Rising TAMP

By John Bowen

The key to building a hugely successful asset management business is to develop great relationships with your clients—on purpose. Strength in building long-term relationships with top clients, and differentiating yourself from the competition, will give you a significant competitive advantage. However, the big questions for many financial advisors are: "How do I do this?" And, "Even if I knew how, how do I make the time?"

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To accomplish this goal, you must develop a financial planning business that consistently delivers more value-added than your competitors do in your target market. For advisors, one of the most successful strategies to make time to build client relationships and beat the competition is to make use of the investment-consulting process. And, a rapidly growing value-added solution for those who want to make use of the investment-consulting process is using a turnkey asset management program.

TAMPs provide, to varying degrees, a soup-to-nuts investment solution that advisors can utilize to provide client profiling, asset allocation recommendations, mutual fund selection, performance reporting, back-office support and marketing assistance. In other words, non-core tasks are farmed out (but still under your supervision) while building client relationships becomes the primary focus of your time and energy.

Basically, there are two types of advisors: those that are "asset managers" and those that are "asset gatherers." In the past, most advisors have chosen to go it alone. They have followed the traditional model with the advisor doing everything: asset aggregation, investment policy statements, asset allocation, investment selection, performance reporting, customer service and, oh yes, running their practice.

These are the "money-management specialists." Unfortunately, we've found that advisors who try to do everything, on average, do not have the same level of success as advisors who outsource many of the investment processes and stay focused on their client relationships.

As advisors increasingly focus on their client relationships, they recognize that one of the more successful models is to be "just" an asset gatherer working in partnership with a money management firm. This is proving more effective than trying to be all things to all people. So, to accomplish this goal they are outsourcing much of the investment solution to a TAMP that shares their same investment philosophy.

We found that advisors' net income increased significantly as the percentage of financial advisors who choose to position themselves as money-management specialists decreased from 31.8 percent to 14.3 percent. As the net income of financial advisors increases, there is a higher propensity to outsource everything but their core competency: client relationship management. Elite financial advisors use their core competencies (most often their skills in relationship management) and outsource as many components of their business as possible. And many, to their client's advantage, have successfully partnered with financial institutions to provide support beyond their core competencies. Partnering allows advisors to deal successfully with the demands on their time, give their client relationships top priority and significantly leverage their own talent and expertise.

In evaluating and redesigning your business, you want to identify those essential attributes regularly employed by successful advisors that will give you and your practice the highest probability of success. Conclusion: If we want more success as advisors, we need to seriously examine the opportunities for outsourcing non-core services. Many advisors are doing just that, which is why TAMPs are enjoying significant growth.

Last month I had the opportunity to share these concepts with hundreds of independent financial advisors in a national series of workshops entitled "Maximize the Bottom Line." I found almost universal agreement among attendees who said they were so busy trying to do everything that they'd lost focus on what was important: serving their clients. They wanted to be more client-focused and they did have an investment- consulting process that differentiates them from competition, but they did not know how to accomplish this.

Fortunately, the timing could not be better for advisors to be looking to financial institutions for support. Progressive institutions recognize that advisors are indispensable to the affluent marketplace. If these institutions are going to work with advisors, they recognize that they must do more than provide products. A typical financial advisor receives offerings from more than 100 mutual fund companies, insurance providers, asset managers and retirement providers each week! With a typical advisor managing client investments, continuing education requirements, compliance training, technology updating and meetings with clients, there is simply not enough time left in the day to evaluate all this sales material in an efficient, useful way.

To compete effectively for the attention of a financial advisor, institutions must compete on a value-added proposition basis-that is, a clearly defined two-way exchange that mutually benefits both parties.

Among financial services companies, a product manufacturer provides quality products, service support, technical support and value-added components such as business-building support and market and client information. In exchange, the advisor buys the institution's products for his or her clients' portfolio. Besides product purchases, however, the advisor provides the institution access to clients.

After first identifying which high-quality providers are suitable for your clients, then take the next step and identify which of those (and which features) will help you grow your business and help you become more client-focused. Identify which features would provide a foundation for a solid long-term relationship on both sides if managed effectively. Use the resources available through financial institutions that specifically help you leverage your core competencies. In other words, form strategic alliances with those firms that will add substantial value to your practice.

Ideally you want to have the TAMP take over all investment management responsibilities other than asset aggregation and client service. At a minimum, TAMPs should provide you with support in three major areas:

• Technical support on their own products, as well as on issues you face in delivering services to your clients such as client profiling tools, investment policy statements, investment management, back-office support and performance reporting
• Marketing and sales support, focused around training or turnkey processes that help you build your business by attracting affluent investors for your investment services, and
• Practice management support; that is, bringing you the best ideas and practices of other financial advisors.

If you are to maintain a high-quality, consistent experience for your clients, evaluate each aspect of your practice by whether it best serves your clients and your business to be fulfilled inhouse or outsourced. Elite financial advisors explore outsourcing everything but their core competencies. With today's competitive markets, it has never made more sense for financial advisors to consider partnering with a TAMP to differentiate themselves from the competition.