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Retirement Planning > Saving for Retirement

Morningstar Announces tRx Deal; Partners with Schwab on 401(k)s

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Fund research firm Morningstar said recently that it plans to acquire Total Rebalance Expert, tRx, from FNA LLC. The deal to buy the automated, tax-efficient investment portfolio rebalancing software for financial advisors should be wrapped up by the end of November. Terms of the deal were not disclosed.

The tool is currently used by more than 500 advisors with 175 firms who use it to rebalance more than $20 billion in client assets. It was created by Sheryl Rowling, CEO of FNA and head of the independent advisory firm Rowling and Associates. Advisors can use the software to help them minimize taxes paid by clients, harvest losses and rebalance portfolios for individual accounts or households. They also are able to show clients how much they save in taxes with the software.

“For 25 years, Morningstar has worked alongside independent advisors to help them build portfolios for investors and bring efficiency to their practices. We’re excited to acquire tRx because it adds a key capability — tax-aware rebalancing — to our suite of offerings,” said Tricia Rothschild, head of global advisor solutions for Morningstar, in a statement.

In June, the Chicago-based research company said it was integrating the tRx rebalancing tool into Morningstar Office, its practice and portfolio management system used by more than 4,000 independent financial advisors. “As we began to work together, both firms liked what we saw and realized that it made sense for Morningstar to acquire tRx,” explained Rowling, in a press release. “Morningstar has the resources to take tRx to the next level by combining it with the company’s proprietary research and data.”

Rowling, a CPA, will continue to run her advisor practice in San Diego and work for Morningstar on a part-time basis. Morningstar plans to incorporate the tRx capability into its advisor offerings and will also continue to offer it as a standalone platform. “Today, with tRx, advisors can implement trading decisions informed by taxes and fees,” she added. “In the future, Morningstar plans to add other important metrics, such as its investment valuation, risk factors and real-time pricing, to the rebalancing capability.”

In other news, Schwab Retirement Plan Services, which serves about 1.3 million workers, announced it was rolling out advisor managed accounts for 401(k) plans in cooperation with Morningstar Associates. Retirement plan consultants who are registered investment advisors will be able “to build and manage customized investment portfolios for the plans they support, integrating recordkeeping services from Schwab Retirement Plan Services and managed account technology from Morningstar Associates,” Schwab explained in a press release.

“Advisor managed accounts give employers and retirement plan consultants acting as investment advisors much more flexibility in designing investment advice programs to meet the specific needs of employees. This is the next logical step in the evolution of 401(k) plans,” said Steve Anderson, president, Schwab Retirement Plan Services, in a statement.

The service is available for retirement plans holding at least $20 million.

Brock Johnson, head of retirement solutions for Morningstar, added that the research firm had “found that employees enrolled in managed accounts can achieve better outcomes through increased savings rates and more diversified portfolios. They were also likely to have significantly more income in retirement.”

“We’ve seen that when advice is built into a 401(k) plan so that participants start off with it and are free to opt out, 87% remained in the advice program. That can significantly impact retirement outcomes,” Anderson noted. “We anticipate the first 401(k) plan will implement this approach early next year.”


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