Some financial advisors take a hands-on approach when it comes to managing client assets. While this is a great practice, the hands-on financial advisor could make better use of their time instead of doing the back-office tasks and other administrative work involved in asset management. That’s where turnkey asset management platforms or TAMPs come in.
These platforms provide a more streamlined, efficient way for advisors to manage client accounts. A TAMP gives them the choice of outsourcing selected tasks so they can focus more of their time and energy on more important tasks.
In this article, InvestmentNews delves into the basics of turnkey asset management platforms. We’ll provide insight into questions like:
A turnkey asset management platform or TAMP is a wealth management tool and technology platform or program for fee accounts. Financial entities and professionals like broker-dealers, insurance companies, law firms, RIA firms, CPA firms, and banks can all use TAMPs.
Turnkey asset management platforms help financial professionals save time, allowing them to focus on servicing clients within their areas of expertise, which may not include asset or portfolio management tasks. TAMPs allow financial professionals and firms to outsource investment management tasks like investment research and portfolio allocation to another party that specializes in those areas.
One of the features of a TAMP is doing due-diligence tasks. Some of these tasks can include investment research and selection, portfolio rebalancing, and maximizing tax efficiency. Typically, advisors pay a fee to the firm that manages the TAMP and offers turnkey services. Fees from turnkey service providers are usually based on a percentage of the total AUM the advisor has with the firm.
Here’s an introductory video on turnkey asset management platforms. The presenter gives a more thorough explanation of what they are and the potential benefits of using them:
Matt Matrisian, Head of Client Growth at AssetMark, offers his two cents to answer this question. “Financial advisors are juggling multiple tasks, but wouldn't it be ideal to focus on their core strengths: building relationships and offering personalized financial guidance? A TAMP can be their secret weapon.”
Using a TAMP allows advisors to make better use of their time. What’s more, the firm doesn’t have to increase benefit costs or pay for more staff to do the back-office work that can be outsourced to a TAMP.
With a turnkey asset management platform, firms not only save money but also experience more growth and better business performance. Matrisian says, “By handling portfolio construction and management, a TAMP frees up valuable time for advisors to focus on in-depth consultations, personalized financial planning, and building stronger relationships with clients. This translates to higher quality service for more clients while also empowering advisors with a wider range of investment options and sophisticated technology for streamlined workflows and clear client communication.”
And here’s the clincher: “research shows that advisors who partner with an outsourcing provider are able to save an average of 9 hours per week to focus on higher-value activities. This results in accelerated growth and business performance,” says Matrisian.
There are several types of turnkey asset management platforms available to advisors. Here are the most common types:
An SMA is designed for investors with higher levels of investable assets, and it works much like a mutual fund. However, instead of pooling money from other investors and sharing ownership, all the investments in an SMA are owned by a single investor.
This is a form of wrap account that also resembles a mutual fund, like the SMA. The main difference is that the investment choices are limited to exchange-traded funds or ETFs. Compared to a traditional mutual fund wrap account, cost-efficient ETFs give this type of wrap account slightly lower fees.
This type of arrangement is a simplified way to manage client assets that reduces fees. A mutual fund wrap account is one that offers multiple mutual funds. Their fees wrap around a client’s mutual fund trading activity. In this manner, advisors can do portfolio construction consisting of mutual funds that best suit their client’s investment goals.
A unified managed account holds various investments within separate sections called “sleeves.”
In a UMA, advisors maintain one sleeve each for stocks, mutual funds, and bonds for individual client accounts. Each sleeve is then managed such that the client may realize the maximum returns and tax efficiency possible.
Multiple individuals within the same household can hold assets together in this type of TAMP, hence the name. This type of arrangement is typically meant for high-net-worth and ultra-high-net-worth families.
This is a turnkey asset management platform for digital asset accounts, specifically cryptocurrencies. As cryptocurrency is a recent invention, TAMPs that handle it are recent innovations as well.
One of the most prominent cryptocurrency TAMPs is BITRIA. It enables financial and investment advisors to actively manage accounts for clients who want to invest in Ether, Bitcoin, or other cryptocurrencies.
Advantages of turnkey asset management platforms
Finance firms or professionals can enjoy a few benefits in using a TAMP, including:
For advisors to effectively provide well-planned financial advice, they need to spend less time on activities that can be otherwise outsourced to experts. Turnkey asset management platforms afford advisors the option to do exactly that. In fact, outsourcing asset management tasks to TAMPs gives advisors the opportunity to harness the skills of experts who are even better at these tasks.
When advisors are not tied down to do administrative, back-office tasks related to asset management, they can make better use of the time to improve essential skills, such as client prospecting. Using a TAMP can free up time for training, mentoring, and upskilling.
By outsourcing asset management tasks to a TAMP, advisors can have more time to focus on specific duties. Instead of doing the reporting, compliance and back-office administrative functions, advisors can focus on maintaining or deepening client relationships or do more client prospecting.
Advisory firms can become more productive and profitable with TAMPs, which potential buyers or new investors may notice. If the business owners ever decide to sell or merge the company, their improved performance and more attractive balance sheet can allow shareholders to command a higher price.
With turnkey asset management platforms, advisors are not directly accountable for underperforming investments. Though advisors are generally inclined to defend an investment’s performance even when it underperforms for long periods, the advisors do not typically “fire” themselves in these cases. With a TAMP, that means a strategist underperforms, so the advisor works with the client to identify a new strategist for the client.
But of course, before considering outsourcing tasks, finance professionals should consider these drawbacks:
Advisors who truly enjoy the market and investment research aspects of their occupation, (i.e., the technical side of investment management), might miss this part of the job. Completely outsourcing these tasks may negatively impact some advisors’ overall job satisfaction.
Another potential drawback is that outsourcing to a turnkey asset management platform requires advisors to hand over some control of the way their clients' assets are managed. However, advisors still play a role in helping their clients select investment strategists through the TAMP.
Once hired, the TAMP strategist typically has all the control over the assets and how they are invested.
Turnkey asset management platforms are certainly not free, and the costs and services they provide can vary. In fact, some TAMPs charge a hefty fee, since some of them are meant to cater to high- and ultra-high-net-worth clients of advisors.
Finance professionals should thoroughly research potential TAMPs before choosing a provider. Whether you are held to a fiduciary standard or not, it’s best to practice due diligence and make sure you and your clients are getting the best value.
In some cases where clients prefer speaking directly with their advisors, using a TAMP can make the client’s experience feel less personal. With a TAMP, there is the risk that some clients may feel disconnected from their advisor and their investments. Losing this direct advisor-to-client relationship by using a TAMP can also mean losing what differentiates their firm.
RIAs and TAMPs work together to manage the RIA’s client’s assets. While the client works directly with the RIA, the RIA sub-contracts TAMPs as part of the investment arrangement contract. TAMPs only manage a portion of the clients’ investment process. Not all TAMPs offer the same services or at the same rates.
To help you choose, look at some of the biggest TAMPs on the market. Choosing the right TAMP, however, is not as simple as picking one from the list. There are different criteria to consider when choosing the right TAMP for you and your clients.
It’s important to check the TAMP’s investment philosophy and business strategy. As an advisor, it’s your duty to make sure that their investment strategy aligns with your client’s philosophy and financial plans.
A TAMP that charges fees that are above your budget are a no-go. Find and choose the TAMP that is transparent with their fees, align with your business model and are proportional to your client’s AUM.
The TAMP you contract should have:
Check that the TAMP platform is user-friendly, scalable, and is compatible with your business needs. Ideally, it should be compatible with your RIA’s tech stack.
Check that the TAMP's compliance and risk management protocols meet industry standards and adhere to regulatory requirements. Ensure that the TAMP's due diligence processes for selecting investment managers and monitoring investment risks are of the highest caliber.
If you’re considering using a TAMP, consult other advisors who are already using that TAMP. Ask about their relationship and overall experience like onboarding and tech support, and how satisfied they are with their services.
Outsourcing investment or asset management tasks means choosing the right TAMP. While this can be a tedious process, it can free your firm from back-office tasks and focus on delivering impeccable client service. Do your due diligence - getting the appropriate TAMP for you and your clients can also be a good investment.
Read and bookmark our goRIA section for more on turnkey asset management platforms and other tools to help support your RIA practice.
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