What is a TAMP and How Do They Work?

By Antonio Neri on

Although Turnkey Asset Management Platform’s, or TAMP solutions have been a player in the finance industry since the 1980s, it’s only until recently that financial advisors are truly utilising their power. According to a recent study, approximately 25% of advisors are now turning to TAMPs for their asset and investment management practice.

If you’re yet to turn to these strategies or you’re asking yourself what a turnkey management system is, this article is for you. The world of TAMPs is on the rise and it’s essential that wealth managers keep up with this booming industry platform. Here you will find a detailed explanation of what a Turnkey Asset Management Platform is, how they work and how your business can benefit from using it.

What is a Turnkey Asset Management Program?

The idea behind TAMP is to help make the process of managing portfolios more streamlined and easier for financial advisors. For independent advisors, outsourcing the management for clients’ assets can be key to running a successful business.

By handling and monitoring portfolio changes on an ongoing basis, advisors, therefore, would have greater free time to focus on consistent investment portfolios. For example, TAMPs can handle tasks such as reporting and accounting. As a result, the advisor can direct their attention to effective client onboarding or fine-tuning financial plans.

Looking back to the 1980s when these systems were introduced, advisors would usually only sell popular and well-performing funds to clients. Although this strategy may have served some, it led to a misinformed jumble of stocks, bonds, and funds that weren’t related to the client’s needs. Using a TAMP structure is a value-added approach to ensuring advisors stick to due-diligence best practice. This includes investment research and selection, as well as maximising tax efficiency.

TAMP & Stocks

Overall TAMP services include but aren’t limited to:

  • Research
  • Portfolio construction
  • Rebalancing
  • Reconciliation
  • Performance reporting
  • Tax optimisation and reporting

How Do These Programs Work?

TAMPs act as a third-party tool for financial advisors to help alleviate pressure and workloads. Essentially, professionals are able to delegate asset management responsibilities to fee-account platforms that oversee their clients’ investment accounts for them. This can be done with both technology and human-lead businesses.

Programs such as Britech’s SaaS platform are key in this regard. With Britech, financial advisors not only have access to market information but they can seamlessly integrate their client portfolios into the system too. As a result, total assets under management can grow under a standardised investment strategy that ultimately helps keeps costs down while maximising efficiency.

However, technology isn’t the only third-party asset management strategy for advisors to choose from. There are firms and individuals who solely focus on such avenues. In return, a fee is typically expected based on the percentage of total assets under management.

For your clients, this TAMP fee usually is included in the advisor’s fee schedule. For that reason, it’s advisable that these costs are disclosed with your clients. Furthermore, it’s essential to ensure that the TAMP’s investment strategy aligns with your client’s portfolio and needs.

Types of Turnkey Asset Management Programs

With a better understanding of Turnkey Asset Management, it’s important for advisors to get a complete overview of what these programs entail. There are 5 basic models that TAMPs can be used to operate and each one is unique in its characteristics.

Tax Documentation

1. Mutual Fund Wrap Accounts

 

As the name suggests, this type of TAMP offers multiple mutual funds. Fees for this program wrap around all of the client’s mutual fund trading activity. Their fees wrap around all of a client’s mutual fund trading activity. Not only can advisors tailor their client’s investment goals but this structure also offers a simplified and more cost-effective approach to finance management.

2. Exchange-Traded Fund Wrap Accounts

Although this type of wrap account is similar to a mutual fund, investment choices are slightly more restricted. Exchange-traded funds are only applicable here. However, cost-efficient ETFs make this type of wrap account slightly lower in its fees compared to mutual fund wrap accounts.

3. Separately Managed Accounts

This account is best used by investors with higher levels of assets. It does, however, operate similarly to a mutual fund but is led by a single investor.

4. Unified Managed Accounts

Unified accounts place investments into separate categories that allow for individual strategic management. Furthermore, each category is then designed to maximise return potential and tax efficiency.

5. Unified Managed Household

Accounts that have multiple individuals are managed under this account. Typically, we see parents and children who hold assets together under this type of TAMP.

The Benefits of Working with TAMPs:

As we’ve already mentioned, the underlying key benefit of working with turnkey asset management services is the fact that advisors have more time to focus on serving their clients. With remedial and time-consuming tasks out of the way, clients can expect a greater hands-on approach to their investment management.

From the advisor’s side, this can lead to stronger referral rates too. If you’re looking to grow your financial management business, gaining positive client referrals is crucial. Word of mouth is one of the best ways to generate solid leads and make a name for your services. For more lead generation strategies, make sure to consult our blog post here.

Aside from a positive client service, working with a TAMP can help lower operational costs. The reason for this is that although you’re paying a fee, setting up an in-house management team won’t be needed. Instead of paying additional employees and incurring these extra operating expenses, advisors can simply pay a single fee to the management platform.

Lastly, instead of having multiple case files and running into the risk of client data loss, TAMPs help advisors view their accounts in one place. Let’s take Britech’s dashboard, for example. All of your clients’ assets and financial needs can be accessed in one place. This is a huge time-saver and mitigates the risk of losing confidential information.

Wealth Management Software

Final Thoughts

Using a TAMP could help you improve the way you manage your financial assets and business. Working with the right program can help bring value to your offering while providing assistance in maintaining a winning service.

Learn more today!

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