SMArtX Advisory Solutions, a technology provider of managed accounts and a turnkey asset management platform, has closed its Series D funding round with a $30 million investment from Morningstar Investment Management, the unit of Morningstar that provides discretionary investment management and advisory services.
Daniel Needham, president of Morningstar’s wealth management solutions group, and Michael Holt, chief strategy at Morningstar, will join SMArtX’s board of directors.
The investment comes after a November 2021 announcement that Morningstar would use SMArtX’s unified managed account technology to power its turnkey asset management platform. (Morningstar previously used Tegra118, now part of InvestCloud, to power its TAMP, according to published reports.)
SMArtX says it will use the funds to expand its development in support of Morningstar’s existing TAMP and direct indexing service, set to launch later this year. SMArtX currently hosts 133 strategies on its direct indexing platform. Morningstar announced in September its acquisition of Moorgate Benchmarks, a privately held indexing specialist in Europe, as it builds out its own direct indexing service.
“SMArtX has a track record of building products that offer greater flexibility, advisor choice and personalization at scale, which aligns with our mission of empowering investor success,” Needham said, in a statement.
The investment by Morningstar will also enhance SMArtX’s existing services, improve its integrations and add more staff to support its growth. The company also plans to add new capabilities, including fixed income strategies in a UMA and better manager analytics. It will also continue to add to its “select list” of investment strategies.
Alois Pirker, director of the wealth management practice at Aite-Novarica Group, said there is a trend for TAMPs to unbundle services, as opposed to trying to build an all-in-one platform for advisors.
“The TAMPs space is pretty fluid right now,” he said. “You need to be able to unbundle various things in the TAMP context, and direct indexing is a classic example of that.”
A lot of traditional TAMPs leverage third-party partnerships for services—like portfolio reporting or client onboarding—when they do not have those capabilities.
“I would imagine Morningstar looking at this and saying, ‘Let’s put a platform together. Let’s leverage third party components so we don’t need to build things ourselves, and then when it really takes off, we can change things around to bring things in-house,’ or acquire SMArtX, and make it more strategic,” Pirker said. “This is a first step to gain experience in an area and see what the flow is and the uptake is.”
“The more you unbundle and provide flexibility to your clients to tailor the platform and the portfolios, the more smart technology you need in the middle to obtain all this,” he said.
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