What Is a Turnkey Asset Management Program?
A turnkey asset management program offers a fee-account technology platform that financial advisers, broker-dealers, insurance companies, banks, law firms, and CPA firms can use to oversee their clients’ investment accounts. Turnkey asset management programs (TAMP) free up these professionals’ time to focus on providing clients with service in their areas of expertise, which may not include asset management tasks like investment research and portfolio allocation.
TAMPs also handle account administration, billing, and reporting. Essentially, TAMPs let professionals delegate asset management responsibilities to someone else who specializes in it. TAMPs can serve all types of investors, from mass market, lower net worth clients to ultra-high-net-worth individuals.
Turnkey Asset Management Programs Explained
Delegating asset management helps professionals who use TAMPs to increase profitability by freeing up more time for tasks like attracting new clients and meeting with clients in person. TAMPs can also save their clients money as it can be expensive to develop a proprietary asset management system if the company does not already have one in place. Using TAMPs also helps wealth advisers limit their risk of being sued for poor investment performance. By outsourcing investment selection and management, they transfer part of that risk to the TAMP.
TAMPs have become considerably more popular in recent years, with a steady increase from about $50 billion in assets under management in 2008 to nearly $250 billion in assets under management in 2013. Major TAMP providers include Envestnet, SEI, and Genworth.
Types of Turnkey Asset Management Programs
Mutual fund wraps, ETF wraps, separately managed accounts, unified managed accounts, and unified managed households are five types of TAMPs. TAMPs typically charge fees of about 0.85% to 2.80% depending on the amount of assets under management and the complexity of the investments held.
TAMPs are available in both off-the-shelf and customized varieties. They are often privately labeled, meaning that it is not apparent to clients that a third party is handling their investments.
In addition to the base technology they provide, TAMPs can offer additional “back office” support such as setting up automated alerts, asset tracking and reporting, and other dashboard features. The service might also include supplying proposals, wealth management tools, compliance services, investment policy statements, and might also conduct risk analysis.
Even with these benefits, TAMPs include caveats. The fees for using a TAMP can start at 85 basis points and rise from there. Moreover, by involving a third party, a financial adviser does not have as much direct control compared with overseeing client’s investment accounts on their own.