Morningstar CEO: 'Our mission is different, we focus on serving advisers'

This is because the way in which the investor is changing means they have more access to information and resources than ever before.

Investment offerings are more inexpensive and therefore more accessible. 

In general, the investor of today is better informed, and they tend to be younger, starting earlier in investing and having more options than ever before when it comes to how they choose to invest.

They have work to do to be prepared for that next generation; they need to be able to talk a different language.

Additionally, the ability to personalise portfolios is much greater, which means advisers need to become more sophisticated in their approach.

“How prepared is the adviser for the client of tomorrow? Transitions take time, so it is hard to use a broad stroke and say they are more or less prepared,” Kapoor says.

“They have work to do to be prepared for that next generation; they need to be able to talk a different language; need to be able to use tech differently and they need to be able to explain their value proposition more completely than how they did to this generation’s parents. 

“Are [advisers] thinking about it; are they starting to do good work? Absolutely, but they are not there yet.”

In his 25-plus years in the industry, Kapoor has seen many changes, having started off as a data analyst at Morningstar after university.

We are different from everybody else because of the mission and the focus on serving the advisers.

During his ascent to the top job, Kapoor worked in various parts of the business, including running the research team and helping to build the company’s non-US operations.

His reason for staying in the company he says is its “strong mission and great people”.

“We have grown and growth creates opportunities for everyone in the business. We evolve and change to stay relevant as the investor changes.”

For the full year, the company reported double-digit revenue growth. The last quarter of 2022 saw growth in its licensed/subscription-based product areas offset sharp declines in asset-based and transaction-based product areas, which faced significant market headwinds.

Praemium acquisition

One way Morningstar Wealth is working to stay relevant is with the acquisition of the non-Australian assets of wealth management platform Praemium, acquired in December 2021 – a business that Kapoor describes as an end-to-end turn key platform.

He adds: “If you are an IFA it can take you from the basics of the initial interaction with the client – doing the risk profiling, thinking through how you build the portfolio for the client – all the way to implementation of the actual portfolio and then subsequent tracking and reporting of the portfolio.

“It is intended to be a tech-first, research-heavy and beautifully designed platform that’s easy for advisers to use.”

Earlier in March this year, it was reported that Morningstar has asked Praemium employees to increase their working hours for no extra pay as they moved onto new contracts under Morningstar. 

We are investing in ESG meaningfully. You are going to see a lot from us on climate.

A source with knowledge of the company told FTAdviser at the time that some Praemium employees were already applying for new jobs as a result.

But Morningstar said the package of benefits under the Morningstar contract was significantly better than the original Praemium contract and was therefore within the bounds of UK law, adding that the change in agreement was not detrimental to the employee.

The platform has also been previously described by Morningstar as a challenger in the UK market, with a strong growth trajectory.

Kapoor says: “We now have a really robust wealth platform and so if you are a financial adviser, our offering for you is as strong as ever.”

The continued development of the Praemium proposition is just one of a number of areas Morningstar is focused on this year.

“In the managed products area, we are investing heavily in areas like managed portfolios because more investors are using packaged products as opposed to single strategies,” Kapoor explains.

“We are investing in ESG meaningfully. You are going to see a lot from us on climate. We are going to bring our indexing capabilities to the UK.

"We think index providers are charging too much for what they are providing clients today and we think we have an equally good yet cheaper proposition than some of the larger incumbents.

Morningstar arms

Other areas that Morningstar is looking to expand further include its credit rating capability, private equity, venture capital and private debt.

The various sections within Morningstar are divided into product areas.

The subscription areas include Morningstar Data and Morningstar Direct, which includes its managed products data, our research and ratings.

There are a lot of frenemies or competition – whatever word you want to use. We are comfortable with that as long as it’s in service of empowering and providing insights to the investor.

Morningstar Sustainalytics is focused on ESG, then there is PitchBook, which tracks every aspect of the public and private equity markets, including venture capital, private equity, and M&A.

The transactional business includes DBRS Morningstar and ad sales on Morningstar.com.

Meanwhile, Morningstar's assets-based product areas are Morningstar Investment Management, Morningstar Indexes and Workplace, a US-focused business.

With all the different arms to the Morningstar business, Kapoor says this means the company does not have a direct competitor.

Asked if Morningstar has the scale to compete with the large UK investment managers, Kapoor says Morningstar is not necessarily trying to compete with them.

“One thing that makes Morningstar unique is its mission of empowering the investor and providing the investor with insights. We are joined at the hip with financial advisers because we have this shared mission of serving that end investor.

“So when we think about who we compete against and our proposition, we are different from everybody else because of the mission and the focus on serving the advisers.

“We have an entire wealth platform and the investing piece is just one part of it. Research, tech and design, which are the three tenets on which Morningstar is built on are also how we serve the adviser. That essentially means we do not have a perfect competitor.

“Having said that, it is also the case that in financial services today, there are a lot of frenemies or competition – whatever word you want to use. That’s just a fact of life. We are comfortable with that as long as it’s in service of empowering and providing insights to the investor.”

Ima Jackson-Obot is deputy features editor of FTAdviser