The use of TAMPs is widespread in the US. But google ‘Tamps in the UK’ and the first result you’ll get is for a British stamp dealer, followed by the Royal Mail!
So what is a TAMP, what sets it aside from other model portfolio services, and how does it give advisers the opportunity to grow their business and improve profitability?
Let us explain.
Defining a TAMP
Investopedia gives us this definition:
A turnkey asset management program offers a fee-account technology platform that financial advisers… can use to oversee their clients’ investment accounts.
In a nutshell, TAMPs use technology to provide all elements of a Centralised Investment Proposition, from the initial fund screen to portfolio delivery, streamlining the adviser’s process of managing portfolios, ensuring consistency across the client base and supporting advisers in meeting their regulatory responsibilities.
As such, they are equally a service for business management as much as investment management.
This is what makes them very different to other model portfolio services, and which enables them to transform the way an adviser does business.
How does it do this?
All TAMPs are not created equal, but good ones will enables advisers to free up their time, and offer a much more efficient service:
1. Technology that streamlines all processes – TAMPs usually sit within a Software as a Service (SaaS) business model, providing a technological solution to support the adviser in all aspects of investment.
This may include selecting the right asset allocation/portfolio/model for each individual client in line with their risk profile; presenting the strategy and reviewing it with clients; performance reporting and benchmarking; portfolio analysis, record keeping and documentation; automating alerts, e.g. for portfolio drift, portfolio rebalancing and other dashboard features.
In Betafolio’s case, the online datahub ‘Control Centre’ provides a one-stop-shop for all the information you might need to service your clients.
2. The investment strategy is taken care of – Having selected the TAMP, the adviser steps away from the investment process. Investment professionals set the asset allocation strategy and undertake investment research, both quantitative screening and qualitative evaluation, to select appropriate instruments or funds. This also relieves the adviser of the ongoing analysis of manager performance relative to the market and industry peers, investment philosophy, buy/sell discipline and style consistency. The TAMP holds the manager to account.
3. Competitive advantage - As an aggregator of adviser business, TAMPs are often able to get fuller access to asset managers, who may see them as a distribution centre for their own communications, and at a certain scale are sometimes able to secure advantageous fund fees.
4. Total independence - The adviser remains responsible for ensuring the investment strategy is suitable for each individual client’s needs as the TAMP has no relationship with the retail client. Good TAMPs can be white labelled, allowing advisers to use their own branding and present an ‘in-house’ investment solution. This suits firms that want to reassure clients that they retain responsibility for all aspects of the financial planning service.
5. The ongoing portfolio implementation, monitoring and rebalancing is also taken care of – the TAMP technology supports oversight of the account set up, facilitation of asset transfers and re-positioning strategies; cash management; ongoing monitoring against asset allocation targets and associated risk profiles; portfolio rebalancing.
6. Regulatory support is embedded – initial and ongoing investment due diligence will be held on record enabling the adviser to meet all regulatory requirements needed to support the investment proposition. The TAMP may produce an Investment Policy Statement to document the philosophy behind its portfolio management, providing a comprehensive record of all elements of the investment process. Risk analysis will be taken care of on an ongoing basis.
7. Retirement planning can be facilitated – the TAMP may be able to facilitate decumulation and provide the adviser with a Central Retirement Proposition.
Choosing an outsourcing partner for investment business is a serious commitment that is difficult to unwind, not least because it involves explaining to clients that you made a mistake and chose the wrong provider. No adviser wants to have that conversation. Thorough due diligence is required - including full research of the TAMP’s investment capabilities so you can be confident in the level of expertise and resource on offer. With the right partner, advisers can create the opportunity to grow their business and improve profitability.
While we agree with Investopedia that a TAMP is a technology-driven solution, it is also a business partner, that collaborates with the adviser in the shared goal of providing best-in-class service to the end retail client. Advisers need to be able to speak with a human to deal with the real-life day-to-day issues that will always come up when servicing real-life clients.
Over the next 10 years we expect to see TAMPs, and outsourced investment offerings, growing rapidly in the UK market as advisers focus on adding value through financial planning and coaching their clients. And we intend, of course, to be leading the way.