The acronym ‘TAMP’ (Turnkey Asset Management Platform) is used freely across the financial industry, denoting an investment platform used to facilitate and streamline investment operations. The proliferation of the term “TAMP” has been spurred by the several different types of firms who have launched platforms and want to be easily associated with a burgeoning industry. However, not all TAMPs are built the same, and some using the moniker are merely product platforms or marketplaces where you can access portfolio holdings.
So, what makes a successful TAMP? There are several key elements, and here we will explore a few of them, namely trading, customer support, software architecture, and access to strategies.
At the cornerstone of any true TAMP platform is trading. The intended trading functionality of a TAMP is to execute the trading instructions as provided by the third-party manager, internal portfolio manager, or RIA directly into the client portfolios at the relevant custodian(s). This may seem like a simple step up from a model marketplace, but it makes all the difference. Specifically, a TAMP doing the trading practically eliminates the operational burden of trading.
Some platforms that refer to themselves as a “TAMP Solution” are actually model marketplaces. This kind of platform allows you to subscribe to a third-party or internal strategy and, in turn, you receive a trading file at some point. You are now responsible for making sure the trades are managed through their entire life cycle. This includes booking, ensuring completion, cleaning trade breaks, as well as being responsible for best execution and personnel trading policies. You could hire a trader, but between compensation and engaging the time of human and operational resources, the trader would typically cost more than using a TAMP and still leave the burden of trading on the advisor. It also does not solve the issue of timeliness, specifically entering or exiting a position.
A smart TAMP trades in real-time throughout the trading day. This functionality is particularly relevant for tactical strategies who are timing investments in seconds and minutes. These types of strategies cannot afford a platform that executes trades the next day or T+2. If you want to get in or out of a strategy completely, it may take several days to invest or divest. The real-time functionality of a TAMP promotes minimal trade dispersion and provides the ability to capitalize on volatile, quick-moving market events. The events surrounding the COVID-19 pandemic that rocked the market for most of 2020 have been a testament to the importance of this functionality. Markets were moving 5%-10% a day and seeing even larger swings intra-day. The idea of submitting a sell order on Monday and getting filled on Wednesday is no longer an option if you want to keep your clients.
A successful TAMP is built to be user friendly, with a simple interface, easy navigation, and straight-forward tools. After all, navigating through the platform should be intuitive. Sounds easy, but many platforms tend to be a series of “forward/backward” clicks and, therefore, inherently prevent multiple level, simultaneous functionality. The platform tools need to work in the same way, with do-it-yourself setup and manipulation of functions to meet desired outcomes. For the instances where additional help is required, a key aspect is the ability to reach a customer service team member, particularly one who actually knows how to use the platform themselves. After all, a TAMP is a managed service solution. Solid technology is a great foundation but, at the heart of it, a TAMP solution should help the user build their business. They need to know there is someone who can help them in a moment’s notice. Too often, users find it hard to reach a person in real time who can address questions on the spot, let alone in a timely manner. This level of service can usually be achieved through simple steps such as live chat, email threads, dedicated support team members, training videos, written processes, and a well-documented support ticket process to ensure all issues are addressed.
Many TAMPs have continued to see the expansion of existing architecture through the growth of the industry’s largest players. While this consolidates multiple services under one roof, at its core, it increasingly relies on an aging architecture. The ability to effectively support customer issues and provide trading capabilities to meet a speed-oriented marketplace is facilitated by the initial and on-going infrastructure development surrounding a platform and its tools. Fortunately, financial technology has recently experienced a leap forward in architecture and a cloud-based deployment. This means technology enhancements and roll-outs can be done across the entire system simultaneously without any localized upgrades. Internal architecture created to operate both independently and in sync with the system as a whole maximizes efficiencies through faster load and response times for a smoother user experience. For the client, this means better reliability, increased speed, and timely deployment of new features.
Access to Strategies
Finally, we look at access to investment strategies. The typical TAMP can offer access to hundreds, if not thousands, of third-party investment strategies. These can be your traditional long only managers focused on a specific market cap, industry, or geographical location; your ETF and mutual fund strategists who are leveraging these products to gain asset class diversification at lower minimums; or your pre-set asset allocation providers creating static portfolios. Though different, many of them all have one thing in common: they are long only with correlated performance records.
A successful TAMP also offers access to a wider array of strategies beyond the traditional strategies – a capability that has only recently come online by taking advantage of cloud-based technologies. These strategies can include everything from long/short trading to fixed income trading in a UMA, can offer non-correlated return profiles, and also create opportunities for tax harvesting. They also help an advisor to differentiate their service offering, opening the door to the more sophisticated, High Net Worth (HNW) individuals looking for something more than a 60/40 portfolio. This variety of strategies can zig when the markets zag and helps users to create a diversified portfolio of trading strategies.
When considering investment operations solutions, it is important to understand that not all TAMPs are built the same, regardless of what they call themselves. A successful TAMP will provide complete trading and execution services, a simple user interface, modern solutions, and a strong support team to help at a moment’s notice. Anything that falls outside of these key elements are probably not going to achieve the streamlined solution you are looking for and, to the contrary, may even add additional burdens on your team, your time, and your bottom line.