Turnkey asset management programs, or TAMPs, are becoming increasingly popular among financial advisory firms. TAMPs allow financial advisors to outsource asset management and reporting to a third party, which oversees their clients' investment accounts. Is a TAMP a good fit for your firm? Here's what you need to know.
At its heart, a TAMP supports various investments that are managed by multiple asset managers. TAMPs are offered as either a standalone tool or as a privately branded "white labeled" platform complete with your firm's branding. Once implemented, they enable you to delegate asset management to a third party so that you can focus on other areas of your practice.
TAMPs typically include dashboards, automated alerts, and various tools for tracking and reporting assets. In addition, TAMPs often include additional services and features such as investment policy statements, risk analysis, proposals, and links to a brokerage account. With a TAMP serving as your back office, you can gather financial data and interact with clients while the TAMP handles the details.
However, not all TAMPs are created equally. Some include features that extend well beyond the basics of portfolio management to include billing, accounting, staff training, and practice management. These features may or may not be desirable for your practice.
A type of fee account, TAMPs allow financial advisers to quickly get into the fee-only market quickly and without having to develop their own platform for managing clients' assets. Small firms can offer the same level of services that larger firms offer when using a TAMP. You'll be able to track your clients' goals, comparing them to their own portfolios and making appropriate adjustments along the way.
While you'll incur costs associated with outsourcing asset management, you may also save on associated employee, payroll, IT and support costs. And if you've considered developing a proprietary asset management system of your own, you'll save on software development, too, by using a TAMP.
Moving to a TAMP will save you time. For example, by outsourcing asset management, you'll have more time to:
While there are several compelling reasons to consider using a TAMP, you'll also want to consider why you might not want to use one. TAMP fees, which typically range from 85 to 280 basis points, can cut into your advisor fees significantly.
You will also have less control over your clients' investments. It's important to carefully consider the TAMP's services to make sure they meet your needs.
According to Tiburon Strategic Advisors, about 25 percent of financial advisers are using TAMPs. In 2013, there were nearly $250 billion in assets under management by TAMPs, up from $50 billion in 2008. By 2015, that number had increased to $1.75 trillion. The TAMP market is dominated by about three dozen companies.
Many financial advisors are moving to TAMPs. Should you? If your firm already has its own systems in place and you enjoy managing portfolios, maybe not. On the other hand, if you'd rather nurture and sustain relationships, provide tailored advice to your clients, or concentrate in your area of expertise, then outsourcing asset management could allow you the extra time to do that.
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