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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."

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."

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."

Morningstar Debuts Web-Based Variable Annuity Research Tool

"Morningstar officials said Annuity Intelligence combines the best features of two popular tools, Morningstar Annuity Analyzer and the Annuity Intelligence Report, to create an all-in-one source for annuity data and information. Users will now have improved capabilities to search for variable annuity contracts, compare them side-by-side, and then generate client-friendly, FINRA-reviewed presentations and reports."

Morningstar Finds ESG Funds Are More Expensive Than Conventional Funds

"The asset-weighted average expense ratio for passive funds fell to 0.12% in 2020 from 0.13% in 2019 ... Active funds ... also had a decline in fees from 0.65% in 2019 to 0.62% in 2020.... The study found a higher asset-weighted average expense ratio for environmental, social and governance (ESG) funds (0.61%) compared with their traditional peers (0.41%)."

Plan Sponsor Selection of Target Date Glide Path May Not Always Consider Participants' Behavior or Needs

21 pages. "[M]ost plans offer TDFs designed for participants staying in the retirement plan through their retirement even in cases when a plan's participants are more likely than average to roll their money out of their plans. This mismatch is important because these 'through' glide paths typically take on more risk than 'to' retirement glide paths, leaving participants with more equity exposure than they would have if their glide path accounted for their propensity to take money out of the plan at retirement or separation from employment."

Getting ESG Funds Into Retirement Plans Can Be Challenging

"CalSavers recently announced the selection of State Street Global Advisors [SSGA] to manage the investment lineup ... but said there won't be an ESG fund in the plan, at least not initially. The reason? The ESG options were too expensive."

The Latest Attack on Target Date Funds

"Target-date funds are neither relatively expensive nor visibly poor performers. To be sure, most have trailed their expense-free benchmarks over the past decade, owing to their costs, the drag of cash, and the occasional investment glitch. But the same may be said for pretty much every other flavor of mutual fund. For those sins, target-date funds very much do not stand alone."

Clearing Up Cybersecurity Confusion for Investment Advisers

"[M]any advisors assume that protecting client data and staying compliant require outsourcing these tasks entirely, purchasing expensive tools, or both. While outsourcing and quality cybersecurity tools can certainly be of benefit, advisors would be best served to understand what's required, what's best practice, and what their risks are before tackling the cybersecurity process and compliance."

How Long-Term Services and Supports Impacts Retirement-Income Adequacy

"41% of households are projected to run short on money in retirement when [long-term services and supports (LTSS)] costs are included. Without LTSS costs? Just 26%. Single women are particularly exposed to LTSS risk ... About 43% of Baby Boomers will incur LTSS costs in retirement, ... The average unconditional present value of LTSS costs for Baby Boomers from retirement age through death is $130,700. The average cost for those who are projected to incur costs is $242,373."