Morningstar's wealth group, a 'strategic priority,' adds model portfolios from asset giants

Morningstar is expanding its new wealth management service for financial advisors, adding preset investment portfolios from four asset managers including BlackRock and Fidelity Investments.

The Chicago-based company, better known for its fund rankings, investing data and market research, said Tuesday it was adding 32 model portfolios — preconfigured templates with ready-made funds — from giant asset managers BlackRock, Fidelity, T. Rowe Price and Clark Capital Management Group. The latter is a privately owned independent firm in Philadelphia with $27.8 billion in assets under management as of last December. 

Morningstar announced the creation of its wealth group in February 2022 with the aim of attracting advisors seeking a one-stop shop for managed portfolios, investing software and data, and educational research through its consumer-facing website. The service aims to compete with Envestnet and Orion, among others. 

Last November, in its first big rollout, the group introduced a direct indexing function on its turnkey asset management platform, which offers technology, back-office, investment research and asset allocation services to advisors.

Wealth Group President Daniel Needham said Tuesday at Morningstar's annual investment conference in Chicago that the group "is an area where we're investing significantly and bringing these businesses together because we think there's value in integrating offerings." He called the group "very important" to Morningstar's overall strategy, adding that "it's one of our top three strategic initiatives." 

Needham is a former president and chief investment officer of the group's Morningstar Investment unit. 

The group brings four business units under one organizational roof: the Investment Management unit, a registered investment advisor and broker-dealer; a software unit that researches, designs and implements portfolios for advisors; a financial data service; and the firm's consumer-facing morningstar.com website of market and fund research and analysis.

Needham said the wealth group also creates a way for advisors to see all of the assets their clients hold, including at outside firms. 

"It gives the advisor visibility beyond the asset base on which he's earning," he said.

The wealth group is targeting small to mid-sized independent advisors and broker-dealers, although some larger advisory practices use the service. Needham wouldn't say who, but securities filings show that Invesco, a roughly $1.4 trillion asset manager, uses Morningstar's wrap-fee program, which is under the wealth group.

As of late Tuesday, only portfolios from BlackRock and Clark Capital were on Morningstar's website. The new model portfolios bring Morningstar's offering to roughly 130, spokesman Scott Gilmore said.

Needham said Morningstar's research and data give it an edge over competitors like Envestnet, SEI Investments and Orion Wealth Solutions. 

"We have our own unique data and research," he said. "So we build everything around our research and insights. And that's embedded in all of the services that we provide."

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Model portfolios are increasingly attractive to advisors. Cerulli Associates said in 2021 that more than 16,000 U.S. advisor practices used portfolios created by other firms, representing $1.9 trillion, or 7%, of all advisor-handled assets. More than 67,000 U.S. advisor practices were ideal consumers of model portfolios, the research firm said.

"The key commodity an advisor has is time," said Dan Kemp, the global chief investment officer of Morningstar Wealth. "This is a service that allows advisors to spend more time with clients and serve them better."