Traditional Investment Solutions Transforming As Macro Conditions Change

Investment Solutions Providers Are Under Greater Pressure To Use New Strategies And Technologies

The economy continues to face significant headwinds, in terms of supply chain disruptions and talent shortages in certain sectors while waves of job cuts are happening in others, together with continued inflationary trends that are only starting to show some signs of potential easing and investor uncertainty about it all.

The result? Investment solutions providers are under greater pressure than ever to use new technologies and strategies to keep their offerings up to date.

From turnkey asset management platforms (or TAMPs) to tech-enabled alts platforms, to income-oriented investment solutions, there is more pressure than ever for asset managers to transform how they work.

TAMP-ering With Competitive Dynamics

Traditional TAMPs continue to face challenges in bringing together multiple legacy operating and technology costs that take considerable time and expense to integrate seamlessly.

According to Andy Kalbaugh, Founder and Managing Partner of Cassique Strategies, a wealth management industry-focused consultancy, there has been a proliferation of TAMPs, both among third-party asset managers but also in-house within RIAs, RIA aggregators and independent broker-dealers.

“One way TAMPs have been responding has been with launching services beyond asset management, such as practice management and business sales coaching,” said Kalbaugh, who previously served as Divisional President at LPL Financial.

In Kalbaugh’s perspective, this trend “brings TAMPs into more direct competition with many of the wealth management enterprises whose platforms they are trying to get onto and further engage with.”

Can TAMPs Avoid Competing With Wealth Management Enterprise Customers?

For wealth management enterprises that are growing wary of engaging with TAMPs that are also competing against them with consultative and other solutions for financial advisors, certain players are reimagining the TAMP space to deliver a more conflict-free experience.

Take, for instance, FusionIQ – with more than 7,500 advisors collectively managing over $100 billion in assets with access to its platforms – which was named a winner of a WSR Wealth Exemplar Award for Asset Manager Platform of the Year for 2022.

To address a number of perceived shortcomings among traditional TAMP players, the Boston-based firm launched its finTAMP ecosystem in the fourth quarter of last year.

FusionIQ provides a wealth management platform that provides a full-service and seamless advisor and client experience for independent broker-dealers, RIAs, banks and credit unions.

Its digital investing platform integrates directly into the existing offerings of wealth management enterprises, delivering operational efficiencies, cost savings, compliance support and new revenue opportunities.

In an interview with WSR, Mark Healy, CEO of FusionIQ, emphasizes that the finTAMP offering rolled out by the company late last year is an end-to-end digital platform that offers customizable RTQ, customizable proposal tools, Digital Model Marketplace and reporting, all in a multi-custodian environment.

According to Healy, TAMPs are “facing a strategic inflection point that requires fundamentally new ways of operating that transcend legacy operating and service structures.”

“This calls for access to a wide assortment of world-class investment strategies, and user-friendly software that streamlines end-to-end workflows in a cost-effective manner so advisors can scale their business, increase profitability, while creating positive advisor and client experiences.”

Growing Options With Alts Platform Providers

Tech-enabled alts platforms that enable financial advisors to access complex alts solutions at lower minimums are also growing in popularity among financial advisors – and firms in this segment of the industry are evolving their offerings accordingly.

Three tech-enabled alts platforms poised for significant growth are iCapitalCAIS and Crystal Capital Partners – the three firms recognized with the WSR Wealth Exemplar Award for Alternative Investments Platform of The Year in 2022.

iCapital, which services over $149.3 billion in client assets, brands itself as “a global fintech platform driving access to alternative investments for the wealth management industry.” The company provides end-to-end technology and services, education tools and resources, as well as diligence, compliance and portfolio analytics. Its cloud-based suite includes a turnkey solution for advisors and wealth management firms, a custom platform solution for fund managers and distributors as well as a machine learning-powered portfolio intelligence tool to reveal risks for multi-asset portfolios. In January, iCapital announced that it would hire more than 100 professionals to its technology team, adding to the 400 technologists on its 1,050-person payroll.

CAIS, which leverages its open marketplace to work with more than 7,400 advisory practices that collectively oversee more than $3 trillion in network assets, has facilitated over $20 billion in transaction volume since inception. The company provides its CAIS IQ learning system to help advisors improve their own education along with client outcomes.

In November, it released a survey with Mercer that found that nine in ten financial advisors planned to increase their allocations to alternative investments during the next two years. In recent months, CAIS struck partnerships with the private equity firms Reverence Capital and Warburg Pincus to onboard some of their strategies to its platform.

Steven Brod, CEO & Chief Investment Officer of Crystal Capital, believes that for an alts platform to be truly compelling to advisors, it must provide advisor education about alts; deliver expertise on how to integrate alts within existing client portfolios; showcase the quality of the alts manager selection process; and offer a combination of metrics and advisor support beyond the point of sale.

“The investment experience must mimic the seamlessness of traditional investing platforms,” said Brod, whose firm has over $1 trillion in collective assets managed by the funds on its platform and partnerships with over 200 advisory firms.

“Since alts don’t have daily liquidity like traditional investments, this asset class is a long-term journey that requires continuous support beyond the point of sale.”

Earlier this year, Crystal Capital announced that during 2022 its assets under management (AUM) increased by 20%, the firm experienced 32% growth in new advisory relationships and its hedge fund platform outperformed key benchmarks.

Reimagining Annuities For RIA Firms

Providers of alpha-seeking alternative investments are one thing, but on the other end of the spectrum are providers of fee-based investment solutions that traditionally have been offered in a commissionable context. Perhaps the strongest example of this trend is with annuity and insurance solutions.

Historically they have risen in demand during periods of intense and prolonged financial market volatility, but demographic shifts such as the increasing number of baby boomer retirees have heightened demand for fee-based insurance solutions. Therefore, prevailing conditions may provide opportunities for growth among firms that specialize in these products. Back in February 2021, Pacific Life launched a no-commission investment-only variable annuity tailored to RIAs. In November 2022, the company announced a collaboration with Bank of America to address market volatility by enhancing the Pacific Index Dimensions fixed indexed annuity. Meanwhile, the Pacific Life Advisory team has invested resources to allow for integration into commonly used tech systems in the RIA space such as AddeparOrionTamarac and Black Diamond. In an interview with WSR, Jennifer Griffin, Head of Advisory Distribution at Pacific Life, said, “There’s much more to making annuities RIA friendly than creating a fee-based wrapper and offering the solutions with no commissions and no surrender charges, although these are all important first steps.”

Griffin notes that Pacific Life has been ahead of the demand curve that is building across the RIA segment because the company has already built several annuity strategies that specifically align with the needs of RIA firms. These strategies emphasize a transparent cost structure and institutionally priced investment options that can be integrated into the various tech stacks of different RIA firms.

As with alts platforms and next generation TAMP providers, comprehensive advisor support that goes beyond the point of sale is viewed by Pacific Life as crucial for successfully aligning annuities with RIA firms.

Griffin emphasizes, “We’ve invested in a dedicated team of highly credentialed managing directors focused specifically on the RIA space and an RIA’s business. By pairing product innovation with timely, relevant education and practice management that is focused on the advisory market, there is strong potential for annuities to become more relevant than ever before to this segment of the industry.”

Pivoting From Growth To Income

It is also likely that the industry will see increased convergence between wealth management and insurance in the coming months and years, with income generation as the connective thread between these two segments of the industry.

One firm that is already embracing this trend is Sound Income Group, one of the winners of the WSR Wealth Exemplar Award for Retirement Income Solutions Provider of the Year in 2022.

The company’s multipronged approach consists of three businesses – the fee-based RIA Sound Income Strategies (SIS), with $2 billion in AUM; the insurance FMO Advisors’ Academy; and The Retirement Income Source, which offers a turnkey financial service franchise model to advisors providing retirement planning services.

For example, among the services and products offered by Sound Income Strategies is the Sound Enhanced Fixed Income ETF (SDEF), which invests in investment-grade and high-yield debt securities.

The company sees growth opportunities expanding for wealth management firms to address growing demand among investors and their financial advisors for income-generative strategies and products.

The Retirement Income Source follows a fixed income investing model that includes dividend-paying stocks, high-yield bonds and municipal bonds. Meanwhile, Advisors’ Academy provides sales, marketing and practice management support.

“Today’s investors have endured the Great Financial Crisis, the global coronavirus pandemic, the cryptocurrency collapse as well as the ongoing economic and financial markets impact of Russia’s war in Ukraine,” said Dave Scranton, Founder and CEO of Sound Income Group.

“All of this tells me that investment solutions providers of the future will address the goals of clients who value stable sources of income over unwarranted levels of risk-taking.”

Chris Latham, Deputy Managing Editor at Wealth Solutions Report, can be reached at