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	Please click the image above to view the table of contents for Tiburon's newly updated Separately Managed Accounts & Other Fee-Account Programs research report.

Tiburon Strategic Advisors, a market research & strategy consulting firm serving a wide variety of financial institutions and investment managers, released a newly updated research report addressing separately managed account & other fee-account programs earlier this year.

One chapter of the report addresses Turnkey Asset Management Programs (TAMPs), by defining TAMPs, providing a market overview, and addressing TAMP merger & acquisitions. This release provides a summary of that chapter.

Turnkey Asset Management Programs Definition

Firms that do not build their own fee-accounts platforms & become proprietary sponsors, typically outsource to a TAMP, essentially independent, third-party fee-accounts platforms. The benefits to TAMPs are them having no up-front costs, allowing firms great speed to market, having scale benefits, and fee-accounts being their core competency. The downsides are that firms hiring them have a relative lack of control, and are not as able to tailor to nuances of their firms.

TAMPs have enjoyed tremendous success because they can deliver comparable platform solutions to new clients for a fraction of the cost, in ninety days, with a fraction of the liabilities.

One must be careful not to double count TAMP assets, as they are the underlying structure for many firms’ fee-accounts programs that are also counted.

Turnkey Asset Management Programs Market Overview

The number of TAMPs had grown steadily from their introduction in the mid-1980s; PMC (now absorbed into Envestnet), London Pacific Advisors (now SunGard Advisor Technology), and Brinker Capital led the way. From 1986 to 1990, TAMPs first emerged. From 1990 to 2000, they experienced rapid growth, with firms such as Advisor Port, Asset Mark, Envestnet, Fund Quest, and Lockwood making names for themselves. Starting in 2001, a period of widespread consolidation began to push the TAMPs market towards a few dominant players.

The growth of assets under administration of the TAMPs has been substantial, and now stands at over $250 billion. This market in 1986 had only $1 billion. Eight years later in 1994, the market was still tiny, only $4 billion. However, by the end of 1995 this market began its growth spurt and by 1996 it had $16 billion in assets. By the end of 2001, TAMPs had $78 billion in assets and from there to 2005, they grew even faster to over $190 billion, before reaching over $250 billion today. If we think back to the growth in fee-accounts and the growth in the fee-only financial advisors market, we saw almost exactly the same growth trend – slow to moderate growth until about 1995 or 1996 and then the boom began. In addition, the addition of counting Prudential Financial’s assets helps explain to the substantial growth.

While the growth of the TAMP market has been quite rapid, this is still a relatively small amount of money versus the overall fee-accounts market, the fee-only financial advisors market, or the mutual funds market. The $250 billion represents a fair portion of fee-business done in the independent markets, however, comparing it even to the total packaged fee-accounts market, which is about $1.5 trillion, the TAMP market is tiny. There are two other worthy comparisons. The fee-only financial advisor market, which has $2.2 trillion in mostly fee-based assets, and the mutual funds market, which has $10.4 trillion in assets show quite a difference. Tiburon believes that the TAMP market will continue to grow quite quickly, but will probably always be relatively small compared to the other markets due to its starting point and positioning. If it even though reached half of the size of today’s fee-accounts market, it would be a four-five fold increase!

TAMPs are gaining an even bigger share of overall fee-account assets, having reached over 15% of the market. In 2002, TAMPs represented an 11% share of the packaged fee-accounts market. In 2005, that share had risen to 16%.

There is some fierce competition at the top of the TAMP market, with four firms now exceeding $30 billion in assets under administration and ten having over $5 billion. Specifically, Prudential Financial (whose largest client, is Wachovia Securities) leads the pack with $44 billion, and is followed by Envestnet at $34 billion, SEI with $34 billion, and Fund Quest with $30 billion. From there, the other leaders are, Advisor Port ($26 billion), Lockwood ($22 billion), Russell ($21 billion), Genworth Financial (Asset Mark) ($13 billion), SunGard ($8 billion), and Brinker Capital ($6 billion). All said, these top ten firms have $238 billion in assets, for an average of nearly $24 billion apiece.

The second tier of TAMPs is far behind the leaders, with BAM Advisory Services leading the way with $4 billion or so. All other firms (about 30) account for only about $17 billion in assets, making up an average of only $800 million apiece (one-thirtieth the average of the top ten!).

Not surprisingly, control of the TAMP market is incredibly concentrated; the ten largest firms account for nearly all the assets, with all other firms having limited share. The leader of the pack, Prudential Financial, makes up for about one-sixth of the assets by itself. The next nine firms – Envestnet, SEI, Fund Quest, Advisor Port, Lockwood, Russell, Genworth Financial (Asset Mark), SunGard, and Brinker Capital – control $194 billion. All told, the top ten account for a hair over 90% of the TAMP market!

Although separately managed account programs are growing rapidly in the independent advisor markets, two-thirds of TAMP assets are still with mutual fund TAMPs. This can be attributed to the fact that TAMPs have traditionally sold to independent broker/dealers and insurance companies, who have a long history of selling mutual funds.

Nonetheless, TAMPs’ share of separately managed account assets have risen to 12% from 7% in the past few years. In 2000, TAMPs controlled 7% of separately managed accounts assets; in 2004, that share had risen to 12%.

Turnkey Asset Management Programs Mergers & Acquisitions

As a result of increased competition, the TAMP market has recently experienced consolidation through institutional acquisitions and TAMP roll ups. The number of institutional acquisitions from the past six years alone is vast, including Advisor Port, American Skandia, Asset Mark, Centurion Capital, Lockwood, Fund Quest, London Pacific Advisors, Net Asset Management, Oberon, PMC, Private Accounts, Russell, RWB, Schield Management Company, and Separate Account Solutions. Furthermore, TAMPs such as Assante, Clarke Lanzen Skalla, US Fiduciary, and Vista Analytics have been involved in rollups.

The number of TAMPs has declined from almost 70 in 1999 to about 40 today. From 1999, there were a total of 67 TAMPs in the marketplace. That figure had dropped to 56 in 2004, and to just over 40 in 2006. It is worth mentioning that this figure’s change includes small firms being reclassified by Tiburon as being other advisory firms (and not TAMPs) due to a lack of success in selling to institutional clients. Those firms might still consider themselves TAMPs, which could sway the number back up.

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Tiburon Strategic Advisors