The Turnkey Asset Management Platform (TAMP) has been a popular solution for financial advisors who want to provide comprehensive wealth management to clients, but focus their time more on financial planning and client-facing duties than the actual investment management process and its implementation. Made feasible by the decline in transaction costs and rise of portfolio management tools beginning in the 1980s, the TAMP marketplace today is estimated to be more than $250B of AUM.
However, the growing capabilities in recent years of “robo” automation tools to handle the trading, rebalancing, and management of investment models, have made the need for a TAMP’s back-office support less and less relevant. And now, that robo-technology appears to be instigating a new competitive threat for TAMPs: the rise of the Model Marketplace.
In essence, a Model Marketplace is a centralized platform where financial advisors can select from a series of third-party-created investment models, but retain control and discretion to implement the trades themselves (in an efficient manner) by leveraging trading and rebalancing software. And in just the past month, both TD Ameritrade (via iRebal rebalancing software), Riskalyze (via its new Autopilot rebalancing tools), and Orion Advisor Services (via their new Eclipse trading and rebalancing solution) have rolled out Model Marketplaces. And the emergence of Model Marketplaces appears to be supported by asset managers themselves, who are seeking new paths to distribute their (otherwise increasingly commoditized) investment products, along with new revenue opportunities from adding a layer of fees for model management itself.
Ultimately, it remains to be seen whether Model Marketplaces will gain traction, and via which platform – from “robo” onboarding tools to portfolio accounting software or an RIA custodian – advisors will choose to adopt. Nonetheless, the transition of “robo” trading and rebalancing tools into the creation of Model Marketplaces represents a significant new disruptive threat, for both existing marketplace incumbents like Envestnet, and the entire world of TAMPs, as advisors gain newfound choices about whether to outsource just the creation of investment models, or their back-office implementation as well.