Morningstar Equity Analysts Identify Companies Poised to Succeed in Wealth Management Industry; Examine Competitive Advantages

  Morningstar Equity Analysts Identify Companies Poised to Succeed in Wealth
     Management Industry; Examine Competitive Advantages in Latest Report

PR Newswire

CHICAGO, Sept. 3, 2013

CHICAGO, Sept. 3, 2013 /PRNewswire/ -- Morningstar, Inc. (NASDAQ: MORN), a
leading provider of independent investment research, today published its
inaugural issue of Financial Services Observer, a research report examining
the competitive shifts in the U.S. wealth management industry, how companies
are responding to industry changes in the years following the financial
crisis, and which companies Morningstar equity analysts think are positioned
to fare well for shareholders.

Financial Services Observer is part of Morningstar's newly expanded Observer
series, in-depth sector research reports that harness Morningstar's focus on a
long-term investment horizon and economic moats—or sustainable competitive
advantages—to analyze complex investment trends across sectors.

Key takeaways of the first Financial Services Observer issue, "Differing
Strategies Will Contribute to the Evolution of Moats in Wealth Management,"

  oFinancial services firms with the strongest economic moats are those that
    serve ultra-high-net-worth investors, defined as those with more than $20
    million in investable assets, and offer comprehensive, sophisticated
    suites of financial products that are difficult for other companies to
    replicate. These companies, like Northern Trust and Morgan Stanley, also
    have strong brands and reputations, and often high switching costs;
  oThe high-net-worth customer segment, defined as investors with between $1
    million and $20 million of investable assets, is increasingly competitive.
    U.S. households in this segment control more than half of U.S. investable
    assets, and wealth controlled by high-net-worth individuals in the United
    States is expected to rise at a compound annual rate of 7.3 percent
    through 2015. However, it is becoming increasingly difficult for firms to
    distinguish their offerings from competitors in this crowded segment;
  oMorningstar analysts identify Raymond James as a financial services firm
    that is well positioned to compete in the high-net-worth customer segment,
    because of the firm's unique business model in employing advisors;
  oFinancial services companies are experiencing competition for advisors in
    addition to clients. Significant numbers of advisors have moved from
    wirehouses to independent advisor networks, as the regulatory environment
    has increasingly required significant investments in technology and
    compliance systems, and the market has become more segmented as wealth
    managers focus on the type of investor they can best serve. Firms have
    also seen a definitive swing from commission-based to fee-based revenue
    models; and
  oMorningstar analysts consider Charles Schwab as a more successful wealth
    manager for the mass affluent customer segment, defined as those with less
    than $1 million in investable assets, while Bank of America 's large size
    and scope of services could create a strong competitive advantage for
    serving both high-net-worth and mass affluent clients.

"Our research team views wealth management as a profitable business with high
shareholder returns, because these firms tend to have wide economic moats, or
strong competitive advantages, which we attribute to long-standing client
relationships and falling costs as production increases," Jim Sinegal,
Morningstar's director of financial services equity research, said. "Over the
last few years, the financial services sector has experienced significant
change, including rising capital requirements and lower interest rates. As a
result, competition has increased. In our report, we look at ways these
companies are distinguishing themselves in the market, their strategies, and
how they are revamping their business models."

The Financial Services Observer also analyzes the competitive factors of the
wealth management industry, various business models, effect of global economic
growth, and the changing nature of regulation and client needs. Specific
economic moat analyses for 10 companies—Ameriprise Financial, Bank of America,
Charles Schwab, Morgan Stanley, Northern Trust, PNC Financial Services Group,
Raymond James Financials, TD Ameritrade, US Bancorp, and Wells Fargo—are also

Morningstar publishes editions of its Observer series regularly throughout the
year, focusing on various topics across sectors, including basic materials,
consumer goods and services, energy, financial services, healthcare,
industrials, and technology. The company recently published its first
utilities and consumer sector editions: Utilities Observer, which explores
demand, pricing, and competitive forces in the Texas power markets; and
Consumer Observer, which studies the competitive dynamics between consumer
product firms and retailers. Morningstar also published its latest Energy
Observer, which examines the key drivers of U.S. natural gas demand and
focuses on the power generation, industrial, and export markets; and its most
recent Healthcare Observer, which delves into the dynamics and competitive
advantages of the lucrative pharmacy benefit management (PBM) industry. Later
this month, Morningstar plans to publish its second Technology Observer, which
will explore global demand for the personal computer industry and the outlook
for hardware and software companies in the new era of computing.

The Financial Services Observer is available at All of Morningstar's Observer
publications are published in Morningstar Direct^SM, its global investment
analysis platform for institutional investors; and Morningstar Select, the
company's institutional equity research portal.

Morningstar launched its equity research in 1998 and now has about 120 global
equity and credit analysts who provide qualitative analyst coverage of
approximately 1,600 companies. Morningstar also provides quantitative ratings
and reports for more than 30,000 companies globally.

About Morningstar, Inc.
Morningstar, Inc. is a leading provider of independent investment research in
North America, Europe, Australia, and Asia. The company offers an extensive
line of products and services for individuals, financial advisors, and
institutions. Morningstar provides data on approximately 433,000 investment
offerings, including stocks, mutual funds, and similar vehicles, along with
real-time global market data on nearly 10 million equities, indexes, futures,
options, commodities, and precious metals, in addition to foreign exchange and
Treasury markets. Morningstar also offers investment management services
through its registered investment advisor subsidiaries and has more than $166
billion in assets under advisement and management as of June 30, 2013. The
company has operations in 27 countries.

©2013 Morningstar, Inc. All rights reserved.


Media Contact:
Nadine Youssef, +1 312 696-6601 or

SOURCE Morningstar, Inc.

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