March 02, 2011

BNY Mellon's Pershing Unit Study Advises Broker-Dealers to Embrace Hybrid Platforms to Capture Growth of Dually-Registered Advisors

JERSEY CITY, N.J., March 2, 2011 — Pershing LLC, a BNY Mellon company, announced today the availability of an independent study, The Economics of Constructing a Hybrid Platform, that provides broker-dealers with an analysis of investment professional trends and describes the need to support dually registered advisors' shifting capabilities toward a hybrid platform.  The study offers a road map to understanding the economics and creating a tactical plan for developing a hybrid platform.  A hybrid platform accommodates dually registered advisors by offering them the ability to integrate fee-based and commission-based business.

The Economics of Constructing a Hybrid Platform, developed with Advisor Growth Strategies, LLC, details the opportunity created by the ongoing shift among investment professionals and independent broker-dealers toward fee-based business.  The study advises broker-dealers to develop a strategic plan to incorporate fee-based business and includes case studies of three broker-dealers—American Portfolios Financial Services, Summit Brokerage Services, Inc. and Capital Analysts Incorporated—to illustrate different and successful approaches to launching a hybrid solution.  The study also warns that independent broker-dealers who choose to ignore the trend towards advisory and hybrid models may see their growth marginalized.

Key findings from the study include:

  • Broker-dealers need to develop plans that suit their specific firms – The hybrid model offers broker-dealers and investment professionals the opportunity to mutually benefit from additional revenue sources created by a holistic approach to wealth management that leverages solutions from both sides of the business.  Firms must understand the needs of the investment professionals they want to service in the future and develop a unique value proposition to attract and retain their business.  Broker-dealers who do not carefully evaluate the hybrid opportunity run the risk of being at a competitive and economic disadvantage.
  • Compliance oversight must be factored into selection of a hybrid model – Broker-dealers have oversight responsibility for the actions of an independent RIA, even though they do not sponsor an advisory program or may not act as a custodian.  By integrating hybrid business into a single technology platform, firms can create efficiencies to more easily manage compliance and simplify oversight.
  • Efficient, integrated technology is critical to the success of a hybrid model – Entrepreneurial investment professionals will likely prefer their own customized technology and regard the broker-dealers' platform as too homogenous.  Broker-dealers need flexible, open architecture technology platforms with powerful capabilities that will be attractive to advisors and enable firms to integrate easily.  A fully integrated platform can lower expenses and create new revenue streams, while simplifying oversight responsibility for all parties.
  • Varying hybrid models impact economics differently – The risk of introducing a different hybrid model may impact revenue streams with limited opportunity to make up the difference without lowering payouts on the commission business.  At minimum, by allowing an investment professional to use his or her own RIA, broker-dealers lose the ability to charge a program fee and may be under pressure to raise payouts on the advisory side of their business since the investment professionals are taking on the responsibility of running their own programs.
  • Hybrid models bring new expense considerations – Revenue is only one side of the equation when thinking through a hybrid platform.  There will be increased compliance costs as the broker-dealer is required to monitor the independent RIA, which likely will not be consistent with the firm's corporate RIA.  Investment professionals with their own RIA may also have their own internal technology, policies and procedures that are inconsistent with the broker-dealer.  As the number of dually-registered advisors grows, an increased expense burden for the broker-dealer can result.

"The Economics of Constructing a Hybrid Platform is the first study to offer broker-dealers an in-depth look at the economics and diverse challenges of implementing a hybrid strategy and provide guidance on how to seize this opportunity," said Jim Roth, managing director of Pershing.  "A growing number of independent broker-dealers have taken proactive measures to transform their businesses to attract the fastest growing segment in advisory services—the hybrid advisor."

"Broker-dealers seeking to explore the hybrid opportunity need to align with service providers who have a deep understanding of the complexities of both fee and commission based business and can work with them to develop plans specific to the broker-dealer's unique business challenges," said Mark Tibergien, CEO of Pershing Advisor Solutions.  "Broker-dealers who develop thoughtful hybrid strategies will improve their ability to recruit investment professionals, and grow and compete in the next decade and beyond."

To download a copy of the study, please visit

Pershing LLC (member FINRA/NYSE/SIPC) is a leading global provider of financial business solutions to more than 1,500 institutional and retail financial organizations and independent registered investment advisors who collectively represent approximately five million active investors.  Located in 21 offices worldwide, Pershing and its affiliates are committed to delivering dependable operational support, robust trading services, flexible technology, an expansive array of investment solutions, practice management support and service excellence.  Pershing is a member of every major U.S. securities exchange and its international affiliates are members of the Deutsche Borse, the Irish Stock Exchange and the London Stock Exchange.  Pershing LLC is a BNY Mellon company.  Additional information is available at

BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 36 countries and serving more than 100 markets.  BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, providing superior asset management and wealth management, asset servicing, issuer services, clearing services and treasury services through a worldwide client-focused team.  It has $25.0 trillion in assets under custody and administration and $1.17 trillion in assets under management, services $12.0 trillion in outstanding debt and processes global payments averaging $1.6 trillion per day.  BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK).  Additional information is available at