# The RIA model: pure RIAs, hybrids and RIAs that own a broker-dealer

URL: https://www.financialadvsr.com/guides/what-is-an-ria
Updated: 2026-10-10
Publisher: Financial ADVSR (https://www.financialadvsr.com)

A registered investment adviser (RIA) is a firm paid to give investment advice, registered with the SEC or the states under the Investment Advisers Act of 1940 and held to a fiduciary duty. RIAs come in several forms. A pure RIA has no broker-dealer relationship and is paid only through advisory fees. A hybrid RIA runs its advisory business through its own RIA while its advisors keep securities licenses with a broker-dealer for commission business, either an outside independent broker-dealer or one the firm owns itself. A corporate RIA is the in-house RIA of a broker-dealer, which its advisors use instead of owning one.

Key points:
- An RIA registers on Form ADV, names a chief compliance officer, keeps client assets with a qualified custodian and owes clients a fiduciary duty of care and loyalty.
- Advisers generally register with the states below $100 million in regulatory assets under management, may register with the SEC from $100 million and must at $110 million.
- A pure RIA has no broker-dealer relationship, so its advisors cannot accept securities commissions; FINRA Rule 2040 bars broker-dealers from paying commissions to unregistered people.
- A hybrid RIA pairs an advisor-run RIA with a broker-dealer for commission business. In the classic form the broker-dealer is a separate, unaffiliated firm; some hybrid firms, such as &Partners, are instead registered as both an RIA and a broker-dealer themselves.
- A corporate RIA belongs to the broker-dealer, not the advisor. Kitces distinguishes an advisor who is dually registered with a broker-dealer and its corporate RIA from a true hybrid advisor who runs a separate, independent RIA.
- Cerulli Associates reported that the independent and hybrid RIA channels together held 27% of industry assets in 2024, up from 21% a decade earlier.

## What is an RIA?

A registered investment adviser is a firm that is paid to give advice about securities and is registered under the Investment Advisers Act of 1940, overseen by the SEC or by state securities regulators depending mainly on its size. Broker-dealers, by contrast, fall under the Securities Exchange Act of 1934 and are also supervised by FINRA, which does not regulate investment advisers in their advisory business.

RIAs are fiduciaries. In a June 2019 interpretation (Release No. IA-5248), the SEC said an adviser's fiduciary obligation includes a duty of care, which requires a reasonable inquiry into the client's objectives and advice that suits them, and a duty of loyalty, which bars the adviser from putting its own interests ahead of the client's and requires full and fair disclosure of conflicts. Broker-dealers recommending securities to retail customers follow Regulation Best Interest instead.

The people who give advice on behalf of an RIA are investment adviser representatives, or IARs, generally licensed by the states. The Series 65, NASAA's Uniform Investment Adviser Law Examination, qualifies a person as an IAR on its own. The Series 66 qualifies a person as both a securities agent and an IAR, with the Series 7, FINRA's general securities representative exam, as a corequisite.

## Does an RIA register with the SEC or the states?

The dividing line is regulatory assets under management (RAUM), reported in Item 5 of Form ADV Part 1A. Under SEC Rule 203A-1, an adviser with less than $100 million in RAUM is generally prohibited from registering with the SEC and registers with the states instead.

The rule builds in a buffer. An adviser with $100 million to under $110 million may register with the SEC but is not required to, an adviser with $110 million or more must, and an SEC-registered adviser does not have to switch to the states unless its RAUM falls below $90 million. Under Rule 203A-2(d), an adviser that would otherwise have to register in 15 or more states may register with the SEC instead.

The Dodd-Frank Act raised the federal threshold from $25 million to $100 million, according to law firm Day Pitney.

## How does an RIA work day to day?

Registration runs through Form ADV, filed electronically on the SEC's Investment Adviser Registration Depository. Part 1 gives regulators structured data about the firm, Part 2A is the plain-English brochure covering services, fees, conflicts and disciplinary history, Part 2B supplements describe individual advisors, and Part 3 is Form CRS, the short relationship summary for retail investors. Every registered adviser must file an annual updating amendment within 90 days after its fiscal year ends.

An RIA that launches with the SEC waits up to 45 days after filing a complete Form ADV, the period the SEC has to grant registration or begin proceedings to deny it. It names its own chief compliance officer and answers to the SEC or the states for its advisory business.

Client money does not sit with the RIA. Under the custody rule, Rule 206(4)-2, an adviser with custody must keep client funds and securities with a qualified custodian, such as a bank or an SEC-registered broker-dealer, and have a reasonable basis to believe the custodian sends statements directly to clients at least quarterly.

Most RIAs are paid an ongoing fee calculated as a percentage of the assets they manage. Investor.gov gives the example of a 1.5% annual fee on a $50,000 account, or $750 a year, and notes the percentage tends to be higher on smaller accounts. Brokers, by contrast, are generally paid a commission on each transaction.

## What are the main types of RIA?

Pure RIA. A pure, or fee-only, RIA has no broker-dealer relationship for its advisors. It cannot accept securities commissions, and any product that pays only a commission is sold elsewhere or not at all. Industry researchers such as Cerulli Associates treat independent RIAs, advisory firms not affiliated with a broker-dealer, as their own channel.

Hybrid RIA with an outside broker-dealer. In the classic hybrid, the advisors own and run their RIA, which files its own Form ADV, while keeping their securities licenses as registered representatives of a separate independent broker-dealer that handles commission business. LPL Financial launched a hybrid RIA platform in 2008, and Cetera lists an advisor-owned hybrid RIA as one of the affiliation models in its RIA services business. The broker-dealer must approve the outside RIA, and some charge an oversight fee on its revenue.

Hybrid firm with its own broker-dealer. Some firms keep both businesses under one roof, so their advisors have a broker-dealer available for commission business without affiliating with an outside one. Investor.gov calls a firm registered both as an investment adviser and as a brokerage firm a dual registrant. &Partners, the St. Louis firm founded in 2023 by former Wells Fargo Advisors CEO David Kowach, is dually registered as a broker-dealer and investment adviser, so its partner teams can run both kinds of business through it. Vanderbilt Financial Group is a brand for two affiliated firms: Vanderbilt Securities, a broker-dealer, and Vanderbilt Advisory Services, an RIA.

Corporate RIA. An independent broker-dealer can run its own RIA, and advisors who affiliate with that broker-dealer often act as investment adviser representatives of it rather than owning their own. The broker-dealer, not the advisor, owns the RIA. InvestmentNews has noted that under a corporate RIA, the corporate RIA usually takes control of the accounts if the advisor dies or becomes disabled, which is one reason some advisors prefer to own their RIA.

Advisors can also join an existing RIA and work under that firm's registration, use a supported-independence platform that supplies operations and technology, or sell their firm to an RIA aggregator. Those routes are covered in our guides to breakaway advisors and RIA aggregators.

## How do pure, hybrid and corporate RIAs compare?

Ownership is the first difference. In a pure RIA or a hybrid, the advisors typically own the RIA, choose its brand and investment platform and often its custodian, and build equity in it. In a corporate RIA, the broker-dealer owns the registration and the advisor is a representative of it. Kitces distinguishes an advisor who is dually registered with a broker-dealer and that broker-dealer's corporate RIA from a true hybrid advisor who keeps a broker-dealer registration for commission business while running a separate, independent RIA.

Supervision is the second. A pure RIA answers only to the SEC or the states. A hybrid answers to two regimes: the RIA for its advisory business and FINRA rules, through the broker-dealer, for brokerage. Under the rules in place as of October 2026, FINRA Rule 3280 has generally required a broker-dealer to supervise and record transactions its registered representatives conduct through an outside RIA, and InvestmentNews reported in 2018 that broker-dealers usually took about 5% of affiliated advisors' RIA revenue for that oversight.

Disclosure is the third. A firm registered as both an adviser and a broker-dealer prepares one combined Form CRS covering both businesses, which may run up to four pages. In a hybrid with an outside broker-dealer, the RIA and the broker-dealer are separate firms, so each prepares and delivers its own relationship summary, each limited to two pages.

Commissions are the last. Products such as variable annuities and commission-share mutual funds can only be sold, and their ongoing trails collected, through a broker-dealer, and FINRA Rule 2040 bars broker-dealers from paying commissions to unregistered people. A hybrid or corporate RIA advisor keeps that business; a pure RIA advisor generally gives it up, although Kitces notes that a fee-only RIA can still be paid on many insurance and annuity products through an insurance license and a brokerage general agency.

## Why do advisors choose one model over another?

Advisors with a large book of commission business, such as variable annuities, often choose a hybrid so they can keep serving and being paid on it while building an advisory business they own. Some use the hybrid as a step toward becoming fully fee-only; others treat it as permanent.

The trade-off is cost and complexity. A hybrid advisor pays for compliance at the RIA and may still pay the broker-dealer for oversight. InvestmentNews has argued that advisors with less than $100 million in assets are often better served by a corporate RIA or an existing hybrid group than by launching their own.

The same person can be paid in two ways under any model that includes a broker-dealer, which is the central conflict regulators watch. An advisor might recommend a commission product rather than an advisory account, or the reverse, and Investor.gov notes that the capacity in which a dually registered professional acts determines both how they are paid and which standard of conduct applies.

## How big is the RIA business?

The Investment Adviser Association's 2026 Investment Adviser Industry Snapshot, produced with COMPLY, counted 16,544 SEC-registered investment advisers in 2025, a record, managing $176.8 trillion in regulatory assets for 73.7 million clients. It found that 92.8% of advisers had 100 or fewer employees. The figures cover only SEC-registered firms, not state-registered advisers.

Dual registration of individuals is common. FINRA's 2026 Industry Snapshot reported that, at the end of 2025, 331,802 individuals were registered both as brokers and as investment adviser representatives, against 307,921 with broker-dealer-only registrations and 94,562 with adviser-only registrations.

Assets are moving toward the RIA channels. Cerulli Associates reported in February 2026 that the independent and hybrid RIA channels together held 27% of industry assets in 2024, up from 21% a decade earlier, and that 71% of advisors say they would choose an independent channel if they switched firms.

## What is changing for hybrid RIAs?

The SEC approved FINRA Rule 3290 (Outside Activities Requirements) on Sept. 15, 2026, according to the approval order published in the Federal Register on Sept. 18. The rule will replace Rules 3270 and 3280 and treat a registered person's work for an unaffiliated SEC- or state-registered adviser as an outside activity rather than an outside securities transaction.

Compliance consultants reviewing the rule, including FiSolve, say broker-dealers will still receive prior notice and assess the activity but will no longer have to supervise it or record its transactions. FINRA said it would announce the effective date in a Regulatory Notice, and Rules 3270 and 3280 remain in force until then. Firms can still set stricter conditions, so how much oversight, and any oversight fee, survives will depend on each broker-dealer.

This guide is general information, not legal or investment advice.

## Questions

**What is an RIA?** A registered investment adviser is a firm paid to give investment advice, registered with the SEC or the states under the Investment Advisers Act of 1940. It owes clients a fiduciary duty of care and loyalty and keeps client assets with a qualified custodian.

**What is the difference between a pure RIA and a hybrid RIA?** A pure RIA has no broker-dealer relationship, so its advisors are paid only through advisory fees and cannot accept securities commissions. A hybrid RIA's advisors also hold securities licenses with a broker-dealer, so they can earn commissions on products such as variable annuities alongside advisory fees.

**Can an RIA have its own broker-dealer?** Yes. A firm can be registered both as an investment adviser and as a broker-dealer, which Investor.gov calls a dual registrant, or run an RIA and a broker-dealer as affiliated firms under one brand. &Partners is dually registered, and Vanderbilt Financial Group is the brand for Vanderbilt Securities, a broker-dealer, and Vanderbilt Advisory Services, an RIA.

**What is a corporate RIA?** A corporate RIA is an RIA owned by a broker-dealer. Advisors who affiliate with the broker-dealer act as its investment adviser representatives instead of owning their own RIA. InvestmentNews has noted that the corporate RIA usually takes control of the accounts if the advisor dies or becomes disabled.

**When does an RIA register with the SEC instead of the states?** Under SEC Rule 203A-1, an adviser generally registers with the states below $100 million in regulatory assets under management, may register with the SEC from $100 million and must at $110 million. An SEC-registered adviser need not switch back to the states unless it falls below $90 million.

**Which exams does an RIA advisor need?** The Series 65 qualifies a person as an investment adviser representative on its own. An advisor who also does commission business through a broker-dealer holds the Series 7, FINRA's general securities exam, and often the Series 66, which with the Series 7 qualifies a person as both a securities agent and an investment adviser representative.

Sources:
- Investor.gov: Which Investment Professional is Best for You? (https://www.investor.gov/additional-resources/specialized-resources/directors-take/which-financial-professional-best-you)
- Faegre Drinker: SEC Interpretation Offers Clarification on an Investment Adviser's Duties of Care and Loyalty (https://www.faegredrinker.com/en/insights/publications/2019/7/sec-interpretation-offers-clarification-on-an-investment-advisers-duties-of-care-and-loyalty)
- SEC: SEC Adopts Rules and Interpretations to Enhance Protections and Preserve Choice for Retail Investors in Their Relationships With Financial Professionals (2019-89) (https://www.sec.gov/newsroom/press-releases/2019-89)
- FINRA: About FINRA (https://www.finra.org/about/about-finra)
- NASAA: Uniform Combined State Law Examination (Series 66) Overview (https://www.nasaa.org/wp-content/uploads/2023/09/NASAA-Series-66-Exam-Study-Guide.pdf)
- Legal Information Institute (Cornell): 17 CFR § 275.203A-1: Eligibility for SEC registration; Switching to or from SEC registration (https://www.law.cornell.edu/cfr/text/17/275.203A-1)
- eCFR: 17 CFR 275.203A-2: Exemptions from prohibition on Commission registration (https://www.ecfr.gov/current/title-17/chapter-II/part-275/section-275.203A-2)
- Day Pitney: Financial reform and investment adviser registration (https://www.daypitney.com/article/print/4308)
- SEC: Form ADV: General Instructions (https://www.sec.gov/files/formadv-instructions.pdf)
- SEC: How To Register as an Investment Adviser (https://www.sec.gov/divisions/investment/iaregulation/regia.htm)
- SEC: Investor Bulletin: Custody of Your Investment Assets (https://www.investor.gov/news-alerts/investor-bulletins/investor-bulletin-custody-your-investment-assets)
- Kitces: Getting paid for financial planning: broker-dealer, RIA, hybrid or dual-registered (https://www.kitces.com/blog/get-paid-for-financial-planning-broker-dealer-ria-hybrid-dual-registered/)
- Kitces: How fee-only RIAs can get paid on annuity, LTC and life insurance: BGA, hybrid or broker-dealer (https://www.kitces.com/blog/annuity-ltc-life-insurance-license-fee-only-ria-bga-hybrid-broker-dealer/)
- Advisor Perspectives: How Breakaway RIAs Can Retain Annuity Trails (https://www.advisorperspectives.com/articles/2022/05/24/how-breakaway-rias-can-retain-annuity-trails)
- Financial Planning: IBD Elite 2021: LPL's hybrid RIA power play (https://www.financial-planning.com/news/ibd-elite-2021-lpls-hybrid-ria-power-play)
- InvestmentNews: SEC advice rule contains a huge hole (https://www.investmentnews.com/regulation-legal-compliance/sec-advice-rule-contains-a-huge-hole/76074)
- InvestmentNews: 4 reasons not to launch your own hybrid RIA (https://investmentnews.com/rias/4-reasons-not-to-launch-your-own-hybrid-ria/57829)
- InvestmentNews: Finra should let brokerages decide whether to supervise unaffiliated RIAs, FSI says (https://investmentnews.com/rias/finra-should-let-brokerages-decide-whether-to-supervise-unaffiliated-rias-fsi-says/74122)
- SEC: Form CRS instructions (https://www.sec.gov/file/instructions-form-crs-0)
- Zinn Wealth Management (&Partners practice): &Partners (https://www.zinnwm.com/andpartners/)
- InvestmentNews: Ex-Wells chief Kowach wants 100 advisors at new firm &Partners (https://investmentnews.com/ex-wells-chief-kowach-wants-100-advisors-at-new-firm-partners-241161)
- Vanderbilt Financial Group: Disclosures - joinvanderbilt.com (https://www.joinvanderbilt.com/disclosures/)
- Investment Adviser Association: 2026 investment adviser industry snapshot shows continued growth in demand for adviser services (https://www.investmentadviser.org/iaatoday/press-release/2026-investment-adviser-industry-snapshot-shows-continued-growth-in-demand-for-adviser-services/)
- FINRA: Four Insights From FINRA's 2026 Industry Snapshot (https://www.finra.org/media-center/blog/four-insights-from-finras-2026-industry-snapshot)
- Cerulli Associates: RIA Channel Momentum Redefines Advisor Retention Strategies (https://www.cerulli.com/press-releases/ria-channel-momentum-redefines-advisor-retention-strategies)
- Federal Register: Order Approving a Proposed Rule Change, as Modified by Partial Amendment No. 1, To Adopt FINRA Rule 3290 (Outside Activities Requirements) (https://www.federalregister.gov/documents/2026/09/18/2026-19126/self-regulatory-organizations-financial-industry-regulatory-authority-inc-order-approving-a-proposed)
- FiSolve: FINRA Rule 3290: A Significant Shift in the Supervision of Outside Business Activities (https://fisolve.com/finra-rule-3290-a-significant-shift-in-the-supervision-of-outside-business-activities/)