As the TAMP segment continues adapting to and recovering from the wave of changes imposed by the pandemic, some things have changed, while others have remained constant. In the latter category, RIAs who focus their energies productively on marketing, growth and client care remain in the best position for growth. Another thing that hasn’t changed is the background of market volatility that makes the human touch more important than ever, both for retaining current clients and attracting new ones.
But some newer trends are emerging — or, rather, certain trends that have been emerging for some time are becoming more pronounced. For example, the cloud-based technological innovations that enabled advisors to maintain their practices during the days of absolute lockdown have accelerated the acceptance and even expectations of many clients for the technology they use to do business with their advisors. And, of course, the consolidation wave, driven by the ever-increasing need for greater scalability in an increasingly competitive landscape, shows little sign of subsiding.
With these backgrounds in mind, let’s take a look at five trends among TAMPs that are worth watching. By now, most have realized that “pre-COVID normal” isn’t coming back any time soon, if ever. So, as the industry continues to evolve in response to change, here are some developments you should be thinking about.
Tech = Growth
Probably the number-one tool for greater efficiency in the RIA world is having the right tech deck for your client base. Especially since the pandemic, a host of new tech tools for prospecting, proposal development, and client retention have launched and more are on the drawing boards. Advances in artificial intelligence and machine learning will accelerate the process of building, maintaining, and cultivating prospect lists, an innovation that could help RIAs preserve growth even during times of greater market volatility when clients often get nervous and start looking elsewhere. Leading TAMPs are at the forefront of developing, implementing, and deploying these new tools in the RIA space.
Inflation-Proof Financial Planning
Even as hopes rise for the winding down of the pandemic, supply-chain problems, labor shortages, a resurgent economy and recent global political and military concerns have combined to contribute to rising inflation as a chief worry for economists, the markets and investors alike. This will dictate that advisors develop communication strategies to keep clients informed and also that portfolio models and asset allocation plans incorporate the potential impact of higher inflation on investment performance. A responsive TAMP can provide streamlined client communication pieces and off-the-shelf asset allocation models to help busy RIAs stay responsive and on top of things in the current inflationary economic environment.
Process-Driven Succession Planning
Inevitably, the M&A surge mentioned above has dictated that succession planning absorbs the attentions of a growing number of RIAs. This marks a needed shift from the attitudes exhibited in Schwab’s 2019 benchmarking survey, where succession planning ranked dead last among concerns of RIA firms. With perhaps as many as 111,500 investment advisors (about a third of the workforce and AUM) looking to retire over the next decade, succession planning is clearly moving toward being a top-of-mind concern at many firms. This is another place where a relationship with the right TAMP can ease the process and take worries off your plate. Preserving your culture, taking care of your key team members, maintaining continuity and comfort for your clients, and, of course, maximizing the value of your business are the guiding principles by which the right TAMP can guide your succession planning process.
Model Portfolios
For the vast majority of RIAs, the days of meticulously building and handcrafting each portfolio for each client are over, mainly because the demand for scalability and growth is high and getting higher each day. Whether they form a relationship with a TAMP, use a robo platform or utilize a hybrid model, more and more RIAs are realizing not only the efficiency but in most cases the superior investment results of portfolio modeling. According to a recent estimate by Cerulli Associates, the “potential future market opportunity for asset allocation models stands at $7.2 trillion,” a staggering prospect in light of the $1.9 trillion in assets invested in model portfolios as of the end of 2020. According to Cerulli, the top three reasons given by financial advisors for asset allocation modeling are better investment performance (47%), efficiency in managing client portfolios (38%), and control over and consistency in client investments (32%).
Tax Efficiencies
Tax-efficient strategies for clients have never gone out of style, and with many analysts and other observers warning of higher taxes on the horizon, they’re more important than ever. Advisors across the nation are hearing from clients who are concerned about changes in estate tax law, higher marginal rates, increases in the capital gains tax and other concerns. According to a recent survey, some three-fourths of advisors say that tax policy is a top client concern. Automated tax-loss harvesting and other tax-efficient strategies available through many TAMP platforms make it easy for time-conscious RIAs to know that someone is “minding the store” for their clients and to communicate proactive strategies, driving client retention and new client acquisition.
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