ELITE ADVISOR BEST PRACTICES

TAMPs Power Strategic Alliances

How a turnkey asset management provider can move your wealth management practice to the next level

By Ernest Clark

Key Takeaways:

  • According to a 2010 study from CEG Worldwide, the wealth management business model combined with a collaborative service model receives the highest revenue of the business models examined.
  • The benefits of a collaborative service model using a wealth management TAMP are significant.
  • There are several factors to consider when selecting a wealth management TAMP.


In today’s complex environment, Registered Investment Advisor (RIA) firms may find that their growth is limited because of the time required to manage their practices. To avoid this problem, firms have begun moving to a service model that includes a strategic alliance with an outside service provider, most commonly a turnkey asset management provider (TAMP). The goal: to move their business to the next level.

CEG Worldwide’s research of CPA firms that are building financial service practices indicated that the firms using the wealth management business model along with a collaborative service model received the highest revenue of the business and service models examined. CEG Worldwide defines the collaborative model as a CPA firm that provides financial services and products through employees or partners and through strategic arrangements with financial service providers outside the firm.

One approach would be to select a wealth management TAMP before selecting other strategic alliances, as other alliances typically enhance the offering of the selected wealth management TAMP.

Four Benefits of a Wealth Management TAMP

1. Profitability
The fee-only RIA business is a top-line business. The margins can be so large that a significant part of an increase in revenue will fall to the net income. A wealth management TAMP can provide significant intellectual capital to assist in growing assets under management (AUM) at a variable cost rather than at the fixed cost of adding the intellectual capital internally. Growing revenue and a variable cost provide a powerful combination that has been shown to drive profits.

2. AUM Growth
By outsourcing day-to-day administrative tasks, an RIA firm has both the time and the focus to enhance client service and gain new pathways for experiencing significant revenue growth. In addition, the firm has access to best practices in business processes, training and tools.

3. Leveraging Services
An RIA firm using a wealth management TAMP leverages its service offering by expanding the firm’s internal team to include outside team members who help to identify and harvest clients’ financial opportunities. By combining internal and external team members, the firm can set itself apart from the local competition.

4. Quality of Life
The wealth management business is a relationship business. With a TAMP as a strategic alliance, the firm has more time to deepen its client relationships, which leads to additional assets, referrals and job satisfaction. In addition, advisors have more time to achieve important quality-of-life personal goals.

Ten Keys to Selecting a Wealth Management TAMP

Although a wealth management TAMP can provide significant value to an RIA firm, finding an appropriate TAMP can be a challenge. A TAMP can be found through recommendations from successful advisory firms, industry experts and mutual fund companies. The following is a list of factors to consider when reviewing a TAMP:

1. Philosophy
The TAMP’s philosophy in critical areas should align with your firm’s philosophy. This includes focusing on the client’s best interest, following a fiduciary standard of care and building trusted relationships. Client solutions should be based upon a deep understanding of the client and followed by a custom-designed wealth management plan.

2. Back-Office Support
The core day-to-day support from the TAMP is back-office support. The TAMP must excel at this core offering, meaning it should be able to serve the distinct needs of your wealth management clients.

3. Intellectual Capital
The TAMP should provide your firm with access to intellectual capital. This includes subject matter experts and best practices for business processes to attract and serve high-net-worth clients. Such experts would have a broad base of educational backgrounds and include CPAs, attorneys, MBAs, wealth strategists, fixed income specialists, established authors and researchers.

4. Technology
The TAMP should offer technology tools that are customized to serve the complicated needs of your high-net-worth clients. These tools should be designed to save your firm time and increase the amount of services your firm is able to offer clients.

5. Training
The TAMP should provide different training programs designed to educate assistants, beginning advisors and the most experienced advisors. Programs should offer on-site training programs, ongoing training on current topics, annual conferences and lifelong learning.

6. Compliance Support
Compliance is increasingly cited as a major drain on a firm’s operational efficiency. The TAMP should have a strategic compliance partner that has working knowledge of the TAMP’s tools and can act as a consultant on compliance matters inside your advisor firm. This teamwork can provide a seamless compliance solution.

7. Communications
The TAMP should offer solutions for today’s communication opportunities, which may be key to developing new clients. The tools can include Web site templates, a PowerPoint presentation slide library, books, articles written by subject matter experts, brochures and quarterly client newsletters.

8. Support for Serving Institutional Clients and Retirement Plan Services
A wealth management advisory firm’s core service offering is typically designed for individual clients. Serving this group of clients may lead to referrals to serve institutional and retirement plan clients. Selection of a TAMP with strong support in institutional and retirement plan services can assist in converting the referral from an individual wealth management client into an institutional or retirement plan client.

9. Risk Management Services
Wealth managers normally “lead with” a fee on managing the client’s assets. In some instances, the wealth manager may discover a risk that could prevent a client from achieving his or her goals. Often it is possible to transfer risk to an insurance carrier for a known fee. The TAMP should be ready to provide a risk management solution for the end client that is aligned with the wealth manager’s philosophy.

10. Coaching
The TAMP’s existing clients should be part of a network of entrepreneurial professionals who are driven to build successful firms. Through this network, you can build and strengthen peer relationships that add significant value to the building of your firm. The TAMP should provide robust access to this valuable resource.

Conclusion

Each advisory firm has to decide how it will successfully deliver services to its end clients. According to CEG, firms with a collaborative service model received the highest revenue of the business models examined. These firms focused on serving the end client with best-in-class service at a variable cost.


About the Author

Ernest Clark, CPA/PFS, is a principal and the director of wealth management of BAM Advisor Services, LLC, a comprehensive service provider for independent Registered Investment Advisor firms across the country.