The TAMP industry is having a moment. With considerable growth in the past few years, despite the market eroding some $6 trillion in investor assets¹, TAMP assets are at $2.5 trillion and expected to continue to grow 25% annually.² And it’s not hard to reason why when you consider the evolution of the advice industry and the advisors who are part of it.
At the heart of the matter is the fact that clients are seeking greater personalization and comprehensive wealth experiences. To meet those demands, advisors need to find ways to effectively deliver those experiences for all of their clients. And as technology evolves to automate, streamline and regulate functions that were once manual — while becoming more cost-efficient — TAMPS become a vital part of an advisor’s business.
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The Rise of the TAMP
Dating back to the late 80s/early 90s, TAMPs started out as providers of portfolio construction and oversight, making ongoing adjustments as needed. Some offered back-office operational services along with portfolio management, which enabled advisors to spend more time growing their businesses and meeting with clients.
Over the next few decades, TAMPs evolved to offer advisors the ability to outsource a myriad of investment management and administration, such as asset allocation, manager and fund selection, trading, performance reporting, billing, and account administration.
TAMPs have evolved significantly and now the marketplace consists of traditional TAMPS and newer, more tech-focused supermarkets. They are still focused on outsourced investment management but many of them are broadening their offering to be a comprehensive wealth management platform that delivers everything advisors need.
How TAMPs Benefit Advisors
Within the next decade, 37% of financial advisors — collectively controlling $10.4 trillion or 40% of total industry assets — are expected to retire.³ That’s a lot of clients and a lot of assets passed to the next, smaller generation of advisors. TAMPS provide the technology, marketplace, and services that enable advisors to outsource a host of investment-related functions, creating efficiencies and capacity that they need to focus on clients.
As the industry moves away from transactional business toward a wealth planning mindset, TAMPs help to create capacity so advisors can spend more time building relationships and delivering personalized experiences to their clients.
Breaking Down the Benefits for Advisors
- Modern technology platforms, including integrated compliance
- More automated, efficient business processes
- Expanded expertise with access to additional capabilities, such as insurance, credit, or specialized services for affluent or business owner client
- More time to focus on client relationships and prospecting
- Skills and capabilities that differentiate them from the competition
- Scalable growth through outsourced investment management and model portfolios
Scalability with Model Portfolios
TAMPs can help advisors embrace the practice of using model portfolios for clients, commonly considered as a way to gain scalability. According to a new report from Cerulli, the trend toward a planning-oriented service model is considered “a powerful impetus for the adoption of model portfolios.”⁴
One of the driving factors behind the preference for using model portfolios is time management and the report notes that among advisors, those who either customize client portfolios or use practice-level resources to build custom models spend between 18.5% to 29.5% of their time focused on investment management. Advisors who use model portfolios are able to reduce that to less than 10% of their time.⁵
How TAMPS Benefit Clients
As investors expect more nuanced and personal investment experiences, advisors need ways to be able to offer customizable wealth solutions and services. TAMPs provide services and access to solutions and strategies that can help advisors expand their offering to meet specialized client needs, such as:
- Custom indexing, ESG, tax alpha and other specialized investment strategies
- Cashiering and money management
- Proactive tax optimization including tax loss harvesting
- Tailored high-net-worth solutions
- Other strategies and services such as insurance, credit, trust, and estate services
Outsourcing investment management through a TAMP means clients benefit from the superior depth and breadth of resources of professional money managers, including proven investment philosophies, research and due diligence, access to CFAs and other specialists, portfolio rebalancing and optimization technology.
Breaking Down the Benefits for Clients
- Access to more customized strategies, services, and solutions
- Professional portfolio construction, implementation, and management
- Potential for higher overall returns through proactive tax management
- More personalized experiences and deeper connections with their advisor
Better Client Experiences
Clients of advisors who outsource can both directly and indirectly benefit from a TAMP partnership. Advisors with more time to focus on relationships will gain a better understanding of client goals, mindset, reactions to market events, and financial developments — all directly impacting their ability to serve clients more effectively.
During the market volatility of the COVID-19 pandemic, 66% of advisors who outsourced reported being able to spend all their time with clients because they didn’t have to worry about investments.⁶
A Win-Win
As the wealth business becomes more personal, more planning-focused, and more nuanced, managing clients requires more time and outsourcing becomes even more necessary to deliver better outcomes and to keep growing.
A TAMP partnership delivers tangible advantages like integrated advisor and client tech and investment capabilities, giving advisors the tools and time to spend delivering the best wealth experience to their clients.
Learn more about how Orion can help you unlock scalable growth and deepen your relationships with clients.
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