Morningstar, Envestnet team up to revolutionize IRA advisory space

The large share of U.S. consumers who have an individual retirement account but have balances that make retaining the services of an advisor unrealistic are the focus of a new solution.

Morningstar Investment Management and Envestnet plan to launch a managed accounts service that will provide personalized advice for IRA holders, whatever their balance. It will bring together Morningstar Retirement’s managed accounts methodology with Envestnet’s fund selection and model portfolio-building capabilities.

The firms say that 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 plan holders.

It will be packaged within an IRA serviced by IRALogix, which provides low-cost investments using institutional share classes rather than retail ones. Morningstar Investment Management’s 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 personalization," 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 built investment portfolio, but also one highly configured to their specific needs and objectives."

The new service is expected to launch in the first quarter of 2024 and will be custodied by Matrix, a subsidiary of Broadridge Inc.

"This service is a very powerful collaboration that we believe will give asset managers, broker-dealers, record keepers, and advisors options to shift the growing cost of administering their IRA programs to a private-labeled offering, while still retaining their existing revenue streams," said Sean Murray, head of workplace solutions at Envestnet. "It is a win for investors. It is a win for asset managers. And it is a win for the wealth and retirement industry."