A Better Workstation

For most RIAs, however, Workstation is not nearly as attractive. "There was no functionality so compelling as to even begin to motivate me to make the huge investment of time and money needed to migrate my data," says Curt Weil, an advisor in Palo Alto, California, who represented one of the 15 RIAs who participated in an hour-long demonstration of Workstation. "I'm not sure Morningstar gets RIAs."

For advisors like Weil, who for years have been using sophisticated planning, portfolio management, and customer relationship management tools, Workstation would be a step down. Its goals-based planning module is not nearly as well developed as software from MoneyGuidePro, NaviPlan, or MoneyTree. The CRM pales in comparison to ACT! or GoldMine, much less Junxure, Junxure-I, Act4Advisors, or ProTracker. And the analytics, while much stronger than the planning or CRM modules, may not be compelling enough to make an RIA want to switch from Ibbotson Portfolio Strategist or AdvisoryWorld–especially considering the price RIAs must pay.

Workstation costs $5,000 per seat. With most advisors paying a discounted price of $1,000 or less for Principia with the mutual fund and stock database, Morningstar's flagship research and analytics software for RIAs, it's unlikely RIAs would fork over $4,000 more to buy CRM and goal planning tools inferior to what they now use. For RIAs using Morningstar's portfolio analytics–importing Schwab Centerpiece and Advent Axys reports into Principia's portfolio analytics module–the few new analytical bells and whistles won't alone be enough of an incentive to pay $4,000 a year more.

After the Workstation demos, I e-mailed a survey to the 15 advisors. Thirteen responded. None said Workstation was worth up to $10,000 a year; four said it was worth up to $5,000; eight said they'd buy it at $1,000 or less; and one said he would not buy it at any price.

"To replace AllocationMaster or my CRM, they have quite some work ahead of them," says Dean Giella, who runs a Jericho, New York, RIA and was one of those saying he is likely to adopt Workstation at $5,000 or less. "RIAs are used to having the freedom to choose best-of-class software. It's a tall order to provide total one-stop shopping in all these categories."

Morningstar is going to have to make an important business decision about selling customized versions to RIAs through custodians. It's unlikely TD Waterhouse, which plans to integrate Workstation into its back office, or any other custodian, will allow assets from other custodians or B/Ds to be included in its implementation of Workstation. So only RIAs holding all of a client's assets at a single custodian would be able to use it.

Since RIAs generally prefer not to rely on a single custodian, many RIAs will prefer that Workstation take downloads from multiple custodians. Morningstar could perhaps do this by interfacing Workstation with an account aggregator. However, that would undermine Morningstar's ability to sell custom Workstation implementations to custodians. Advisors also worry that if they fire their custodian in five years, or if it is acquired, that they might lose all that aggregated account data. But the challenges Morningstar faces with RIA adoption should not diminish the fact that it seems committed to building Workstation into a viable contender for RIAs.