An experienced, high-level CIO (chief investment officer) can cost $250,000 to $500,000 per year. Their salary can run your firm more than any other position; and rightly so, because chief investment officers are in charge of creating or preserving a company's investment thesis as well as their asset portfolios. Their job is to supervise a team of qualified professionals and help develop both short and long-term investment plans, recommend investments, and assign assets.
They can also save your team a ton of time, because according to a recent Wealth Advisor survey — on average, running the investments chews up about 37 hours in an advisor’s typical 50-hour workweek.
Because portfolio management is not a core strength for most advisors, this is a recipe for disaster — as it can leave extremely limited time to pitch new clients and cultivate existing ones.
And those are the only two ways you grow.
The CIO Dilemma
Many firms hire a CIO, and just bite the bullet on the considerable costs. And this is just the first step in what can be a very expensive proposition. Factor in the costs of portfolio management & reporting systems, data subscriptions, Bloomberg terminal(s), back-office and trading staff, GIPS® and custody audits and other costs unique to investment management and you could be talking about millions of dollars annually. But is this absolutely necessary?
There’s another way for advisory firms who want to focus more on what they are uniquely qualified to do — and delegate the rest to specialists with the resources to pick up the slack.
Odds are good that “slack” starts with the portfolio itself. It takes scale and other resources to keep high-net-worth investors in line with their benchmarks and goals, much less provide a world-class experience.
And a CIO — no matter how competent — is often not the solution for a world-class experience.
Their ability to maximize returns is far from assured; as they often run into the same challenge we see with advisors, meaning that no single individual can possibly deliver the level of investment sophistication and performance needed to best serve clients, especially in the long-term.
How TAMPs or Turnkey Asset Management Programs Help
TAMPs or turnkey asset management programs help outsource many functions for advisors, but the most important is investment management.
It’s a natural fit because you get paid for managing relationships and converting them into assets. Keep the relationships and you keep the assets. Create new relationships and you expand your AUM and business growth, which generally means you see your bottom line grow.
Everything else you do in the course of a working week is really an added cost center you either pass on to your clients or absorb in order to prove that you deliver more value for your fees than anyone else.
Surprisingly few advisors pass on the costs of running the portfolio in house. That means that most are simply burning resources on this side of the business.
Once upon a time, investors expected their advisor to manage the assets personally. Now, the $3 trillion TAMP industry says the clients don’t really care who populates the portfolio as long as the performance numbers stay ahead of their benchmarks and the fees.
Why the Best TAMPs Focus on More than Just Portfolio Management
When looking for a TAMP, for all the reasons you just learned, it’s clear the most important factors are their level of sophistication around portfolio management and their level of service to the advisor, their staff and their clients.
You want a firm who performs quantitative risk analysis when constructing portfolios and monitoring their exposures. You want them to incorporate historical risk attributes and correlations across different asset sleeves as well as forward-looking estimates on risk exposures to arrive at the desired portfolio.
Beyond that, you ideally want a provider who specializes both in mutual fund portfolios from standouts such as DFA (Dimensional Fund Advisors) — and in designing and managing multi-asset class global portfolios and specialty target-term portfolios using exchange-traded funds (“ETFs”).
This is because ETFs deliver a cost-effective, diversified, liquid and transparent financial instruments to your clients.
Not only are ETFs more flexible, cost-effective, and tax-efficient versus other investment vehicles, you ultimately know what investment exposure you’re buying and have a real-time pricing mechanism to gauge the value of what you own.
The overall ETF market consists of thousands of different funds, offered by dozens of different providers. Now throw into the mix scores of different indexing methodologies tracked by ETFs, and the combinations become overwhelming.
That’s why working with the right firm is essential.
A 3D Approach to Portfolio Management and Service
3D Asset Management is a turnkey asset management provider with a focus on portfolio management and white-glove advisor service.
I invite you to download a complimentary special report called, Rewarding Smart Investor Behavior. The link is at the bottom of the page.
It outlines all the critical portfolio management factors an advisor must consider to maximize their long-term relationships with clients, and continue growing. In the 11 pages of that PDF report, you’ll discover solutions are fully scalable and make it easier to build the value of your fee-based advisory business.
Because the TAMP model is based on assets managed and not upfront fees, it’s like having a world-class CIO for free. Better in fact, because no single CIO could possibly deliver the level of sophistication and service that a firm like 3D Asset Management provides.
3D fundamentally employs a strategic investment methodology, but does periodically make adjustments based on multi-factor indexing methodologies and the firm’s assessment of current market and macroeconomic conditions.
Their global portfolios are designed and managed to produce a targeted rate of return over long term market cycles, thus providing an ideal solution for the investor’s core asset holding and sophisticated planning strategies like time-segmented retirement income distribution.
Delivering World-Class Service and Performance to Clients
If you’re an advisor or run an advisory firm and want better portfolio management -- without spending a small fortune on a CIO and investment department, working with a firm like 3D Asset Management represents a strong opportunity.
Whether it’s 3D or any other TAMP you’re considering, you want:
- A full back office that can work directly with your clients for speedy & accurate processing
- Online access to your client’s account information and reporting
- Comprehensive customer service, including research and educational broadcasts
- Quarterly performance reporting with available automatic e-delivery to your clients
- Monthly and Quarterly investment commentary
- Monthly fee billing and timely payments to smooth out your firm’s cash flow
Additionally, you again want a firm with proprietary strategies that include ETF and DFA-based models targeted at both accumulation and income-distribution oriented investors. That is absolutely the case with 3D.
In fact, 3D recently announced they are now partnering with other innovative investment managers to offer an even broader array of investment solutions to the financial advisor community because even 3D realizes that one investment manager will be challenged trying to offer meaningfully different types of investment strategies to meet the needs of different types of investors and advisors.
If you’re interested in getting the best portfolio management possible and learning more about their dynamic approach to investing and white-glove style of service—you can download their complementary report entitled Rewarding Smart Investment Behavior right here.
