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Morningstar Restructures Operations

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Morningstar has restructured into two operating segments–Investment Information and Investment Management–replacing its former operations based on what it called three “audience segments,” which included Individual, Advisor, and Institutional. Morningstar has also shifted some of its top employees into different roles. For instance, Don Phillips, Morningstar managing director, is now also president of fund research.

Morningstar formally announced the changes on February 19, although the changes became effective January 1, 2009. The company said it will begin reporting its financial results based on the new operating segments when it issues its first-quarter 2009 earnings press release on April 30, 2009.

The restructuring is meant to organize Morningstar’s operations according to product lines and growth strategies rather than audience segments, the company stated in a release. The new Investment Information segment includes all of the company’s data, software, and research products and services, which are typically sold through subscriptions or license agreements. The Investment Management segment includes all of the company’s asset management operations, which operate as registered investment advisors and earn the majority of their revenue from asset-based fees, according to Morningstar. In addition, the company says that under the previous segment reporting, “Morningstar allocated costs for its corporate functions to each of the segments. Beginning in 2009, Morningstar will no longer allocate corporate costs to its business segments.”

Phillips says the new structure will mean more editorial content from Morningstar customized exclusively for advisors. “I think advisors have thought of us more in recent years as numbers crunchers–as a numerical resource–as opposed to being fully engaged with our editorial content,” he says. “I want to get back to our roots, which is working hand and hand with advisors.” Phillips says he wants Morningstar’s “analysts to be engaged in a dialogue with the financial planning community and getting ideas on what we can do to help advisors better serve their clients.”

Another notable personnel change is that Chris Boruff, previously president of the advisor business unit, is now president of advisor software. Key products in this area are Advisor Workstation and Principia.


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