Morningstar unveils wealth tool to plug 'advice gap'

Morningstar has launched a new investment forecasting tool for investors in an effort to plug what it warns will be a post-RDR advice gap.

The research and data provider says its Wealth Forecasting Engine gives investors a cost-effective forecasting tool and helps them develop a personalised investment plan. It could also be the "first step" in addressing the advice gap in the post-RDR world, Morningstar said.

"The anticipated advice gap that may result for many thousands of investors as the UK industry moves to a fee-based advice model puts greater urgency on a technology solution that supports investors in an efficient and scalable way," said Morningstar CEO Geoff Balzano.

The tool uses simulations to forecast how long a person's money might last, based on a mix of investment products, asset types, risk levels and savings behaviour.

Financial services providers can embed the tool within their online portals to help investors and advisers develop an investment plan including: estimated retirement expenses, projected income shortfall, probability of meeting retirement needs in differing market conditions and income draw-down analysis.

Although Morningstar said the tool is aimed at both investors and advisers, its investor-empowering technology potentially poses a challenge to traditional advice models.

The Wealth Forecasting Engine makes the "delivery of robust and cost-effective investment forecasting to large numbers of individuals entirely possible," added Balzano.

But Informed Choice managing director Martin Bamford (pictured) said the tool should not be considered a threat to IFAs.

"This is a useful tool and we have to recognise not every investor needs an adviser," he said. "These kind of tools will help fill the adviser gap and we should be encouraging things that empower investors."

He added the highly personalised and bespoke services IFAs offer will never be threatened by online tools which offer a different but complementary offering.

Bamford added he expects more technology solutions to surface as investors look to online tools to take control of investment planning and said IFAs can help deliver such services.

"RDR is a side-show when it comes to growth of the internet and investors' yearning to take control of the investment process."

Bamford also revealed Informed Choice is developing an investment tool, set for roll-out in six months, which helps people understand how much risk they can take before suggesting appropriate investment models.