Investment Operations

OPERATIONAL SOLUTIONS, DISRUPTIVE TECHNOLOGY DRIVE MANAGED ACCOUNT OUTSOURCING

Managed Accounts Operations Technology

Sponsor firms are now looking at turnkey asset management providers (TAMPs) as a buffet from which they can select the services they need while building the other pieces of the managed account stack in-house, according to the latest Cerulli Edge—U.S. Asset and Wealth Management Edition.

Over the past few decades, Cerulli has observed a fundamental shift in how sponsors are using turnkey asset management provider (TAMP) services. A sponsor firm that would traditionally use all aspects of the managed account platform stack—from portfolio construction and security selection to reporting, billing and account administration—now has more options to selectively outsource portfolio management functions. “Sponsor firms today are more likely to treat the TAMP as an à la carte menu, selecting the services they need from a third-party vendor and then looking to create some of the other services in-house, thus driving down costs,” according to Matt Belnap, associate director at Cerulli.

While the service model continues to evolve, TAMPs that offer the option to consolidate different managed account structures into a single account will be well positioned. According to the research, unified managed accounts (UMAs) made up 19% of managed account assets by program in 2020, up from 12% in 2011 and 2% in 2003. “Much of this growth has come at the expense of rep-as-advisor accounts, which have seen marketshare erode 50% since 2011,” says Belnap. “While separate accounts and mutual fund advisory programs retain their position as the largest program types in the TAMP channel, we anticipate that the streamlined technology and the consolidated interface of the UMA will make them an increasingly popular choice for sponsors using TAMPs going forward,” he adds.

Adopting technology and processes that enable customization and scale will also help TAMPs gather more assets. “An increased focus on customization that incorporates environmental, social, and governance (ESG) throughout the asset and wealth management industries will flow through to the TAMP channel. More importantly, increased customization through direct indexing will play a significant part in TAMP differentiation going forward,” says Belnap. In order to achieve this end, TAMPs will need to shift their mentality. “TAMPs that succeed will move away from offering investment solutions and toward offering disruptive technology solutions that solve advisors’ problems and help them offer holistic wealth management to their clients,” he concludes.