Whether you’ve recently gone independent or are looking to free up your time, there are a number of reasons why advisory firms choose to outsource their asset management services. While Turnkey Asset Management Programs (TAMPs) have historically been the go-to option for RIAs since the 80s, a fairly recent rise in digital adoption across the industry has brought new opportunities to light—namely, the option to work with an Outsourced Chief Investment Officer (OCIO).
The question is, which is right for you, your firm, and your clients? Let’s take a look.
The Benefit of Outsourcing
No matter where you are on your professional journey, it’s possible that you’re going to need to enlist some outside help.
Perhaps you recently left your broker-dealer, and now you’re building your own firm from the ground up. Not only do you have to navigate becoming a business owner, but you have to find a way to serve your clients without the backing and resources of a large institution. If you have significant resources, you may be able to hire an entire internal staff from the get-go. But in most cases, newly independent advisors keep staffing slim and instead rely on the expertise of outside professionals or platforms to operate efficiently.
Or, if you’ve been successfully growing your firm for a while now, you may find that your internal investment management team is stretched too thin — but hiring is a time-consuming and expensive gamble (especially if you’ve had bad experiences in the past). To free up their time, it could make sense to outsource some of their investment-related responsibilities.
Outsourcing can also help with transitions in the firm. When an owner retires, and the new owner takes over, it’s common that one may have a different investment strategy or philosophy than the other. Or, an internal CIO or senior advisor may choose to step down, and the firm needs an outsourced solution to step in quickly and keep operations running seamlessly.
What Is a TAMP?
TAMP is a rather broad term, but it generally refers to asset management programs that advisory firms can use to oversee and manage their clients’ portfolios. TAMPs are designed to save advisors time by addressing the asset management and research responsibilities that the advisor wants to delegate to a third party.
TAMPs not only save advisors time for other client-facing or business-oriented tasks, but they also eliminate the need for advisors to develop their asset management system from scratch. Because TAMPs can manage back-end administrative tasks like billing and reporting, they can help advisory firms address their compliance obligations and meet reporting requirements. TAMPs can also take on some of the risk and responsibility in the event the firm is sued for poor performance.
What Is an OCIO?
While a TAMP is typically a platform offered by a large institution, an OCIO is a strategic partner that provides comprehensive investment services. An OCIO can handle as much or as little of your firm’s investment-related responsibilities as you need in order to regain your time and meet the ongoing demands of your firm and your clients.
Because an OCIO is a knowledgeable and unbiased third-party provider, they can help you and your key leaders make forward-focused decisions for the firm — as well as offer a professional second opinion on all investment-related matters.
An OCIO is meant to be a true partner to your firm, meaning they’re typically more involved in the inner workings of your asset management responsibilities and tasks than a TAMP ever would be. They can help you, for example, understand what responsibilities you may not be aware of now but should start doing in the future to better serve your clients.
Your OCIO can even be client-facing if you’d like, which can help increase your credibility with clients while saving you valuable time. Some firms choose, for example, to forward emails with investment-related questions from clients to their OCIO — which ensures a timely, accurate response and saves the initial advisor the time and hassle of responding to the email themselves.
Which Is Right for Me?
A TAMP can be a wonderful solution for advisors with very specific investment management needs who don’t require customized strategies, second-opinion guidance, or collaboration.
The problem with TAMPs is that they’re designed to be “turnkey” (that’s why it’s in the name!). What this means for advisors and their clients is that they don’t have much say in the strategies or options provided. TAMPs tend to be fairly “take it or leave it” options. In most cases, you may not be able to tweak or change what the TAMP offers.
TAMPs also don’t offer individualized investment support like an OCIO does. In most cases, with a TAMP, you won’t have a dedicated investment professional who can meet with you and your clients on a regular basis.
An OCIO can provide you with customized investment solutions so you (and your clients) get exactly what you’re looking for. They provide a much higher level of collaboration, flexibility, and overall customization. An OCIO is designed to fit in with your firm and offer their expertise wherever need be.
If you want an OCIO to attend client appreciation events or assist with a prospecting webinar, they can do that in addition to their portfolio management responsibilities. In most cases, a TAMP will not provide that level of interaction and support to your RIA firm.
Looking for an Outsource Partner?
While both a TAMP and an OCIO can help free up your time by handling portfolio-related tasks, only an OCIO can offer full, customizable support to you, your team, and your clients. At East Bay Investment Solutions, we serve as a trusted, go-to partner for managing our clients’ investment-related tasks and responsibilities — giving advisors hours back in their week to pursue more fulfilling work for their firm and their clients. To learn more about East Bay Investment Solutions and our OCIO services for RIAs, contact us today.