Morningstar Adds Individual Bond Data to Advisor Platforms

Responding to what it said was a long-time demand from advisors, Morningstar Inc. announced Monday that it was adding new fixed income research capabilities to its Advisor Workstation and Morningstar Office platforms.

In a partnership with Interactive Data Corp., which supplies the raw fixed income data on price and performance using its global network of ties to all manner of financial markets, those two Morningstar platforms will display research on more than 1.3 million individual U.S. bonds, including Treasuries, corporates and municipal bonds.

“This was the one tool missing from our toolbox,” Morningstar VP of advisor software Melinda Sgariglia in an interview on Thursday, saying the fixed income coverage was “one of the top feature requests” from advisors using both platforms. In addition to giving advisors a more holistic view of a client’s portfolio by including individual bond holdings, the enhancement will also solve a compliance issue, since Sgariglia noted that FINRA doesn’t allow the use of proxies—such as the Lehman Aggregate Bond Index (now called the Barclays Capital Aggregate Bond Index)—in reports that an advisor can hand to a client.

The enhancement for Advisor Workstation, used primarily by broker-dealer reps, will occur in March 2011 and will carry an extra fee at the enterprise level. Morningstar Office users, mostly RIAs, will gain access to the bond research in April 2011 at no additional charge.

Elizabeth Duggan managing director for global evaluations at Interactive Data pointed out that in addition to the value of seeing individual bonds rather than a proxy index, advisors also preferred to see bond holdings’ value and performance on a daily, rather than a monthly basis.

Sgariglia said the bond research—displayed in the same familiar Morningstar “tearsheet” format as individual stock or mutual fund holdings—uses 30 separate data points and displays 10 years of performance data that can be compared to those holdings’ appropriate benchmarks. As for ratings on the individual bonds, Morningstar will not rely on the independent ratings agencies, but will use its own internal ratings developed through the resources of Realpoint, which it acquired last March for $52 million.

Much as advisors use Morningstar’s research tools to evaluate stocks and mutual funds, the bond data allows for screening of the bond universe to meet specific advisor or client needs and allows for the creation of lists. Sgariglia said an individual broker/dealer could also create pre-built lists of approved bonds for use by its representatives.