Voya Jumps Into The Hybrid RIA Channel

The hybrid registered investment advisory (RIA) business has a new player — Voya Financial Advisors, the independent broker/dealer (BD) of Voya Financial Inc.

The firm announced this week that the BD is launching a hybrid RIA platform for its top-tier advisors, a move that is expected to support the delivery of holistic advice.

Under this hybrid RIA business model, financial advisors can offer advisory-based services and solutions to clients as an independent RIA, while also keeping their traditional BD business and registration with Voya’s BD for commission-based business.

To qualify, the firms must be experienced, sophisticated practices with substantial assets under management, Voya said. In addition, they must have the willingness and ability to build a dual registration model, and have a client base that would benefit from customized investment strategies.

One of the perks is that advisors operating under the hybrid RIA model will have access to a full range of Voya's technology resources, including its platform for managing fee-based business.

Growth of the hybrids

A decade or so ago, hybrid RIAs were seen a type of way station or transition point for financial advisors who wanted to move from commissioned brokerage sales in a wirehouse to a fee-based independent RIA structure.

Likewise, among insurance specialists who also hold securities licenses, the model often was viewed as a transition point as they leveraged their commissioned accounts into a fee-based advisory structure for insurance and securities.

But the hybrid RIA is recognized now as a financial business model in its own right, not just a transition point to independent RIA status. It is increasingly described as well suited for advisors serving customers with continuing needs for both commission- and fee-based services and products.

Hybrid RIAs and independent RIAs are the only two advisory segments that have increased their headcounts since 2008, according to Cerulli Associates.

As of 2013, for example, dual-registered advisors had experienced a 14.4 percent five-year compound annual growth rate, Cerulli said in a first quarter 2015 report. The growth rate for independent RIAs was a bit higher, at 14.5 percent.

“Dually-registered” is Cerulli’s term for hybrid RIAs. It references the fact that the advisors are registered as RIAs with the Securities and Exchange Commission (SEC) or their state securities regulator and also serve as registered representatives of a broker/dealer. By contrast, independent RIAs only register with the SEC or their state securities regulator.

Some advisors view dual registration as too difficult, costly or complicated to pursue. But others see the advantage of being able to work in both environments as well worth the effort.

Advisors are drawn to “the economic advantages and flexibility inherent in these models,” Cerulli commented in its 2015 report.

Among several advantages listed on Voya’s website - in addition to flexibility and practice management support - is the ability to access options, advice and guidance solutions used in holistic, personalized planning. Another advantage is the ability to grow the business by, for example, marketing investment models to other advisors, potentially earning higher revenues, and recruiting other advisors.

Wirehouses and some other advisory channels still outnumber the hybrid channel, and by considerable margin. Some sources estimate their numbers as close to but not yet equal to 10 percent of the total advisory market.

However, Voya has its eye on the “significant” growth that has occurred in the hybrid channel. For instance, between 2004 and 2013, the number of advisors who adopted a hybrid RIA business model grew 21.8 percent annually, Voya said, citing a 2014 Cerulli report.

"We're seeing much greater interest in the hybrid RIA model among advisors," concurred Voya’s Andre Robinson, head of advisory services, in announcing the new platform.

Natural next step

Voya said its BD advisory business grew to $9.92 billion in 2014, up 25 percent from the previous year.

"The introduction of a hybrid RIA platform is a natural next step for us," said Tom Halloran, president of Voya Financial Advisors.

“Giving sophisticated advisors the ability to operate as an independent RIA helps them deliver a broader suite of client services and, ultimately build a more well-rounded practice," he also said.

InsuranceNewsNet Editor-at-Large Linda Koco, MBA, specializes in life insurance, annuities and income planning. Linda can be reached at [email protected].

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Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda can be reached at [email protected].