Making an institutional-level active-management portfolio solution more widely available could offer significant benefits
With the perceived value of investment management declining among clients, advisors in Canada may do well to consider taking some cues from the U.S., where a key investment outsourcing trend is developing.
A growing shift toward turnkey asset management programs (TAMPs) south of the border could provide benefits for clients and advisors alike, wrote TriVest Wealth Counsel OCIO Martin Pelletier in a piece for the Financial Post.
“TAMPs are essentially an institutional level, active-managed portfolio solution made available to high-net-worth investors, in which a professional investment manager is given discretionary authority over the adviser’s client account and their investment portfolio,” Pelletier explained.
By pairing TAMPs with a custody solution, advisors in an independent-friendly regulatory regime have a one-stop platform to set up their own independent practices, he noted. U.S. advisors who put matters of segregated account management and use of outside managers and ETFs in the hands of a third-party institutional firm, he said, can benefit from streamlined administration and reduced compliance risks associated with running in-house proprietary asset-management solutions.
“More importantly, it can free up an adviser’s time to focus on financial planning, setting goals-based investment policies and diversifying their total service offering allowing them to scale out their practice,” he said. With that, clients can enjoy more productive one-on-one meetings with advisors as well as higher value-add services such as in-depth planning and exploring tax-minimization strategies.
And with clients’ portfolio assets being combined with those from other firms into a large investment pool, they stand to access a selection of world-class managers at a reasonable price point. AUM hurdles that keep alternative and private investment options exclusive to those with assets over US$10 million or more, for instance, could be overcome.
“[A] TAMP structure can also help during times of excess volatility by having a professional solely dedicated to managing your portfolio,” Pelletier added, noting the importance of functions such as timely rebalancing, monitoring sector and geographic weightings, and pouncing on potential opportunities from mispricings.
Some wealth-management firms in Canada have moved in that general direction, he said, by offering their clients access to wrap accounts and unified managed accounts — solutions that, until the recent fee compression in both active and passive segments of the investment industry, were quite expensive.
Such programs still face some resistance, he said, as brokerage firms have around one quarter of their advisor workforce still operating under a traditional commission-based, non-discretionary model.
“However, we think this could change as the industry continues to shift towards the fiduciary relationship with clients,” he said.
