Broker Check

Traditional vs. Independent Hybrid & RIA Models

To achieve your goals, you should consider two main business models – a Hybrid RIA/broker-dealer or an RIA.  What are the other differences between a transactional or product-driven model at a traditional b/d or insurance firm versus independent Hybrid and RIA models?

Payout and Recurring Revenue:  Grid compensation at a b/d might begin as low as 39%, whereas breakaway independent Hybrid or RIA advisors typically earn 90% or more of fees and/or commissions.  Advisors at traditional wirehouse, regional, and insurance firm firms may earn recurring fee-based income, but at a much lower payout rate than breakaway Hybrid or RIA advisors.

Ownership: Hybrid and RIA advisors can monetize the value of their practices and they can create succession plans that they alone control. This is not possible at many traditional firms.

Branding: Hybrid and RIA advisors are free to create and maintain their own brand to foster growth of their practice, whereas the corporate brand is the focus at traditional firms.

Time Management and Scalability:  When advisors reach a particular AUM level they often struggle to grow their practice.  Stagnation may stem from both the wrong business model and a bit of burnout.  Shifting to a new model may greatly affect how you spend your time.  Here is a comparison of how a typical traditional advisor might allocate his/her time, versus a Hybrid advisor, if each managed $100M – $500M in client assets.  Clearly, as a practice grows to this size, many traditional advisors become consumed by administrative and operational chores.  This leaves very little time to provide exceptional client focus while pro-actively growing the practice.

Operations: Marketing, Technology, Compliance.  Administration:  HR, Accounting, Paying Bills.

Investment Management:  Portfolio Construction, Implementation.  Client Service:  Meeting with Clients/Prospects, Case Preparation.

Add and Enhance Relationships: The Hybrid model can help free up your time to build your brand, enhance your client relationships, grow wallet share, and add new clients.   Taking time to enhance existing relationships is especially critical today.  As Baby Boomers age, they are increasingly seeking complex financial planning and advice services.  These services are available in our Hybrid model.

Connect with Family and Trusted Friends:  It is important to invest sufficient time and energy to become a valued resource to a client’s spouse or partner, children, and other financially-connected individuals, including the client’s executor/executrix. Time invested consistently to build these relationships can help ensure that when a client passes on, you will be able to retain the family relationship and some estate assets.

 
 

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