TAMPs, what does that mean?
Over the past decade, there has been a dramatic shift among institutions and financial planners. In the past, both corporate and individual planners would manage the investments for their clients. That’s changed as most planners now are using outsourced solutions, whether they’re TAMPs, sub-advisors, or third-party asset managers.
At Mack Capital, we provide these solutions for institutional and individual planners alike. Here’s what these terms mean and how each of these outsourced roles can help accelerate your financial planning business.
What Is a TAMP?
A Turnkey Asset Management Platform (TAMP) is a portfolio offering intended to be as turnkey as possible. The company that offers the TAMP would handle selecting the initial stocks or mutual funds (ETFs are far more common these days) and then keep an eye on the portfolio, making changes as required.
Instead of advisors having to monitor these investments and make changes to rebalance the portfolio for each client, they could offer one or more of these TAMP products. Since all the management and rebalancing happens in the TAMP, that time and energy can improve the service provided to existing clients, or the advisor can use that time to find new clients.
In recent years, though, things have changed a little bit. Instead of a TAMP being just a portfolio, the TAMP is now a sub-advisor. So the planner contracts the TAMP as a sub-advisor to manage their client accounts.
Sub-advisor and Third-Party Asset Manager
A sub-advisor is someone that the financial planner contracts to help manage a client’s portfolio. They typically help with the day-to-day management of the fund. A third-party asset manager has the same role – they help with the day-to-day management.
The primary difference between these two roles is who can hire or fire them. If the client can hire or fire them, they’re third-party asset managers. If the financial planner can hire and fire, they’re sub-advisors.
For investment advisors, the sub-advisor role tends to make the most sense. Instead of arranging for the client to work with third-party managers who require signatures and signoffs on every move, the advisor can work with sub-advisors instead. That way, the manager can still provide the client with a hands-off money management service, just without the actual day-to-day tasks of managing the money!
A TAMP is a sub-advisor, as the wealth manager is the one that can initiate or disengage the relationship on the client’s behalf. It’s a streamlined operation that tends to make money management easier for everyone.
How Can TAMPs Help Your Financial Business?
There are three ways that TAMPs can help financial businesses and investment advisors.
First, it makes the investment advisor and client relationship more succinct. Instead of the client choosing a third-party asset manager that they can hire or fire, they’re only a client of the investment advisor under the TAMP arrangement. That means the client still only works with one person or company – the investment advisor. However, that advisor doesn’t have to do all the hard work of actively managing the portfolio. In essence, they “manage” various TAMPs for clients.
Second, since the client is only part of the investment advisor, the advisor can claim their assets under management. If a client gives an advisor $1,000 to invest, the investment advisor then finds a TAMP, contracts them, and gives them the client’s $1,000. However, the advisor is still “managing” this money, meaning that they decide which TAMP to choose. That makes the investment advisor still responsible for the primary management of the client’s money (even if that management effectively amounts to choosing a TAMP!).
Finally, TAMPs can be much more cost-effective for both clients and advisors. It’s not uncommon now to see TAMPs with management fees that range between 0.3% and 1.0%. These rates were unheard of many years ago.
Mack Capital Is Your Trusted TAMP or Third-Party Advisor
No matter if you need a TAMP or a third-party advisor, Mack Capital has experience in this domain. Our Mack Funds seek to raise capital and find opportunities to buy businesses in the private sector. That experience means that we can offer similar combinations of public/private equity for institutional investment advisors.
If you are an institution or an investment advisor that wants to learn more about outsourcing day-to-day management activities, please schedule a consultation with us.
Alternatively, you can call Mack Capital at 713-540-7247. One of our investment experts would love to learn more about your business and see how our custom investment offerings might help you grow your company!