Turnkey Asset Management Programs (TAMPs) have become essential for advisors aiming to enhance portfolio management for their clients. These platforms offer a wide range of solutions for advisors that streamline investment management and operations, improve access to best-in-class strategies, and boost competitiveness. Given the vast marketplace of providers, advisors’ use of TAMPs is a significant differentiating factor in optimizing investment performance and improving overall client outcomes.
Efficient Portfolio Management
At its core, a TAMP is a platform. The TAMP platform acts as a type of marketplace where financial advisors may access a variety of third-party asset management solutions and model portfolios depending on the needs of firms and their clients. Registered investment Advisors (RIAs) and TAMPs typically work in tandem to create cohesive client solutions, where the advisor deals directly with the TAMP and clients communicate directly with their RIA.
TAMPs offer a wide array of services through different custodians, which helps streamline the investment process. RIAs and advisors largely utilize TAMPs to outsource the management of investment portfolios and the daily administrative tasks that support trading operations. Tasks like compliance checks, tax-loss harvesting, and portfolio rebalancing, among others, can be delegated to third parties via TAMP platforms.
Before TAMPs, firms and their advisors had to identify and contract with managers for use of their investment offerings. Firms would typically negotiate fees, enter into unique contracts, and coordinate the logistics for their trades. As different custodians handle different tasks or had their own unique offering, the logistical load increased accordingly for each custodian a firm engaged.
TAMPs have largely eliminated this back and forth and streamlined the process for advisors that use them by creating a centralized place that provides access to various managers and model providers. This helps solve the logistical problem of sourcing individual managers and allows advisors to choose from many options with standardized offerings and fees, thus freeing up more time for advisors to focus on scaling their businesses and spend time with clients. “We’ve historically operated in the institutional space, making our suite of investment strategies less accessible to advisors,” says Bob Peatman, senior vice president at SSI Investment Management. “Through SSI’s partnerships with TAMPs, advisors are now able to easily access and benefit from SSI’s Flexible Allocation Strategies. By outsourcing investment management and simplifying business operations, advisors can focus on building deeper relationships with their clients.”
The variety of offerings is crucial, helping advisors to pursue strategies that align with their client’s risk tolerances and financial goals, saving both time and resources. One way advisors can achieve this is by blending models on a TAMP platform, which involves combining different investment strategies to create a tailored portfolio. “The technology that exists on many of these third-party asset management platforms provides the ability to blend different model portfolios and really see how the whole portfolio looks under the hood – its exposures, sector risk, country risk, etc.,” says Eric Biegeleisen, partner and deputy chief investment officer at multi-asset investment management firm 3EDGE Asset Management. Firms like 3EDGE are building their own tools internally that can allow advisors to solve for blending models via TAMPs. These strategies help expand an advisor’s capabilities, and ultimately, may increase the scope of what they’re able to achieve.
“Quantitatively, you might have an advisor or client who wants a particular volatility target, a Sharpe ratio, or return target. We can work with advisors to select a benchmark they like and then help determine a blend of solutions that seek to get them to their target. From there, you can see how they may be able to increase returns or lower drawdowns while maintaining that same level of volatility,” Biegeleisen adds. TAMPs can serve as a crucial conduit for expanding the distribution of such tailored investment strategies, connecting asset managers with a broad network of advisors.
Enhanced Distribution of Investment Products
TAMPs act as a marketplace, facilitating the distribution of diverse investment products and strategies. By connecting asset managers with financial advisors, these platforms can help expand the reach of investment solutions, enabling RIAs and advisors to offer custom solutions to their clients.
One such example is the availability of ETFs in different macro asset classes, allowing for liquidity and different levels of risk tolerance. Another is through the use of Unified Managed Accounts (UMAs). Many TAMPs offer UMAs, allowing advisors to consolidate multiple model portfolios into a single account. The integration simplifies management and helps to provide a comprehensive view of the client’s holdings. Further, TAMPs can facilitate the delivery of advanced analytical tools. Platforms like BlackRock’s Advisor Center, for example, provides tools that aid in the assessment of combined portfolio exposures, sectors, and geographic allocations. BlackRock is one of the few providers of such a platform, but firms and RIAs throughout the industry are expected to create similar platforms as the access to customized models via TAMPs and other technologies increases as well. Technology like Advisor Center, says Bob Peatman, “enables SSI to direct advisors to a research tool that will assist them in efficiently screening various manager solutions, exploring customized offerings, and analyzing holdings that are critical for portfolio construction.”
Some firms, like Biegeleisen’s 3EDGE, develop proprietary internal tools to facilitate model blending. These tools help advisors quantitatively assess and adjust the mix of models to achieve specific investment objectives. The use of TAMPs can allow for tactical adjustments to the asset allocation – for example, leaning towards asset classes that are expected to outperform while avoiding those with higher risk in the short term.
Larger RIAs may prefer third-party solutions for their investment strategy and may not commit their assets to one specific custodian. RIAs can build a custom “stack” of custodians via TAMP platforms that can work in multiple custodians without needing to change anything in their day-to-day processes, regardless of the custodian a client or advisor chooses. Conversely, broker-dealer environments have typically offered fewer models from fewer managers.
These strategies can help advisors to create well-rounded, customized portfolios that may meet the diverse needs of their clients. In addition, the variety advisors can choose from as a result of TAMP flexibility ultimately can give them an advantage over their competitors.
Boosting Competitiveness in a Crowded Market
In a competitive investment landscape marked by firms integrating technology at a rapid pace, TAMPs can provide advisors with a significant edge. By offering tools for blending model portfolios, advisors can create investment strategies that may meet specific client targets like volatility or tax optimization. Platforms by firms like BlackRock’s Advisor Center offer insights into exposures, sectors, and geographic allocations, enabling advisors to target enhanced returns or to reduce drawdowns while seeking desired risk levels.
Moreover, TAMPs can facilitate the inclusion of alternative investments, hard assets, and currencies, which can serve as effective hedges against market volatility. TAMPs also help advisors remain competitive and offer diverse asset classes to their clients. “Alternatives have historically been offered at high minimums and at a relatively high cost,” says Peatman of SSI. “However, technology has changed the landscape by providing a broad range of reasonably priced alternatives through TAMPs or their strategic partners. SSI believes alternatives are an important component of multi-asset portfolios, and we utilize alternative ETFs in our Flexible Allocation Models to diversify returns and manage risk.”
In conclusion, TAMPs are transforming the methods by which the financial advisory industry selects high-quality financial products and executes its day-to-day operations. By providing a wide array of model portfolios, blending capabilities, and robust downside protection strategies, TAMPs can empower advisors to seek to deliver customized, effective solutions. As the industry continues to evolve, TAMPs will likely play an increasingly vital role in shaping the future of how the investment management industry operates.
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