When running the Hybrid Configuration Wizard, you may receive the following error on the credential page.

Hybrid Configuration Service may be limited
This error is the result of an out of date hybrid configuration wizard. In the screenshot above, we are using version 16.0.3149.4. At the time of writing, the current version is 17.0.4554.0.
Despite the historically self-updating nature of the hybrid configuration wizard, users on older versions will need to uninstall and then reinstall version 17 from the portal. However, once installed, version 17 will check for updates on launch.
The new wizard contains several significant changes, including smaller bug fixes and enhancements.
The first is that the wizard will no longer create or require a federation trust in some Exchange environments. If the wizard detects the presence of Exchange 2010, the federation trust will be created. However, if the on-premises environment only includes Exchange 2013 or newer, the federation trust is skipped. This means that domain proof is not required, which skips the need to create DNS TXT records as part of the wizard.
Second, the wizard also vastly improves how it reports OAuth errors if enablement fails during the execution of the wizard. Detailed OAuth failure messages are now reported in the HCW logs, which will help significantly with troubleshooting.
Update to version 17 of the HCW
To update the Hybrid Configuration Wizard, we first need to uninstall the prior version. To do this, navigate to Control Panel > Programs and Features. Select the Microsoft Office 365 Hybrid Configuration Wizard and click Uninstall.

To get the latest version of the wizard, you need to log onto the Exchange Online Admin Center, select the Hybrid tab, and click the Configure button. This will download and install version 17 of the wizard.

Note: The new version of the wizard also requires .NET Framework 4.7.2 to run. You can install that from this link.
Now when the wizard runs, the warning regarding the service may be limited will be absent.

Have you seen this issue before? What did you do to fix it? Drop a comment below or join the conversation on Twitter @SuperTekBoy.
Hi,
I have had the same problem, and after reading this article (https://techcommunity.microsoft.com/t5/exchange-team-blog/march-2020-significant-update-to-hybrid-configuration-wizard/ba-p/1238753#M27979), the notification was resolved.
In addition, I have noticed that the HCW v17 does not update the Default Email Address Policy, do you know more about this? Unfortunately, I don’t find this anywhere on the internet or on docs.microsoft.com.
Hi Arend,
The HCW should update the default email address policy on its first run. However, it will not update it on subsequent runs. Essentially, the HCW will not redo anything it has done before, even if this was initially done in an older version (e.g. v16).