Over the last 13 years, I have been fortunate to meet and work with a vast array of financial planners and to see many business models including the good, bad and ugly.
It comes as no surprise that in the last 18-24 months we have seen an evolution, and in some cases a revolution, in the way many businesses operate and it is exciting to watch a number of innovative models emerge and gain traction.
The current environment is far more complex than just dealing with FOFA. When deciding on the way forward, serious consideration needs to be given to changes in consumer behaviour, digital disruption (access to online education, information & tools) and a population that is increasingly sophisticated and, post GFC, sceptical.
Many principals and practice owners are acutely aware of these issues. They realise that to stay relevant they need to focus on, and leverage, what they do well and not allow unprofitable or non-core activities to consume valuable time and resources.
Turnkey Asset Management Programs (“TAMPs”) have been around in various forms for many years. They are now seeing a surge in popularity due to the transparent, tailored and efficient delivery of investment management they provide to both the adviser and the end client, at a lower cost than traditional asset management.
Importantly, a TAMP allows an adviser to outsource ongoing (and time consuming) investment decisions and implementation, while the adviser maintains the primary relationship. This means the adviser can focus on areas where they can add value, such as strategy.
TAMPs typically use platform technology and are delivered via an MDA structure. The TAMP provider holds a license and contracts with the client and adviser for the service. Most TAMPs utilise listed securities and/or ETFs, but may also use managed funds where specialist skills or specific asset class exposure is required.
A recent survey by Northern Trust in the US, where the terminology ‘TAMPs’ originates, indicates 58% of advisers are now outsourcing investment management. 38% report that they intend to increase the percentage of assets they outsource in the next year.
Of those who have outsourced, 64% said they have more time to spend with clients and 63% have been able to grow more efficiently. Other benefits included support for tactical asset allocation, reduction in costs related to research staff and access to institutional quality due diligence and monitoring.
Like any outsourced relationship, it is important to select the right partner. There is no doubt that a TAMP which fails to deliver satisfactory investment performance will over time negate any of the benefits listed above.
While TAMPs may not be the silver bullet to success, or the right answer for everyone, they are certainly interesting and worth considering as you seek to future-proof your own business.
Matthew Heine joined netwealth in July 2001. He has been instrumental in the development of the distribution, branding and marketing of netwealth since that time. Matthew’s role and experience in the sales and marketing field brings a “hands on” understanding of the industry and client base to the Board. Matthew had previously worked at Heine Management Limited. Matt is a member of netwealth’s Investment Committees.
