What Is a Turnkey Asset Management Program?

Posted Jul 23, 2022

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Financial advisors and asset managers often turn to Turnkey Asset Management Programs (TAMPs) to help them manage clients’ accounts. 

 These technology-based platforms provide financial professionals with a wealth of tools, including investment strategies, risk tolerance questionnaires, reporting, planning, and other types of outsourced investment support to help financial advisors better serve their clients. By outsourcing certain aspects of their clients’ accounts, such as research, reporting, billing, and other administrative duties, financial professionals can better zero in on their areas of expertise.  

 In this article we’ll take a closer look at how wealth advisors and other financial professionals use the different types of TAMPs, and what that might mean for your portfolio. 


History and Types of Turnkey Asset Management Programs 

TAMPs were first launched in the 1980s as a means to streamline time-consuming account management services. Instead of overseeing all the minute details associated with managing investment accounts, financial advisors began outsourcing tasks such as accounting and reporting, portfolio selection, and rebalancing to TAMPs in order to focus their attention on fine-tuning investment strategies or offering more personalized account management services. 

 Turnkey asset management programs offer various “buckets” of stock, mutual fund, or ETF investments, which simplifies portfolio setup for financial advisors. Today’s technology-based TAMPs also handle a wide range of back-office duties, including asset tracking, automated alerts, compliance, risk analysis, and other support features. 

There are five different types of TAMPs: 

  • Unified Management Account (UMA). With this type of account, different types of investments are placed into their own buckets that are maximized for potential return and tax consequences. One bucket may hold equity stocks, another ETFs, and a third would hold bonds. 
  • Separately Managed Account (SMA). High-net-worth investors and institutional investors may use this type of professionally managed TAMP, which provides a customized investment strategy according to each investor’s risk profile and goals. 
  • Unified Management Household (UMH). A UMH covers the investments for multiple people living under the same roof, such as parents and children. 
  • Mutual Fund Wrap Accounts. This type of TAMP reduces overall trading fees by wrapping around or encompassing all mutual fund trading into a singular account. 
  • Exchange-Traded Wrap Accounts. These accounts are similar to mutual fund wrap accounts but are for exchange-traded funds. 


Advantages of Turnkey Asset Management Programs 

TAMP outsourcing frees up a great deal of time for financial advisors. It’s also financially beneficial to house all TAMP services under one platform rather than hiring out the various investment management support services. Outsourcing also puts those functions in the hands of experts who may be more capable at reporting or accounting than your financial advisor. Your advisor also has more time to work directly with you. 


Disadvantages of Turnkey Asset Management Programs 

 Financial advisors who use TAMPs have less control over asset management since the TAMP provides the investment strategy for the client. There also are costs associated with using a TAMP, and investors are encouraged to determine which fees might be passed onto them for TAMP services. 


The Bottom Line 

 Financial advisors can be crucial in helping investors meet their financial goals. Many financial and wealth management professionals use fee-based turnkey asset management programs to simplify account management and portfolio makeup. If your financial advisor uses a TAMP, you should know what role you have in paying for these investment solutions, how the TAMP may benefit your investment portfolio, and whether the investment strategy aligns with your financial objectives and goals. 

 

This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation.

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