The large portion of American consumers who have an individual retirement account but have balances that make retaining the services of an advisor unrealistic is the focus of a new solution.
Morningstar Investment Management and Envestnet plan to launch a managed account service that will provide personalized advice for IRA owners, whatever their balance. It will combine Morningstar Retirement’s managed account approach with Envestnet’s fund selection and model building capabilities.
The firms say 40% of American households have an IRA but few retain an advisor because of small balances. But the new solution will provide them with the same Morningstar Retirement platform used by 2 million employer-sponsored retirement plans.
It will be packaged within an IRA serviced by IRALogix, which provides low-cost investments using institutional share classes rather than retail. The Morningstar Investment Management platform will create blended portfolios uniquely aligned with the account holder’s profile and situation and manage the portfolio for them including adjustment when appropriate. There will be no minimum account balance.
“We believe the IRA space is ripe for innovation and customization,” said Brock Johnson, president of Morningstar Retirement. “With the help of Envestnet Workplace Solutions and IRALogix, we aim to advance access to personalized investment advice and institutionally priced investment options in the IRA space. Every account holder should have access to not only a professionally constructed investment portfolio, but also one highly customized to their specifics needs and goals.
The new service is expected to launch in the first quarter of 2024 and will be maintained by Matrix, a subsidiary of Broadridge Inc.
“This service is a very powerful collaboration that we believe will give asset managers, brokers, recordkeepers and advisors options to shift the increasing cost of managing their IRA programs to a private-label offering, while still maintaining their existing income streams. ,” said Sean Murray, head of workplace solutions at Envestnet. “It’s a win for investors. It’s a win for asset managers. And it’s a win for the wealth and retirement industry.”
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