Morningstar introduces direct indexing, combining market-leading technology and investment management

The new offering makes it possible to tailor portfolios to the individual needs of investors

CHICAGO, November 1, 2022 /PRNewswire/ — Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent investment research, today announced that Morningstar has launched Wealth Direct Indexing, an investment offering that leverages industry-leading research, technology and insights from across the Morningstar organization to deliver greater personalization, automation , and tax efficiency for advisers and their investors. Morningstar Direct Indexing is unique in that it brings together extensive in-house capabilities – Morningstar’s Investment Management, Morningstar Indexes, Morningstar Sustainalytics and Morningstar Equity Research – to create and manage personalized investment strategies at scale. Direct indexing portfolios will initially be made available through the Morningstar Wealth Platform.

“Advisors are looking for ways to satisfy client interest in new investment options, particularly those that allow for customization and personalization. Morningstar Direct Indexing leverages Morningstar’s strengths to enable advisors to engage with their clients in new and collaborative ways. Together, they can intuitively and effectively adjust the portfolio in a variety of ways, and gain visibility into the impact of those decisions,” he said DanielNeedham, President, Morningstar Wealth. “This is the latest way Morningstar is innovating, guided by our mission to empower investor success.”

Direct indexing allows advisors to build a portfolio that efficiently tracks a broad index, while typically buying all or a portion of the index holdings. This approach makes direct ownership of underlying securities practical for more individuals, allowing them to personalize their holdings based on their preferences and select additional services such as tax loss collection, tax billing, and holding period management.

The launch comes amid growing interest in direct indexing. Approximately 61 percent of advisors say they use or are considering direct indexing.1 Other research suggests that direct indexation will grow at 12.4 percent annually from 2021 to 20262which beats the 11.3 percent annual growth forecast for exchange-traded funds (ETFs).2.

“For almost a year we have worked with a council of consultants who helped us design Morningstar Direct Indexing. Her hands-on insights and experiences with customers have guided our roadmap and development. In June, we launched a pilot program that introduced our Morningstar Direct Indexing in Practice and interest in the pilot program has more than tripled our original goals,” he said Cindy Galiano, Head of Product, Investment Management, Morningstar Wealth. We’re excited to bring this to the market now.”

Direct indexing is one of the first major product launches by Morningstar Wealth, a new group combining managed portfolios from Morningstar’s investment management group, portfolio management software Morningstar officesmallInvestment data aggregator ByAllAccounts®and the personalized investor experience on Morningstar.com®. Morningstar Wealth plans to roll out additional features and capabilities for advisors and corporates over the coming year.

To learn more about Morningstar Direct Indexing, visit go.morningstar.com/directindexing.

About Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australiaand Asia. The company offers an extensive range of products and services to individual investors, financial advisors, wealth managers and owners, plan providers and sponsors, and institutional investors in the debt and private equity markets. Morningstar provides real-time data and research across a wide range of investment offerings, including managed investment products, public companies, private equity markets, debt securities and global market data. Morningstar also offers investment management services through its investment advisory subsidiaries, with about $239 billion in managed and managed assets as of 09/30/2022.

The company operates in 29 countries. Visit www.morningstar.com/company for more information. Follow Morningstar on Twitter @MorningstarInc.

The Morningstar Direct Indexing Portfolios are offered by Morningstar, Inc. affiliates that are authorized in the relevant jurisdiction to provide advisory or advisory services. in the The United States, these companies are Morningstar Investment Services LLC or Morningstar Investment Management LLC, both registered investment advisers. Morningstar Investment Management provides monitoring and maintenance of the direct indexing portfolios on behalf of Morningstar Investment Services. in the The United StatesDirect Indexing Portfolios are intended for citizens or legal residents of The United States or its territories and can only be offered by a registered investment adviser or investment adviser representative.

Morningstar® indices are created and maintained by Morningstar, Inc. Morningstar, Inc. does not sponsor, endorse, give, sell or promote any security or other investment option tracking any Morningstar Index and shall have no liability with respect to any such security or investment option.

Morningstar Equity Research investment research is prepared and distributed by Morningstar, Inc. subsidiaries, including but not limited to Morningstar Research Services LLC, which is registered with the US Securities and Exchange Commission.

Sustainalytics is an environmental, social, governance and corporate governance research, rating and analysis firm. Morningstar acquired Sustainalytics in 2020. Sustainalytics provides ESG scores on companies, assessed within global industry peer groups, and tracks and categorizes ESG-related contentious incidents at companies. Morningstar uses enterprise-level ESG analysis from Sustainalytics to calculate ratings for managed products and indices using Morningstar’s portfolio inventory database.

Caution with forward-looking statements

This press release contains forward-looking statements, as that term is used in the Private Securities Litigation Reform Act of 1995. These statements are based on our current expectations regarding future events or future financial results. By their nature, forward-looking statements relate to matters of varying degrees of uncertainty and often contain words such as “may”, “could”, “expect”, “intend”, “plan”, “aim”, “anticipate”. ,”, “believe,” “estimate,” “predict,” “potential,” or “continue.” These statements involve known and unknown risks and uncertainties that could cause the events we discuss not to occur or differ materially from our expectations. For us, these risks and uncertainties include, among other things, failure to maintain and protect our brand, independence and reputation; Liability related to cyber security and protection of confidential information, including personal information about individuals; liability for losses resulting from an actual or alleged breach of our fiduciary duties or failure to comply with applicable securities laws; compliance failures, regulatory actions or changes in legislation applicable to our credit rating businesses or our investment advisory, ESG and index businesses; failure to respond to technological change, keep pace with new technological developments, or adopt a successful technology strategy; the failure to recruit, develop and retain qualified employees and the compensation costs associated with those activities at a time of inflation and rising pay scales in the markets in which we operate; inadequacy of our operational risk management and business continuity programs in the event of a material disruption event, including an outage of our database, technology-based products and services, or network facilities; inability to differentiate our products and services and to continually develop innovative, proprietary and insightful financial technology solutions; continued volatility or downturns affecting the financial sector, global financial markets and the world economy and the impact thereof on our revenue from asset-based fees and credit ratings business; failure to sustain growth in our businesses in today’s fragmented geopolitical, regulatory and cultural world; liability in relation to the information and data we collect, store, use, create and distribute, or the reports we publish or that are generated by our software products; the failure of acquisitions and other investments to integrate efficiently and deliver the results we expect; the impact of the current COVID-19 pandemic and government actions in response thereto on our business, financial condition and results of operations; Challenges faced by our operations outside of the United States, including the concentration of data and development work at our offshore facilities in China and India; our indebtedness could affect our cash flows and financial flexibility; and failure to protect our intellectual property rights or claims of intellectual property infringement against us. A more complete description of these risks and uncertainties can be found in our filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K. If any of these risks and uncertainties materialize, our actual future results and other future events could differ materially from our expectations. We undertake no obligation to update our forward-looking statements as a result of new information or future events.

Contact for media work:
Scott Gilmore
Morningstar Wealth
773-664-9829
[email protected]

1 Uncovering the Product Preferences of Today’s Advisors’, Broadridge Financial Services, Sep 2021.
2 “Improving the Customer Experience: Customize with Direct Indexing”, Cerulli Associates, Aug 2021.

SOURCE Morningstar, Inc.

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