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Morningstar to Offer Differentiated Views on Risk
New solution offering enterprise-level risk insights; goals-based risk framework shared at 2017 investment conference

CHICAGO, April 26, 2017 /PRNewswire/ -- Morningstar, Inc. (NASDAQ: MORN), a leading provider of independent investment research, today shared unique risk-related insights at the company's 29th annual investment conference for financial advisors, offering multiple angles from which to view and assess risk.

The conference's Innovation Lab will feature interactive demonstrations of the research and development work Morningstar is advancing to help firms and advisors gain a clearer picture of business risk and portfolio suitability across an entire book of business. Using proprietary algorithms, Morningstar's solution can help identify unintended overexposure across multiple client portfolios managed at advisors' discretion. The approach identifies a suitable portfolio given an investor's goals, prioritizes investigation into sources of overexposure, and informs a firm's strategy for defining advisor roles and pinpoint opportunities for advisor training and development.

The upcoming offering, in development as Morningstar Data Catalyst, may also assist advisors with best interest requirements as well as firms looking for new business opportunities with their existing investors. Morningstar expects to launch the solution through software services and data feeds.

Morningstar Data Catalyst will build on the Global Risk Model, introduced in 2016 to help identify and assess the amount of risk in a portfolio by tracking each stock's underlying economic exposure to 36 factors, including six style measures unique to Morningstar. Morningstar plans to expand the Global Risk Model to additional asset classes, beginning with corporate, sovereign, and municipal bonds later this year.

"Morningstar sees an unmet need to view risk through multiple, additional lenses," Tricia Rothschild, chief product officer for Morningstar, said. "We work to understand risk at the firm level, and how it may create unintended risk consequences within individual client portfolios. We take into account underlying exposures within individual securities using our Global Risk Model. And we examine how the psychology and related choices of the individual investor can introduce unintended and often unmeasured sources of risk, particularly in the face of significant market events."

The understanding that traditional risk measures have not effectively addressed actual implementation gaps led Morningstar behavioral science researchers Ryan Murphy and Steve Wendel to develop a "Goals-Based Risk" framework as an alternative approach to traditional individual investor risk-profiling surveys for strategic investment planning. Goals-based risk creates a detailed investor profile incorporating the investor's risk reactivity—how market volatility may affect his or her risk tolerance going forward—and offers guidance to advisors on the types and timing of interventions they can make to keep the investor on track to reach established financial goals. Murphy will discuss their findings and outline the goals-based risk approach tomorrow at the Morningstar Investment Conference. A summary of the research paper is available here.

Innovation Lab demonstrations of Morningstar Data Catalyst will be available today until 7:30 p.m., Thursday, April 27 from 7 a.m. to 7 p.m., and Friday, April 28 from 7 a.m. to 11:30 a.m. Conference updates are also available on Twitter at http://www.twitter.com/MorningstarInc or through the conference hashtag, #MICUS.

About Morningstar, Inc.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of products and services for individual investors, financial advisors, asset managers, retirement plan providers and sponsors, and institutional investors in the private capital markets. Morningstar provides data and research insights on a wide range of investment offerings, including managed investment products, publicly listed companies, private capital markets, and real-time global market data. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $200 billion in assets under advisement and management as of March 31, 2017. The company has operations in 27 countries.

©2017 Morningstar, Inc. All Rights Reserved.

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