Morningstar recently announced the launch of Direct Indexing. The new offering will draw from industry-leading research, technology, and insights from Morningstar to help deliver greater personalization, automation, and tax efficiency for advisors and their investors. It will utilize many of the firm’s in-house capabilities, including Morningstar's Investment Management, Morningstar Indexes, Morningstar Sustainalytics, and Morningstar Equity Research to create and manage personalized investment strategies. Initially, the direct Indexing portfolios will be made available through the Morningstar Wealth Platform. This is one of the firm's first major product launches from Morningstar Wealth, a new group combining managed portfolios from Morningstar's Investment Management group, portfolio management software Morningstar Offices, investment data aggregator ByAllAccounts, and the individual investor experience across Morningstar.com. Morningstar Wealth is expected to introduce additional functionality and capabilities to advisors and firms in the coming year. According to Morningstar, approximately 61 percent of advisors indicate they are using or are considering using direct indexing.

Finsum:With a majority of advisors using or planning on using direct indexing, Morningstar has launched its own Direct Indexing offering.

Category: Wealth Management

Keywords: direct indexing, advisors, clients, tax efficiency

While hundreds of mutual funds are expected to lose their ESG designations under new EU rules, money continues to flow into these funds. The fund class is called Article 9, which is Europe’s top environmental, social, and governance disclosure designation. Analysts and industry lawyers say a large number of Article 9 funds don’t currently meet the EU’s strict sustainability requirements, with dozens of funds having already lost their Article 9 tag. Hortense Bioy, Morningstar’s global director of sustainability research, said in an email to Bloomberg, “There could be hundreds of Article 9 downgrades in the next six months.” However, the fund class brought almost €13 billion ($13 billion) in inflows last quarter. This brings the total amount over the first nine months of this year to €29 billion, according to Morningstar data. But industry experts don’t know why. Hugo Gallagher, senior policy adviser at the European Sustainable Investment Forum told Bloomberg, “I am somewhat mystified at the continuing inflows. I can only suspect that it’s due to many end-investors not being entirely cognizant of the ambiguities around Article 9.”

Finsum: Billions continue to flow into sustainable funds that are likely going to lose their EU ESG designation and industry experts don’t know why.

Independent wealth management firm Private Advisor Group recently introduced WealthSuite, its new investment management platform. The multi-custodian platform, which is exclusive to its network of over 750 financial advisors, offers bespoke mutual fund, ETF, and blended mutual fund/ETF model portfolios. The platform also provides custom indexing and tax-optimized solutions delivered through an SMA structure. The portfolios are managed by investment strategists including BlackRock, Fidelity Institutional Wealth Adviser LLC, Orion Advisor Solutions, and WisdomTree. Private Advisor Group partnered with Orion Advisor Solutions to handle the technology powering account opening, management, and servicing of the platform, while Private Advisor Group's internal portfolio administration team will manage the day-to-day. The company has plans to continually evaluate and expand its lineup of available strategists with a focus on providing differentiated solutions for advisors and their clients. Verne Marble, Private Advisor Group's Director of Business Development had this to say about the platform, “On average, investment management accounts for 19% of an advisor's time, and WealthSuite is structured to free up capacity so advisors can focus more of their time with investors.”

Finsum:Private Advisor Group launched its new model portfolio platform WealthSuite to help free up time for its network of financial advisors.

According to a poll of over 355 financial services IT and business leaders, financial services firms feel more confident that they're protected from cyber risk than firms in any other sector. However, they still face significant third-party cyber risks. Cybersecurity firm Trend Micro Incorporated commissioned Sapio Research to perform the survey. The poll found that 75% of financial firms believe they're adequately protected from ransomware. This is far higher than the average of 63% across all sectors. This confidence is attributed to the actions being performed by cybersecurity professionals. According to the survey, 99% say they regularly patch servers, 92% secure remote desktop protocol (RDP) endpoints, and 94% have rules in place to mitigate risks from email attachments. But 72% of respondents also admitted that their organization had been compromised by ransomware in the past, and 79% see their sector as a more attractive target for cyber-attacks. In fact, Trend Micro found that 56% have had suppliers compromised by ransomware, 54% believe their suppliers make them a more attractive target, and 52% say a significant number of their suppliers are Server Message Blocks (SMBs), who may have less resource to spend on security.

Finsum:While financial services firms are more confident in their cybersecurity protection than other sectors, they often face more threats.

Anyone say temporarily neutralized bucking bronco? John Elway? Nah. He’s moved on to other career opportunities.

Instead, despite attempts by the DOL to standardize fiduciary practices across financial professionals, they’ll remained sidelined until at least Q1 2023, according to forbes.com.

Stemming partially from two active and related legal cases, the regulation – aimed at creating a universal fiduciary guidance standard – probably will be tabled again. At least that’s the burgeoning consensus among retirement professionals.

Under the Trump presidency, the DOL released PTE 2020-02 in December 2020, according to worldnewsera.com. As a result, investment advice fiduciaries could receive payment linked with rendering fiduciary investment advice, including advice on rolling over the account of a participant in an employment retirement plan to, for example, an IRA.

That was in the aftermath of the Fifth Circuit Court of Appeals decision to overturn the fiduciary rule in 2018 from the Obama administration. The court not only cited it was “unreasonable”, it was said the execution of the rule by the DOL amounted to “an arbitrary and capricious use of regulatory power.”

Within the retirement plan sector, in the aftermath of the 2020 election, many thought the Trump administration’s rule would be deep sixed. Instead, while emphasizing it would review the five part criteria and – if it saw the need – implement changes, the Biden administration allowed it to go into force.