Are you TAMPing it?

Amar Pandit , CFA , CFP

Amar Pandit

A respected entrepreneur with 25+ years of Experience, Amar Pandit is the Founder of several companies that are making a Happy difference in the lives of people. He is currently the Founder of Happyness Factory, a world-class online investment & goal-based financial planning platform through which he aims to help every Indian family save and invest wisely. He is very passionate about spreading financial literacy and is the author of 4 bestselling books (+ 2 more to release in 2020), 8 Sketch Books, Board Game and 700 + columns.

What do you make of this headline? Sounds nice but a little cryptic right. Well, my intention was to make you curious about the word TAMP. Does anything ring a bell yet? Instead of you, I am losing my patience and thus breaking the suspense in the following paragraph.

In case you have never heard of TAMP, it stands for Turnkey Asset Management Program. TAMPs are designed to help financial professionals save time and focus on the things that are truly important for their business such as acquiring new clients and delivering a world class client experience to existing clients.

TAMPs also help firms preserve valuable resources as developing technology is not only expensive but also super risky not to mention time consuming while dealing with the headaches of hiring and managing tech teams in which most firms have no competency. These benefits along with a faster go to market strategy means lower risk, better execution, lower costs, and higher profitability. Let me give you the key operating word here that makes all of this possible – Outsourcing.

For any financial professional, the most important capital is time (as this decides the capacity of the firm, profitability, growth and valuation). Like I have written before, this capital is invaluable and can never be earned back. Thus, we need to create Leverage (a word loved by many financial professionals) by Outsourcing the non-core tasks (and some core tasks that are actually non-core to the business that you are in). Now the critical part is what these non-core tasks are.

According to Investopedia, TAMPs offer back-office support, technology, reporting and tasks such as investment research and asset allocation. The service might also include supplying proposals, wealth management tools, compliance services, and investment policy statements. TAMPs are fee-based services and typically charge between 0.45% and 2.5% p.a. You can expect a reasonable one to charge anywhere from 0.45% to 0.75% p.a. While such fees are absolutely unaffordable in India, they are fairly common in the US.

I am expecting some of you to roll your eyes when you read tasks like investment research and asset allocation as non-core. After all, this is what we do for a living right.

Folks must be stupid to even think of these activities as non-core. And who on earth would be doing this by paying so much in fees?

But you would be surprised to know that TAMPs are big business (billions of dollars) in the US. There are many firms like yours and even ones with billions of dollars. Rather you need a certain size for a TAMP to even call you back. Most if not all (rather all) need a minimum guarantee and won’t call back unless you have sizable assets. The bigger ones understand the benefits of outsourcing and the impact a partnership like this can have on their business. The point being there is a huge demand for their services as financial professionals too have realized the benefits of TAMPs or of outsourcing.

According to AssetMark (a publicly listed TAMP managing $82 billion of assets as on 30th June 2022), the outcomes for advisors who switched are substantial-

  • 7.9 Hours saved per week when outsourcing more than 50% of their Assets.
  • 51% Growth in total assets
  • 83% reporting that outsourcing improved their client relationships

While the benefits of outsourcing are substantial in itself (if done right with the right partner), a collaborative partnership is a completely different ball game.

I won’t get into the nitty gritty of TAMPs (there is too much to cover and it’s the subject of a book in itself) as the intent of this post is not to make you a TAMPion but to highlight some learnings that are relevant to your practice/business.

  1. Don’t try to do everything by yourself. This is the era of collaboration and partnerships so take advantage of the offerings available to you. Firms with billions of dollars under management do this.
  2. (This is a point on outsourcing and not about TAMPs)The biggest ones including banks and giant financial institutions outsource not only within their country but globally too. Look at the rise of TCS, Infosys, Wipro and thousands of technology firms. It’s all thanks to outsourcing the non-core activities. Why do these giant firms do it even when they have loads of capital and expertise to build their own? For one simple reason – this is not their core business. If the giants can, so can you and me.
  3. If and when you decide to outsource, the next biggest step is the choice of a world class partner, one who has been in your shoes before and who will be in the trenches with you to navigate this uncertain changing landscape.

The value of your firm is a direct function of not only what you have done so far but most importantly it is about future growth (remember – finance 101). Your future growth is a direct function of how much time you have to invest in prospecting, client acquisition and delivering an exceptional client experience that further helps with client referrals and so on. Being Busy and Playing Office-Office will give you places to hide (a post on this is warranted) but do you no good. Every firm thus has to intentionally protect their precious time and invest it on things that matter. Because if you don’t take this up personally (and seriously), like the tiny hole in a ship, not investing your time wisely will continue to slowly (and then quickly) erode the value of your firm.