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Morningstar Launches a Single Platform for Multiple Model Portfolios

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Morningstar has just launched its Model Marketplace where advisors can research third-party investment models, customize strategies to comport with their clients’ needs and preferences and execute trades at no additional cost.

Thirteen firms are currently participating in the Model Marketplace, including three of the four largest asset managers: BlackRock, Vanguard and Fidelity. (State Street was not listed in the Model Marketplace roster.) Many of the firms, including Morningstar, have their own model portfolios but now they will all be included on a single platform. Morningstar will not include its own model portfolios, known as Managed Portfolios, on the platform; nor will it accept incentives from platform participants.

The platform will be integrated into the Morningstar Office Cloud, which is a portfolio and practice management software package for independent RIAs that combines portfolio accounting and reporting with Morningstar’s data, analytics and research.

Model portfolios have been growing in popularity as increasing numbers of financial advisors choose to outsource investment management though most of them retain discretion over the assets. According to a 2018 survey by Cerulli, 26% of advisors, representing $5.3 trillion in assets, use models in combination with their own research to customize portfolios, but only 12% cede discretion to a third party. Cerulli estimated that more than 150,000 advisors, representing $5.8 trillion, would be better served if they increased their reliance on model allocations rather than maintain those responsibilities in-house.

Advisors using model portfolios can have more time “to focus on financial planning and business development without sacrificing the quality of the portfolio,” said Jason Kephart, senior analyst for manager research at Morningstar who specializes in alternative strategies, in a statement. Having a marketplace of multiple model portfolios allows advisors to maximize those time savings not only for investment management but also for portfolio monitoring and rebalancing functions.

“Developing and managing model strategies can be complicated and time-consuming, “said Dermot O’Mahony, head of software products at Morningstar, in a statement. “Like an ‘app store of investment models,’ Model Marketplace allows advisors to research, screen and gather in-depth insight on models from different firms to determine the right strategies for their clients’ portfolios all within a single platform.”

Advisors using the Morningstar Model Marketplace can research and screen models against Morningstar’s holdings database and analytics, which is supported by the firm’s 250 global analysts. The Model Marketplace will be displayed at the Morningstar Innovation Lab at the firm’s investment conference that will be held May 8-10 at Chicago’s McCormick Place.