Are TAMPs Really Turnkey?

We won’t bury the lead. Today’s TAMPs are not turnkey.

And, yes, we’ll explain why.

But before we do, we need to look back in time to understand why TAMPs rose in popularity, how the landscape has evolved, and why advisors face more challenges today than ever before.

A Brief History of TAMPS

Turnkey Asset Management Programs—or TAMPs—first emerged on the wealth management scene in the 1980s, alongside the birth of the fee-based advisory model. At the time, TAMPs acted as an alternative to advisors directly picking and buying individual stocks or mutual funds for each individual client, allowing advisors to off-load some portfolio management responsibilities and spend more time prospecting.¹

But that meant many advisors felt they needed to shift how they positioned their value related to investment management. The value narrative became:

If it’s not about how I do my own stock research and “pick winners,” then maybe it’s about how I select the supposedly best managers or funds companies that in turn pick the winners.

Rather than meaningfully pivot the value proposition, the industry essentially just added a layer to the same story.

As a result, two things happened in lockstep:

First, investment products of all kinds proliferated across the industry. Mutual funds, ETFs, and third-party managers became ubiquitous, all competing for advisors’ attention.
Second, TAMPs became marketplaces—endless seas of investment products from which to choose and build portfolios.

This resulted in a less-than-simple program rooted in providing choice, which incentivized advisors to continue selling a manager selection story to clients.

The idea of a supposedly “special” ability to pick winning funds and managers isn’t real. And if you can’t beat the market (and you can’t), you need a new way to stand out from the crowd.

At the same time, client demands changed as they began to recognize the actual value of advice. It’s not about market alpha; it’s about feeling like you're in good hands.

In other words, the value story shouldn’t be centered on picking products. It should be centered on the person for which you’re building a portfolio. The client wants to know that their advisor thoughtfully crafted a portfolio that’s right for them, not that it’s based on some crystal ball beliefs about market movements or magic managers.

It makes sense. After all, we live in an age where we expect that we should be at the center of all services experiences. Look no further than your Amazon product recommendations to know this is true. Amazon isn’t selling us a better product story. They’re selling us what we need because they know us.

But this growing demand for personalization comes with the need to establish new processes, making investment management—and client service in general—more complex.

TAMPs haven’t really moved away from offering vast investment product marketplaces. Instead, they’ve rushed to introduce more features, options, and solutions to their platforms in an attempt to solve these challenges, leading to unintended consequences that can make you question whether the “turnkey” in “TAMP” still belongs–or ever belonged at all.

TAMPs Ignore the Front-End Client Experience

TAMPs do not serve the entire client lifecycle.

They serve a small portion of the client experience—behind the scenes investment management—while ignoring arguably the most essential part of the client lifecycle: discovery.

Think about it: a healthy, trusting client relationship doesn’t start with creating a portfolio out of thin air. It starts with discovery.

Discovery is a critical step in your client experience. It's where you can learn about client goals and discuss their wants, needs, values, investing preferences, risk tolerance, special circumstances, and more. It sets the tone for your entire relationship, as these discussions inform investment recommendations and play a major role in portfolio construction.

Or, at least, they should.

By existing as disparate processes, TAMPs make it difficult for advisors to connect the dots between the financial plan and their portfolio recommendations. The front-end client experience is often completely disconnected from the portfolio.

TAMP users who wish to create a memorable experience from the first engagement can leverage additional financial planning or risk assessment tools as part of their onboarding process. However, connecting these inherently disengaged tools creates additional operational complexity and interrupts what could be a seamless client experience.

Even TAMPs on a mission to acquire companies that address other parts of the client journey aren’t really solving the problem. In fact, they are missing the point altogether: adding more tools doesn’t serve advisors when they are still responsible for connecting pieces of the puzzle together.

TAMPs Reinforce Rather Than Relieve Advisors’ Operational Burden

Since TAMPs don't serve the full client lifecycle, parts of the client journey require additional operational oversight.

But that’s not the only reason TAMPs are falling flat on their promise to alleviate operational complexity.

Manager-Picking Replaced Stock Picking

TAMPs may have removed the need for advisors to pick stocks, but they still require advisors to select asset managers from their model marketplaces.

Plus, TAMPs have not entirely eliminated manual portfolio tasks; advisors still need to make decisions around rebalancing, where to raise cash, and how and when to make model-level trades.

This means advisors need to make important portfolio allocation decisions, tie allocations to specific client scenarios, and pick the underlying investment products that create those exposures on their own—adding significant operational weight to an advisor's already full plate, especially when you multiply these requirements across an advisor's entire book of business.

Optionality Fuels Confusion

As mentioned earlier, many TAMPs—to their credit—recognize that advisors need to employ other solutions to create a standout client experience. They have begun acquiring companies that fill gaps in their original offering to bring these solutions under one roof.

TAMPs will also add platform features as prospective firms tell them what they need. While well-intended, this modularity makes it difficult for advisors to decipher what they need and how the tools connect together across a seamless journey between client and advisor. While some may feel this flexibility enables more customizability, it tends to have the opposite effect, introducing more complexity into the equation.

Lack of Service is the Standard

Unfortunately, TAMPs are willing to sacrifice service for sales.

Most TAMPs do not offer a consultative service that guides firms through implementation and optimization.

They don't have to. It's become a widely accepted fact that advisors have to fend for themselves when configuring their TAMP and applying its functionality to their unique needs. Or, they must hire an operational expert to manage the implementation and ongoing optimization, requiring advisors to sink more costs into a platform not designed to power sustainable growth.

Bringing Intentional Simplicity to the Full Client Investment Journey

Most advisors experiencing TAMP-fueled strife are aware of the process disruption plaguing their firm. They know their front-end client experience is piecemeal, and their back-end operations are unnecessarily complex.

So, the answer is clear: what used to be “turnkey” is no longer–or never was.

However, there is a solution that embraces the benefits of a TAMP without the operational complexity and disconnected front-end experience.

With Seeds, financial advisors can build an intentional, personalized investing experience rooted in their clients' unique investment beliefs. Seeds simplifies your TAMP experience and connects the dots between your back-end operational processes and front-end client experience.

Seeds provides an investment management platform that powers every step of the client journey, from the onboarding assessment to portfolio proposal generation, investment implementation as a sub-advisor, and ongoing client engagement. Because we believe in providing a truly turnkey experience, we work hand-in-hand with you to configure the system for your unique needs without overloading you with optionality.

If you want to maximize your experience and minimize your burden, schedule a demo with Seeds today.

Sources:

1: Kitces.com

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