(Corrects parameters of study in paragraph 7 to show that the
53 percent of TAMP users are drawn from those financial advisers
who outsource, instead of from all 200 advisers in the survey)
By Robyn Post
CHICAGO May 9 A growing number of certified
financial planners are outsourcing administrative tasks and
investment management under a strategy they say gives them more
time to spend with clients and access to resources resembling
what large institutional companies offer.
For example, Jude Boudreaux, a New Orleans certified
financial planner, says he wants to keep his personal touch with
clients. He outsources his investment management to a turnkey
asset management program, or TAMP.
It's good for business, too. A study this year by Northern
Trust Corp, a custody bank and wealth manager, showed
that 70 percent of advisers reported growth after outsourcing.
Many advisers say spending more time helping clients plan
their lives results in more referrals with fewer marketing
dollars spent. For Boudreaux, the extra time brings him more
satisfaction than the money. He cited a fellow adviser who works
until 3 a.m. doing administrative tasks.
"That would suck the value out of my life," Boudreaux said.
Hiring a third-party provider to handle anything from
portfolio construction and management to rebalancing,
compliance, research and back-office support has been a
fast-growing trend among advisers over the past decade,
according to a recent report by consulting firm Tiburon
The Northern Trust survey of 200 advisers showed that of
those who outsourced, 53 percent of them use TAMPs for their
"Researching investments, aligning them with risk profiles,
getting trades right and doing all the reporting and compliance
is a substantial undertaking," said Alice Lowenstein, director
of portfolio strategy for Litman Gregory in San Francisco.
AssetMark Inc., which has about $20 billion in client assets
on its platform, says it can provide advisers some of the same
tools used by institutions, such as the ability to create "what
if" scenarios. Other popular TAMP firms include Envestnet Inc.
and Symmetry Partners.
Christopher Knight, a Charlotte, North Carolina, certified
financial planner, wanted to spend less time doing investment
models and research and found a money manager who shared his
preference for passive, buy-and-hold investing.
A general assumption for many advisers who avoid outsourcing
is that costs will be stifling. Fees and costs vary, however,
depending on the services.
COST VS. BENEFIT
Advisers have to decide whether to pay the costs themselves
or pass all or some of them on to clients. Knight says his
clients pay his hourly fee and get another bill from the
investment provider, which currently amounts to about 0.45
percent of the assets under management.
Advisers who don't outsource, according to the Northern
Trust study, feel that investment management is a big part of
their value. Some also fear clients won't respond well to the
idea of outsourcing.
However, 92 percent of advisers who outsource said their
clients responded positively to the firm's decision to
outsource, according to Northern Trust.
Knight said he tells clients it's a partnership.
"From the client's experience, it's all driven by me with
specialists behind me," he said.
He still assesses client risk tolerance level, time frame
and goals and chooses one of seven model portfolios his provider
offers. He then adjusts with input from clients.
Cary, Illinois-based financial planner Dave Grant, founder
of Finance for Teachers, says clients are surprised when the
total price of custom services is less than 1 percent of their
He said if a client comes to him with $1 million in assets,
he will charge them a $5,400 fee, while his TAMP, Asset
Dedication LLC, charges $3,500. That works out to 0.89 percent
of assets. Grant's fee will decline as a client's assets
increase, because he doesn't increase his fee on assets above $1
WHERE TO START
Before choosing a TAMP, consider the following:
- Look for providers that share your investment philosophy.
- Decide what services you need. Options can range from
basic investment services to soup-to-nuts offerings.
- Find out the account minimums for adviser and client; they
can vary significantly by provider.
- Get a rundown of all fees and costs.
- Who is the firm's custodian? Gaining automatic access to
one of the big custodians that normally require $10 million
minimums can be a big bonus.
- Is the technology easy to use and integrate with your
current software? Will clients have access to their own portal?
- Look into the ease of transitioning in and out of the
plan. What are the logistics for adviser and client if you
(Editing by Tim McLaughlin)