In his opening remarks at Morningstar’s annual investment conference on Thursday, CEO Kunal Kapoor said that though his firm’s analysis showed markets to be four percent overvalued, there has never been a better time to be an investor, or a true financial advisor.
Kapoor pointed to research his firm has done showing the value of good financial advice adding almost two percentage points to an investor’s personal return, the equivalent of increasing retirement income by 29 percent.
“We believe advisors add a tremendous amount of value,” Kapoor said. “Specifically, we think we need to be your partners and help you communicate that value.”
To do that, Morningstar unveiled a number of new initiatives at the conference.
Fixed income investing is getting more complex as different types of funds are introduced, many using derivatives and credit swaps. Morningstar is rolling out what it calls Fixed Income Data and Analytics platform next month, bringing a better ability to compare fixed income funds, and shine a flashlight inside the funds to find out what makes them “fixed,” Kapoor said.
Working closely with asset managers, the investment research firm’s analysis will separate accounting values and exposure, according to Morningstar’s Global Portfolio Acquisition & Analytics Leader Nick Vassilos.
Kapoor also unveiled Morningstar’s new “Best Interest Scorecard,” an application for advisors looking to roll over client 401(K)s into retirement funds. It was, he said, a way for advisors to help demonstrate to clients (and class-action lawyers) that their recommendations for the rollovers were compliant with the new Department of Labor’s fiduciary rules for retirement accounts (even as the ruling has been delayed and may even be reversed.)
Kapoor also spoke about Morningstar’s new set of wealth management tools meant to bring better communication between team members in an advisor firm and clients, flagging potential problems in a portfolio in a faster timeframe than traditionally possible. The idea, he said, was to give advisors the same level of risk management tools available to institutional investment officers.
There are many risk management tools suited for an individual client or portfolio, he said, but evaluating a book of business as a whole is more complex. The new Data Catalyst tool is meant to monitor portfolios and flag when they go adrift, leading to under- or over-exposures, alerting advisors and providing a data-fueled opportunity to engage with the individual client.
On another front, Morningstar is launching in 2018 a “model marketplace,” making third-party investment strategies available to advisors who understand that portfolio management is not their strength and either want to give up discretion over the accounts or, if not give up discretion, use the models to guide their investments.
Of course, Morningstar has its own models, but the marketplace will be open. Kapoor said BlackRock has already signed on to provide portfolios and that Morningstar was speaking to other firms.
Kapoor deviated from the topics centric to the conference and closed his speech encouraging financial advisors to join Morningstar, calling for reform in how client data is collected and monetized by some other firms, and makes APIs available so advisors can integrate Morningstar products into their existing technology stack.
“We fundamentally believe that the advisor should have access to the data that belongs to their clients,” he said, but that data is not theirs to do what they’d like. “We do not stand for selling data to others like hedge funds.”
