An increasing number of financial advisors are outsourcing their asset and investment management to third parties. According to a recent study by Tiburon Strategic Advisors, the sector had been managing $1.75 trillion in assets by the end of last year.
This kind of outsourcing, often referred to as TAMP (turnkey asset management programs), provides a wide variety of financial services — such as account administration, billing, and reporting — in addition to asset management.
Essentially, TAMPs let professionals delegate asset management responsibilities to another firm that specializes in it. TAMPs can serve all types of investors, from mass market to lower-net-worth clients to ultra-high-net-worth individuals.
According to “America’s Best TAMPs” guide, outsourced investment management is fast becoming a best practice for trust companies, broker dealers, registered investment advisor firms (RIAs), and family offices.
The market includes roughly 36 major companies, and approximately 25% of advisors are now outsourcing to TAMPs, according to Tiburon. Some reports say investment advisory firms with less than $50 million in AUM (assets under management) are more likely to outsource asset management.
Most often, advisors burdened by heavy workload caused largely by expanding business volume turn to outsourcers for their technology. Later they end up outsourcing many functions of their business. Some advisors outsource more services to avoid hiring more employees.
Most of the TAMPs provide what they call an “all-inclusive solution” that includes the automation of major financial management tasks, thus allowing the advisor to spend minimal time on investment management. Sometimes, people who worked as money managers or investment advisors in the past become outsourcing service providers.