Model marketplaces typically offer little other than the models themselves, although the models are very often integrated into the technology offerings of the firms that provide them. This facilitates the advisor’s ability to trade, generate performance reports and perform other functions related to account management and administration.

Model subscription services typically provide models and research to support the advisor’s ability to understand the models and explain them to their clients, but little else.

Firms that offer OCIO services offer a wide variety of support. Usually, it is very focused on the construction and management of the portfolios themselves and less focused on ancillary services like marketing and tech support.

How Do I Pick A Partner?
Once you decide to outsource, you still have a lot of work to do in identifying a specific outsourcing partner. Not all TAMPs are created equal.

Here are five factors you should consider in making your choice.

1. Portfolios. The heart of any outsourcing offering is asset management. Do the same extensive due diligence you would on any other asset management offering.

Make sure the portfolios are consistent with your philosophy and approach to investment management. Look for a disciplined process that you understand and can explain to clients.

Ask about open architecture, objectivity and the use of proprietary products. Some firms adhere strictly to an open architecture approach. Others offer portfolios comprised of proprietary funds. Make sure you understand any relationships that influence fund selection.

2. People. Check the experience, reputations and credentials of the people behind the firm. Also pay attention to the intangibles like attitude, responsiveness and flexibility. 

You are choosing a long-term partner for your firm. If the chemistry isn’t there, walk away.

3. Service and Services. Make sure you understand what services are included in the TAMP’s offering. There is great variation among TAMP offerings.

Keep in mind that the selection of a TAMP is a fiduciary decision. You’re selecting a firm to manage your clients’ assets and, one way or the other, those clients are paying for it. Don’t use client assets to pay-up for services that benefit you, but not them.

A firm that has a great list of available services may be terrible at delivering them. Interact with the individuals who will service your firm. Get referrals from other advisors.  Make sure your outsourcing partner cares as much about your clients as you do.

4. Cost. The variation in TAMP fees is very wide. Higher fees reduce returns. Even differences that appear small can make a huge difference in your clients’ wealth over time.

Most traditional TAMPs charge on a percentage of AUM basis. But there are variations.  Our firm, for example, charges a low, flat annual fee with a household cap. 

Ask about add-on charges for extra services and the internal expense ratios of the portfolios. Find out if trading costs are included in the TAMP’s fee and, if not, how much they will be. 

5. Fit. Every firm has a target market and a culture that determines what your experience will be in working with that firm. Make sure your firm will be welcomed and valued. 

Ask what gets your potential partner going every day and why they’re in the business. Look for an outsourcing partner that shares your approach to doing business and serving clients.

Addressing The Objections
Remember, about half of all advisors don’t outsource any of their investment management and here are the primary reasons why.

• 47% say the fees for outsourcing are too high.
• 45% say that investing is key to their value proposition.
• 34% don’t outsource because it limits their ability to customize portfolios.