Financial advisors have much on their plates, from attracting new clients to keeping up with ever-changing compliance regulations. Due to this predicament, one-third of financial advisors say focusing on client relationships is challenging.
A Turnkey Asset Management Program (TAMP) may be the ideal solution if you’re one of them. TAMPs allow you to outsource your investment management and streamline your administration so you can dedicate more time to your clients.
While TAMPs are very popular, 66% of advisors don’t fully understand how these platforms work. Below, we’ll explain what TAMPs are, how they work, their benefits and drawbacks, and how to determine if they’re the right tool for you.
What is a TAMP?
A TAMP is a comprehensive investment platform that helps you manage your clients’ portfolios and enjoy comprehensive back-office support. TAMP services typically include:
- Investment due diligence
- Asset allocation
- Trade execution
- Portfolio rebalancing
- Performance reporting
- Compliance management
Some TAMPs also offer the following administrative and operational support services:
- Client onboarding
- Self-service portals
- CRM capabilities
- Billing and reporting
- Marketing automation
- Client communication
- Advisor consulting
By outsourcing these tasks, you can allocate your time and attention where it matters most: building strong client relationships, delivering personalized financial planning, and driving business growth.
A Brief History of TAMPs For Financial Advisors
TAMPs were first developed in the 1980s. Back then, the technology was much more rigid and rudimentary than today, but even so, TAMPs revolutionized the financial advising landscape.
Forty years later, TAMP technology has advanced substantially. Today’s TAMPs are much more flexible, offering a broader scope of investment solutions and greater customization. Additionally, many TAMPs have expanded their offerings beyond basic asset management.
Best of all, modern financial advisors have a wide range of TAMP options, so finding a TAMP that aligns with advisors’ unique strategies, needs, goals, and budgets is easier than ever before.
How Does a TAMP Work?
As outsourced investment platforms, TAMPs take care of many components of the asset management process, including:
- Investment strategy – As your financial advisory firm grows, hand-picking investments for each client simply isn’t feasible. Fortunately, your TAMP can select investments on your behalf and ensure they align with your clients’ goals, risk tolerance, and timelines.
- Portfolio design – TAMPs can access a vast selection of model portfolios, which third-party asset managers or in-house investment teams may create. Once you’ve selected your preferred investment strategy, your TAMP can design and maintain your clients’ portfolios accordingly.
- Account management – Manual account management can be time-consuming. Luckily, outsourcing asset management to a TAMP can take many tedious tasks off your hands, including trade execution and documentation, transaction monitoring, and performance reporting.
- Portfolio rebalancing – Maintaining your clients’ ideal asset allocation requires ongoing optimization. By buying and selling certain securities, TAMPS can automatically rebalance portfolios to align with your clients’ risk tolerance and investment goals.
- Performance monitoring—TAMPs constantly monitor the performance of your clients’ portfolios and generate detailed performance reports, ensuring they’re always well-informed about their investments.
- Reporting and compliance—Many TAMPs can carry out crucial compliance and reporting tasks, including maintaining detailed records about all investment transactions and client interactions. This automated audit trail offers clear evidence of your adherence to fiduciary standards.
TAMPs provide these comprehensive services using a combination of specialized teams and technology. Their specialized teams often include in-house investment managers, third-party asset managers, compliance officers, and administrative support staff.
Meanwhile, TAMPs’ automated software uses advanced algorithms to execute trades, rebalance transactions, generate reports, maintain compliance, and automate client communication.
What Are the Benefits of Using a TAMP?
In 2018, 54% of financial advisors outsourced their investment management to TAMPs. By 2021, TAMPs managed over $2 trillion in Assets Under Management (AUM), with RIAs representing the largest segment of users. Given the rising demand for efficiency and scalable solutions, these figures have likely only increased in recent years.
With TAMPs’ growing popularity in mind, let’s explore six key benefits of integrating a TAMP into your financial advisory practice:
#1 More Time For Clients
Trust is your greatest asset if you want to build a thriving financial advisory practice. Trust is built through consistent communication and personal relationships. Thus, it’s no wonder that 75% of consumers consider “developing a personal relationship” to be the most valuable service a financial advisor can provide.
Many financial advisors want to connect with their clients more often—they simply need to find the time. By outsourcing security selection, portfolio rebalancing, and performance monitoring to a TAMP, you can provide high-quality asset management while delivering excellent customer service.
Investing more time in your client relationships can yield impressive returns. After all, nine out of ten clients report that their financial advisors’ frequency and quality of communication heavily influence their decision to remain at their firm and their willingness to provide referrals.
#2 Access to More Investment Options
One of the main reasons financial advisors leverage TAMPs is to increase their investment options. In fact, 23% of surveyed financial advisors cited this as their primary motivation for using a TAMP.
TAMPs can connect you with a wide variety of investment products that may be unavailable through other channels, including mutual funds, exchange-traded funds (ETFs), and separately managed accounts (SMAs).
TAMPs can help diversify client portfolios and enhance their performance by giving you access to a broader selection of investment strategies. This benefit is particularly valuable for smaller financial advisory firms that can’t leverage the same economies of scale as large institutions.
#3 Seamless Scalability
The majority of financial advisors are highly motivated to grow their businesses. Unfortunately, only 12% are satisfied with their current growth rate. As a highly scalable solution, TAMPs can help close this gap.
TAMPs can strengthen your ability to scale your business by:
- Streamlining your asset management and administration.
- Freeing up your time to focus on growth-oriented initiatives.
- Ensuring expert asset management, even as your AUM increases.
- Strengthening your client relationships, so you can attract more referrals and increase your client retention rate.
#4 Cost Savings
TAMPs typically charge fees that are based on a percentage of your total AUM. On average, TAMP fees range from 0.85% to 2.80% of your AUM. Your fee amount will ultimately depend on the cost and complexity of your investments.
Even with these fees, TAMPs cost a fraction of what hiring, training, managing, and compensating an in-house team of investment professionals would cost. TAMPs can also take advantage of their economies of scale to provide you with more competitive pricing than you’ll find on your own.
TAMPs’ attractive fee structure is why 20% of surveyed financial advisors believe using a TAMP can make expenses more scalable during a market crash and provide valuable financial flexibility in the face of volatile conditions.
#5 Compliance Support
Staying on top of constantly evolving regulations can be daunting. More importantly, it can divert your time and attention away from client relationships.
TAMPs with built-in compliance features can help you satisfy regulatory requirements and keep up with industry best practices. In turn, they can ease your administrative burdens, reduce the risk of non-compliance, and allow you to pay more attention to other areas of your business.
#6 Stronger Client Relationships
So far, we’ve talked a lot about how TAMPs can give you more time to focus on your clients. However, TAMPs can also carry out crucial client communication on your behalf.
For example, many TAMPs share real-time portfolio updates with your clients, cultivating greater transparency and trust. Some TAMPs also feature client portals and self-service dashboards, enabling your clients to access their information 24/7.
These TAMP advantages can save you time and enhance your client satisfaction and long-term loyalty.
What Are the Potential Downsides to TAMPs?
Despite TAMPs’ many benefits, they also have some potential drawbacks to be aware of. These downsides include:
- Cost—While leveraging a TAMP will almost always be more cost-effective than maintaining an in-house asset management team, you need to make sure the fees of your chosen TAMP align with your firm’s budget and business model.
- Loss of control – By outsourcing your asset management, you naturally lose some control over day-to-day investment decisions. This may present some challenges, particularly if you have a strong investing philosophy.
- Limited customization – While many TAMPs offer comprehensive customization options, they may still be more limited than what you could do with an in-house team. As a result, you may not be able to accommodate highly specific client requests.
- Client perception—Some clients may have reservations about allowing a third party to manage their investments. You can put their minds at ease by addressing their concerns early on and explaining the advantages of using a TAMP, such as access to professional managers, diversified strategies, and improved service quality.
Who Should Use a TAMP?
TAMPs may only be suitable for some advisors, but the majority can benefit from their efficiency, scalability, and time savings.
Here’s a closer look at who can benefit the most from leveraging a TAMP:
- Advisors who want to focus on client relationships and financial planning – If your main priority is financial planning, managing assets can be a time-consuming distraction. You can dedicate more time to client engagement and personalized planning by offloading your asset management duties to a professional team.
- Small-to-medium-sized firms – If you’re running a smaller firm, you may not have the resources to manage complex investment portfolios in-house. A TAMP can connect you with cost-effective, high-quality portfolio management so you can offer your clients a wider range of investment strategies and compete with larger firms.
- Growth-minded advisors – Business growth is much easier to achieve and sustain when outsourcing your asset management to a TAMP. You will have more time for marketing and prospecting, and you can trust that your new clients’ portfolios will be managed with professional expertise and consistent oversight.
- Advisors experiencing burnout – As a financial manager, attempting to do it all can add unnecessary stress to your plate and contribute to burnout. In part, this is why 80% to 90% of financial advisors leave the industry within three years. Strategic outsourcing can improve your business outcomes and restore some much-needed work-life balance to your career, allowing you to thrive in a field where many struggle to stay afloat.
If you fall into any of these categories, you may be the ideal candidate for a TAMP. However, outsourcing ultimately depends on your specific needs, goals, and business structure.
Revolutionize Your Practice With A Flexible TAMP Solution, Like Alden COVE
Turnkey asset management programs can transform your efficiency, scalability, and client satisfaction. By outsourcing investment management and back-office tasks, you can free up time to focus on what matters most.
At Alden Investment Group, our TAMP solution, Alden COVE, stands out for its ability to streamline your operations while delivering a bespoke level of service. When you choose Alden COVE, you gain access to:
- Increased investment flexibility – Alden COVE offers unparalleled flexibility, whether you prefer to manage your own investment strategies, fully outsource your investment management, or leverage institutional asset managers. It gives you access to over 500+ institutional strategies, including mutual funds, ETFs, and equities.
- Advanced trading and portfolio management—Our trade order management system (TOMS) allows you to easily scale your investment models across multiple custodians and customize your rebalancing parameters.
- Account opening and back-end support – Alden COVE’s seamless account opening process can prefill forms, ensure compliance, and minimize custodial delays. Powered by Black Diamond technology, Alden COVE also offers a robust back-end system that includes private-labeled web portals and mobile apps.
- Integrated billing, reporting, and accounting – Alden COVE can consolidate your billing, reporting, and accounting within one easy-to-use platform, streamlining your administration.
- Scalable solutions – No matter your size, Alden COVE is built to scale with your business. Its flexible investment options and robust administrative support can help your firm expand efficiently without adding unnecessary overhead.
- Hands-on support from a seasoned investment team – Alden COVE’s investment professionals are readily available to assist with model/UMA creation, business development, asset manager introductions, and institutional or high-net-worth client management. This high-touch support ensures that you enjoy expert guidance every step of the way.
By choosing a TAMP like Alden COVE, you can ensure that your practice has access to top-tier technology and investment management expertise all in one. You can also enjoy the many benefits of joining our RIA, including access to other innovative software solutions, steady referrals, succession planning, and compliance support.
Want to learn more about Alden COVE? Reach out to our team at Alden Investment Group today.
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