Morningstar, Inc. (NASDAQ: MORN) and iCapital, a wealth management Fintech, have announced a strategic relationship to provide Advisor Workstation users “with access to alternative investments and analytics for the first time.”
The integration equips Advisor Workstation’s more than 170,000 users with alternative investment research and tools “to evaluate private assets side by side with traditional investments.”
Coupled with investment proposal and report capabilities in Advisor Workstation, the solution empowers advisors to “offer holistic recommendations and build diversified portfolios that include alternative assets for clients.”
Vimal Vel, Chief Product Officer for Morningstar’s Enterprise group, said:
“This is a game-changer for advisors who are building a modern advisory practice and serving evolving investors’ demands for diversification and personalization. Advisor Workstation’s integration with iCapital is unique because it’ll be end-to-end. Advisors will be able to include alternatives alongside traditional investments in model portfolios, reports, and proposals.”
Lawrence Calcano, Chairman and Chief Executive Officer at iCapital, said:
“We are enormously excited to forge this relationship with Morningstar and support expanded access to alternative investing opportunities and insights. Our simple, intuitive technology interface ensures that Advisor Workstation users have access to both the right products for their clients and an extensive library of educational resources to make informed decisions relating to portfolio allocations and diversification strategies.”
With the recent completion of the first phase of the strategic relationship, independent advisor clients now have access – through a single interface – “to both iCapital Marketplace, a platform featuring the industry’s broadest selection of alternative investment funds, due diligence and education resources, fund subscription processing, and third-party reporting services, and iCapital Architect, an innovative portfolio construction and analysis tool for financial advisors to build robust, personalized client portfolios incorporating alternatives.”
Phase two, coming in the first half of 2024, will “bring the integration to Advisor Workstation’s Enterprise-level clients and leverage iCapital’s analytics to generate Morningstar’s Portfolio Risk Score, a numeric score that represents the risk level of a given portfolio against the Morningstar Target Allocation Index Family, when alternatives are added to client asset allocations. Coupled with the Morningstar Risk Profiler’s risk tolerance test, Advisor Workstation can then show the range of Portfolio Risk Scores, known as the Risk Comfort range, within which each client would be most comfortable.”
Advisors are responding to client needs and “an uncertain market environment by offering more products – in the form of alternative assets, according to Morningstar’s Voice of the Advisor study that takes the pulse of more than 600 financial advisors and wealth managers across the U.S.”
The study found that advisors “offering a wide variety of products to their clients say alternatives (cryptocurrency, structured products, liquid alternatives, REITs, private debt, and private equity) make up between 14% and 19% of their total assets under management.”
In addition, an iCapital survey of 400 U.S. registered advisors last year found “that 50% of all advisors said client interest in alternative investments has increased over the past two years. Almost all (95%) advisors surveyed say they plan to allocate the same or more to alternative investments in the coming year.”
Currently, advisors who use alternatives – “about 36% – allocate between 5% and 15% of client portfolios to alts.”