Turnkey asset management platforms (TAMPs) have become increasingly popular in recent years. These innovative platforms allow financial advisors to outsource their investment management and streamline their administrative tasks.
As of 2018, over half of advisors used TAMPs, and the number of assets managed under TAMPs doubled from 2017 to 2022. While a growing number of advisors are leveraging TAMPs to focus more on client relationships, some have yet to make the transition. These slow adopters’ concerns include TAMP fees, loss of control, and fears about clients’ perceptions.
If you’re an advisor who is on the fence about embracing a TAMP, keep reading. Below, we’ll explain how TAMPs work and what benefits they provide. After that, we’ll address advisors’ most common concerns and how to overcome them.
What Is a TAMP?
A Turnkey Asset Management Program (TAMP) is a platform that allows financial advisors to outsource various aspects of their investment management, including their:
- Asset allocation
- Portfolio construction
- Trade execution
- Performance monitoring
- Rebalancing
- Compliance management
Some TAMPs connect advisors to seasoned investment teams, who can assist with portfolio model creation, unified managed accounts (UMA), and institutional or high-net-worth clients.
Some may also offer support for administrative tasks, such as client onboarding, billing, reporting, and marketing.
By taking these tasks off advisors’ hands, TAMPs allow them to focus more on what they do best—building relationships with clients, delivering personalized financial planning, and growing their practice—all while ensuring their clients receive best-in-class investment management.
Read More: What is a TAMP and Should You Use One?
What Are the Benefits of Leveraging a TAMP?
TAMPs provide financial advisors with many advantages. Some of the most significant benefits include:
- More time to spend with clients – According to a Fidelity study, the number one reason advisors outsource their investment management is to provide more value to their clients. Advisors who use TAMPs spend significantly less time on research, due diligence, and trading, freeing them up to dedicate more time to value-added, client-facing activities.
- Improved client retention and satisfaction – Today’s clients want more than just investment returns. They expect holistic, personalized financial planning from their financial advisor. TAMPs give advisors the tools and support they need to satisfy these expectations, enhancing their clients’ loyalty and satisfaction.
- Higher quality investment strategies – TAMPs offer advisors access to curated lists of third-party investment strategies. By employing these strategies, advisors of all sizes can offer their clients institutional-quality asset management, improving their investment outcomes and bolstering their service value.
- Operational efficiency and consistency – Since TAMPs streamline several administrative tasks, they can boost advisors’ operational efficiency. Additionally, some TAMPs can automate routine tasks, such as rebalancing or reporting, reducing the risk of human error and enhancing their consistency.
- Scalability – Without the right resources and infrastructure, financial advisors may struggle to scale up their operations while ensuring high-quality service. TAMPs allow advisors to take on more clients and expand their assets under management (AUM) without worrying about these concerns.
- Increased revenues – By using a TAMP, advisors can enjoy economies of scale that would be difficult to achieve on their own. Meanwhile, TAMPs’ operational efficiency and scalability can help advisors boost their profitability over time.
- Enhanced practice valuation – With 40% of financial advisors retiring over the next ten years, it’s crucial that advisors have a solid exit strategy in place. Adopting a TAMP can increase advisors’ practice values by enhancing their profitability and making their businesses more attractive to potential buyers.
Read More: The Importance of Succession Planning
5 Common Hesitations Financial Advisors Have About TAMPs
Now that you know the benefits of leveraging a TAMP, you may be wondering why some financial advisors hold off from adopting them. Here are a few questions that contribute to advisors’ hesitation:
- “How will I justify adding another set of fees to my client’s overall costs?”
- “How will I update my fees and agreements with my existing clients?”
- “Why would I outsource my asset management if I’m good at it?”
- “I’ve marketed myself as an expert money manager, so how do I pivot away from that?”
- “Does using a TAMP go against my fiduciary duty?”
Let’s take a closer look at these common apprehensions:
- Incorporating an additional layer of fees – Many advisors worry about the extra costs involved in using a TAMP. They may feel uneasy about introducing these fees to clients, particularly if they already charge investment management fees for their services.
- Loss of control over investment decisions – Some advisors have built their reputations on being seasoned portfolio managers. As a result, they may be reluctant to hand over control of their clients’ investment decisions to a third party.
- Concerns about fiduciary responsibility – Some advisors wonder whether outsourcing their investment management will compromise their fiduciary duty to their clients, especially if they lack understanding about their TAMP’s customization options.
- Uncertainty about the impact on client relationships – Hesitant advisors often worry that outsourcing to a TAMP will damage their relationships with clients. They may fear that their clients will question their involvement in investment decisions or feel confused about the role of a third-party manager, leading to a lack of confidence and trust.
- Perceived complexity of implementation – As with many tech tools, transitioning to a TAMP platform may sound daunting to some advisors. They may worry about the complexity of the integration process, the subsequent learning curve, and how it will impact their existing business workflows.
How to Overcome Your TAMP Hesitations
If you relate to some of the concerns listed above, it’s important to know that you’re not alone. It’s completely normal to feel apprehensive about new technology. In fact, nearly half of business leaders cite employees’ resistance to change as their biggest challenge.
Many advisors who now reap the benefits of TAMPs initially shared similar concerns, but the ones who addressed them head-on now enjoy the enhanced efficiencies, deeper client relationships, and business growth that only TAMPs can provide.
Want to follow their lead and avoid falling behind? Check out these practical strategies to overcome the most common TAMP hesitations.
How to Justify TAMP Fees to Your Clients
Most TAMPs charge advisors fees for their services, typically as a percentage of AUM or through a monthly or annual subscription fee. Advisors often feel awkward about passing these fees on to their clients.
The key to overcoming this uneasiness is explaining the benefits your TAMP will bring to your clients. These benefits include:
- Superior financial planning – By freeing up your time, a TAMP can help you develop a deeper and more holistic understanding of your clients’ finances. These insights allow you to craft tailored financial plans that help your clients achieve or surpass their goals.
- Swifter strategy modifications – TAMPs make it easy to adjust clients’ investment strategies as their goals evolve, ensuring they receive satisfactory investment outcomes.
- Insulation from market volatility – Financial markets are constantly in flux. Fortunately, TAMPs can automatically adjust your clients’ asset allocations and promptly rebalance their portfolios to account for these changes. During market downturns, these managed accounts typically enjoy much better outcomes.
- Stronger communication – Advisors’ communication frequency has a direct impact on client satisfaction. According to a 2024 survey, only 22% of clients who hear from their financial advisors every four to six months are comfortable with their financial plans, compared to 71% of clients who receive monthly contact. Since TAMPs allow you to focus more time on client communication, they can lead to higher client satisfaction and confidence.
- Broader scope of services – Lastly, TAMPs allow you to offer a wider range of services to your clients. With fewer investment management tasks on your plate, you can invest more time into financial planning, retirement planning, estate planning, and tax optimization.
By communicating these benefits to your clients, you can justify your TAMP fees with confidence. Your transparency will enhance clients’ trust and assure them that you’re using every tool at your disposal to further their financial goals.
How to Maintain Your Sense of Control
If you’re used to managing investments on your own, you may worry about giving up control to a TAMP. However, simply choosing the right TAMP can put this fear to rest.
Some TAMPs allow you to maintain your preferred degree of oversight over clients’ investments. For example, Alden COVE gives its users the ability to select from the following options:
- Managing their own investment strategies
- Leveraging the support of institutional asset managers
- Fully outsourcing their investment management
Relinquishing some control may also feel easier if you know your TAMP is backed by an experienced investment committee. For instance, Alden COVE’s investment committee is composed of seasoned investment professionals who ensure your clients’ portfolios are expertly managed and aligned with their goals.
How a TAMP Can Strengthen Your Fiduciary Duty
If you’re one of the 66% of advisors who don’t fully understand how TAMPs work, you may worry that leveraging one could compromise your fiduciary duty. Fortunately, this couldn’t be further from the case.
As a fiduciary, your duty is to act in the best interests of your clients. Part of fulfilling that duty involves ensuring their investments are managed as well as possible with their long-term goals in mind.
A TAMP lets you access top investment strategies and institutional insights to grow your clients’ wealth, strengthening your fiduciary duty by ensuring their accounts are managed with the highest level of care and expertise.
Read More: 10 Must-Have Tools for Financial Advisors in 2024
How to Speak Transparently About TAMPs With Your Clients
Some advisors fear that using a TAMP will harm their relationships with clients or cause clients to question the value of their role. While investment management was once the core of financial advisors’ responsibilities, their role has evolved significantly over time.
Today’s clients have different expectations than those of previous generations. Many view their advisors as trusted financial partners who can help them navigate the complexities of their financial lives.
For example, consider a client who is undergoing a divorce. As they navigate their overwhelming emotions, investment returns may be the last thing on their mind. However, this client is still likely to appreciate you checking in frequently and offering reassurance about their finances.
If you use a TAMP, you’ll be better positioned to proactively:
- Conduct a comprehensive review of this client’s financial situation.
- Offer insights about how their finances will change after the divorce.
- Find out if they have any new goals or priorities to incorporate into their post-divorce financial plan.
- Update their financial plan accordingly, factoring in any child support and alimony payments, along with other details related to their divorce’s asset division.
As you can see, using a TAMP can help you provide a much higher level of service than you could if you were solely responsible for your own investment management.
Read More: The Role of the Modern Financial Advisor: How Technology is Shaping Their Success
How to Integrate a TAMP With Minimal Disruptions
While most new technology comes with a learning curve, modern TAMPs are designed to be intuitive and seamlessly integrate into your practice. For example, Alden COVE features a user-friendly interface that allows you to easily transition your clients into managed portfolios, track their progress, and make adjustments to their investment strategies as needed.
Better yet, Alden Investment Group provides ongoing training and transition support, ensuring you have the resources you need to maximize Alden COVE’s potential and enhance your client service from day one.
This combination of ease of use and attentive customer support can help you become proficient with the Alden COVE system, allowing you to focus on what matters most—growing your business and serving your clients.
Elevate Your Financial Advisory Practice With Alden COVE
In summary, TAMPs can help advisors strengthen their client relationships, expand their service offerings, and scale their businesses while maintaining excellent investment management behind the scenes.
Ready to reap the benefits of outsourcing your investment management? Consider leveraging Alden COVE. This TAMP stands out for its:
- Customizable solutions – Alden COVE offers over 500 flexible investment strategies, along with a scalable trade order management system and innovative risk profiling tools.
- Comprehensive support – Alden’s dedicated support team can assist you with everything from portfolio design to account openings. Thanks to our robust back-end support, you can make focusing on client relationships your top priority.
- Operational efficiency – With Alden COVE, you can automate many aspects of your portfolio management, reducing the time spent on administrative tasks and enabling you to focus on what matters most—your clients.
- Fiduciary first – Alden COVE is built with your fiduciary responsibilities top of mind, ensuring that every decision is made in alignment with your clients’ best interests.
If you want to learn more about Alden COVE or the advantages of joining our Registered Investment Advisor (RIA), reach out to Alden Investment Group today.
Sources:
Advisor Hub. What is a TAMP and Should You Use One?
https://www.advisorhub.com/resources/what-is-a-tamp-and-should-you-use-one/#:~:text=In%202018%2C%2054%25%20of%20financial,only%20increased%20in%20recent%20years.
Morning Star Wealth. Considering a TAMP? Evaluating the Growth Opportunity.
https://mp.morningstar.com/en-us/articles/bltfa3606193b06a610/considering-a-tamp-evaluating-the-growth-opportunity
Forbes. Time to go TAMP.
https://www.forbes.com/sites/advisor-intelligence/2019/09/26/time-to-go-tamp/
Cerulli Associates. 40% of Advisory Assets Will Transition in 10 Years, According to Cerulli.
https://www.cerulli.com/press-releases/40-of-advisory-assets-will-transition-in-10-years-according-to-cerulli
PR Newswire. Workforce Resistance to Change Emerges as Top Challenge for Successful Digital Transformation.
https://www.prnewswire.com/apac/news-releases/workforce-resistance-to-change-emerges-as-top-challenge-for-successful-digital-transformation-301838163.html
YCharts. Why Frequent Advisor Communication Matters: Insights from YCharts’ Latest Survey.
https://get.ycharts.com/resources/blog/why-frequent-advisor-communication-matters-insights-from-ycharts-latest-survey/
The Wealth Advisor. Industry Poll: 66% of Advisors Don’t Understand TAMPs, Why Advisors Can’t Afford to Ignore This Growth Industry.
https://www.thewealthadvisor.com/article/industry-poll-66-advisors-dont-understand-tamps-why-advisors-cant-afford-ignore-growth