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Citigroup and Stanley Black and Decker Fiduciaries Accused of Fiduciary Malpractice for Choosing Morningstar's Top-Rated BlackRock Target Date Funds

"In both lawsuits, Miller Shaw flips the script of the typical excessive fee lawsuit by alleging that the respective plan fiduciaries 'chased the low fees' charged by the BlackRock index target-date funds and saddled the plans with purportedly inferior returns compared to other target-date funds. The complaints are filled with charts ... implying that Morningstar validates their fiduciary malpractice claims. But they leave out the most important chart in the entire Morningstar survey -- the one that identifies the very same BlackRock target-date funds as the number one rated target-date funds in the 2022 Morningstar survey."

Rollins Inc. 401(k) Participant Sues Morningstar, Prudential Over Alleged RICO Violations

"The complaint said Morningstar and Prudential violated the Racketeer Influenced and Corrupt Organization [RICO] Act by engaging in a 'conspiracy' to increase revenue and profits 'from their self-interested administration' of GoalMaker, an 'automated investment advice program' from Morningstar and Prudential. Alleging GoalMaker is a 'predatory racketeering enterprise,' the lawsuit argued that it 'gets retirement plan investors to turn over the investment management of their accounts' to a unit of Prudential." [Green v. Morningstar, Inc., No. 17-5652 (N.D. Ill., complaint filed Aug. 3, 2017)]

Morningstar's 401(k) Week

"[H]ow do we make [the 401(k) system] work? What role can employers play? And how can we, as employees and as savers, also become the good investors we need to be to ensure a comfortable, well-funded retirement? This week, we aim to help you stack the deck for success in your 401(k) plan. We'll cover the basic rules and tax advantages of the investment wrapper, how to allocate your 401(k), and what to do with your assets once you enter retirement. We'll also look at the viability of the 401(k) itself in a special roundtable discussion on Friday."

Morningstar Star Ratings: Do They or Don't They Predict?

"Most of the advisers ... see Morningstar's ratings as historical evaluations, not predictive devices. Morningstar, the proverbial hairdresser in this sense, appears to delight in leaving the answer rather ambiguous. It wasn't always this way.... But now Morningstar's tune might be changing."

Thoughts on Morningstar's Target Date Fund Research

Excerpt: Two weeks ago Morningstar published its 2010 Target Date Fund Survey. In the survey Morningstar compared the performance of 'open' and 'closed' fund series and drew the conclusion that neither had a distinct performance advantage. This conclusion is not particularly surprising given relatively few funds have long enough return histories to do a complete analysis. However, what was surprising was what Morningstar omitted from the report, and in particular three major differences between 'open' and 'closed' funds that we think paint a very clear picture of why the differences between open and closed funds are significant.

Morningstar Launches Online Investment Document Library

Excerpt: Morningstar, Inc. has launched the Morningstar Document Library, an online repository of documents covering investment products. The Library includes documents from open-end, closed-end, money market, and exchange-traded funds, as well as unit investment trusts, variable annuity subaccounts, and stocks. Morningstar said brokerage firms and retirement plan providers can link to the library or integrate it into their adviser and investor platforms, software, tools, and Web sites to deliver documents to clients that meet pre- and post-sale regulatory requirements.

Morningstar Drops Recommended Safe Withdrawal Rate to 3.7%

"Morningstar Inc. has lowered what the investment research firm considers a safe retirement savings withdrawal rate for new retirees based on a 30-year outlook.... Morningstar researchers considered forward-looking asset class returns and inflation assumptions for new retirees, excluding what they may be getting from Social Security or other nonportfolio income sources such as a company pension."

Class Action Alleges 'Scheme' by TIAA and Morningstar to Drive Participants Into TIAA's Most Profitable Funds

"The Complaint alleges TIAA and Morningstar developed an investment advisory tool ... deliberately inducing participants to transfer account balances into TIAA's Traditional Annuity and/or Real Estate Account, TIAA's two most profitable investment products. Notably, no plan nor plan sponsor is named as a fiduciary nor a Defendant. TIAA and Morningstar are the sole Defendants." [Kelley v. TIAA, No. 24-5945 (S.D.N.Y. complaint filed Aug. 5, 2024)]

Wave of Annuities in TDFs: 'It's Complicated' Says Morningstar

"[N]ew Morningstar research takes a deep dive into the new wave of target-date strategies trying to make the transition from saving to spending easier by including annuities as part of their glide path.... For investors who plan to annuitize some of their assets, this package deal eliminates having to sort through myriad complicated options. Providers choose the type of annuity, which varies by series, and do the due diligence on insurance companies."

Morningstar Advises 3.8% 'Safe' Withdrawal Rate

"Morningstar's annual model of how much a retiree with a balanced portfolio should withdraw over a 30-year time horizon increased to a starting point of 3.8% on the back of higher bond yields and lower equity valuations. The investment data and insights provider said the return outlooks were appreciably higher than last year, when the firm recommended a 'safe' withdrawal rate of 3.3%. That rate made waves at the time because it went against the industry standard of a 4% withdrawal rate for a retirement portfolio balanced roughly 50-50 between stocks and bonds."