Morningstar Investment Conference 2023: Top 5 Takeaways

Chris Latham, Deputy Managing Editor, Wealth Solutions Report

Morningstar Reveals Open AI And Shares How Advisors Can Invest In Volatile Markets, Derek Notman Of Intrepid Wealth Partners Goes 100% Virtual, Rob Schlegel Of Clark Capital Talks Portfolio Strategies, And Aswath Damodaran Of NYU Is Skeptical Of ESG

The annual Morningstar Investment Conference that occurred from Tuesday through Thursday at McCormick Place in Chicago had an abundance of actionable insights relevant to financial advisors and wealth management firms. They ranged from the realization that firms are already embedding GPT-based artificial intelligence into their businesses to the suggestion that environmental, social and governance (ESG) criteria have become meaningless as investment strategies. Here are my top five takeaways.

1. Morningstar Reveals Open AI Personality Called “Mo” – And I Try It Out

Morningstar revealed its spin on Open AI by displaying a large-screen interactive setup of its “Mo” personality, which I tried out in the Exhibit Hall. Mo, which resembles a video game-like young man in a red Morningstar sweater, comes preloaded with the company’s proprietary data on funds, market research and editorial content.

WSR Deputy Managing Editor Chris Latham, with Morningstar’s “Mo”

I asked Mo, “What is the best way to save for retirement?”

Mo responded, “There are several steps you can take to save for retirement, including contributing early and consistently saving at least the amount your employer will match, increasing your contributions with each raise, and keeping your future goals in mind, as you save. The best retirement savings plans also typically include government mandated contributions, savings incentives and transparent oversight of benchmarking fund performance and costs.”

Morningstar Chief Executive Officer Kunal Kapoor also presented Mo during his keynote speech. Kapoor asked, “Hey Mo, what makes a good financial advisor?”

Mo responded, “A good financial advisor should offer comprehensive financial and portfolio planning and have a broad range of expertise, including tax specialists, investors and estate planners. They should also have a Certified Financial Planner credential and be able to add value to clients through their skills and advice. However, the level of fees and the investor’s own skill level should also be considered. Ultimately, a good financial advisor will prioritize understanding a client’s goals and intentions and offer personalized advice and solutions.”

According to the Exhibit Hall display, potential future use cases of Mo include automatically scheduling it to run analytics at a future time, surfacing the type of data and tools needed to run a workflow process and assisting with client questions about investments or market moves. Morningstar built Mo in less than two weeks, and the Exhibit Hall display warns that users should not try to game the system because Mo can be misled with foolish prompts.

2. Derek Notman Of Couplr And Intrepid Wealth Partners Goes 100% Virtual

Derek Notman, Founder & CEO of both Couplr, a fintech lead-generation solution for advisors and their firms, as well as Intrepid Wealth Partners, an online financial advisory firm, discussed how he built and maintains a 100% virtual book of business.

Derek Notman, Founder & CEO, Couplr and Intrepid Wealth Partners

Notman spoke on a panel called The X Factor: Hear from Some of the Fastest-Growing Advisors in the Business, alongside Christopher Fisher, Co-Founder of ISTO Advisors; Tony Bacarella, owner of Bacarella Wealth Consultants; and Mac O’Brien, Head of Investment Distribution, Morningstar Wealth.

“Early on I would work with anyone who fogged a mirror, and that was a big challenge,” Notman said. He did once open a brick-and-mortar wealth management office, believing that to be the standard method of establishing trust and growing a client base, but he found that to be a waste of money compared with his current setup. “Now I have clients coast to coast that I’ve never met in person, yet I manage millions of their dollars.”

These days, Notman said on the panel, he nurtures prospects through an email sequence, podcasts and LinkedIn posts. This approach brings in three to five leads per week and enables him to filter potential clients down to only those he wants to serve. A $20 million startup founder became a client after finding Notman from his online presence.

“I’m now turning leads away and referring them out to other advisors that I trust,” Notman said. “My marketing budget per year is zero.”

3. Rob Schlegel Of Clark Capital Talks How Advisors Can Outsource Portfolio Strategies

Rob Schlegel, Divisional Sales Manager at the asset manager Clark Capital Management Group, talked about his firm’s approach to helping financial advisors build portfolio strategies for clients. Clark Capital is among the firms involved with Morningstar’s newly launched third-party manager partnerships, alongside BlackRock, T. Rowe Price and Fidelity.

Rob Schlegel, Divisional Sales Manager, Clark Capital Management Group

Clark Capital, which was founded in 1986 and oversees $27.7 billion in AUA, is a Philadelphia-based family and employee owned and operated business with 130 employees. The firm was recognized as an Asset Manager of the Year by the Money Management Institute (MMI) and Barron’s for three years in a row, from 2020 to 2022.

The asset manager currently has seven total portfolio models on the Morningstar platform, with conservative, moderate and growth risk tolerances. Schlegel summarized how advisors can use Clark Capital’s Tactical Fixed Income and Navigator U.S. Style Opportunity strategies.

According to Clark Capital’s website, as of Jan. 31, the actively managed Tactical Fixed Income Fund consisted of 38.3% corporate bonds followed by 28.4% ETFs and then 11.9% U.S. government and agencies, along with various other holdings. As of March 31, the passively managed Navigator U.S. Style Opportunity consisted of 56.9% in the iShares S&P 500 Index, 22.5% in the iShares Russell 200 Growth Index and 20.6% in the Invesco NASDAQ 100 total return ETFs.

“The goal is to provide optionality with managers that complement each other, and help clients avoid bad decisions,” Schlegel said. “Clients tend to do the wrong thing at the wrong time for the wrong reasons.”

Clark Capital’s strategies take more of a satellite approach, and some of them are purely mathematical with a minimal human element. He emphasized that advisors who use dynamic managers can outsource portfolio management in order to go from a micro approach to more of a macro asset allocation approach, freeing up time in the process to focus on more meaningful aspects of client interaction.

“Rarely do we see clients leave advisors strictly because of performance,” Schlegel said. “It’s usually about service or something to do with communication.”

4. Aswath Damodaran Of NYU Stern Explains Why He Is Skeptical Of ESG Investing

Professor Aswath Damodaran, who teaches corporate finance and equity valuation at the New York University Stern School of Business, explained why he’s skeptical of ESG investing. In his view, companies have gamed the system to make the term meaningless for practical purposes, and investors fail to recognize how their consumer patterns with devices such as air conditioners can undermine their ESG values with issues such as climate change.

Professor Aswath Damodaran, NYU Stern School of Business

“ESG’s now politics. It’s nothing to do with economics or business anymore,” he told a room full of journalists. “Name me one social issue on which there is consensus. Pick a social issue, 50% hate it and 50% love it.”

Damodaran argues that it may be better to retire the ESG concept and focus on core ideas such as climate change, and engage in direct indexing that allows investors to exclude specific companies based on disclosures of how their operations impact their carbon footprint.

However, he acknowledged that this does not mean that publicly traded companies can completely avoid taking social stances and that some of them might have no choice but to do so. This is particularly the case for companies whose employees care deeply about a certain issue, which makes the issue an operating requirement.

Disney, for example, has been grappling with this challenge over LGBTQ rights and representation. As a result, Disney has run afoul of everyone from some shareholders to Gov. Ron DeSantis of Florida, who runs a major U.S. state where the company has massive theme parks, real estate holdings and jurisdictional sway.

Damodaran suggests that financial advisors reframe the ESG conversation for next-gen clients. “When a next-gen client walks in and says, ‘I’m interested in ESG,’ the first question to ask them is, ‘What is your definition of goodness? What do you care about?’”

That way, instead of assuming the client prioritizes investing based on climate change or civil rights, the advisor might learn the client’s biggest ESG priority is something entirely different, like privacy. In which case, the company that client might choose to exclude from their portfolio is Facebook and not Exxon Mobil, according to Damodaran.

5. Morningstar Wealth’s Marta Norton And Mike Laughlin Discuss Investing In Volatile Markets

The biggest consideration for investors is whether markets are undergoing a regime change or merely experiencing cyclical noise, according to Marta Norton, Chief Investment Officer, Americas at Morningstar Wealth. Regime change may involve structural issues tied to inflation and rising interest rates, where asset class returns can become different in the future than they have been in the past and strategies that had performed well no longer do so on a longer-term basis.

Marta Norton, Chief Investment Officer, Americas at Morningstar Wealth

“It’s reasonable to put a not insignificant likelihood that inflation doesn’t come down as quickly as people might expect, which would mean that the Fed doesn’t pivot as much as the market might expect,” Norton said, explaining that this could prompt additional stock market volatility. “In terms of our portfolios, we’re leaving some space for that.”

With big tech once again outperforming and bonds serving as a hedge against equity performance, it could appear that 2022 was an anomaly and 2023 will be characterized by a return to normal. However, the 30-day volatility of 2-year Treasury yields is as high as it’s ever been during the past 35 years and the only comparable period was the global financial crisis, Norton said.

Regarding investment opportunities, Norton sees potential for certain equities in the U.S. technology sector, as well as for some companies based in China and Brazil. But discernment matters in the search for meaningful valuation discrepancies, between both specific equities and in asset allocation between equities and fixed income. With yields getting higher, Norton also sees cash as having real utility when investors are still looking for good valuations.

As for what financial advisors can do for clients in this environment, Michael Laughlin, Head of Portfolio Specialist Team at Morningstar Wealth, suggested that direct indexing and separately managed accounts (SMAs) could be part of the solution. Morningstar Wealth released the direct indexing capability to its Wealth Platform in November. Laughlin pointed to how greater market uncertainty and potentially lower returns compared with the last 10 to 15 years could make fees and taxes in a portfolio even more important for investors.

Michael Laughlin, Head of Portfolio Specialist Team, Morningstar Wealth

SMAs that use direct-indexing – where clients own the underlying equities and their holdings undergo tax-loss harvesting on a daily basis at both the individual security level and the individual tax-lot level – can have better after-tax returns than mutual funds and ETFs with similar holdings, according to Laughlin. Advisors also can personalize the approach to address issues such as concentrated stock positions or a client’s values, which could appeal to higher net worth clients.

“An advisor’s role is to be an educator for their clients, and this is something that I would put into that category the same way advisors would educate a client about estate planning or their executive compensation plan,” Laughlin said of direct indexing. “This has been around for over 35 years. It’s just the ability now for someone who’s in that mass-affluent category to have access, and that’s really important.”

Chris Latham, Deputy Managing Editor at Wealth Solutions Report, can be reached at


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