Why Morningstar Believes in Financial Advice

Jamie Wickham  |   23rd Jul 2018  |   3 min read

It’s a difficult time to be a financial adviser and a challenging time for the industry. Morningstar believes in the value of financial advice and has proven that prudent financial advice boosts investment returns.

Great advice is personal. It isn’t how long it takes to return a phone call or respond to an email.  It’s knowing your client’s financial habits, goals and dreams.  It’s knowing when your client wants to retire, invest money in a way consistent with their values, or save for that rainy-day fund that they hope they’re never going to need.  It’s building a plan for a successful financial life, sticking to it, and updating it as life happens before their eyes.

I want to see Australians getting good financial advice, securing their future and leading the lives they want to lead. And with about eight in ten Australians not getting any financial advice at all, and a growing number of Australians relying on the part-pension, according to ASFA estimates, the complexity of superannuation and the financial industry means it has never been harder to secure your future and lead the life you want to lead.  Good financial advice will become more important to all Australians and that is why we at Morningstar believe in advice.

Great financial advice goes beyond creating portfolios and investments.  It is not about stock picking or beating the benchmark.  It’s about giving people goals-based advice; helping them reach their financial objectives; and managing complex issues that can cause a huge amount of heartache if not managed properly.

If you want long-term financial security, you need to put your money to work.  But, unless you are a savvy, self-directed investor with sufficient time to nurture your portfolio, you need professional financial advice to do that.

Why? First, because most people don’t have enough information to make smart investment decisions.  To invest wisely, you need a deep understanding of fundamental investment concepts and what you intend to invest in, as well factoring in your risk appetite.

And second, because even professional investors struggle to make rational choices.  Human beings tend to fall back on short-term thinking, gut instincts and emotions.  Driven by greed or fear, investors tend to follow the crowd, making irrational decisions to sell when the market crashes or towards the overvalued momentum stock.  A rational approach would be to ride out the lows patiently and take advantage of under-priced stocks when they arise.

Morningstar Illuminates Investing

At Morningstar, we use analytics, design and technology to communicate complex information quickly and easily, often through visualisation.

We do that by:

  • Simplifying the endless list of investments by evaluating every asset using the same standards – so investors can make meaningful comparisons.
  • Shedding light on assets designed to be intentionally complex – removing the camouflage and replacing it with transparency.
  • Asking tough questions and distilling investments into their fundamental elements – understanding how they work, whether they’re worthwhile and the role they should play in a holistic investment strategy.
  • Finding undervalued investments that people can hold onto and benefit from for years.

Put simply, we judge every investment based on what it does – not what its manager says it does – and on what long-term value we believe it will deliver to a portfolio. We also give advisers the tools to help communicate investment ideas and information in a form their clients can easily understand.

A large part of how we judge every investment is through the lens of transparency and disclosure.  Transparency is there to help investors understand exactly what they’ve invested in, what they’re paying for, and the role products play in a holistic investment strategy.  And transparency leads to improved analytics and measurement.  With measurement comes the pressure to deliver value. Enable measurement and you improve the outcomes for investors.

I believe to regain trust, to educate investors, to further personalise advice and to enable a strong advice industry delivering the right outcomes for investors, transparency and disclosure must be an area of focus for government and regulators.

We Believe in Advice

Despite the pressures in the industry right now, we continue to believe in the future of financial planning. This is not just wishful thinking. For five years now, our most senior researchers in the US and Canada have been working to quantify the benefits of good financial planning decisions.

The initial 2013 paper, Alpha, Beta, and Now…Gamma by David Blanchett and Paul D. Kaplan, explored a new concept called ‘Gamma’ designed to measure the value of prudent advice. Last year, David and Paul conducted more empirical tests. They concluded that “the ‘average’ investor is likely to benefit significantly from working with a financial adviser, so long as the adviser provides comprehensive, high-quality portfolio services for a reasonable fee”.

The New Face of Financial Planning

The events of recent months will continue to push the advice industry closer to the model that we at Morningstar advocate for. It’s how we see the world.  Investor centric.  Where advice trumps product sales every time.

And I believe the best financial advisers, those doing the right thing by investors, will not just survive the current industry turmoil, but will continue to play a vital role in ensuring financial security for all Australians.





Jamie Wickham

Managing Director, Morningstar Australasia


Jamie leads the 150 financial services professionals who work here at Morningstar Australasia. He has over twenty years’ experience in the financial information and research industry, with management roles spanning product, operations, sales and technology.

Jamie is driven by our mission to help investors reach their financial goals.



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