According to a joint news release, the Chicago-based Morningstar and mPower expect to complete the transaction this summer. Terms of the deal were not disclosed.
John Rekenthaler, president of Morningstar Associates who will manage the combined businesses, said there should be little or no impact on participants using mPower’s Personal Advisor retirement planning and advice service except for potentially rebranding it with the Morningstar name. There are no plans to move participants in mPower plans to the Morningstar platform, he told PLANSPONSOR.com.
“We’re very loath to change things,” Rekenthaler told PLANSPONSOR.com. “These are services these customers are comfortable with. We’re in no rush to go from two (platforms) to one because we want to keep our customers happy. We’re not going to pull the rug out from under you at this point.”
The transaction made sense on both ends, Rekenthaler said, because it provides Morningstar with an existing block of business among some of the country’s larger companies (3M, Wells Fargo, Peoplesoft, Hewitt Associates, and Texas Instruments), while mPower escapes the need for continually having to search for venture capital funding.
“mPower has a good platform and has started to build a nice business, but they need money to run that business,” Rekenthaler said. “They’re spending more cash then they are bringing in and they needed financial stability. We provide the financial stability and the credibility in the marketplace they needed.”
mPower’s Block of Business
Meanwhile, Morningstar gets mPower’s current roster of more than 6,000 plan sponsors with more than 1.6 million participants as well as 17 plan providers. By comparison, Morningstar’s provides its ClearFuture advice and guidance products to 20 retirement plan providers as well as 47,000 plans covering more than 7.5 million participants. Rekenthaler said most of Morningstar’s current business has been with small- and mid-sized plans. “(mPower’s system) is a platform that we can grow,” Rekenthaler said.
Even if participants end up moving to the Morningstar platform, Rekenthaler said the transition period shouldn’t be too jarring since the Morningstar and mPower investment philosophies are similar. For example, he said both companies have similar forecasting engines and a practice of helping participants select their asset allocation and then suggesting specific investments fitting that allocation.
He said current plans are to retain most of mPower’s current personnel roster of 27 people with most being offered positions at Morningstar’s Chicago operation. Sales representatives may be allowed to remain on the West Coast, he said. Morningstar has about 600 employees.
Morningstar currently offers:
- online or print statements for do-it-yourself investors
- tools for call center representatives and financial advisors
- professionally managed portfolios for participants who wish to fully delegate their investment responsibilities
- retirement plan design and monitoring service for plan sponsors.
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