Why advisors need to understand how a TAMP (Turnkey Asset Management Platform) works

By MBA, CFP® - Chief Executive Officer, Vernon C. Sumnicht on June 6, 2013

Often, many professionals get so involved in their day-to-day responsibilities that they do not fully understand tools and resources that can benefit their business and their clients. A recent article in The Trust Advisor is testimony to this fact. In the article, I was shocked when I read that the results of a poll they conducted found that: “barely 10% are confident they know how a TAMP works”.

This statistic was shocking to me because both iSectors and our wealth management affiliate, Sumnicht & Associates are structured ses around the usefulness of TAMPs. Long ago, Vern Sumnicht, our CEO and founder determined that converting his business to an outsourced provider/TAMP would enable his business to become more efficient and better serve his clients. It was a stressful decision, although once-made, he has never looked back, nor regretted the decision. Making the move to outsourcing to a TAMP eliminated or significantly reduced time spent on uploading and reconciling trades, as well as other back-office tasks.

What are TAMPs?

TAMPs are actually very simple…they provide advisors with the back office support to run their business. Through a TAMP, advisors are basically obtaining an entire team of specialized professionals to help them with the various tasks necessary to service the investment needs of a large client base. TAMPs provide advisors with:

  • marketing materials
  • risk assessment questionnaires
  • proposal generation software
  • account opening documents
  • performance reporting software, and many other tools.

TAMPs provide entrée to institutional and professional money managers from which you can choose to help invest your client’s money. The article does a great job of highlighting what TAMPs do for an advisor’s business. For example:

“this is not so much a way to bring portfolio management down to a mass-market clientele as it is a way for advisors to streamline the service they offer high-net-worth investors. Michael Stier, CEO of service provider Adhesion Wealth Advisor Solutions, can point to clients who compressed a weeklong rebalancing cycle into two hours after adopting this kind of account structure.”

TAMPs provide SMA and UMA-type accounts to your clients. “A unified managed account boils down to a single fee-based structure that can contain various types of investment products like stocks, bonds, SMAs, mutual funds, ETF shares or alternatives. Each asset class fits into its own “sleeve” and the advisor can build as many sleeves as the portfolio requires.

Within the structure, an advisor can select the individual holdings personally, delegate that task to any number of outside managers or adopt a hybrid insourced/outsourced approach.

As a “turnkey” asset management program, a TAMP makes the adoption process simple, cutting out most of the convolutions in one.”

Thus, TAMPs consolidate many of the back-office processes, all for an asset-based fee that typically varies from a few basis points up to perhaps 25 bps, depending on the provider. TAMPs provide your firm with a “double” benefit. You not only cut your costs (since you don’t have to pay for additional tools), but because they free up more time, you can spend more time helping more people, which helps grow your AUM and your revenues as well. Lower costs and more revenue allow you to keep your advisory fees low, which benefit your clients.

Why don’t more advisors consider TAMPs? I suspect there are several reasons. Perhaps some advisors entered this business because they enjoyed the research and analysis and investment part of the equation, or they were good at investing and wanted to help other people with their interest and talents. Other advisors may feel that it is in the investing process where they add value. But, because so few seem to know what TAMPs actually do, more than likely it’s inertia… because they are simply too busy with research, trading, performance reporting, and other aspects of their business to spend time on researching tools that can help them grow their business. Regardless of the reason, if you are an advisor that is tapped out on time and your firm no longer has the capacity to grow, before adding more staff, now would be a good time to start learning more about TAMPs

iSectors models are currently available on three platforms: Envestnet, Eqis and Mid Atlantic Capital Group’s ModelxChangeSM for 401ks and other retirement plans.

The article, TAMPs Feed Advisors’ Hunger for Steady Returns and Slick Technology, by Scott Martin appeared in the Trust Advisor e-newsletter on August 26th, 2013. You can read the entire article here: http://tinyurl.com/TrAdvTAMP130826.

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