Morningstar CEO Kunal Kapoor on AI, Investing, and Company Culture

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This podcast was recorded on June 27th. This is Greg Bartlett with Barron's Advisors: The Way Forward. We're recording live at Navy Pier in Chicago at the Morningstar Investment Conference. My special guest is Kunal Kapoor, CEO of Morningstar. Welcome, Kunal.

Thanks for having me.

Total pleasure. Thank you for inviting me. The following question is most certainly not going to be the most important one today, but I just wanted to ask it because I listened to a podcast you did, and on the podcast you indicated that some people write you to say how much they like Morningstar veggie burgers, or they might complain that the ingredients, the recipe changed for the burger. I just want to quickly ask, how often does that happen?

It's happening less and less, fortunately, but I would say I get at least I get maybe 1 or 2 letters a quarter from somebody who will write in, and the case in point I was referring to was a couple years ago when someone wrote in, and I always try to call the person back or write them back to let them know that they've got the wrong person, and I called this woman back and she was adamant that I was lying to her, that I was indeed the CEO of Morningstar Farms and I could do something about the recipe, but I could not, unfortunately. So it was not a 5-star outcome.

Well, I was going to ask you how many stars you rated it. Okay. So moving on, if the— for the people in the audience, first of all, thank you for coming. And for those listening, you may know the following, but regardless, I'm going to give a little context of Morningstar's history. Think of it as 40 years and 40 seconds. In 1984, Joe Mansueto founded the company with an $80,000 investment. In 1997, Kunal graduated college and literally within a week or so joined the company as a data analyst. Um, in 2005, the company went public in a Dutch auction at a price of $18.50 per share. In 2017, Kunal was promoted from president to CEO, and since that time, Morningstar stock has risen by more than 300% which is the equivalent of an annualized gain that exceeds 20%. That trounces the S&P 500 and any mid-cap and small-cap index, and in the process took the company's value from about $3 billion to over $12 billion. So that's the big picture context.

The podcast is over.

Okay. Mic drop. We go. So I just wanted to put two questions to begin with. What was fundamental, instrumental in helping the company thrive since you assumed the CEO position. And then after that, I want to talk about the importance of advisors and demonstrating value to clients.

Yeah. So I think, first of all, thank you for the kind introduction. And, you know, what I would say is some things don't change at Morningstar and some things do. And among the things that haven't changed are the mission we have, and our reason for being, which is empowering investor success. And it's why we work so tightly with advisors, because we believe we have this joint mission of helping people get to their goals. And so that's obviously, you know, critical from our perspective. We also have a huge focus on great people at Morningstar. We really care about who comes to work at Morningstar, the values they bring to the table, and how they want to contribute to the firm. And so I think part of why the firm has continued to do well, obviously, you know, Joe started this and, you know, built this amazing legacy. But I think many of us who are in the leadership team today are taking it forward. And so it's a team that knows why the firm exists and how we're going to succeed. And so it's a joint effort in that context. But most importantly, we try to do the right things for the client. And I'm going to oversimplify, but I often say I always want to be in a position where Morningstar can X-ray a client's portfolio. And it used to be that doing that was a relatively straightforward activity because a client's portfolio didn't have many asset types in it. You fast forward to today and what goes in a client's portfolio is more diverse than it ever was, and it includes an array of liquid and less liquid or maybe not liquid at all types of investments. And Morningstar has been able to be on the journey with clients as they've made that transition. And I think ultimately we've benefited from the fact that we've aligned ourselves to industries and to segments that are also in secular growth. So it's not a coincidence that the wealth business has grown and that advisors are as well-off as ever and as needed as ever, and that Morningstar has won as a consequence as well.

Yeah, I mean, your incentives are very much aligned. If you help the advisors and their clients, they're going to bring you more business, which might seem self-evident, but in many businesses as kind of a zero-sum game or there are elements of chicanery where the company might be trying to hoodwink the consumer, but it's a very transparent, equally incentivized business, which is interesting.

Yeah, that's right. And the reality is that if advisors are getting their clients to good outcomes, we tend to do well as a consequence of that. I will say that the model we have isn't followed as much by others, partly because I think it's hard and culturally difficult to maintain, because we do say no to business that we think isn't good for the end investor, and we're very guarded about how we think about offering advice on certain things. Or, you know, we're not guarded. Our analysts are anything but guarded. They go right into what they think about things, but we're guarded about that independence, and that matters a lot.

Okay. Now let's talk about the role of technology and advisors demonstrating value and the great multi-trillion-dollar generational transfer of wealth ahead. Just speak to that. What's, what's important that advisors really need to know?

Well, my first Morningstar Investment Conference was in 1997, as you pointed out, and one of my memories when I think back on it is that pretty much every advisor who attended came with a briefcase. Like, I remember this distinctly. And there were like tons of papers in that, and oftentimes people would come to our booth and they'd ask if they could print things that we were showing them because they wanted to take a hard copy back. And obviously you look around here and there's nobody really walking around with a briefcase.

And I've seen exactly zero.

Yeah. And I think it's, it's an interesting sort of image in my mind because To this day, if you ask people who have not interacted with the sort of financial advice industry, you might get the old picture. But the modern picture of an advisor is quite different. It's one who's digitally enabled, serving larger clients and, you know, post-COVID kind of engaging with clients in a way that is different than ever before. Right. So the whole— I was talking to an advisor earlier today who said, you know, I actually don't see my clients in person anymore. And I said, wow, why did you make that pivot? And he said, well, they don't want to see me. And in that world, it could be dangerous because out of sight, out of mind, you know that. But I think it's also an opportunity just to be super clear about the engagement model, the relationship model, the value model. And I think advisors are getting better at that and clients are getting better at understanding that as well. And so we've got a lot of work to do. You heard Michael Kitces earlier kind of point that out as well. But I think, you know, in our journey with advisors, one thing we're really focused on when it comes to technology is how do we deploy it in a way that allows the advisor to talk about their value and candidly to come across as, you know, being with the times, which I think is very important.

Yeah, exactly. And demonstrating value is tricky because the quality of advice can seem some kind of nebulous and abstract, right? Someone might say, what am I really getting for what I'm paying? But I think that given market returns, I think Morningstar's US market index has risen 12.2% per year over the last decade, and your projection for the next decade is 5.36%. So if that's correct and returns will be much lower, it's all the more important that an advisor underscores why they're offering sufficient value to be hired by a potential client.

I think the transition to fee-based models has been a good one for both the client and the advisor. But the reality is it's partly happened because when you have a 12% annualized return on, on just equities and admittedly other asset classes have not done as well, 100 basis points maybe doesn't get noticed. When you're talking about just over 5%, you're talking about 20% of a overall return, it does start getting noticed. And I actually believe that there's a lot of value being created. I think what's not happening is the value is not being identified and talked about, and value is created in multiple ways. It could be on how taxes are managed, it could be how investments are put together, it could be on behavioral coaching, it could be in a plethora of things. But the advisor has not necessarily as yet learned how to speak about those things. It's kind of a checklist. I often think of it like, you know, you kind of have your checklist before you sit with a client. But the checklist doesn't say I leaned into one thing more or less successfully and why I did it and why it was applicable to the client. I think doing that really does matter.

Yeah, no, I think so. You have to— you can't assume the client will understand it. You kind of have to spell it out, frame it, and communicate it. So in terms of technology, of course, let's talk about AI and kind of be remiss if we didn't. I met Morningstar's Mo last year. Tell us about Mo and what Morningstar is doing with AI.

Yeah, so Mo is the AI technology we've put together and trained on Morningstar data and research. And Mo is a little different because Mo does not leave Morningstar's walled garden, so to speak. So you may say tonight that you want to go out to dinner somewhere and go to Mo and say, hey, Mo, Where in, you know, Streeterville in Chicago can I get a nice dinner? And Mo's going to tell you that he can't give you an answer. So on the one hand, you might find that unsatisfying. On the other hand, the reason we keep him in this walled garden is because one of the big fears with AI is that you don't know necessarily where the answer is coming from. And so we're trying to build from a place of Clarity on what the inputs are and explainability in terms of how we're getting to the outputs that we are getting to. And candidly, the goal and the real thing we're trying to do, especially with advisors, is to take friction out of their day to day. How do you just make the things they're doing much easier? So among the things that Mo is now starting to work on is the ability for him to just essentially look at a client. And if you can kind of essentially define the kinds of things that matter to the client, Mo will propose a proposal to you, the advisor, and then the advisor can obviously meddle with it further to kind of tinker with it further to kind of get it to the right spot. But that's the kind of thing where the advisor might spend an hour today to get going and that work just goes away.

I think the removing friction is really important. And I've heard you speak about that because with AI there are endless debates about the ramifications. I mean, are imagination can take us anywhere and nearly everything is plausible. But I do think what you speak about, at least in the short term, is that removing friction, simplifying is much more tangible, easy to understand and quantifiable.

Yeah, I think it's the other thing is it also leads to a world where more of the advisor workflow starts getting linked in a way that's more seamless. So today, a lot of the workflows that advisors use aren't linked together very well because the pipes and plumbing tend to be quite different. And I think with AI, you can get around that problem quite successfully.

And for your average advisor, I mean, is onboarding one such thing? I mean, give me a couple examples of ways that others might be able to harness the power in a relatively easy manner.

Well, I think it's also how you build portfolios is a very simple use case. An advisor who has a clear kind of idea about how they want to build model portfolios, can essentially set certain criteria in place, and Mo can essentially go out and generate that. We're also working on essentially portfolio talking points. So it's a simple use case of where that advisor with the briefcase, probably in there somewhere was a thick book with all the talking points that they were going to talk to a client about. And what Mo can do is on the morning of a visit, with the client, boil it down to 3 to 5 points and say, for this client, these are the most important things you should touch on, and essentially kind of give you the language you can use to have a productive conversation with your client.

Okay. Let's pivot now to investing. I wanted to ask you where you're seeing interest and growth from advisors and also where alts fits in the universe of Morningstar. And the backdrop partly is that there's a massive— there are fewer and fewer publicly traded companies. There's a lot more money flowing into private companies. So private companies as a percentage of economic activity continues to rise. And there are benefits of diversification, potentially yield, potentially higher gains. And I use the word potentially because it's potentially the case, not necessary.

But yeah, no, it's true. And you heard one of our speakers yesterday be very skeptical about, you know, private markets because of the lack of liquidity and transparency. I think you don't get more transparency and liquidity options unless firms like Morningstar start to shine a light on what's happening in that space. And that's what we're trying to do. But from an advisor's perspective, I would say up until this point, alternatives have been just a big disappointment. They've overpromised and they've underdelivered. And I think most advisors would tell you that the instruments available to them historically have not done the job. And I would agree, and our data supports that in general right now. I think people are starting to get smart about really reconfiguring the products so that they are actually quite useful and valuable. And I'm for the first time starting to see asset managers who have long-term views starting to really look at this. You're starting to see on the fixed income side the use of private credit in traditional strategies. And so you look at some of the largest 40-act products today and they have on the fixed income side and they have huge exposure already to private credit and they're not called private credit funds. And so Advisors are being exposed to that, and obviously these days everyone wants to feel like they're an expert when it comes to investing in startups and whatnot. And so I think what used to be the case is like, you know, my neighbor told me to invest in X dot-com companies. Nowadays, oh, my neighbor has this great idea for this guy he met who's going to start a company, and I'm going to get in on the ground floor. And so advisors are dealing with those kinds of things more than ever. And what we're trying to do is just make sure we have the data. And so You know, we have a great capability in the public markets. We, through our pitch book unit, have a great capability in the private markets and private credit. And we're trying to make sure all that kind of comes to work for advisors. I just add advisors also very focused on portfolios and maybe not building the portfolios themselves, but essentially scaling their practice through prepackaged portfolios. And we're collecting the data on that, providing ratings and research on that aspect of things as well.

Okay. And where are you seeing any particular interest or momentum, any emerging signs or themes and conversations you're hearing?

Yeah, I think in terms of where advisors are using things, it's clear that the private markets are probably the big and interesting idea that almost all of them are starting to look at. The big issue that they face with most clients is one is capital calls are not particularly friendly, obviously, that you kind of get them and you have to meet them. And then second, from a tax perspective, that the tax regime is not as easy as it is, you know, for something that's a public type of instrument. And so we're starting to see more and more efforts around creating products that get around those two things. And so, for example, you've seen the rise of interval funds, and interval funds have been around for a long time. They haven't been that popular, but they're kind of a good hybrid of public and private because you can invest, for example, in something and the money's then locked up, but it's not locked up for 7 years. It's locked up where you can maybe have an out in a quarter and you can decide if you want to put in more money in the quarter too. So I think those kinds of things are what are starting to sort of fuel the interest. And you're seeing different firms, even Capital Group recently announcing that they're going to do something with KKR in this space. And so it feels very natural that that's where the momentum is going to be. T. Rowe Price has invested in the space through an acquisition. Franklin has done that. So you're seeing that all over.

And what are you focused on right now with Morningstar?

What are some to-do things coming ahead that Yeah, I mean, we're obviously driven by this notion of how do we continue to be, you know, critical to the workflow. And so you've touched on a few things that are top of mind for us, which is, you know, the convergence of the public and private markets. We've been front and center on that for about 8 years now. We're very much trying to think about how to leverage AI to drive a number of the things that we're working on. But if I take a step back and go bigger picture, it all starts with data. And our goal continues to be to just continue to build databases that cover different and new investment types, and then to provide research and ratings on it. And particularly with our research, you know, our analysts are amazing and do a wonderful job, but the number of vehicles and types of investments that we have to cover keeps exploding. And so we're trying to find models that take the great work our analysts do and extend it through quantitative means as well.

So there's a, there's a point I want to bring up that I think is quite fascinating about Morningstar, and that is that information and data in and of itself does not necessarily have a moat. I mean, a lot of information is publicly accessible. And one might be surprised to learn that Morningstar's value quadrupled, right, since 2017. So there's clearly— there's data everywhere. But what is it about the Morningstar data? And it's more than just the data, it's the people and everything you do that has engendered, I guess, trust. I'm partly answering my question to, to, to keep that as a virtuous cycle, if you will.

So I love this question because I always start by answering it by saying data is not a commodity. Right. So there's that Economist kind of COVID Data is the New Oil. And I think it was meant to be complimentary, but I was like, well, it's not a commodity.

Well, aspects of it can be, but that's right.

But I mean, you have depth of data, quality of data, breadth of data, timeliness of data. You keep asking me, I'll come up with new dimensions. But I think the most important one for us is how do you take the data and add unique IP to it? Right. And so this is where The folks on our teams who collect the data work in concert with the folks on our team who are the analysts who are using the data. And we try to take concepts that the analysts think are important and then through our, you know, skill sets and design and technology and research kind of come up with simple things that become iconic in that way. And so you think about something as simple as the style box. And started by trying to tell how a portfolio for a single investment worked. And today we have a style box that represents the whole market as well as indexes that track. That's—

it's a wonderful thing. And it's one of those things you just take it for granted. It's always been there. And it, you know, picture says a thousand words. I mean, there's so much meaning distilled in that little box.

Yeah. I mean, these days, if you get up and you look at the market barometer, as we call it, which is the style box applied to the market, almost every day this year, it's felt like large growth has done well and the rest of the market has not. And so everyone sees the headlines that, you know, the Morningstar US market is up a huge amount this year. But you actually look at it through the lens of that and you're like, well, it's actually just large growth. And then if you click on that large growth index and go in there, then you find like on a day that NVIDIA is up, everything is going well and on a day it's down, it's not. And so for most investors, actually, that's a huge part of the market that's not being covered. And There's like a huge simple insight right there that could lead an advisor to making different choices about how they might choose to position a client's portfolio in a very meaningful way.

Exactly. And I think that's why—

that's the power of data, is what I'd say.

Right, right. Absolutely. And in terms of the personalization, I mean, you— I forget, you either— I know you said the following words, podcast or article, I'm not sure. But anyway, the point is that You said personalization leads to more increased engagement and increased engagement leads to better outcomes. And I thought that's, that's a really great point. Speak to that.

Yeah, no. So I think all of us who are in this industry to a certain degree are in the markets every day and we follow the markets, we're engaged by the markets, and we get up every day thinking that everybody around us also thinks the markets are super interesting and they want to spend their lives looking at the markets. And it probably took me 20 years to realize, like, okay, no, that's not going to happen. But, but even if you are not going to get fully engaged in the market, you need to understand how to save and grow your capital. Because at least in the US and a number of other developed countries today, the responsibility for retirement is back on the individual. And so even if you're not super into the markets, you need to find a way to be engaged with your money. And so my thesis is that we need personalization to help drive that because it's a tool through which people start to have a say in how their money works for them. The reality is when I talk to a lot of people outside Morningstar who maybe are not in the industry, they're not engaged with their money and they don't believe their money works for them. And I think we have an opportunity through personalization to help people understand that money does work for them and they do have a choice in that. And so that's why I think it's so important. And if that converts, I think people end up saving more. And I think that's a societal good because people are off to having better retirement outcomes than I think may be the case today.

Yeah, no, absolutely. With with pensions largely gone, I mean, everyone has the incredible task of managing their money and it's really stunning how many people don't. I mean, it's such an important point. So I want to ask you, in terms of retirement planning and personalization, how does Morningstar deliver differentiated insights? What's— and if you could speak to that a little.

Yeah. So we have a very significant managed accounts offering. And so chances are that if your company is offering a 401(k) plan that comes with a managed account, that there's a high probability Morningstar is an option to help you manage your money. And then what we try to do there is, you know, relatively straightforward but incredibly important. And so among the things we try to do, one is of course we build portfolios, and that involves using our capital market assumptions It involves picking ideal investments from the lineup that's available. But then we also do things such as incorporate behavioral tactics to help people have nudges to be better savers. So, for example, if people start to get raises or they're getting promotions, we try to find automatic ways to escalate the contributions that they're making. And so this has been very important. But what's been missing all along has been the advisor. And it's— the retirement part of people's assets has historically not been an area where advisors have spent a lot of time in the US. But we are now enabling that by essentially offering a managed account service to advisors as well that essentially allows them to start engaging with their clients on that front as well. So our differentiation comes not only from our methodologies and the way we're building portfolios, but also because now we've built recordkeeper connections and things like that so that the advisor can participate and help a client and truly then manage the whole portfolio as opposed to just pieces of the portfolio.

Okay. And on the theme of retirement, it's a real— at Barron's, it's a topic that's of perennial interest. And given demographics, that's certainly part of it. And since COVID frankly, a lot of people are choosing or leaving the workforce at an age earlier than they expected, some of it due to a reckoning of someone dying close to them, or remote work for some people facilitated the exit ramp from the full-time workforce, etc. How do you deal with things such as decumulation and whatnot? Because Christine Benz yesterday mentioned that she thought that was something that was underreported by the financial media. And I think she's right about that, but I'm just curious.

Yeah, it's a favorite hobby horse for Christine for sure. And she's right. You know, as an industry, we are geared towards accumulation. That's what everything has historically been based on. And the reality is more people are coming to a time when they need to start to draw down their assets. And look, I've seen many advisors and it's a hard conversation for an advisor to have because even an advisor has spent all these years talking to their client about how they need to grow assets and accumulate assets to hit goals. And then the moment arrives and it's like, hey, it's time to start drawing it down. And, you know, I think we've got to get into the habit of saying it's okay to celebrate and to say you've hit your goal and that's okay. And that's where we need to, you know, get to. And so there are more products now coming on that are lower cost than historically used to be the case that will start to, I think, address some of this problem. But I think the biggest thing is just letting people know that they've kind of gotten there, and it's okay to start using the money for the things that they had done it for. It can be quite liberating. You know, Don Phillips always has said that we're in the business of hitting our— helping our clients hit their goals, and once they get there, we should be celebrating and not kind of comparing as to, well, this person has this and that person has that. At some point, if you hit your goal, that's good enough and it's time to focus on drawing it down.

No, I absolutely agree. I mean, people work 30, 40 years and that's kind of the end goal. It need not end with a whimper, right? Or just— it is a big deal. And I think that from a behavior— behavioral perspective, you know, you can't ignore inertia, right? Every day people get up. Retirement is tricky because this big adjustment. And as well with accumulating assets, I mean, going to decumulation is arguably two changes because you're stopping the accumulation and you're not just standing pat, but now you're actually dispensing and spending that money. So I imagine that that's a— or an advisor on an interpersonal level could also help facilitate. It's not just punching numbers.

The biggest issue for people and the reason why they hesitate so much is long-term care. And the fear of the costs associated with long-term care. And I think like it's almost like that needs to be a separate bucket in someone's retirement planning. And I think we're headed down that path. But the impediment thus far is that people are so fearful and they've seen bad outcomes for people they know on that front that they're unwilling to kind of take that leap, which I understand. That's, that's a hard one to know.

Absolutely. And health scares can happen at any time and the cost can be Variable. Yeah. Yeah. I would— I want to segue to ask you some general questions about management, your philosophy. And before I do that, though, maybe if there's anything else that you feel is important that we haven't touched on, you know, please take the floor and let us know it.

Yeah, no, I think you've covered good ground. You haven't asked me any investing questions.

Any what questions?

Any investing questions.

Investing. Okay. So Well, I did touch on alts, but not—

I wasn't—

okay. So where is your highest conviction? What do you guys love, hate, etc.?

So if you look at our projected returns at Morningstar, they would suggest that you want to have a higher tilt today to smaller-cap stocks and to non-U.S. stocks than you do to U.S. equities. Now, it's also fair to say that we've been saying that for a little while and we've been wrong about it.

So it's just been early.

I was going to get there. So but, but I think that's where the conviction is. I would also just say that, you know, when you look at the equities we do cover in the US, it's worth pointing out that even though small cap and non-US, probably we have higher expected returns, our basic thesis for areas like value stocks remains pretty compelling. And so I think there's plenty of opportunities to put your money to work if you're reading our research. And our analysts also think fixed income has lots of opportunities and, you know, would suggest that someone who's trying to diversify a portfolio today, that a 60/40 today is more compelling than it was 5 years ago.

Yeah, absolutely. And value, I think you guys are positive on, right? Um, what else? Anything else?

Because those are the main things that I kind of point out.

Okay. Um, you're also— your firm, your, your research has an indicator. I forget the name of it, but it assesses the relative value of the market.

Fair market value.

Fair market value. There you go. And it, it indicates the market's 3 to 4% overvalued now, I believe.

Break-even is how I describe it. Yeah. And I recall a really good indicator.

I, I know. Um, and I, and I like that it's very much bottom-up. It's not an arbitrary multiple slapped on the market. It's, you know, and I think last year at this meeting, it suggested the market was undervalued. I might be off by the number, but 8, 9, 10%, what have you. But it was, it was, it was accurate.

Yeah. If you've invested when that indicator has said that the market is more than 10% undervalued, you've almost always been rewarded on a historical basis.

How long has it been in existence for?

I don't remember off the top of my head, but I think it's probably going back 10, 15 years at least now.

So interesting.

I would guess at least back to 2008 before that big financial crisis.

Okay. So any other things on investing or talk about you? Okay. So I want to ask you, so Morningstar is in 29 countries, I read. And how did you manage during COVID Because that was challenging for pretty much every company, never mind one that's so spread around the globe. High level, how did you manage through that?

Yeah, I mean, I think looking back on it, one has to be candid that, you know, I think first of all, everybody rallied very strongly. We were also lucky that we had been using Zoom well before the pandemic hit. And so for our teams, there was already kind of knowledge in how to switch to that.

You didn't have the cat wandering across the screen. That's right.

That's right. Although, of course, I've on many occasions to this day, I'm the guy who's like, hey, can you unmute yourself?

So we all do.

But I think, you know, what really mattered was a strong culture and kind of we rallied for each other. And I remember, you know, we had teams, we have a team in Hong Kong. And I remember people were scrambling in the Chicago and New York offices trying to find masks for people in Hong Kong, even in the early stages. And so When you have a strong culture, you tend to rally at moments like that. And among other things, you know, we're focused on helping investors. And I think one of the things we did really well during that period was keep the focus on investments. And during COVID if you recall, in the early days, the markets fell sharply and everybody was essentially predicting some very significant doom and gloom. Yet our fair market indicator was screaming like, this is the time you should be investing in equities. I think a large percentage of our universe went to 4 and 5 stars. And I'm really proud of the fact that like we saw through that. And so we were good to each other and we were good to our clients. And that matters.

Yeah, the S&P 500, it was the fastest bear market in history.

You mean the Morningstar U.S. Market Index.

I'm sorry, I stand corrected. That other index that those people use, the S&P 500, that fell 36% in 6 weeks. And as you know, recovered quickly along with the more important Morningstar Index. So anyway, so that— so tell me about culture, because advisors always talk about that and we know that is important. But tell me what you can about Morningstar's culture. You've been here for so long, so undoubtedly, presumably it's not a coincidence that is strong that you've been here. And are there any Are there any, you know, cons though to that about rising from the ranks from the ground floor? I mean, obviously I think there's a lot more good, but maybe was there at a certain time potential awkwardness or a little weirdness like, oh, now you're the big kahuna, or did that not really exist here?

I hope not. But, you know, culturally, what I would say is many firms just talk about having strong cultures. I think at Morningstar, people can articulate for you what that means and we live it. And if you look at our internal surveys, one of the things that people say is they love working at Morningstar because they love their colleagues and they love the mission. And that matters. Like, everyone wakes up and feels good about the fact that we're helping Main Street and that, you know, Main Street's winning when Morningstar is fighting for it. And that, you know, really matters. And for me, I think culture is incredibly important. But I'm also very clear with everybody that it can't be a crutch. And what I specifically mean by that is cultures do evolve. And so you take your values and you ensure that your values are omnipresent, but you have to evolve as a firm no matter what. And I think we've been okay on that front. One can always sort of try to challenge whether you're changing fast enough and evolving fast enough, but I think we have in general. And I think that has been part of our success, that we've had strong culture, but the culture has never gotten in the way of change. And, you know, as for kind of moving up the ranks and getting to lead the firm, I think we're not a hierarchical firm. We're very flat. And so it's not really a big deal in my kind of conscience in that way. And, you know, Joe Mansueto, who founded the firm and is still our chairman, you know, I'd say among the many things that are amazing about Joe is he has no ego. And I'd like to think I've kind of learned from that and kind of carried that forward as well.

Yeah, no, that sense seems, that seems kind of palpable, that sense. What are you proudest of since you've been running the company?

I'm just proud of the fact that it continues to be a place where some terrific people are building their careers, and they're doing it while making a difference in the lives of investors, right? I think like, At the end of the day, that's why we all get out of bed. It's because we're trying to help people hit their goals. And that means a lot. And especially being at a conference like this, you know, people come up. I've seen advisors over time and so many come up to just say thanks. I did this or that based on something I heard here or something I've used from Morningstar. And that's what it's about. And, you know, we're a close-knit group as well. And, you know, Even as teammates, I like to think that it's not just what we do in the office, but we're there for each other out of the office. And the relationships do matter in that sense and are a difference maker.

Okay. And what's your biggest regret, assuming there are any that rise to that level, or maybe they're just too small to not really be material?

I mean, you always have regrets. I mean, you know, I would say some of my biggest regrets are on hiring decisions I made that were poor. And, you know, hiring is like a really difficult thing to do. People sometimes talk about hiring like they've kind of nailed it and the process works amazingly well. And I feel like with hiring, you can't invest enough of your time to understand what's going on. And, you know, I certainly regret a few of those kinds of decisions I've made because I think like they certainly do have an impact, but they're also learning experiences, right? And I think like you can only get better and kind of ensure, you know, you do a good job on that front. And the other thing I would just say, and this is true of any leader or any of us, there are clearly situations where you wish in retrospect you had acted faster than you did if you had a belief or a hunch, but maybe you let it play out longer than you should have.

And hindsight's 20/20, right?

I've certainly made mistakes in that context. Yeah.

On your Twitter/X profile, it says you identify yourself as a contrarian. Is there any good example of that that you can think of?

As a contrarian?

Yeah.

I can give you lots of examples. Well, so among the things that drive my kids insane. So I went to the Booth School here at the University of Chicago, and among the people whose classes I enjoyed was Dick Thaler's class. As you know, he's a Nobel laureate for his work in behavioral economics. And one of the things he challenged was this notion of the hot hand in basketball. And so all of you who watch games know that if someone's got a hot hand, they just keep passing the ball to that person because they're going to maintain a hot hand. But the data supports the fact that there's no such thing as a hot hand. And so sometimes when I'm watching basketball with my family or with some friends, everyone's like, pass the ball to the guy with the hot hand. I'm like, no. Pass it to the guy who doesn't have a hot hand, and I'm not very fun in those situations. And oddly, actually, the data supports it, but I'm kind of like swayed by the fact that the hot hand does seem to work. So, but Dick Taylor's research still wins out.

Absolutely. And it makes me think a little bit of the market and reversion to the mean. And it also alludes— maybe this is a stretch, but Sports Illustrated, the thing called the Sports Illustrated Cover Curse, and it simply shows that when an athlete makes it to the COVID they invariably slump after because when they make it on the COVID they're kind of at a peak performance level. It's a snapshot of them at a given time.

So I have to say, one of my absolute moments of fear as CEO was when in the second month of being CEO, Barron's put me on the COVID I almost died. And I literally have like locked away that cover because being a student of history, I'm like, oh my God, I do not want this coverage.

You could blame Jack Otter for that.

Well, funny story there too, like—

The stock's done great since then, by the way.

Well, whatever the case, but I totally died when that happened, but then I went to the Barron's comments section about the story, and I was very quickly put in my place because the first comment was like, "Who is this idiot that they put on the COVID You guys never put a person on there. Why are you suddenly doing it for this idiot?" So, I was like, "Okay, order has been restored." I mean, just for the record, I can't vouch for precisely what the reader comments said.

However, there were a few that I remember took issue with the stock price. I don't recall the personal dimension, but I'll, you know, leave it there. Hopefully not.

Anyway, I don't remember that aspect. Yeah, yeah, yeah.

Well, it all turned out, turned out well since then. So we only have a few minutes left. I want to ask, I don't know if you're going to be CEO for the next 40 years.

No.

But, you know, You sure?

I think it's fair to say that.

All right.

Well, there's a lot of talented people at Morningstar.

All right. Well, 40 or not, what do you see ahead for Morningstar?

Yeah, I think we have many opportunities. You know, my colleague Danny Dunn and I were speaking to some clients earlier today, and we spent almost the entire time talking about data and AI. And if one just steps back, and thinks about the things we could do to continue to kind of be a leader when it comes to having data and putting unique insights on it and then using technology to harness it, I think the opportunities for Morningstar are manifold. And, you know, how we think about the workflows that we're in and what more we can do to be in those workflows is going to matter. I think one of the amazing things despite the fact that we've been successful is how few people, how few businesses in our industry follow an independent model in the way that we do and truly keep that, you know, sacrosanct. And so I think that in and of itself is a great place to be because I think investors are going to keep needing to have goals to be met and problems to be solved. And despite the fact that, you know, we've helped a lot of investors, the reality is there's a huge percent of people who are still out of the realm of being served by advisors, by Morningstar, and that opportunity exists.

And you've spoken about how you obsess over workflows basically and think about adjacent opportunities, right? And exploiting those and growing in new directions.

Yeah, I always like thinking about like What's the thing that someone did before they came to Morningstar, and what's the thing they're doing after they leave Morningstar? And can we make sure that we're not creating extra work for them as a result of that?

Excellent. Well, I think that's a great place to wrap things up. So thank you very much for joining.

Thanks for having me.

Oh, thank you for having me. I greatly appreciate it. Thank you.

Thanks.

My guest has been Kunal Kapoor. For more podcasts and the latest wealth management news, visit barons.com/advisor. For The Way Forward, I'm Greg Bartolis.

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