Morningstar embraces change and moves ahead

The metamorphosis of financial products is high on the list of changes within the research industry, according to Morningstar head of research Justin Walsh.

Walsh says in the last few years there has been a definite change in the way advisory groups view products, with dealers now opening up their product recommendation lists.

And instead of the traditional push for their own products, groups are extending their inclusion of external offerings.

“In some ways there hasn’t been a lot of change, in other ways there’s been quite a bit. What’s happened for some groups is that there has certainly been an opening in the lists,” Walsh says.

According to Walsh, the possible catalyst for product changes could well be the increased level of compliance knowledge required for advisers.

He says the growth in compliance has undoubtedly been brought on by the introduction of the Financial Services Reform Act.

“The other thing is that there are all different products on the market, so it’s really important that people have some understanding and some view on them. And I think another thing that’s happened is there is greater emphasis on portfolios,” he says.

So how does a research house keep up with the changing product environment?

Walsh says when new products are launched, product managers usually contact Morningstar to request they be put on its database.

He says from Morningstar’s end, it also keeps in regular contact with the major fund managers so it can keep abreast of any new product releases.

And while Walsh claims that in the past five years products have undergone most change, he is more than aware that Morningstar has also been through a myriad of transitions.

Walsh himself was appointed to the head of research role in September last year, finally filling the post left vacant by Daisy Chee, who departed in late 2002.

He was the final entry in a long list of executive appointments that saw Anthony Serhan join the group as head of consulting in February last year.

Chief executive Scott Cooley took up the top job in April with John Lozano joining as head of technology in July.

When questioned about Morningstar’s current standing as a leading Australian research house, Walsh is upbeat.

He believes Morningstar has become a “self-sustaining” business in the past 18 months.

The negative response to Morningstar in Money Management’s Rating the Raters survey earlier this year, in which the research house generally fared poorly and was considered ‘least stable’, doesn’t seem to worry Walsh.

“I think there are some interesting results, because over the period of when [the survey] was conducted there had been some change here. But when we actually sat down and told people where we were going, we got some positive response,” he says.

“We’ve recently spent quite a bit of time just talking to various people and gaining some feedback on where we can do better and what people would like us to emphasise in terms of doing research — and they are some areas that we are actively considering,” he adds.

Morningstar’s current product suite across the group includes Adviser Workstation, Adviser Access, Data Feeds, Star Ratings, as well as Morningstar Investment Consulting.