Morningstar's ByAllAccounts deal could give it big edge with advisers

Acquisition could put the fund tracker in the lead of the portfolio accounting and reporting business

Apr 2, 2014 @ 1:12 pm

By Carl O'Donnell

Its $28 million acquisition of data aggregator ByAllAccounts has put Morningstar Inc. in control of a technology that is relied on by many of the company's competitors.

About 40 companies, including Morningstar, sell portfolio accounting and reporting systems that rely on ByAllAccounts' technology to help users — typically financial advisers — see a full picture of clients' assets, according to James Carney, president and chief executive of ByAllAccounts.

“If you are a purveyor of this technology and also sell a portfolio accounting and reporting system, you are in an interesting position,” said Tim Welsh, principal of Nexus Strategy, a wealth management consultancy. “You could easily undercut competitors by bundling in ByAllAccounts for free.”

ByAllAccounts offers a tool that aggregates information from all of a client's accounts, including those that the adviser does not manage herself, such as a 401(k) or 529 plan.

Morningstar may consider using the purchase of ByAllAccounts, announced Wednesday, as an opportunity to offer “some sort of packaging or bundling or potential discounts” to users of the company's portfolio accounting and reporting system, said Chris Boruff, managing director of business operations at Morningstar.

The company does not plan on charging competitors higher rates to use ByAllAccounts' product, Mr. Boruff said.

“Our intent is not to somehow leverage our power or access to do something that is not in the best interest of our customers,” he said.

The financial information company will encourage ByAllAccounts to expand its business among competing firms, Mr. Boruff said, adding that Morningstar already did business with many of those competitors before the acquisition, including sales of investment data and technologies.

(See also: Look out, Lipper and Morningstar, hedge fund tracking firms gathering data on alt mutuals.)

“Morningstar is in a very unique position in the market where they compete with these companies and sell to them,” Mr. Carney said. “What was important to us is that they will allow us to grow our business.”

The hope, said Mr. Carney, is that Morningstar's larger client network and sales force will help ByAllAccounts grow faster. For example, Morningstar has relationships with large broker dealers like LPL Financial, Ameriprise Financial, and the ING group, Mr. Boruff said. The company's sales force is “hundreds of times larger” than ByAllAccounts', he added.

“Morningstar has more depth and breadth in the marketplace today and this will give ByAllAccounts more exposure faster,” said Geoff Bobroff, principal of Bobroff Consulting Inc., which serves investment companies.

Morningstar also plans on benefiting from the acquisition by integrating ByAllAccounts into more Morningstar products. Mr. Boruff said he sees an application for ByAllAccounts data aggregation tool, which uses artificial intelligence to “crawl” clients' accounts, on, as well as in the company's retirement management offering.

“Users of our retirement management system will be able to build better 401(k) portfolios if they get a holistic look at all of their holdings,” Mr. Boruff said.

ByAllAccounts is not the only company to offer data aggregation services, Mr. Welsh said. There are three other options: Cash Edge, Intuit, and Yodlee. However, ByAllAccounts is often a top choice for financial advisers and institutional investors because the company focuses on reconciled data, which takes into account difficult-to-measure aspects of portfolio value such as stock splits, dividends and hedge funds, he said.

“The acquisition makes perfect sense to me given the fact that Morningstar in the past has acquired firms like DB Cam Technologies Inc. for portfolio management capabilities,” said Chip Kispert, managing partner of Beacon Strategies. “This is an example of Morningstar broadening their footprint into the data management business to better support their tools and provide more value to their broker-dealer clients.”


What do you think?

View comments

Recommended for you

Sponsored financial news

Upcoming Event

Apr 30


Retirement Income Summit

Join InvestmentNews at the 12th annual Retirement Income Summit - the industry's premier retirement planning conference.Much has changed - and much remains to be learned. Attend and discuss how the future is full of opportunity for ... Learn more

Featured video


Advisers beware: tax law has unintended consequences

Commission accounts could be preferable for some clients, and advisers could be incentivized to move from employee broker-dealers to independent channels.

Recommended Video

Path to growth

Latest news & opinion

Morgan Stanley reports a loss of advisers after exiting the protocol for broker recruiting

The firm said it lost 47 brokers in the fourth quarter, the most in any quarter of 2017.

Morgan Stanley's wealth management fees climb to all-time high

Improvement reflect firm's shift of more clients into fee-based accounts priced on asset levels, which boosts results as markets rise.

Legislation would make it harder for investors to sue mutual funds over high fees

A plaintiff would have to state in their initial complaint why fiduciary duty was breached, and then prove the violation with 'clear and convincing evidence.'

Relying on trainees, Merrill Lynch boosts adviser headcount in 2017

Questions remain about long-term effectiveness of wirehouse's move away from recruiting experienced brokers.

Supreme Court review of SEC judges could roil pending cases

But long-term, the agency may get around questions of constitutionality by changing the way it brings on administrative law judges.


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print