"Poor man want to be rich; Rich man want to be king. And a king ain't satisfied, till he rules everything."
Those words from Bruce Springsteen's 1978 single "Badlands" resonate with Jud Bergman, chairman and CEO of Envestnet, as he considers the landscape of turnkey asset management platforms, which provide technology, investment research, portfolio management and other outsourcing services for financial advisers.
As of 2018, TAMPs were a $7.4 trillion market, but a confluence of several industry trends is boosting demand for outsourcing across the wealth management industry, creating a rising tide lifting all ships.
Envestnet remains king, with a 36.7% market share in 2018, according to Cerulli Associates. But Mr. Bergman sees the favorable TAMP market as one that is attracting newcomers looking to get rich.
"We believe we are continuing to grow at a rate that reflects our market leadership position," he said. "But we expect that the market is going to continue to grow and there will be new entrants and re-entrants that succeed in this space."
Several adviser technology vendors, including Oranj, Riskalyze and Morningstar, are dipping their toes in the TAMP waters with low-cost or free digital marketplaces of model investment strategies. Robo-advisers like Betterment are offering products for advisers and starting to win business from notable firms like Ritholtz Wealth Management.
Others are going the partnering route. SS&C Advent integrated its Black Diamond portfolio management software with SMArtX.
Then there's Orion Advisor Services, which acquired a TAMP, FTJ FundChoice, in 2018, merged it with ETF strategist CLS Investments and integrated the resulting TAMP tightly with its expanding suite of adviser technology.
Executives and analysts are calling the trend an "unbundling" of the traditional TAMP model. Instead of an all-in-one platform, newcomers are offering a la carte products and services to reduce the costs that are usually passed along to end investors.
The unbundling is making TAMPs attractive to more advisers. Some firms may be satisfied with their existing technology but want access to managed accounts. Others may prefer their own investing strategies, but see an opportunity with TAMPs to improve their technology.
"The TAMP model was great for convenience 25 years ago, but now it's bloated and expensive, and people are exploiting it," said Tim Welsh, president and CEO of Nexus Strategy.
Meanwhile, the rich are looking to take on Envestnet's crown.
AssetMark Investment Services accessed public markets to continue its growth with an initial public offering in July that was regarded by many as a rousing success. Vestmark, Fiserv and SEI Investments all remain powerful challengers, each with its own special sauce to meet specific adviser needs.
Custodians aren't sitting still, either. Fidelity Investments recently introduced Fidelity Managed Account Xchange, a platform tying together Wealthscape adviser technology, financial planning from eMoney Advisor and investment products from Fidelity and third-party asset managers (though Envestnet is powering the platform's core managed account engine).
So does the king want to own everything? Acquisitions have certainly been crucial to Envestnet's success. The company spent $500 million in March to acquire beloved financial planning software MoneyGuide. It has purchased competing TAMPs (FolioDynamix and FundQuest), data aggregators (Yodlee) and analytics solutions (Wheelhouse Analytics), just to name a few.
But Mr. Bergman says the Bruce Springsteen song isn't a perfect metaphor. In the technology world, he said, developers want to create an app, successful apps want to become platforms, and platforms want to become networks.
"Innovation is a necessary requirement for adviser productivity and investor choice," he said. "The new entrants, renewed interest among custodians, all of this brings about choice. And generally speaking, over time, what that choice brings is better solutions at a lower cost."
Between the competitive pressure created by newcomers and Envestnet's efforts to protect its place on top, some see things becoming increasingly difficult for other providers.
"The whole asset management world is being squeezed," Mr. Welsh said. "The worst place to be is in the middle. [Midsize firms] are going to have to reinvest in their business."
Consolidation has already begun. In addition to Envestnet's deal for Folio Dynamix and Orion's purchase of FTJ FundChoice, Loring Ward merged with the Buckingham Family of Financial Services.
Tiburon Strategic Advisors predicts the number of remaining TAMPs in 2024 will be 42, down from 48 in 2017. Those most at risk of being acquired are so-called "product TAMPs," which focus more on providing proprietary investment strategies and research, as opposed to "platform TAMPs," which emphasize technology to access third-party strategists.
"TAMPs are a fragmented market. Many are subscale," Chip Roame, managing partner at consulting firm Tiburon Strategic Advisors, wrote in an email.
But the opportunity for those that survive is immense. Tiburon predicts there will be $13 trillion in assets on TAMP platforms by 2024, up from $7.4 trillion in 2018, as the independent adviser channel grows and even wirehouses begin outsourcing technology.
Just a decade ago, outsourcing was rare among financial advisers. Few would trust an automated system to handle portfolio construction or rebalancing, and the pitch of many advisers to investors revolved around their expertise in picking investments. In 2009, TAMPs had just $586 billion in assets and 1.3 million accounts, according to Tiburon's data.
The years since the global financial crisis have benefited outsourcing providers. The consolidation of wealth managers and their service providers, increasing competition from technology startups, attrition in the ranks of financial advisers, recruitment challenges and significant regulatory changes and costs have all helped turn outsourcing into a necessity for many firms.
Many advisers today see TAMPs as a critical part of achieving the economies of scale required for success. By outsourcing technology, back-office workflows and investment management, advisers can focus on business growth and client relationships.
Room to grow
Though assets on TAMPs have increased more than twelvefold over the past 10 years, there is still plenty of room for growth. Tiburon estimates only 27% of financial advisers currently outsource to a TAMP.
"As many U.S. financial advisers continue to push toward managed accounts, and as more part-time financial advisers (e.g., CPAs and insurance agents who see investment management as just a portion of their business) push into investment management, TAMPs will continue to grow," Mr. Roame wrote.
Executives see opportunity across all adviser channels. With the move toward independence not showing any signs of slowing down, TAMPs are expanding the ways they can serve registered investment advisers and independent broker-dealers.
For Kevin Crowe, head of product development for independent adviser solutions at SEI, this means going beyond technology and investment outsourcing to help RIAs with practice management, client communication and business services like compliance and human resources.
TAMPs also see an opportunity to help advisers offer financial wellness and comprehensive planning, which explains why financial planning tools have become such a hot commodity.
"The biggest opportunity is in the RIA space right now — the need for outsourcing there," Mr. Crowe said.
But the winners will be the providers that can successfully integrate everything together. "If you're not a comprehensive platform, that leaves the adviser as the integrator," he said. "When the adviser becomes the manager of those connections, it takes their time away from managing and serving their clients."
IBDs are also turning to TAMPs' managed account solutions to help transition away from commissions to a fee-based business.
But the most enticing prospect for many TAMPs may be the new interest they are seeing from the world's largest financial institutions. Banks and wirehouses still prefer their own investment products and platforms, but many are warming to the idea of outsourcing their technology.
In June, Bank of America Merrill Lynch announced it would use Envestnet Tamarac's performance reporting capabilities for Merrill Private Wealth Management, a division serving ultra-high-net-worth clients.
The deal underscores Envestnet's advantage over the rest of the market: Its position as industry leader which makes it attractive to institutional firms considering outsourcing for the first time.
According to Tiburon's data, Envestnet has 3,500 institutional clients, which compares with runner-up SEI's 450; 96,000 financial advisers on its platform, compared with Vestmark's 25,000; and 10.3 million accounts with $3 trillion in assets, compared with Fiserv's 5 million accounts and $1.4 trillion in assets.
Mr. Bergman sees partnerships with the wirehouse community as a path to extend the company's dominance.
"There is a lot of opportunity now to go into some of the areas that have not been open to TAMPs or providers like us before," he said. "The market for firms like Envestnet has gone upscale."
Newcomers are undaunted. Ryan Beach, former president of FTJ FundChoice and current chief operations officer of the newly rebranded Orion Advisor Solutions, said that his firm is currently focused on bringing its TAMP solution to "advisers who are really attracted to the Orion technology," but that it is looking at the wirehouse market as well.
"We're going to start to see growth across all three markets," Mr. Beach said, adding that he believes Orion can win business by providing superior technology.
"From our perspective, as long as we're reinvesting in that technology and service experience, we're going to get more than our share of the outsourcing that comes in the future," he said.
It remains to be seen what kind of market share Orion and other similar platforms can gather, or whether the tech vendor's model marketplaces can disrupt the market. But there is a widespread view that offering only outsourced managed accounts is no longer enough for a TAMP.
Need to differentiate themselves
Product TAMPs that don't have an expertise in providing technology will increasingly be challenged to differentiate themselves, said Rod Klapprodt, Vestmark's corporate strategy officer.
"They are left with divining innovative and unique investment solutions that have to compete with robos," Mr. Klapprodt said. If these firms are unable to prove they can deliver better outcomes for the investor, they are "going to get washed out," he said.
The extended bull market may have helped some small and midsize TAMPs avoid feeling the pinch. A prolonged market downturn could have a serious impact on product TAMPs. Consolidation among TAMP providers could also be driven by asset managers viewing TAMPs as a means of product distribution. BlackRock invested $122.8 million to acquire 4.9% of Envestnet, and it's unlikely to be the last to make such a purchase.
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On the other hand, some feel the TAMP market could be spared the worse effects of a recession because down markets would inspire advisers to outsource even more of their work so they can focus on retaining current clients and growing their business.
Mr. Bergman said Envestnet has historically grown its market share more rapidly in difficult markets than in easy markets, though that growth is usually on the technology side rather than the asset management side.
But the advice industry is growing, not shrinking, and there should be plenty of space for even smaller TAMPs to thrive if they can effectively define their value to advisers.
"It doesn't matter who you are; you're going to do well," Mr. Welsh said. "There are opportunities, you just have to have a focus."
|Firm||Contact||Custodian||Total Assets ($M)||Fee Structure||TAMP Programs Currently Offered*|
35 E Wacker Drive, 24th Floor Chicago, IL 60601
|Lou D'Addario |
Managing director, head of institutional business development
|Fidelity, First Clearing, Pershing Advisor Solutions, Raymond James Investment Advisor Division, RBC, Schwab Advisor Services, TD Ameritrade Institutional, other||$3,300,000||Asset-based fee||ETF wraps, mutual fund wraps, SMAs, UMAs, UMHs, other|
|Independent Advisor Solutions by SEI |
1 Freedom Valley Drive, Oaks, PA 19456
|Alan Lauder |
|SEI||$67,215||Asset-based fee (0.29% - 1.23%)||ETF wraps, mutual fund wraps, SMAs, UMAs, UMHs|
|AssetMark Financial Holdings Inc. |
1655 Grant St., 10th Floor, Concord, CA 94520
|(800) 822-4227 |
|AssetMark, Fidelity, Pershing Advisor Solutions, TD Ameritrade Institutional||$56,700||other||ETF wraps, mutual fund wraps, SMAs, UMAs; other |
Plan to offer in next 12 months: UMHs
|Loring Ward & BAM Advisor Services |
10 S. Almaden Blvd. San Jose, CA 95113
|Steve Atkinson |
Managing director, advisor relations
|Fidelity, Pershing Advisor Solutions, Schwab Advisor Services, TD Ameritrade Institutional||$34,000||Asset-based fee (0.10% - 0.65%)||ETF wraps, mutual fund wraps, SMAs, UMAs, UMHs, other|
|Brinker Capital |
1055 Westlakes Drive, Suite 250, Berwyn, PA 19312
|Ed Kelly |
Chief of sales
|Fidelity, Schwab Advisor Services||$23,782||Asset-based fee (0.00% - 0.64%)||ETF wraps, mutual fund wraps, SMAs, UMAs|
|Orion Portfolio Solutions |
2300 Litton Lane, Suite 102
Hebron, KY 41049
|Cory Kendall Executive vice president, sales |
|TD Ameritrade Institutional||$15,627||Asset-based fee (0.00% - 0.75%)||ETF wraps, mutual fund wraps, SMAs, UMAs|
|Sawtooth Solutions |
3600 American Blvd W. Minneapolis, MN 55431
|Richard S. Conley |
Executive vice president
|Fidelity, Pershing Advisor Solutions, Schwab Advisor Services, TD Ameritrade Institutional, other||$11,900||Asset-based fee (0.20% - 0.35%)||ETF wraps, mutual fund wraps, SMAs, UMAs, UMHs|
|Morningstar Investment Services |
22 W. Washington St. Chicago, IL 60602
|Peter Dugery |
Head of sales
|Fidelity, Pershing Advisor Solutions, Schwab Advisor Services, TD Ameritrade Institutional||$11,200||Asset-based fee (0.05% - 0.55%)||ETF wraps, mutual fund wraps, SMAs; Plan to offer in next 12 months: UMAs|
|Symmetry Partners |
151 National Dr. Glastonbury, CT 06033
|William G. Chettle |
Director, experience and engagement
|Fidelity, Schwab Advisor Services, TD Ameritrade Institutional||$9,400||Asset-based fee (0.15% - 0.50%)||ETF wraps, mutual fund wraps; Plan to offer in next 12 months: SMAs, UMAs, UMHs|
|Frontier Asset Management |
50 E Loucks, Suite 201 Sheridan, WY 82801
|Dan Cupertino |
National sales director
|Fidelity, LPL Financial, Pershing Advisor Solutions, Schwab Advisor Services, TD Ameritrade Institutional||$4,185||Asset-based fee (0.30% - 0.60%)||SMAs|
|Advisors Capital Management |
10 Wilsey Square Ridgewood, NJ 07450
|Claire Comerford |
Director, investment products and sales
|Fidelity, LPL Financial, Pershing Advisor Solutions, Schwab Advisor Services, TD Ameritrade Institutional||2,400||Asset-based fee, Flat fee (0.35% - 0.80%)||SMAs, UMAs|
|Fusion Capital Management |
9111 Cypress Waters Blvd., Suite 140, Dallas, TX 75019
|Justin Koehler |
Director of sales
|Schwab Advisor Services, TD Ameritrade Institutional, other||$1,652||o +ther (0.05% - 0.45%)||ETF wraps, mutual fund wraps, SMAs, UMAs, other; Plan to offer in next 12 months: UMHs|
|Axxcess Platform |
6005 Hidden Valley Road, Suite 290, Carlsbad, CA 92011
|Alexis Brock |
Marketing and communications associate
|Fidelity, Schwab Advisor Services, TD Ameritrade Institutional||$1,650||Asset-based fee (0.05% - 0.65%)||SMAs, UMAs, other; Plan to offer in next 12 months: Mutual fund wraps|
10251 Vista Sorrento Parkway, San Diego, CA 92121
|Peter Nesbitt |
National account director
|other||$1,500||Asset-based fee, other (0.25% - 2.25%)||Mutual fund wraps|
|SMArtX Advisory Solutions |
105 S Narcissus Ave., Suite 701, West Palm Beach, FL 33401
|Alex Smith-Ryland |
|Fidelity, Pershing Advisor Solutions, Schwab Advisor Services, TD Ameritrade Institutional, other||$1,500||Asset-based fee 0.05% - 0.15%)||UMAs, other; Plan to offer in next 12 months: SMAs, UMHs|
|Lockwood Managed360 760 Moore Road |
King of Prussia, PA 19460
|John Hourigan |
Vice president, business development
|Pershing Advisor Solutions||$1,391||Asset-based fee (0.20% - 0.95%)||ETF wraps, mutual fund wraps, SMAs, UMAs, Other|
|3D Asset management |
100 Constitution Plaza, Hartford, CT 06103
|Matthew D. Shute |
Business development officer
|Schwab Advisor Services, TD Ameritrade Institutional, other||$805||Asset-based fee 0.30% - 0.65%)||ETF wraps, mutual fund wraps, UMAs; Plan to offer in next 12 months: SMAs, UMHs|