The Ticking TAMP Timebomb

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I hate making predictions. It makes me feel like another dart-throwing monkey. But I am confident about this one.

Soon – within the next two years – the SEC will wake up and start holding financial advisors who use TAMPs to the same fiduciary standards they hold them to in selecting mutual funds, ETFs, and other investment products. When it does, many advisors will be in trouble.

The nature of the problem

The problem takes two forms.

Some advisors don’t think of the selection of a TAMP to manage their clients’ assets as an investment decision. Instead, they treat it like any other vendor selection. They put it in the same mental category as choosing financial planning software or a portfolio accounting system.

The other form of the problem stems from inertia. Fully recognizing the selection of a TAMP as an investment decision and treating it that way requires ongoing effort. Most advisors have full plates. They don’t relish taking on more work.

And some advisors have existing relationships with TAMPs that have been in place for years. They are not eager to disrupt those relationships and face the burden of moving business from one TAMP to another based on fiduciary considerations.