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Morningstar Buys Financial Planning, Risk Metric Software

Amid the focus on clients' financial wellness, Morningstar is rushing to get its financial planning and risk metrics house in order.

Morningstar’s global financial planning ambitions are coming into focus as the company announced the acquisition of PlanPlus Global, a financial planning and risk metrics software provider. With its purchase, for an undisclosed amount, Morningstar will get a two-for-one: Toronto-based financial planning firm PlanPlus merged with decades-old risk metrics provider FinaMetrica, based in Sydney, just three years ago.

In making the purchase, which is expected to close in the second quarter, Morningstar is investing more money into its financial planning capabilities. In the second half of 2019 it launched its goals-based planning solution, Goal Bridge, and at the T3 Advisor Conference last month, Peter Franco, a senior product manager of advisor software at Morningstar, said planning is “front and center” at the firm right now.

Goal Bridge isn’t as robust as PlanPlus, said Scott Mackenzie, president and CEO of Morningstar Canada, especially with PlanPlus building out estate planning for use in multiple countries on a single code base. “What we didn’t have was the financial planning capabilities that PlanPlus has,” he said. “Now we do. So, this is a good marriage.”

Indeed, Morningstar has evolved in front of advisors’ eyes over the past few years, as the advice landscape has transitioned from a products- and investment management-based business (with myriad products in need of grading) to one centered around goals, planning and client best-interest rules.

In buying a risk metrics and planning software developer, with footholds both in and outside of the U.S., Morningstar is starting to more closely resemble other wealthtech providers who have been busy either buying or developing financial planning features, risk metric measurement tools or other data aggregators.

Originally known for its investment management capabilities, Envestnet made waves with its purchase of data aggregator Yodlee and later with the purchase of financial planning software developer MoneyGuide. Lately it has looked at ways to bring insurance and credit capabilities to advisors, without giving banks or insurance reps an opportunity to poach clients.

Fintechs are looking to capitalize not only on a shift in client preferences but also on regulatory shifts. 

“Risk profiling, that’s something that we’re seeing in demand everywhere,” said Mackenzie, describing the advantages Morningstar expects to onboard with the addition of FinaMetrica. “It’s really a result of not just the changing demands of the industry, but obviously some of the regulatory changes.” 

Morningstar isn’t alone in analyzing that marketplace. Risk metrics provider Riskalyze has positioned itself to take advantage of the SEC’s Regulation Best Interest rule that will go into effect on June 30. It is partnering with enterprises, like Farm Bureau Financial Services, and updated its product tiers to more closely align with the needs of broker/dealers

With its acquisition, Morningstar is building a beefier set of wealthtech capabilities. PlanPlus Global, in turn, expects to leverage the marketing and sales capacity of Morningstar.

“We’re both aligned culturally,” said Shawn Brayman, founder and CEO of PlanPlus Global.

In particular, Brayman sees FinaMetrica’s psychometric risk profiling dovetailing nicely with Morningstar’s behavioral assessments of clients, alongside the product data Morningstar is more traditionally known for. Ultimately, advisors using Morningstar’s product suite will have a set of filters with which to understand the client and provide better financial advice, he said. 

“We just see this as being a home run in giving us a phenomenally powerful end-to-end suite for the advisor,” he added.

In plans laid out at T3, Morningstar’s ultimate goal is to flow clients’ financial planning results into investment planning and portfolio construction, according to Franco. Advisor Workstation 3.0, Morningstar’s next generation of its advisor platform, is designed to be more dynamic, with better visualizations and smoother data flow than what is currently available. The feature is currently in development, with a planned launch date no sooner than February 2021, he said. 

Pending the deal’s approval, the plan is to integrate the capabilities of PlanPlus Global into Advisor Workstation 3.0, said Mackenzie. If all goes as planned, PlanPlus Global’s financial planning and risk metrics will make it in front of a lot of advisors, and Morningstar will have upped its own game when it comes to the financial wellness tools it is providing advisors.

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