It is not enough for financial advisors to tell clients where their investments and show only the stocks, especially now when investors are so intent on managing their fixed-income holdings properly.
Morningstar, the investment research giant known for its expertise on 4 million investment products ranging from equities to futures, feels the same way, and has started to supply individual bond information on its Advisor Workstation platform. The Chicago-based investment research giant is teaming up with New York-based Interactive Data Corp., to furnish its popular workstation with reports and research on more than 1.3 million individual bonds, the company announced Monday morning. Interactive Data Corp., known for its expert bond research, will furnish the bond data. The expanded service will provide information on corporate, government and municipal offerings.
About 150,000 subscribers use Advisor Workstation, and about 45% of them use individual bonds in their practices. Morningstar hopes to make the bond information available to them on March 18, said Melinda Sgariglia, Morningstar’s vice president of broker-dealer solutions. Morningstar Office is the version for registered investment advisors, and the bond data will be available to that group in April. Bonds are included at no additional cost for Morningstar Office subscribers.
“This brings the advisor closer to having a holistic view of a client’s portfolio,” Sgariglia said during a visit with Financial Planning’s editors last Thursday. She added that advisors had consistently asked Morningstar to include bond information in its information offerings. Before Morningstar set out last summer to corral that information, advisors would use substitution data—perhaps an index or an individual bond similar to the strategy they had in mind—to give clients a total view of their investments. “That is no longer an acceptable form of information. Advisors want to see it first hand,” Sgariglia said.
Advisor Workstation will present the data through Portfolio Snapshot, to give an advisor a complete understanding of his or her client’s investment mix, without a proxy. This will help ensure that the portfolio-level reports are acceptable for the Financial Industry Regulatory Authority.
The project enhances the look of Morningstar’s Portfolio Snapshot screen, which is very familiar to advisors. The asset allocation pie in the top left corner will show the entire investment distribution including the bonds. On the top right, there will be a Morningstar Fixed Income Style Box, right next to the familiar Morningstar Equity Style box. Another screen will show a breakdown of the credit quality of the portfolio’s bonds, by percentage. An advisor, for instance, could see that 54.7% of a client’s bond portfolio is rated ‘AAA,’ and make decisions accordingly. The advisor can also see the bond portion’s average effective maturity, average weighted coupon and average weighted price.
The enhanced system will also provide more than 30 data points on each bond, with performance information going back 10 years. The idea is to get a meaningful look at past performances in a variety of market conditions.
“It is important to get underneath, to get more than a basic understanding of the security,” said Martin J. Williams, vice president of reference data product development at Interactive Data.
Morningstar will configure the new offering in a couple of different ways, depending on the advisor’s business model. The March rollout is for advisors in the broker-dealer and wirehouse channel. There, the information is modular and can be customized so that it’s presented in the way that the firm likes, Sgariglia said. Bonds are licensed at the firm level for an additional fee.
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