The hybrid independent registered investment advisor channel has been viewed as a kind of pit stop for financial advisors transitioning from the mother ship wirehouse or broker-dealer firm to full-fledged independent RIA status. Now it appears the hybrid RIA channel is becoming its own bona fide business model, according to Cerulli Associates.

In its “U.S. RIA Marketplace 2018” report, the Boston-based research and consulting firm said this channel increasingly appeals to advisors who see advantages in straddling the advisory-brokerage divide.

“The hybrid model is garnering staying power,” said Cerulli research analyst Marina Shtyrkov. The report found that among advisors who adopted the hybrid model in the past one to five years, only 23% chose to drop their B-D affiliation and move fully to the independent RIA channel if they switched firms.

Slightly more than half of this advisor migration during the past five years came from the combination of wirehouses (27%) and independent broker-dealers (24%). Insurance and bank B-Ds both accounted for 15%, followed by national/regional B-Ds (12%) and independent RIAs (7%).

The hybrid RIA model has been less sticky among advisors who went that route earlier during the past six to 10 years. Thirty-six percent among that group said they would leave the hybrid model if they switched firms. Nonetheless, Cerulli’s basic conclusion is that the hybrid RIA model has become more than just a transitional phase.

Shtyrkov noted the hybrid RIA channel more than doubled its control of advisor head count market share during the past decade, from 4.1% to 8.8%.

“There is a growing segment of advisors who will remain committed to the hybrid RIA model instead of using it as a stepping stone to the independent RIA channel,” Shtyrkov said. “The difference between being a hybrid RIA—with the infrastructure and product support of a B-D affiliation—and an independent RIA is greater than it may initially seem. In addition, the appeal of commissionable product access can’t be underestimated, even in a fee-based environment.”

Cerulli posits that during an era when the industry is leaning toward financial planning and a fiduciary mind set, many advisors want to evaluate all possible product options and like having the flexibility to include commission-based products in their toolbox.

Certain themes have marked the evolution of the hybrid RIA model. For starters, turnkey technology and back-office support are attracting tuck-in advisors.

“The hybrid RIA model is well positioned to absorb advisors who are either unprepared or unwilling to assume the responsibilities of managing a business in addition to working with clients,” Cerulli said in its report.

Furthermore, continued consolidation will breed national hybrid RIAs.

“A patchwork of small businesses is gradually being offset by larger, multi-office enterprises,” the Cerulli report said. “Given their scale, not only are these billion-dollar firms able to acquire the smaller practices of retiring advisors or struggling mid-sized firms, but in some cases, they are also merging with each other.”