Chicago-based Morningstar has long been well positioned to service 401(k) and other defined contribution plan providers with investment advice. Now, it is reaching into the large plan sponsor arena with its purchase of privately held mPower, a San Francisco company that provides online advice to participants of defined contribution plans.

Founded in 1995, mPower specializes in serving the large plan sponsor retirement market and was a pioneer in providing online retirement advice. Morningstar began offering online services in 2000 with a product called ClearFuture.

The acquisition will boost Morningstar's existing participant base by 1.6 million, sponsor base by 6,000 and number of plan provider partners by 14. Once completed, Morningstar will service a total 9.1 million retirement plan participants and 53,000 plan sponsors through 34 plan providers. Terms of the deal, which is slated for completion this summer, were not disclosed.

Joe Mansueto, chairman and CEO of Morningstar, said, "Our acquisition of mPower is a perfect strategic fit for Morningstar and strengthens our position as the leading provider of advice for our retirement plan participants. The acquisition demonstrates our commitment to investors, the large plan sponsor market and the advice business."

John Rekenthaler, president of Morningstar Associates is set to manage the combined businesses. He asserted that the two companies "share comparable investment philosophies."

Mansueto added: "We'll keep the mPower team focused on the large plan market; mPower works directly with large companies, such as 3M, Texas Instruments, Whirlpool, Peoplesoft, Mattel. We'll stay focused on wholesale market - plan providers such as ING and T. Rowe Price."

The Morningstar CEO also praised mPower's sophisticated technology, calling both its IT infrastructure and methodology outstanding. However, Mansueto said that Morningstar would continue to improve both mPower's and Morningstar's products.

The purchase is clearly a bet on the future. John McKean, president of Sensible Planning, a registered investment adviser in Wichita, Kan., said that "the acquisition will just help solidify Morningstar's No. 1 position in the marketplace." Various Congressional proposals, he noted, suggest that plan advice must come from an independent third party. Speaking of mPower's top rival, McKean said that even with this purchase, Financial Engines is still a strong competitor.

Copyright 2003 Thomson Media Inc. All Rights Reserved.

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.