today advisors believe they need to hold on to every source of revenues.

2.) In the wake of a rough market period, there is massive interest in alternative investments. Many of the funds in these asset classes are only available through commission accounts.

Hybrid growth is apparent from these statistics provided by Cerulli Associates
Hybrid growth is apparent from these
statistics provided by Cerulli Associates

3.) The biggest damage caused by the massive market drop in 2008-2009 was done to senior citizens who lost their nest eggs. As a result, interest in variable annuities has been soaring. “Advisors started scrambling for guaranteed income,” Palaveev says. At his own company, Fusion, Palaveev says that the mix of assets has gone from 70% fees and 30% commissions down to 60% fees and 40% commissions because of interest from advisors in variable annuities.

4.) Depending on what shakes out in Washington, every advisor may end up a hybrid advisor of some kind because of FINRA supervision. “You better be somewhat prepared for that,” Palaveev says.

5.) Hybrid platforms are perfect for recruiting wirehouse advisors. Brokers leaving a Merrill Lynch or Morgan Stanley Smith Barney can keep the best of their old life while gaining the best of their new one by wearing both an RIA and a brokerage hat.

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Mentioned in this article:

LPL Financial
Asset Custodian
Top Executive: Dan Arnold

Raymond James Financial Inc.
Asset Custodian
Top Executive: Bill Van Law

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