Morningstar, Envestnet Target Small IRA Accounts

A new managed account will offer more personalized advice and allow asset managers a way to offset high administration costs.

By Rethinking65

Morningstar and Envestnet are introducing a product they say will help people who have IRA balances that are too small to be attractive to an investment advisor.

“We believe the IRA space is ripe for innovation and personalization,” said Brock Johnson, president of Morningstar Retirement, in a press release. “Nearly 40 percent of U.S. households own an IRA, yet the vast majority do not have an advisor and will never be able to retain an advisor because their balances are too small.”

The companies announced Nov. 6 that they plan to launch a managed accounts service during the first quarter of 2024 that offers low-cost investments by leveraging institutional share classes rather than retail share classes. It will offer managed portfolios aligned with the account holder’s profile and situation. The IRA product will have no minimum account size requirements, making it easier for those with low balances to get personalized advice, the release says.

The new managed account product will allow asset managers, broker-dealers, recordkeepers and advisors to shift the cost of administering their IRAs to a private-label offering while retaining revenue streams, the companies added. However, an IRA holder will not need to work through an advisor to access the program, said Sean Murray, head of Envestnet Workplace Solutions.

IRALOGIX, which offers low-cost investments, will service the IRAs. Matrix, a subsidiary of of Broadridge Inc., will custody the accounts. Envestnet will offer fund selection and model portfolios while Morningstar Retirement, a subsidiary of Morningstar Investment Management LLC, will provide managed accounts methodology, an investment engine, and a digital delivery platform.

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