Dually-Registered Advisors: Opportunity Knocks

Is dual registration a viable long-term practice strategy to bridge the gap between the commission and fee-based models, or just a transitory state before advisors abandon their broker-dealer affiliations? To help answer this question, Pershing LLC commissioned Moss Adams LLP to investigate whether dually-registered advisors have demonstrated a viable business and operational "hybrid" model that broker-dealers can use to build fee-based businesses.

Dually-Registered Advisors: Opportunity Knocks presents the findings of this research.

The study provides benchmarks and analyses based upon the special characteristics of these dually-registered advisory firms; suggests ideas about how advisors may employ the hybrid model as a long-term strategy; and reveals how broker-dealers can serve this market.

To order the full report, Dually-Registered Advisors: Opportunity Knocks, please contact Pershing at [phone].

Executive Summary: Bridging the Gap

The investment advisor universe has traditionally been divided cleanly between brokerdealer- affiliated advisors and independent registered investment advisors (RIAs), each representing a different business model. The distinction is no longer as clear. Today, more than 5,000 retail investment advisors defy this conventional "either/or" classification. Instead, these firms successfully employ a strategy that combines commission- and fee-based platforms. Acceptance is growing for this "hybrid model", where firms are dually registered with the National Association of Securities Dealers (NASD) and the Securities and Exchange Commission (SEC).

For many such firms, the hybrid model is not simply a stepping stone from broker-dealer-affiliated advisor to independent registered investment advisor, but rather a deliberate long-term business strategy and an important part of the firm's identity. Through dual registration, these firms have created a rich and flexible environment of investment products, technology, pricing, and operational support.

Lessons for advisors and broker-dealers

Dually-Registered Advisors: Opportunity Knocks challenges the conventional wisdom that advisors must choose one traditional model or the other to grow successful practices, defines the hybrid market, and highlights opportunities for both advisors and supporting broker-dealers. The report offers:

* Dually-registered advisors, or those considering dual registration:

- Insight into the special characteristics of the hybrid model, its strategic advantages, operational requirements, and economics

- Affirmation that a firm's current regulatory affiliation does not necessarily determine its identity or client offerings

- Guidance for making regulatory affiliation decisions that best reflect the advisor's strategy

* Broker-dealers:

- Information about the significance...