Planners choose Morningstar

The findings from the second part of the Money Management’s 2020 ‘Rate the Raters’ survey, in which financial planners are asked to rate research houses on a range of measures, found that Morningstar has overtaken Lonsec for the first time in over four years.

Planners also decided that the most important criteria, when it comes to choosing a qualitative fund research ratings provider, were their ability to provide good fund company research as well as website information and tools that research houses offer, with more than 90% of planners having described both categories as either ‘very important’ or ‘essential’.

Additionally, the ability of providing good and easy-to-use software has gained a new meaning at a time of global pandemic and lockdowns which have essentially forced the entire financial services sector to heavily rely on technology. 

All in all, Morningstar has emerged top in seven-out-of-10 categories which included website and tools, fund company research, corporate strength, client service, asset allocation research capabilities, consulting services and good value for money. On top of this, Morningstar shared the top spot with Lonsec in one other category (staff quality), which was, according to financial planners, the third most important category when it comes to selecting a research provider.

At the same time, Lonsec, which dropped down to the second place overall, triumphed across two categories which were model portfolios and overall rating.

Zenith, which was acquired earlier this year by Sydney-based private equity firm Five V Capital, managed to climb up to the podium and came third in seven categories on top of being a silver medallist in one other.

OVERALL RATING

Once again, Lonsec managed to attract the highest score across this category with 68% of respondents granting the firm a combined ‘good’ or ‘excellent’ rating.

However, this year it was closely followed by Morningstar which received a positive overall rating of either ‘good’ or ‘excellent’ from 67% of financial planners participating in the study.

This meant that financial planners decided to drop last year’s silver medallist Zenith to third place this year with its overall rating being rated as either ‘good’ or ‘excellent’ by only 53% of respondents, down from 58% in the last survey.

FUND AND FUND COMPANY RESEARCH 

For the fourth time in a row, planners confirmed the ability to provide thorough fund and fund company research was their most important criterion when it came to research houses, with the vast majority of respondents (97%) saying this was of an ‘essential’ or ‘very important’ service for them.

Following this, Morningstar emerged as a clear winner in this category with almost 80% of respondents describing its fund research as either ‘excellent’ or ‘good’. By contrast, last year’s winner Lonsec, which saw its fund research ability rated as above average by close to 63%, slipped to the second place this year. However, the total number of planners who appreciated the firm in this category grew to 78.6%. 

At the same time, Zenith’s research was rated above average by 74% of planners who participated in the study and almost half of respondents rated SQM Research’s ability to provide useful fund company research as either ‘excellent’ or ‘good’. At the same time, SQM’s head of research, Rob da Silva, was individually appreciated as one of the best researchers in the market and the “only researcher who has managed money”.

WEBSITE AND TOOLS

With the arrival of COVID-19 pandemic this year and an obligatory switch to technology, planners rated the research houses’ website and tools as the second most important criterion.

They also had no doubt that Morningstar, which was described by some as having the best software in the market, had provided the greatest level of satisfaction when it comes to website and planning tools, almost 90% (88%) of respondents gave it an either ‘excellent’ or ‘good’ rating. This was also the second win in a row for Morningstar in this category.

By comparison, last year’s winner Lonsec, which had previously held the gold trophy in this category for a number of years, came second with only 64% of participants rewarding its website and tools with an ‘above average’ rating.

Following this, the ability of providing highly-satisfying tools and technology by all the remaining raters Zenith, SQM Research and Mercer were viewed positively by less than a half of respondents.

STAFF QUALITY

This has been historically one of the most contentious categories for both financial planners and fund managers who rate the raters every year due to the high expectations they hold for research houses’ staff that they deal with.

Additionally, according to part two of the ‘Rate the Raters’ 2020 survey, as many as 85% of all planners participating in the study admitted that the quality of staff of each of the research houses was key to them, making this category the third most important criterion for them.

Although Lonsec was viewed as a research house which continued to struggle with staff turnover across its research team while Morningstar’s research and consulting teams were criticised by some as having “little knowledge of the real world”, the two firms still managed to attract the highest number (71%) of either ‘excellent’ or ‘good’ ratings for their staff quality.

At the same time, the Zenith’s staff was rated as above average by more than 60% (63%) of respondents. SQM Research, which according to part one of Money Management's ‘Rate the Raters’ survey, saw its personnel highly appreciated by more than 80% of fund managers participating in the study, attracted a combined ‘excellent’ and ‘good’ rating with regards to its staff quality from only 44% of financial planners who participated in the study.

VALUE FOR MONEY

This year financial planners chose, for the first time in almost five years, Morningstar as the research house offering the best value for money, since it attracted a combined ‘excellent’ and ‘good’ rating from 64% of those who participated in the study and was described as “a bit expensive but great value”.

Zenith, which came second in this category, received a similar rating from 58% of respondents while Lonsec, which also climbed to the podium, was appreciated as a good value for money by half of the respondents.

Following this, 38% of respondents, were of opinion that SQM Research also offered above average value for money.

CORPORATE STRENGTH

This category, which focuses on how planners perceive financial strength and stability of each of the research houses, was viewed as either ‘essential’ or ‘very important’ by more than half of respondents.

Once again, Morningstar was the sole winner in this category with 92% of financial planners participating in the study rewarding its brand with either an ‘excellent’ or ‘good’ rating. Last year Morningstar managed to climb up from the second place to the top spot but saw no more than 80% of responses according to which its corporate strength was described as either ‘excellent’ or ‘good’.

Following this, Lonsec managed to return to second spot, after being pushed down in 2019 to third by rival Zenith, and saw its corporate strength rated as either ‘good’ or ‘excellent’ by 79% of respondents.

Mercer took out the bronze medal across this category as over 60% of planners, who chose to share their opinions in the survey, rated the firm’s brand as above average and appreciating its corporate strength.

Zenith managed to attract above average ratings for its corporate strength from over half (53%) of respondents.

CLIENT SERVICE

With 74% of planners who participated in the survey believing that client service was either ‘essential’ or ‘very important’ criterion in their process selection, Morningstar defended its last year’s win and continued to top the table, having improved the percentage of positive responses to 75% according to which its client service stood above average.

At the same time, Lonsec managed to return to second spot, after finding itself in third place last year with only 42% of voters rating its client service as either ‘excellent’ or ‘good’, and attracted the combined highest ratings from 67% of surveyed planners.

By comparison, Zenith, which landed in second place last year, dropped to the third place this year with only 37% of respondents having described its client service as either ‘excellent’ or ‘good’.

The client services of Mercer and SQM Research were viewed as above average by only 30% of the respondents.

ASSET ALLOCATION RESEARCH

The category, that focuses on the resourcing, value-add and methodology employed by raters, was deemed as either ‘essential’ or ‘very important’ by more than 70% of planners participating in the study this year.

Surprisingly, Morningstar managed to outshine Lonsec by delivering top performance and being rated as above average by 64% of financial planners who voted in the survey.
At the same time, Lonsec, which previously won this category three times in a row, dropped one spot down and saw a slightly lower proportion (61%) of those who viewed its asset allocation research capabilities as either ‘excellent’ or ‘good’. 

The second part of the 2020 ‘Rate the Raters’ survey also found that half of respondents rewarded Mercer with positive feedback, describing the firm’s asset allocation research as either ‘excellent’ or ‘good’ and putting it onto the podium.

However, both Zenith and SQM Research saw the combined ‘excellent’ and ‘good’ ratings from less than 50% of respondents across this category.

MODEL PORTFOLIOS

Lonsec continued its win across this category with 54% of financial planners participating in the survey rewarding its model portfolios with the highest score.

By comparison, two years ago 44% of respondents rated Lonsec’s model portfolios as ‘good’ and further 16% described it as ‘excellent’.

Lonsec was followed by Morningstar and Zenith which garnered positive feedback, described as a combined ‘excellent’ and ‘good’ ratings, from 46% and 37%, respectively.
At the same time, both Mercer and SQM Research managed to attract a similarly positive ratings from between 20% to 30% of respondents.

CONSULTING SERVICES

As far as the consulting services category was concerned, Morningstar continued to demonstrate the highest value, scoring the highest combined rating from close to 60% of respondents.

This represented a significant growth compared to last year when the research house shared the top spot across this category with Lonsec and the consulting services of both groups were rated as either ‘good’ or ‘excellent’ by only 44% of respondents.

Following this, Lonsec saw half of respondents highly satisfied with the quality of its consulting services, while Zenith was appreciated in this category by close to 40% of voters.

Mercer and SQM Research attracted above average ratings from 31% and 20%, respectively, of financial planners who rated the quality of their consulting services this year.