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Capital Group Teams With Morningstar on Personalized Target Date Service

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What You Need to Know

  • Capital Group and Morningstar have teamed for the first time on a target date offering.
  • Target Date Plus launches this month.
  • The service incorporates an investor’s age, salary, assets, savings rate and company match rate.

Capital Group and Morningstar Investment Management’s Workplace Solutions group subsidiary teamed up to offer a new target date service, Target Date Plus, that the companies said Monday was designed to provide personalized allocation advice tailored to a retirement investor’s specific needs and objectives.

The service incorporates an investor’s age, salary, assets, savings rate and company match rate, according to the companies.

Morningstar analyzes that information and provides the investor with a customized asset allocation and investment portfolio, the firms said. Morningstar can also inform the investor if and when they may benefit from annuitizing part of their savings.

“The service launches this month [and is] available to recordkeepers that currently have Morningstar’s Retirement Manager available on their platform, as well as those who are working towards enabling the service,” a Capital Group spokeswoman told ThinkAdvisor.

This represents the first time in which Capital Group has teamed with Morningstar on target date offerings, she added.

Employers can use the service as a qualified default investment alternative, the firms said, noting it “blends” Capital Group’s American Funds Target Date Retirement Series with Morningstar Investment Management’s experience delivering online investment advice through its user interfaces and network of integrated recordkeepers.

“Target Date Plus will enable retirement plans to deliver the personalized asset allocation that participants, plan sponsors and advisors are increasingly seeking, and importantly with administrative ease,” according to Brendan Mahoney, head of Institutional Retirement Strategic Growth at Capital Group.

With the new service, “we expect our target date series, which thoughtfully balances both building and preserving wealth, to expand its stewardship beyond the nearly eight million participants we serve today,” he added, citing Capital Group’s internal analysis as of Dec. 31.

“Target Date Plus underscores Capital Group’s efforts to provide more flexibility in how it distributes its investment services and is a natural evolution of the firm’s target date series,” according to the company.

“There is growing demand from retirement savers for investment strategies that better reflect their goals and aspirations,” according to Brock Johnson, president of Global Retirement and Workplace Solutions at Morningstar Investment Management.

The new service can “position retirement savers for better outcomes” by using Morningstar’s network of data integrations with recordkeepers, user experiences, and advice engines for a “new generation of personalized advice services,” he said.

The necessary data points are obtained by Morningstar from recordkeepers to “furnish and build out a personalized asset allocation and fund-level portfolio for each investor,” the companies explained.

Morningstar designed a user interface for the service that it said was based on its learnings from serving 1.7 million managed account investors to enable investors to interact with the service and modify required data points.

Morningstar also offers investment management services via its investment advisory subsidiaries, with approximately $265 billion in assets under advisement and management as of Dec. 31.

As of that same date, Capital Group managed more than $2.7 trillion in equity and fixed income assets for millions of individuals and institutional investors globally, it said.

(Image: Shutterstock)