We hear so much today about the battle between wirehouses and RIAs (Registered Investment Advisory firms), often lost in the discussion has been the growth of hybrid wealth managers. Hybrid wealth managers combine a fee-based advisory business with traditional commission-based transactional business. Hybrids enable advisors to tap into an affiliated RIA license as well as keep transactional business through a FINRA-approved brokerage.
In many respects, the hybrid model mirrors the wirehouse world, so logically it is a good potential fit for wirehouse advisors looking to make a move. Advisors who move to a hybrid model/firm don’t have to give-up their transactional business when they go independent. Even if the goal is to eventually stop doing transactional business, the hybrid model certainly eases at least this aspect of the transition. No need to go cold turkey!
While the hybrid model has seemingly not gotten much notice in the news, HighTower Advisors, one of the most successful new firms in the business over the past few years is indeed a hybrid. A recent entrant into this marketplace in Houston, U.S. Capital Advisors, was founded by a former wirehouse branch and complex manager, and the first team recruited was, surprise surprise, from that wirehouse! And other large sponsors – such as LPL – have publicly stated that they plan to expand their hybrid businesses.
I expect the growth of hybrids to continue as they are an attractive alternative for many advisors. Wirehouse advisors do have a choice between staying where they are (or moving to a similar firm) and becoming more independent – both from an investment as well as structural point of view. This very viable business model is going to receive more attention moving forward as entrepreneurial advisors realize that there are ways that they can minimize the disruptions that any moves will have on their current business.
