WTH is a TAMP

The TAMP is back in vogue (it never really went out, to be fair). A TAMP is a Turnkey Asset Management Program. 

The official term is loose, and no ‘one size fits all’ approach pegs all business models together. There are multiple types of TAMPs: from least to most sophisticated are (1) mutual fund wrap accounts, (2) ETF wrap accounts, (3) separately managed accounts – SMAs, (4) unified managed accounts – UMAs, and (5) unified managed households – UMHs. There are also platform TAMPs that offer the complete kit, but that’s another conversation.

The history of TAMPs is that they started to originate in the late ’80s, allowing registered investment advisors (RIAs) and broker-dealers (BDs) to outsource their operations. Outsourcing those operations enabled the RIAs and BDs to focus more on sales to clients and provided third-party investment strategies (actual portfolios). 

TAMPs are utilized by these RIAs and BDs (i.e., wealth advisors – the intermediary market) to outsource duties typically done internally. I view it broken into three buckets; (1) RIAs who have a fiduciary duty and registered with the SEC, (2) BDs who have a suitability standard and registered with FINRA, and then (3) the hybrid, which is both an RIA and BD, registered with both. Hybrids can take any client and use almost any instrument.  

This trend for advisors has been evolving towards an advice-based service vs. service-based. Wealth Advisors utilize a TAMP for their operational needs and focus more on the client. I believe everyone can agree that automating functions & duties to focus more on the client is beneficial (keeping all else equal). 

For the most part, TAMPs focus on being a SaaS offering, and some offer white-labeled wealth management platforms. Platforms access individual asset managers’ funds and capabilities to run advisory services – direct support included. Each company (mostly all) also conducts due diligence on the investment managers (their highest expenses) whom they let on. That control allows TAMPs to decide whom to let into their program and platform.  

The cost structure is usually a single-wrapped retail client fee. Michael Kitces said, “TAMPs have historically charged as much as 75 basis points or even a full 100 for their services. The next generation of more passively-orientated TAMPs is coming in at 50 basis points or lower for larger RIAs.” 

TAMPs differentiate between themselves by a multitude of factors, not limited to the following: 

1) The number of managers on the platform to choose.

2) Availability of specific asset managers. For example, DFA funds.

3) Capabilities of overlay tools.

4) Ease of adding desired new asset managers. 

5) Develop “rep as an advisor” or customized sleeves.

6) Fees for entire accounts or just a relationship.

7) Trading network integrations.

8) Integration with 3rd party tools.

9) Automated compliance (AML, KYC, PEP).

Those differentiated reasons are why an advisor may select a TAMP over another – and this is also what creates competition: select asset managers, level of automation, the enabling of maximized client-facing activities. Also, if a TAMP provides an opportunity to develop unique asset allocation models with specific securities to sell (rent) to other advisors is a feature that many platforms have started to adopt.

Typically platforms may also include overlay tools that allow managers to maintain tax and trading efficiencies; trading networks for securities and manufactured products; sleeve and account reporting, automated rebalancing tools, and fee breakdown of client revenue. It’s essential and a unique capability if a platform provides the opportunity to develop unique asset allocation models with specific securities to sell (rent) to other advisors.  

The types of TAMPs one can use in the market these days equate to a small number when you whittle it down. Perhaps 20 exist that aren’t incumbents, which you can easily Google. For example, some of those incumbents and their hybrid TAMP offerings are: 

Schwab and their Intelligent Portfolios:

  1. Is their robo-advisor who builds, monitors, and automatically rebalances a diversified portfolio of ETFs.
  2. A managed account platform where you can select a variety of money managers, research, and an ability to choose from single or dual contract SMA structures.
  3. A marketplace where they host their TAMP partnerships.

Schwab provides a roster of 3rd party solutions and makes them available to those who custody on their platform. Their marketplace approach allows advisors to use bespoke options for their end clients, ranging from performance reporting, portfolio construction, and other back-office services. 

Another example is Pershing who offers a managed account network and provider, Lockwood Advisor (which BNY acquired years ago), with its product, Managed360, where you can create proposals to performance reporting. Additionally, they partner with Envestnet, FolioDynamix, and Morningstar through their managed account network to provide a full suite of capabilities: trade and administration, rebalancing tools, advisor marketing support, portfolio design, construction, are a few others.

There are many nuances to TAMPs: costs, capabilities, access, service models, target market, Etc. There’s not a one-size-fits-all solution out there, and multiple companies are blurring the lines.

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