Products March 20, 2007

Morningstar’s Principia Gets Asset Allocation Module

Morningstar, Inc. introduced Principia Asset Allocation, a new module for the financial planning resource that helps advisers create individualized asset allocation strategies based on a client's personal circumstances, including risk tolerance, current assets, and future needs.
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The module utilizes Ibbotson Associates’ optimization and wealth forecasting engine, the company said. Advisers are able to determine an asset mix most likely to achieve the highest return for a given level of risk for clients by using the optimization engine and graphing function.

Monte Carlo wealth forecasting allows advisers to simulate the potential performance of both taxable and tax-deferred portfolios, taking into account the impact of such factors as inflation, taxes, and future savings on a client’s ending wealth level, a company announcement said. The program also allows advisers to generate customized reports to present investment plans to clients.

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Principia, a desktop software program for financial advisers, gives advisers the ability to conduct advanced research and analysis, monitor portfolios, and propose investment strategies by accessing a research database that includes mutual funds, stocks, exchange-traded funds, variable annuities, closed-end funds, and separately managed accounts.

In 2005, Morningstar added a Defined Contribution Plans module to the program that helps financial advisors to DC plans evaluate a plan’s fund lineup and build a recommended list of investments. That module provides information on diversification across asset classes, styles, and regions, quality of investment options, and fees associated with the plan and its investment options.

Principia Asset Allocation module costs $995 per year. More information is available at: http://global.morningstar.com/Principia.

In Practice March 20, 2007

Financial Advisers Important to Millionaires

The main reasons millionaires turn to financial advisers are to get a recommendation from a trusted person, to reach a certain level of wealth, and to start planning for retirement.
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According to the Fidelity Millionaire Outlook, a new indicator from the Fidelity Registered Investment Advisor Group, 70% of millionaires have an established relationship with at least one financial professional and about one-third (34%) of those have an established relationship with two or more financial professionals. Respondents said their average length of a relationship is 10 years and the average age they first worked with an adviser was 43.

Of the 30% of millionaires who do not currently use an adviser, 13% said they are likely to get one in the next 12 months. The top reasons were to improve portfolio performance, receive investment recommendations, and get help with comprehensive financial planning.

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Independent advisers are used by 22% of respondents, and they hold, on average, 56% of their investable assets – the largest share among any other financial provider. Those who use an independent adviser cite the top 3 reasons as:

  • their focus on the client’s interests, not those of the firm (73%),
  • their objectivity (68%), and
  • they are not pushing a firm’s products (61%).

“Millionaires told us that while they seek control and validation in their investments, they recognize they need help in managing certain aspects of their finances, such as tax advice and charitable giving,” said Jim Dario, executive vice president, Fidelity Registered Investment Advisor Group, in the release.

The national survey was conducted by Burke, Inc. and included more than 2,500 financial decision makers at households with at least $1 million in investable assets, excluding workplace retirement accounts and real estate.

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