According to the announcement, the new module utilizes Ibbotson Associates’ optimization and wealth forecasting engine. Financial advisors can use the optimization engine and graphing function to determine an asset mix most likely to achieve the highest return for a given level of risk for clients.
The module uses Monte Carlo wealth forecasting to simulate the potential performance of both taxable and tax-deferred portfolios, taking into account the impact of such factors as inflation, taxes, and future savings on a client’s ending wealth level, the announcement said. Advisers can then use customized reports to present investment plans to clients.
Morningstar Principia is a research database that includes mutual funds, stocks, exchange-traded funds, variable annuities, closed-end funds, and separately managed accounts, that advisers can use to conduct advanced research and analysis, monitor portfolios, and propose investment strategies. In 2005, Morningstar added a Defined Contribution Plans module to the system (See Morningstar System Helps Investment Advisors for DC Plans ).