The ABCs of TAMPs

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.

TAMP basics

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.

Why use a TAMP?

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:

• Serve your clients in more personalized ways. Rather than getting caught up in the logistics of asset management, you can dig deeper into your clients to gain a better understanding of their financial goals.
• Focus on your areas of expertise. Is your passion asset management? If not, then you can probably understand why TAMPs are becoming increasingly popular. If you'd rather focus on legacy planning, retirement planning, wealth building, and other areas, using a TAMP could be a smart choice.
• Meet with clients in person. Personal meetings can add significant value to relationships with certain clients, but applied more broadly they can burn up a lot of time inefficiently. Some clients require or need more attention than others for a variety of reasons. By using a TAMP, you'll be able to prioritize, allocate and manage your interaction time with clients more productively and cost-effectively.
• Prospect for new clients. As with any business, a steady stream of prospects is necessary for sustainable business growth. By delegating asset management, you should have more time to devote to cultivating new clients.
• Become a more knowledgeable financial adviser. Instead of managing assets and building reports from scratch, your time could be better spent furthering your education, increasing your knowledge in a given practice area, or updating your skills.

Why to not use a TAMP

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.

How big is the TAMP market?

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.

Is a TAMP right for your firm?

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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