News, Vision & Voice for the Advisory Community
This way M'star gets to intellectually fuel trades but execute lift-off without an awkward hand-off out of its own software zone
October 12, 2015 — 5:09 PM UTC by Brooke Southall
Brooke’s Note: Morningstar is rarely flashy. How can you be when research and data are your stock in trade? But the Chicago-based company has a latent tenacity that should never be doubted — just ask Jeffrey Gundlach. Morningstar is best known as a researcher and second-best known as the advisor to hundreds of billions. But it is perhaps third-best known as a technology company. Advisor Workstation is pervasive. But the company is now concentrating on playing catch-up in the RIA technology business — namely with Morningstar Office. First it “bought ByAllAccounts”: http://www.riabiz.com/a/4974953296297984/why-morningstars-purchase-of-byallaccounts-might-be-a-bigger-deal-than-its-paltry-28-million-price-tag-shows. Now it is buying Total Rebalance Expert. This line-up of technologies under the Morningstar brand clearly has possibilities. It’ll have to contend with fellow Chicago power, Envestnet | Tamarac, Black Diamond and Orion Advisor Services, not to mention Addepar and Matt Abar. But if you’re Morningstar, a researcher at heart, you have quite literally done your homework and all that intelligence is smoldering away.
The ability to execute a trade in addition to conceptualizing it prompted Morningstar to buy Total Rebalance Expert (TRX) from FNA LLC after test-renting it for several months.
“We haven’t allowed advisors to act,” says Tricia Rothschild, head of global advisor solutions for Morningstar. “Now when you want to make a trade, you don’t need to go somewhere else.”
Folding rebalancing into performance reporting has become a must-have among independent software firm owners, according to Tim Welsh, president of Nexus Strategy, who had the opportunity to interact with those owners at last week’s Junxure conference in Las Vegas. See: Greg Friedman channels his inner Marc Benioff and Junxure shows off its sky-high future before a crowd of $1B RIAs and RIA digerati in Vegas.
All of them, he says, are eager to close such a deal.
“Similar to Tamarac, Advent Software and Envestnet Inc., all the big players are going for the complete stack — CRM, portfolio management, rebalancer, financial planning, etc.” See: Volatile markets spark interest in rebalancing software – along with questions about how much is necessary.
One of the main drivers of that vision is Dermot O’Mahony, former senior vice president of products for HelloWallet of Washington D.C., which Morningstar Inc. acquired in 2014. HelloWallet helps employees budget, save and make good use of their benefits. .
The Morningstar-TRX deal will close next month.
All the rage
This new technology vision is being executed on behalf of the 2,800 RIA firms that use Morningstar’s portfolio accounting software. See: Review: Morningstar Office’s web-based platform combines research, advisor tools.
It’s an effort that began when Morningstar bought ByAllAccounts in Woburn, Mass. in April 2014. See: Why Morningstar’s purchase of ByAllAccounts might be a bigger deal than its paltry $28-million price tag shows.
Morningstar charges extra for account aggregation and rebalancing capabilities.
Founded in 2008, TRX was a latecomer to the rebalancing landscape but found a niche by being relatively inexpensive and particularly good for advisors who do tax planning. Today, more than 500 financial advisors from 175 firms use it to rebalance more than $20 billion in client assets. See: How Sheryl Rowling and Cheryll Lurtz turned a blistering walk-a-thon into Total Rebalance Expert.
Metrics still to come
Sheryl Rowling, CEO of FNA and principal of San Diego-based Rowling & Associates LLP and founder of TRX, allows that her company’s software had begun to hit a ceiling — one she’s hoping to punch through with Morningstar’s help. See: How Sheryl Rowling and Cheryll Lurtz turned a blistering walk-a-thon into Total Rebalance Expert.
“Morningstar has the resources to take TRX to the next level by combining it with the company’s proprietary research and data,” she said in a release.
But the full practical realization of that vision will take years.
“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,” Rowling adds.
Rowling will continue to run her RIA and work for Morningstar part time. Morningstar plans to incorporate the TRX capability into its advisor offerings and will also continue to offer it as a standalone platform. See: Strung out on Red Bull, and stung by a red-faced landlord, 70 tech nerds and Russian-style judges, Eric Clarke pushes RIA app coders to new limits in Utah suburb.
In June, Morningstar announced it was integrating the TRX rebalancing capabilities into Morningstar Office.
Mentioned in this article:
Total Rebalance Expert
Top Executive: Sheryl Rowling, CPA/PFS
Envestnet | Tamarac
Portfolio Management System
Top Executive: Stuart DePina
Top Executive: Jud Bergman
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