Morningstar, Envestnet Partner on Personalized IRAs Targeting All Balance Sizes

Morningstar Investment Management LLC and Envestnet announced Monday a managed accounts service for Individual Retirement Accounts that is backed by IRALogix Inc. 

The new offering, available in the first quarter of 2024, is designed to provide savers with fund selection and portfolio-building from Envestnet with Morningstar’s managed accounts methodology, according to the announcement. The IRAs will have no minimum account size requirements, allowing those with low balances to have access to personalized service, says Jim Smith, global head of strategy for Morningstar Retirement. 

“The initial launch thought was there’s a number of asset managers who have IRAs sitting on their platform,” says Smith. “They’ve been there for years, frankly. A lot of those are an old legacy system, so our first target was really those asset managers to say, ‘Hey, want to get off of a legacy system cost savings through our IRALogix?’ In most cases, cheaper share classes pass on to the participants and we can layer on advice on top of it.” 

The deal comes on the heels of other partnerships penned by IRALogix this year. In April, the firm partnered with Slavic 401(k) for an IRA rollover offering. In June, Marsh McLennan Agency, a subsidiary of insurance brokerage Marsh, launched an IRA with IRALogix without account balance minimums. 

With the latest offering, Morningstar Investment Management’s platform will create customized investment portfolios tailored to each account holder’s unique financial profile and circumstances, according to the announcement. The product actively manages these portfolios, adjusting the investment strategy as the individual’s financial situation and investment goals evolve. 

Matrix, a subsidiary of Broadridge Inc, will be responsible for custody services for the IRAs. Envestnet will provide the fund selection and model portfolio-building. 

“This service is a very powerful collaboration that we believe will give asset managers, broker-dealers, recordkeepers, and advisers options to shift the growing cost of administering their IRA programs to a private-labeled offering, while still retaining their existing revenue streams,” Sean Murray, head of Envestnet Workplace Solutions, said in a statement. 

Nearly 40% of U.S. households own an IRA, but the majority do not have an adviser in part due to having relatively low balances, according to Morningstar. The new IRA is designed to solve for that by leveraging Morningstar’s managed account setup that is currently being used by over 2 million participants in employer-sponsored retirement plans.  

Smith says that, if an IRA holder does have an adviser, that person can remain involved with the investments. 

“If there’s an adviser involved, [the offering] is a way for them to essentially pass on end savings to that user. They can still, again, get reasonable compensation,” he says. “We can deliver on advice, giving them a more diversified portfolio, rebalancing or revisiting it, versus a lot of these [IRAs that] have probably been done years ago when the participant rolls it over and it hasn’t been revisited. If there’s an adviser involved, there’s now a systematic advice program put in place.”