Morningstar is rolling out a new line of SMAs tied to its in-house indices and aimed at large RIAs.
The investment research giant has tapped RIA consultancy Wealth Advisor Growth Network (WAGN) to serve as a matchmaker with suitable advisory firms. MG&A Wealth, a Plantation, Fla.-based RIA with $950m in assets under management, is the first RIA to officially access the SMAs through the WAGN arrangement.
WAGN is led by former Envestnet executives Jay Hummel and John Phoenix, who co-founded the consultancy in September of 2019 with backing from Merchant Investment Management.
‘Morningstar, historically, has not had a deep penetration in the large RIA market,’ said Phoenix (pictured above, left). ‘What they partnered with us to do is to help them with their distribution strategy around the large RIA market. They have a pretty big footprint in the small-market — under-$100m advisors — through the Morningstar Office product, but they just hadn’t played in the world that Jay and I played in.’
The consultancy is looking to match Morningstar with RIAs that already have the portfolio management technology necessary to build their own unified managed accounts, all-in-one investment portfolios that combine multiple strategies across different asset classes under a single wrapper.
‘For the next year, our focus is trying to take and stitch together some of the great assets that Morningstar already has and deploy them more efficiently into the RIA space,’ Hummel (pictured above, right) said.
WAGN has signed a consulting contract with Morningstar, Hummel said, and will eventually collect a revenue share of the fee Morningstar charges for managing the SMAs.
The first Morningstar SMA to open through the new offering will be tied to the firm’s Morningstar Wide-Moat Focus index, a US equity index that tracks companies with a competitive advantage that gives them a barrier — the proverbial ‘moat’ — to fend off rivals for a long time.
‘Our mission at Morningstar is to empower investor success,’ stated Morningstar Indexes president Ron Bundy. ‘We are making that mission a reality across the independent wealth management industry and assisting the rapidly growing direct indexing market by providing access to our suite of high quality indexes which harness the power of Morningstar’s vast intellectual capital and longstanding credibility within the wealth management industry.’
Direct indexing is the practice of recreating broad indices via the purchase of individual shares rather than the index itself. By owning the underlying shares directly, investors can tailor the index to their preferences, for example screening out non-ESG stocks, and gain tax advantages by offsetting capital gains with losses.
This article originally appeared on CityWire.
