Turnkey asset management programs taking off

Nov 20, 2006 @ 12:01 am

By Deborah Nason

NEW YORK - Whether due to commission-based advisers' fleeing toward fee-only models, baby boomers' demanding more sophisticated investment strategies or advisers' leaving wirehouses to set up their own shops, turnkey asset management programs are booming.

The TAMP industry holds nearly $200 billion in assets under management and is likely to reach $600 billion by 2010, according to a November 2005 report from Tiburon (Calif.) Strategic Advisors LLC. Although some TAMPs specialize - mutual funds versus separately managed accounts, or passive investing versus active investing - others offer a platform of multiple options.

TAMPs also are enabling new competition. Certified public accountants, law firms and banks also are using them to enter the financial advice marketplace.

'Clients loved it'

At Symmetry Partners LLC, a TAMP based in Glastonbury, Conn., business is exploding. Advisers have been signing on in droves.

The firm has developed a portfolio of mutual funds drawn exclusively from Dimensional Fund Advisors Inc. in Santa Monica, Calif., known for its unique style of passive asset management.

Today, Symmetry has about $3 billion in assets, up from $200 million at the end of 2002.

Likewise, individual investors (largely reached through Symmetry's broker-dealer clients) have risen to 15,000, from about 250.

Symmetry provides back-office support typical of many TAMPs, including asset management, marketing and adviser education, and training via both remote and in-person channels.

Signing on with Symmetry "changed my life," said Janet R. Press, a fee-based financial planner in New York. With $44 million in assets under management, she has $25 million with Symmetry.

"Before I heard the Symmetry story, I was using loaded mutual funds and A shares. But the problem with loads is that you always need to be bringing in new business," Ms. Press said.

She has a "women's financial practice" - 80% to 90% of her clients are widowed or divorced, and they really rely on her, she said.

Before going with Symmetry, "I couldn't provide the necessary attention to established clients on an ongoing basis," Ms. Press said. "I needed to find a fee-based program."

Ms. Press began with Symmetry in 2003, changing over to a fee-based practice. "The clients loved it - they kept giving me more money," she said.

Some TAMPs, such as St. Louis-based BAM Advisor Services LLC, are targeting specific audiences - CPAs, for instance.

When Capital Performance Advisors LLC was established in 1999 as an outgrowth of CPA firm Thomas Wirig Doll & Co., it engaged BAM.

"Since [then], we've gone from zero to $560 million," said Sherman Doll, president of the Walnut Creek, Calif., firm.

"It's amazed us. We attribute our affiliation with a TAMP ... to getting us off the ground. We don't sell products; we charge a fee. It fits with the CPA model," said Mr. Doll, himself a CPA.

"TAMPs started taking off over the last few years," said Clark Randall, a fee-based planner in Dallas with Lincoln Financial Advisors Corp. of Fort Wayne, Ind.

"The public is starting to distrust mutual fund companies, and people are more interested now in paying for advice rather than paying for products."

Mr. Randall, who also is director of the CFP program at Southern Methodist University in Dallas, began working with TAMPs about six years ago; he now handles about 80% of AUM under outsourced asset management.

His TAMP of choice is Berwyn, Pa.-based Brinker Capital Inc., which offers an "open" platform of mutual funds, SMAs, exchange traded funds and alternative investments, along with passive and active investment strategies.

Brinker has seen 27% average growth over the past three years, growing from $3 billion in AUM in 2003 to $7 billion in 2006, said its president, John Coyne.

The firm's primary growth channels are through insurance broker-dealers and independent-contractor broker-dealers.

Baby boomers

"The boomer generation has absolutely fueled the growth of TAMPs," Mr. Coyne said.

"[Boomers] want their advisers to manage their [financial] affairs and get the most sophisticated management."

TAMPs offer access to ETFs, SMAs and other alternative investments to less wealthy individual investors.

Mr. Coyne said that another source of growth for the TAMP industry comes from advisers' leaving wirehouses to go out on their own.

"All of a sudden, you're ... a small-business owner," he said. They often turn to outsourcing to replace the resources they have given up.

According to Patrick Sweeny, principal of Symmetry Partners, "broker-dealers are actively encouraging their reps to utilize third-party TAMPS or their own in-house TAMPs."

Broker-dealers like the fact that their reps aren't practicing portfolio management - something that is difficult to track, to say the least.

And reps moving to fee-based practices prefer to spend their time on client-gathering and client-servicing activities, so outsourcing the portfolio management makes sense.

Ms. Press feels liberated by using a TAMP. "I want to do financial planning, not manage ... money," she said.

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