What is a Turnkey Asset Management Program (TAMP)?

By Rebecca Lake

Working with a financial advisor can help you get a better handle on your investments and other assets. Some prefer a turnkey asset management program or TAMP for handling their client’s assets. It’s important to understand what a TAMP could mean for you and your portfolio.

Turnkey asset management programs offer a streamlined way for advisors to manage client accounts. Some advisors oversee all of the associated tasks that go along with managing client assets on an individual basis. A TAMP allows advisors to outsource certain tasks so they can focus more of their time and energy on others. For example, a TAMP may handle things such as reporting and accounting. As a result, the advisor can concentrate on attracting new clients or helping existing clients fine-tune their financial plans.

A TAMP can also help financial advisors help with due-diligence tasks. Those include investment research and selection, portfolio rebalancing and maximizing tax efficiency. In exchange, advisors pay a fee to the firm offer turnkey services. This fee is typically based on a percentage of the total assets under management the advisor has with the firm.

There are five basic models TAMPs can use to operate and each one has characteristics that make it unique. Here’s how they compare.

A mutual fund wrap account offers multiple mutual funds. Their fees wrap around all of a client’s mutual fund trading activity. As a result, an advisor can design a portfolio of mutual funds tailored to a client’s investment goals. This type of TAMP structure offers a simplified way to manage client assets while reducing fees.

This type of wrap account resembles a mutual fund. However, investment choices are limited to exchange-traded funds. Cost-efficient ETFs give this type of wrap account slightly lower fees compared to a traditional mutual fund wrap account.

A separately managed account is designed for investors with higher levels of investable assets and it operates similarly to a mutual fund with one key difference. Rather than pooling money together from other investors, all of the investments in an SMA are owned by a single investor.

A unified managed account holds various investments inside separate “sleeves”. So you may have one sleeve for stocks, one for mutual funds and another for bonds. Each sleeve is managed in a way that’s designed to maximize return potential and tax efficiency.

This type of TAMP account is designed for managing investments for multiple individuals within the same household. So for example, parents and adult children may hold assets together in a UMH. This type of arrangement is generally designed for high net worth and ultra-high net worth families.

Advisors who use turnkey asset management services primarily reap the benefit of having more time to focus on activities that can directly correlate to better serving their clients. That, in turn, could result in increased profitability if the advisor begins receiving more referrals.

Working with a TAMP could also save advisors money since they’re not having to make what could be a substantial investment to set up an in-house management team. Instead of having to pay additional employees and other operating expenses to outsource tasks in-house, the advisor can pay a single fee to the outside asset management platform.

TAMPs also make it easier for advisors to oversee multiple client accounts in one place. A turnkey program can offer a dashboard allowing the advisor to view all of their clients’ assets, which is another time-saving advantage.

If your advisor is working with a turnkey asset management program, your first question might be what it means for you directly. There are some key questions to ask your advisor, starting with how it may affect the fees you pay.

Remember, your advisor pays a fee to the TAMP for its services. So it’s important to understand if and how any of those costs pass on to you as part of what your advisor charges. Your advisor may not add anything to their fees to make up for what they pay to the TAMP. But it’s always a good idea to review your advisor’s fee schedule so you understand exactly how they’re paid and what you’re paying them for.

Next, you should discuss with your advisor how the TAMP’s investment strategy aligns with your own. Ideally, the advisor should know how a turnkey program selects investments. That should prevent others from steering you toward investments that don’t match up with your needs and objectives. Additionally, the advisor should know whether any potential conflicts of interest exist within the TAMP’s investment selection process.

A TAMP can hamper an advisor’s ability to select investments. This isn’t necessarily a bad thing but it could be detrimental to your portfolio if the program’s choices affect the way your advisor shapes your overall financial plan.

A TAMP could help your financial advisor better manage your assets and their business. Does your advisor rely on this type of service? If so, it’s important to understand what advantages (or disadvantages) that might offer you. Consider talking to your financial advisor about it and seeing if it’s right for you.

• Consider connecting with a financial advisor. If you don’t have one yet and you need help managing your finances or investments. Finding an advisor doesn’t have to be hard, SmartAsset’s free tool matches you with financial advisors in your area in 5 minutes. If you’re ready to be matched with local advisors that will help you achieve your financial goals, get started now.
• Your advisor may pass on TAMP costs to you as part of their advisory fee. Consider what that’s worth to you. Specifically, look at what benefits you might be reaping in terms of your investment performance. Also, consider the quality and level of service you’re receiving from your advisor. Then, determine whether it justifies the added costs.

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