Streamlining the Investment Management Process – Part I: The Top 5 Operational Lessons to Learn From A TAMP

By Amy McIIwain, President, Financial Social Media on Tuesday, October 4th, 2011

It’s no secret that a streamlined investment management process one of the keys to an investment firm’s overall operational performance.  Numbers talk. And what they’re saying is that TAMPs have been very successful. Just look at the growth in TAMP assets: according to Tiburon Research, TAMP assets grew from $16 billion to $250 billion over the past 10 years during a market period when the S&P 500 drew flat returns.

In our first installment in a multi-part series about streamlining the investment management process, from research to asset allocation, investment modeling to rebalancing and trading, we will focus on why TAMPs or Turnkey Asset Management Programs must maximize their efficiency and how these lessons can benefit your firm. 

Specifically, there are five reasons a TAMP platform is a model for success:

1.) TAMP’s provide outsourced back office functions for their advisor clients

TAMP platforms must leverage technology to streamline the asset allocation modeling, trading, performance reporting and other back office services for their advisor clients. By approaching your operational environment as a product that you sell to customers you can identify “un-profitable” areas which can be improved using technology or outsourced.

2.) TAMP’s must balance flexibility with standardization

TAMP platform providers must rely upon standardization to manage the rebalancing and trading processes and other operational services in an effort to achieve straight-through processing. To achieve standardization advisors must either reduce the number of custom options available to clients or find technology that can manage custom options in a streamlined way.

3.) Integration is essential

TAMPs utilize integrated systems to handle each step of the process, including; on-boarding, management of various investment models, individual investment accounts, billing requirements, performance reporting and trade execution. The discussion of integration is not new but the tools often are. Identify areas to improve and then look around for technology that can fill the gap.

4.) TAMP’s share in the historical success of others

Advisors can manage self-directed investments in a TAMP but many advisors choose outside investment management styles available through the TAMP platform. That means you can incorporate the expertise of money managers with distinctive investment styles and methodologies into your overall investment strategy. 

It’s simple: Outside investment managers communicate their investment strategies or models to the TAMP, which then implements the changes across all of the associated firms and accounts. As a result, these investment managers reach a wider audience of advisors, while you gain access to professionally-managed investment styles.

5.) You can create an in-house TAMP as well

If your firm successfully integrates your systems and standardizes your operational processes, you may wish to leverage this expertise and build an in-house TAMP. Taking this step would allow you to bring on additional advisors or smaller firms. 

As a case in point, McLean Asset Management recently discussed their in-house TAMP with RIABiz (http://www.riabiz.com/a/8011006). Per McLean’s stated objectives, they are using their 401(k) TAMP platform to bring in smaller RIAs who are looking to outsource ERISA compliance and platform management.

In sum, whether you are looking to create a TAMP or just look like one there are many lessons to be learned from the TAMP as a platform. As you look for areas of improvement you may wish to contact a trusted technology advisor or custodian to identify best practices for evaluating outsourced TAMP providers.   

Bryson Pouw is the President and founder of BlazePortfolio Systems, a Chicago based firm dedicated to building rebalancing and trade order management technology for investment organizations. Bryson has more than 15 years of experience with financial services technology, helping clients develop integration and streamline operational environments. His background features a range of clients including: Allianz Global Investors, SEI Investments, GenSpring Family Offices, and Mesirow Financial. Prior to starting BlazePortfolio, Bryson worked for Wells Fargo Investment Management, Advent Software as a Senior Consultant, and was a Partner with Fascet LLC, a financial services technology consulting firm.

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