Raymond Heidel is one of those rare dually registered advisors.

In one of its recent Web-cast events dubbed the Strategy Forum, Cerulli Associates Inc., the Boston-based research and consulting firm, discussed independent advisory channels, noting that 23% of all independents are RIAs, 74% are reps of independent broker-dealers, and 3% are dually-registered advisors. Dual registration is a foreign concept to most advisors. Why would anyone want to be dually registered and have to comply with the regulations of their state or the SEC as well as the NASD? Isn't one regulator enough?

Raymond Heidel is one of those rare "3%" who can answer this question. Heidel has his own RIA-Five Rivers Financial Advisors in North East, Md.-registered with the state of Maryland's Securities Division. He's also a branch manager and representative of The Investment Center Inc., a New Jersey-based broker-dealer.

The journey that led Heidel to this business model explains why he went in two directions. After working for 25 years in the finance and accounting department of a large corporation and performing family office functions for his own family's money, Heidel incorporated Five Rivers in 1997. At that time, Five Rivers was solely an independent RIA, and Heidel did most of his clients' investment business through the brokerage arm of a major no-load mutual fund company.

"As I grew and took on more clients," says Heidel, "I realized the fund company wasn't providing any of the needed services. It was just a relationship where I brought them money and they sent out monthly statements to clients that didn't even include the necessary return information. I knew then I needed more back-office support."

This was the turning point, when Heidel veered off in the direction opposite to what most other independent RIAs would have taken. He looked at all of the various back-office tasks required of a serious planner providing a comprehensive wealth management service and reasoned that he could get those services less expensively from a broker-dealer than by hiring his own employees and installing his own systems. In other words, he viewed the broker-dealer relationship as a means of outsourcing portfolio reporting (including AIMR return calculations), back-office support (billing, opening and servicing accounts), obtaining group rates on errors and omissions insurance, and other costly functions. As a rep of his broker-dealer's RIA, Heidel leaves just 10% of his fees with his brokerage in exchange for all of these services.

Why, then, maintain the independent RIA status? Most advisors who want these broker-dealer services and want to do financial planning would do everything through their broker-dealer. The problems with that, Heidel discovered, were that his broker-dealer would get 10% of his initial planning fee, which it doesn't presently, and it would be "signing" the planning contract above his name, characterizing him as an investment advisor representative of the broker-dealer. "I want only my name and the Five Rivers name on my contracts," says Heidel, "because having The Investment Center's name prominently displayed would imply I provide a less-comprehensive service than I actually do."

He might also be restricted in his choice of planning software. "My BD does research and recommends various software packages for me to choose from," Heidel says. While that's not as confining as the simplistic, modular packages many wirehouses require their advisors to use, Heidel still wouldn't have the pick of the software universe. With his independence, he chooses to use EISI's NaviPlan Extended for which his own RIA pays a $1,250 annual licensing fee.

Advisors might also question why anyone who's already started in business as an independent RIA would want to jeopardize his fee-only status, and the objectivity that implies to clients, by taking what many would consider a step backwards to BD status. But those same advisors might be more inclined to view this decision from a philosophical, rather than a cost-benefit, standpoint. To Heidel, the availability of all of his broker-dealer's services for only 10% of his gross is extremely attractive.

So how does Heidel justify his broker-dealer affiliation to a prospect who might be looking for a purely fee-only relationship? He passes on his firm belief that The Investment Center is the best broker-dealer he could have chosen. He explains that he interviewed many broker-dealers before selecting The Investment Center. And he presents a fee structure that is easy for the client to understand, with very little incentive for Heidel to sell any particular product to his client.

Suppose a new client walks through the door to have a financial plan prepared and to engage Five Rivers in an ongoing, financial planning and wealth management relationship? Heidel will charge him a flat $600 for the plan he prepares with Naviplan. To some, that low fee smacks of the loss-leader come-on that many reps use to engage a new client in more lucrative business. But, Heidel explains, "The low fee is demographically driven. I live in a small town, it's very much a senior area, and I've even had people balk at $600."