Morningstar Introduces Wealth Forecasting Engine to UK Financial Services Industry

London - 3 May 2011

Technology offers first step in addressing anticipated ‘advice gap’ in post-RDR environment.

Morningstar, Inc. (NASDAQ: MORN), a leading provider of independent investment research, is bringing its Wealth Forecasting Engine—a web-based investment forecasting and planning tool— to financial services providers in the UK.

The Morningstar Wealth Forecasting Engine uses Monte Carlo simulations in forecasting how long a person’s money might last based on a mix of investment products, asset types, risk levels, and savings behaviour. Financial services providers can embed the Wealth Forecasting Engine within their own online portals to enable investors and advisers in their development of a personalised investment plan to include estimated retirement expenses; projected income shortfall; probability of meeting retirement needs in good, fair, and poor market conditions; and income draw-down analysis.

“We are seeing strong interest for a credible investment planning tool that supports institutions as they look to assist increasing numbers of advisers and investors,” said Geoff Balzano, chief executive officer of Morningstar UK. “The anticipated advice gap that may result for many thousands of investors as the UK industry moves to a fee-based advice model puts greater urgency on a technology solution that supports investors in an efficient and scalable way. The Wealth Forecasting Engine offers a first step toward addressing this issue, making the delivery of robust and cost-effective investment forecasting to large numbers of individuals entirely possible. This will be invaluable to financial institutions and financial advisers in light of the approaching Retail Distribution Review.”

The Wealth Forecasting Engine leverages the expertise of Morningstar’s registered investment adviser— Ibbotson Associates— in the areas of capital market expectations; economic forecasting; and simulation methodology1. The Wealth Forecasting Engine employs the latest forecasting techniques including the ability to simulate extreme market downturns that occur with greater frequency than most other forecasting tools predict. It takes into account the UK tax code2 and includes a spousal profile option to offer a more complete expectation of household retirement finances. Also included are financial restrictions such as investment account limits.

Originally developed by Ibbotson Associates for the U.S. market, the Wealth Forecasting Engine has been offered to U.S. investors since 1998 as a tool they can use as part of their assessment of their retirement investment needs. In the United States, it is available to more than 21 million pension plan participants.

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