In the mid-1990s, a bright, young executive at Charles Schwab, Chip Roame, noticed that a handful of investment advisory firms were opening an inordinate number of client accounts. He visited those firms to find out what was going on.

Chip discovered that this small group of innovative advisory firms had created a new business model. For an all-inclusive fee, advisors could outsource all aspects of investment account management and administration to them. The exact offering varied firm-to-firm, but their services included asset allocation, manager/fund selection, trading, performance reporting, billing, and account administration. This freed the advisors from the burdens of portfolio management and allowed them of devote time to other aspects of their business.

Chip coined the term “turnkey asset management program” to describe these firms. Our industry loves acronyms, so these firms soon became known as “TAMPs.” For almost three decades the name stuck.

It’s time to kill it. I spoke to Chip recently and he agrees. Here’s why.

The problem with the term

From the beginning, there was a problem with the term TAMP. If you didn’t already know that it was an acronym for “turnkey asset management program,” it was meaningless gibberish. And, especially in the early years, advisors and clients had no idea what a TAMP was.

Today, most advisors and a small handful of clients know what a TAMP is, at least in a fuzzy, general sort of way. But I still run into advisors who stare at me blankly if I tell them I am in the TAMP business, which I have been since before the term TAMP was invented.

Clear communication is (or should be) highly valued and jargon is (or should be) universally frowned upon; the term TAMP has no value whatsoever in a conversation with a client. Its use would be an off-putting speed bump to relationship building.

But there is a more important reason why the term should be buried. The industry has evolved to such an extent that the term is devoid of meaning, creates confusion, and can even be misleading.

A brief history of the early days of the TAMP industry

In the beginning, there was Brinker Capital and Portfolio Management Consultants (PMC). These firms were founded in 1987 to make the separate account wrap-fee programs that already existed within the wirehouses available to independent financial advisors.

Through these firms, advisors could offer their clients separate accounts managed by “institutional” money managers. If requested, Brinker and PMC would help advisors build portfolios comprised of multiple separate accounts. Both firms provided ancillary services including trading, billing, performance reporting, and account administration.

In 1990, ADAM Investment Services launched the first open architecture managed mutual fund program. ADAM was a spin-off of institutional consulting firm, LCG Associates.

Also in 1990, Reinhardt, Werba, Bowen added TAMP services to its traditional advisory firm offering. RWB was the first advisory firm to expand beyond serving its own clients to providing managed portfolios to other advisory firms. RWB was also the first to offer DFA fund portfolios.

Both ADAM and RWB provided trading, billing, performance reporting, and account administration services.

Thus, the TAMP business model was born even though the term had not been. It included two branches – separate account TAMPs, and mutual fund TAMPs. The essential elements of the model were (1) fully outsourced portfolio management, (2) ancillary services that freed the advisor from having to engage in back-office operational activities.

Soon the TAMP world exploded with choices. Each new option sought to differentiate itself.

Schwab facilitated the proliferation of TAMP options when it introduced its Mutual Fund OneSource program in 1992, offering one-stop shopping for mutual funds from multiple fund families.

In 1992, institutional consulting firm, SEI, pivoted to make its portfolio management capabilities available to advisors, as LCG had done two years earlier. SEI was the first TAMP to develop proprietary mutual funds sub-advised by outside managers.

In 1994, Buckingham Strategic Wealth was founded to provide investment management services to accounting firms and their clients. It was the first TAMP to target a niche market.

In 1996, Len Reinhart left the wirehouse world and formed Lockwood Advisors to compete with Brinker and PMC for separate account business. He revitalized interest in separate accounts. In 2002, Lockwood was acquired by Bank of New York in the first acquisition of a TAMP by a bank.

In 1996, AssetMark became the first TAMP to offer mutual portfolios managed by a variety of outside asset management firms. The founders of AssetMark had also been instrumental in the founding of ADAM but established their own firm to pursue the TAMP supermarket concept.

In 1997, PMC acquired ADAM in the first intra-TAMP acquisition to form a platform that offered both separate accounts and open architecture mutual fund portfolios.

In 1998, RWB was acquired by Assante Corp., which combined it with its existing investment management division, Loring Ward. This was the first TAMP acquisition by a non-U.S. company. In 2018, Loring Ward was acquired by Buckingham Strategic Wealth.

In 1999, another advisory-firm-turned-TAMP, CLS Investments, spawned Orion Portfolio Solutions to service its back-office needs and those of other advisory firms. Through recent acquisitions of Brinker and FTJ FundChoice, Orion, itself, has become one of the largest TAMPs.

Also in 1999, Envestnet and AdvisorPort (acquired by PNC in 2003) launched TAMPs that incorporated Web-based services to facilitate advisor interactions with their platforms. Their emphasis on technology marked the emergence of a new branch on the TAMP family tree.

It established a distinction between “product TAMPs” and “platform TAMPs.” These terms differentiate between firms whose primary focus is managing portfolios and firms whose primary focus is providing the technology platform to deliver those portfolios. This distinction was first articulated by Chip Roame who was then CEO of Tiburon Strategic Advisors.

In 2001, Envestnet acquired PMC, giving it the scale ($5.5 billion in AUM), products, and advisor base it needed to advance its plan to build out the industry’s premier platform TAMP.

In 2004, Envestnet acquired Oberon and NetAssetManagement in a play to expand and improve the technology underlying its managed account delivery capabilities.

In 2005, the late Jud Bergman and his colleagues at Envestnet devised the strategy to unbundle the investment management components of the TAMP business from the technology used to deliver them. Jud likened this to the approach used by cable TV providers. Build the pipelines into every home and get paid regardless of whose programming was being viewed.

Soon, Envestnet was providing advisors with access to a supermarket of asset management products, including its own. But, in addition, Envestnet provided the technology infrastructure through which independent broker-dealers and other institutions could deliver their own managed account and rep-as-portfolio manager programs.

The landscape has changed – It’s far less turnkey

The TAMP world has evolved significantly since its beginnings over 30 years ago. It has morphed in such a way that the term TAMP no longer captures the available alternatives.

Traditional product TAMPs like Brinker, Loring Ward/Buckingham, and my firm, First Ascent, that offer full-service managed account programs, are still thriving. But the nature of their businesses has changed with the rise of TAMP supermarkets.

Platforms like Envestnet, AssetMark, Adhesion Wealth, and SMArtX offer advisors access to an overwhelming array of “portfolio strategists.” Portfolio strategists provide their model portfolios to the platforms, but the platforms, not the strategists, provide the ancillary services like trading, performance reporting, billing, and account administration.

Because of the distribution power of these platforms, many traditional product TAMPs serve as portfolio strategists on platforms. Now their businesses are bifurcated. When advisors access them directly, they are turnkey. When advisors access them through platforms, they are not.

Some product TAMPs, including First Ascent, have also made available more customized options that allow advisors to be involved in, or control, the portfolio management process. Some even offer outsourced-chief-investment-officer (OCIO) consulting services.

As the trend toward more customized offerings grows, the term “turnkey” has further lost its relevance. Increased advisor involvement marks the emergence of a more collaborative process that cannot reasonably be characterized as turnkey.

In addition, there are a growing number of “model providers” who offer access to model portfolios, but none of the back-office services of traditional TAMPs. These offerings typically come from large asset management firms like Blackrock, Vanguard, Fidelity, and American Funds and are comprised fully or mostly of proprietary products.

Model providers typically offer their portfolios through the supermarkets referred to above, or through another new branch of the TAMP family tree known as the “model marketplace.” Model marketplaces are offered by firms as diverse as TD Ameritrade, Orion, and Riskalyze.

When offered through supermarkets, they provide the back-office services. When offered through a model marketplace, the advisor is usually responsible for trading and rebalancing the models, as well as billing and performance reporting. Because model providers offer no, or very little, back-office support, they cannot be considered turnkey in any respect.

Another portfolio management option, known as “direct-indexing,” has recently gained much attention from advisors. Direct indexing replicates an index for a client using individual securities. The index can then be modified to meet the individual needs of the client. Tax-loss harvesting and building ESG portfolios are two instances where direct indexing is useful.

Some direct indexing firms offer TAMP-like solutions where the direct indexing firm manages the portfolio based on instructions provided by the advisor on behalf of the client. These firms typically offer back-office services too. But, again, because of their collaborative nature and the level of advisor involvement in customizing the portfolios, calling them “turnkey” misses the mark. JustInvest and O’Shaughnessy Asset Management’s Canvass program are examples.

Another branch of the TAMP family tree has emerged that is focused on owning the advisor’s desktop. These TAMPs offer portfolio management that is packaged with a tech-stack designed to satisfy some, or all, of an advisor’s technology needs. Calling these “asset management” programs (the A and the M in TAMP) is misleading because of their integrated nature. You can’t get the asset management without the technology. The Carson Group, GeoWealth, Altruist, and Hanlon have such offerings.

Arguably, SEI, one of the granddaddies of TAMP land, has morphed into this category as well. It used to emphasize its roots as an institutional investment consultant, but now positions itself more as an advisor tech solution integrated with an investment platform.

The world used to be so simple

Today there are many more options for advisors to outsource their portfolio management than there were when the term TAMP was invented to describe a small and homogeneous group of pioneering asset management firms. That term is too small to capture the breadth of these diverse offerings. The only letter in “TAMP” that might apply to all of them is “P” for program.

Where do we go from here?

One idea is to ask Chip Roame to bring order to this chaos. In the past, he has demonstrated prowess at labeling the players in this part of the financial services industry. In the meantime, here are my thoughts on how to re-map the old TAMP territory.

The goal should be to facilitate better communication. When an advisor has a specific outsourcing need, that advisor should be able to ask a colleague for recommendations using terminology that precisely conveys the nature of the need.

I am not a fan of acronyms. My suggested terminology is clunkier than the breezy TAMP term. But my suggestions are more descriptive and, therefore, more helpful.

Finally, my suggested categories are not mutually exclusive. A firm my fall into multiple categories. This is necessary in the complex world of portfolio management outsourcing.

Broad category: Full-service portfolio management platform. This category would include any firm that provides a broad range of model portfolio solutions, along with ancillary support services that include trading/rebalancing, performance reporting, and billing. In short, any firm that allows an advisor to select from a menu of pre-established portfolios and then sit back while the provider performs all the ongoing portfolio management and back-office work.

Possible sub-categories/modifiers: An advisor might want to further specify: “I’m looking for a full-service portfolio management platform that offers…”:

• both active and passively managed portfolios.
• portfolios comprised of DFA funds.
• ESG-oriented portfolios.
• a bundled technology solution along with its portfolios.
• its services for a flat fee.
• a supermarket of portfolios from different asset managers.

Broad category: Customizable portfolio management platform. This category would include any firm that will work with an advisor to provide portfolios built with input from the advisor. This category suggests some level of interaction or collaboration between the advisor and the firm’s investment team. Firms that merely provide technology tools are not included. This category would include direct indexers, OCIO services, and everything in between.

Broad category: Portfolio strategist. This term would refer to any asset management firm that offers its portfolios through a platform or model marketplace. For example, at First Ascent, we offer portfolios through our own platform, but we also offer our portfolios through other platforms, like Envestnet and Adhesion. When we offer our portfolios through other platforms, we are a Portfolio Strategist because we do not perform any back-office services – the platforms do that. This category would also include the large asset management firms referred to earlier that merely provide their models, but no back-office services.

Broad category: Model marketplace. This term would refer to any firm or facility that gives advisors access to model portfolios created by asset management firms but leaves it up to the advisor to determine how to implement those models and also leaves the advisor with responsibility for all trading and back-office activities.

Broad category: Managed account technology infrastructure provider. This category would include firms that offer the technology and expertise to enable enterprises to offer managed account/outsourced portfolio management programs to their affiliated advisors. This category would include firms like Envestnet and SMArtX that advisors may be familiar with, and firms like Vestmark and InvestCloud that are better known to larger financial services enterprises.

An Invitation

It’s time to toss the TAMP term. It has served its purpose and is ready to be superseded by terminology that is more descriptive, has more practical utility, and is not misleading.

Chip, we are ready for your thoughts. For the rest of you, this is an open invitation to start a discussion to see if we can gain some clarity and precision in our conversations about outsourced portfolio management options for financial advisors.