'Not in any other industry': Hot topics at Morningstar

From a potential emerging markets rebound to the future of AI and upcoming unicorn offerings, experts shared their insights on the industry’s biggest disruptors at this year's Morningstar Investment Conference.

Industry leaders — like Tim Buckley, CEO of Vanguard, and Richard Sneller of Baillie Gifford — didn’t just have their heads in the sky.

Strategists also broke down the themes shaping investments today, including how advisors are putting the personal back into personal finance.

Read on for snapshots of some of the conference’s most thought-provoking moments.

"More personal than finance"
Morgan Housel of the Collaborative Fund MICUS2019 iag
“Personal finance is more personal than finance,” said Morgan Housel of the Collaborative Fund. “Realize that people that make different decisions than you are not always crazy.”

Read more: Behavioral finance tricks to combat clients’ investing bias
Irrational responses to risk
“Not in any other industry in the world do you have otherwise smart people become gullible, paranoid and lose the ability to look at risk in a rational way,” said Housel. “Behavior is hard to teach even to extremely smart people.”

Read more: Behavioral finance tricks to combat clients’ investing bias
Creating a new advisor experience
dermot o'mahony
“We’re also seeing firms moving to create their own advisor experiences with more integrations from third-party tools. Firms are interested in the itemized consumption of data. They are trying to differentiate themselves based on their own advisor experience. Not every firm wants to write its own portfolio analysis algorithms. They want to use data but wrap it up in their own workstations,” said Dermot O’Mahony of Morningstar.

Read more: Advisors are becoming 'mini asset managers'
How technology leaves more space for empathy
“The machines are helping with investments and providing that service in a cheap, efficient way that leaves the advisors open to provide empathy. That’s what we’re seeing. A pivot toward financial planning — not a singular meeting but iterations and management over time. Advisors are providing ongoing financial guidance,” said O’Mahony.

Read more: Advisors are becoming 'mini asset managers'
The year of the unicorn
“Welcome to the jungle of 2019 IPOs,” said James Gambaccini of the Reston, Virginia-based Acorn Financial, about “the year of the unicorn,” as a number of high-profile, initial public offerings come to market. “When you have an event of this magnitude there is enormous hype and excitement, but very limited historical financial data that investors need to see to make well-grounded investment decisions… it’s likely to be a wild ride,” he added.

Read more: Clients want Uber. What will you tell them?
Keep a close eye on rideshare companies
Uber IAG
When it comes to the future of profitability of ridesharing apps like Lyft and Uber, "it’s winner takes more, or winner takes all,” said Brian Colello of Morningstar Research Services.

Read more: Clients want Uber. What will you tell them?
Time to revisit this 'unloved' sector?
“Emerging markets have been so unloved lately,” said Morningstar’s senior analyst for equity strategies, Christopher Franz, “This would be a great time for investors to rebalance EM stocks back into their portfolio.”

Read more: Why ‘unloved’ emerging markets may be primed for a rebound
How to jump back into emerging markets
“The single best thing advisors can do is tell clients to own an ETF covering emerging markets and then find an active manager who holds a substantial amount of EM companies with domestic consumer exposure,”said David Dali, portfolio strategist for Matthews Asia. He added, “an investor’s biggest challenge is to find a team that has the research wherewithal to handle the China and India of tomorrow,” he said.

Read more: Why ‘unloved’ emerging markets may be primed for a rebound
"The most exciting growth stage in emerging markets"
Richard Sneller - Morningstar conference 5/10/19
“We’re seeing young people in developing countries with entrepreneurial drive who are increasingly getting connected to the internet,” said Richard Sneller, head of emerging markets equity for Baillie Gifford. “It will be the most exciting growth stage in emerging markets over the next ten years.”

Read more: Why ‘unloved’ emerging markets may be primed for a rebound
Just 1% makes a difference
David Blanchett, PhD, CFA, CFP®
“If you’re paying 1% a year on $1 million that’s $10,000 you could either spend on a vacation or to use to pay an investment manager,” said David Blanchett, head of retirement research for Morningstar Investment Management.

Read more: Is the 4% rule still 'safe' for retirement planning?
Active management doesn't have to be high-cost
“Are we trying to disrupt ourselves? Constantly,” said Tim Buckley, Vanguard CEO. “We believe in active management, we just don’t believe in high-cost active management.”

Read more: Major competitive threat for advisors? Vanguard
A new revolution
“I think we’re in the very early stages of a new revolution driven by AI,” said Sneller.

Read more: Why ‘unloved’ emerging markets may be primed for a rebound