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Big Themes from Morningstar's Advisor Conference

By Deb Wetherbee

The Morningstar conference last week was a great place to observe wholesalers with advisors, see what products and vehicles advisors are looking for from asset managers, and glimpse a bit into the future. There were a number of good speakers, including some industry celebrities - although none of the post-speaker lines were quite as long as last year's wait for a Bill Gross photo. As I listened to the different analysts, portfolio managers and CEO's, a few things stood out for me:

• The panel of Morningstar analysts suggested that they would soon be segmented by passive vs. active instead of ETF, Fixed Income, Equity, and Global.


• The flows to fixed income are becoming an ever increasing industry concern.


• ETF's - Vanguard rolling out low-cost index ETF's and Grail, at the other end of the spectrum, rolling out a few more active, sub-advised ETF's.

There was a great deal of talk about advisors as fiduciaries, and the fact that investing is becoming more complicated (particularly with retirement income needs increasing). While I do believe this is all very true, it is interesting that the individual product structures are getting less complicated and assets are continuing to go to passive products. Interesting...

Many sessions addressed diversification and rebalancing due to the continued inflows to fixed income products. With the markets of 2008 still fresh in investor's minds and the increasing number of boomers reaching retirement, fixed income was bound to benefit. But, at this point, investors have missed out on equity markets. As one portfolio manager put it, the volatility seems worse because we are in the middle of it. When you step back and look at the Ibbotson charts over decades, the volatility doesn't appear so intense. It is critical to keep to your diversified portfolio and rebalance it, therefore making your advisor extremely valuable.

And ETF's were everywhere, from exhibit hall booths to sessions, to press announcements during the event. It seems as though the vehicle no longer matters, you can now get almost every investment strategy in almost every vehicle.

Perhaps it is difficult to manage your money. While the individual products have become simpler and the fees more transparent, designing, monitoring and maintaining the appropriate portfolio mix is that much more complicated. Add in the need to plan withdrawals during retirement and it is easy to understand why the majority of flows in our industry come through the intermediary channel.

Again, the conference is a great place to understand what advisors are looking for, or at least how they interact with your sales staff, get access to a few gatekeepers and take in trends on the investment management side. I look forward to watching further product development and education to get investors diversified and, of course, to see if Morningstar restructures the analysts by active vs. passive disciplines going forward.