By Andrew Welsch

The Warr Group at Morgan Stanley doesn't just help clients retire. It helps fellow Morgan Stanley advisors wrap up their careers, too, by folding them into the Warr team in the years leading up to their retirement. Michael Warr, the group's managing director, says this preretirement transition helps advisors to not only establish a succession plan, but also conclude their working days on a high note. "We try to identify what they are good at and what they enjoy doing, and as a result, their productivity goes through the roof," he says.

Warr and fellow team member Katie Hancock spoke with Barron's about how they have structured their team, and how they are using alternative investments in client portfolios.

Barron's: You have built a large team around advisor succession planning. How did that come about?

Michael Warr: We were able to work with Morgan Stanley to encourage a soon-to-retire advisor to join our team, but make it into an experience that isn't a sad event and to allow that retiring advisor to finish strong. We've done over 20 succession-planning arrangements. These advisors can plug into our team and get access to resources that allow them to continue to do what they do best.

In some cases, they may not have kept pace with how the wealth management industry has evolved. When they came into the business, they were the only access point to buy stocks or bonds and the source of information for what was coming over their squawk box. They were true stockbrokers.

In today's world, people have all that information on their smartphone. So, how do you differentiate yourself? In our opinion, this isn't a business that can be done by a sole practitioner. We have focused on creating a true division of labor.

The measurement of success is the happiness the advisor feels as they get close to the finish line and how comfortable they feel that their clients will be taken care of. Also, the economics will typically be much better for them in their last years of active employment and into their retirement.

You mean, their pay improves as a result of better productivity by joining your team?

Warr: Right. When you look at some of these practices, the advisor has about 200 households, on average. We have created a streamlining process that connects our relationship managers with particular clients.

Let's say the advisor's practice has a handful of $10 million accounts; a particular relationship manager will handle those accounts. If there's another tier between $5 million and $10 million, there's a relationship manager who helps with those accounts. If they have households with $50 million, we have an additional private wealth division within our team to handle those. And we can handle smaller accounts.

One set of clients may not need the same problem-solving that another group does. We want our team members working on the same types of problems all day, every day.

We're doubling [the retiring advisor's] rate of growth, reducing liabilities, and building more appropriate asset allocations. The clients might say, "Oh, I have this other account over here," and then those other assets start coming in, too.

The clients may have been thinking that their advisor was about to retire, but now they see their advisor has a true succession plan and has people helping with all these different aspects. All of that results in massive growth, and we've solved several different issues: The retiring advisor has a great place to leave their clients, they are improving their economics in their final years before retirement, and they get to enjoy their final working years.

How do you find these advisors?

Warr: Word of mouth. If they have a great experience, they tell other people. In Rochester, N.Y., we had one partner who joined us, and now we have four partners there. Same thing in Melville, N.Y. Now we're at the point where we don't want to grow too fast. We know what we are looking for, and we want someone who will fit in well with our team.

How long is the runway before the advisor formally retires?

Warr: We did one in just one year, and that's a little risky because the transition is a little rushed. The rest are between two and five years of being active with our team before retirement.

Katie, tell me a bit more about what clients get out of this process.

Katie Hancock: They get much more robust and nuanced service. It begins with the foundation of the team. All 50 people fit within three divisions: The relationship managers are responsible for knowing the client. The concierge group is responsible for anything a client may need. And the third division is the investing team, which does due diligence on markets and strategies, and determines where we may want to deploy capital across private and public markets.

The relationship manager spends time knowing who that client is, what the family dynamics are, what the challenges are, and then we can really deploy the full firm on their behalf. Why can the relationship manager do that? It's because they don't have to do what the investment team is doing, such as stress-testing the portfolio or ensuring that required minimum distributions are being met. The client is getting a really deep bench that a sole practitioner may not be able to deliver in the same way.

What sets your team apart from others?

Warr: We spent a lot of time and money building out our team, so we have a lot of specialists. They are focused on what is the best solution for the client. That's part one.

Part two is we have the expertise, time, and dedication to study the alternative-investment business. That stuff can be very overwhelming for most financial advisors because you have capital calls to manage, different asset classes to manage, and you have to think about how they form a strategy. At the end of the day, we are managing how much volatility the portfolio is exposed to and evaluating the performance we are getting relative to the risk. We're following a very disciplined strategy that incorporates alternatives.

How much are you allocating to alternatives in portfolios?

Warr: I get asked that question all the time. The answer is, how much liquidity can the client give up? That percentage changes and depends on the individual's needs. I started using alternative investments 20-plus years ago. The suite of options has only gotten better.

Most of the time, alternative investments aren't priced mark to market. We're cycling through a slower initial public offering market right now, and we will see a boom with the seeds we are planting now. But you have to know what you are doing. Earlier, I talked about the evolution of the wealth management industry. Well, the growth in alts came on after the majority of advisors began their careers.

This has been a very volatile year for markets. How are you managing portfolios against this backdrop?

Warr: We made changes before going into this year. We knew [President Donald] Trump was coming in with a chain saw, and we prepared our clients for what to expect. We expected tremendous volatility for the first six months under the new leadership. We adjusted some allocations on the public-equity side, meaning we reduced exposure after such a big run-up in equity valuations over the past two years.

This is somewhat easier today because savings accounts are also paying attractive yields, so you can earn something while you wait for the next investment.

We don't predict the market itself. We prepared our clients for what to expect. We could have been maximally wrong with our expectations, but what we did in client portfolios would still have been right. What I mean by that is, if you are regularly rebalancing portfolios back to target allocations, then you've been selling on the highs. And if there has been a market movement that has taken stocks below their target allocation, then you can purchase.

Hancock: It all goes back to education for the clients, so that they can see what the strategy is. I work hand-in-hand with our investment team and I lead our asset allocation committee, and the most important decision we can make for clients is their asset allocation. We have a process internally that monitors their asset allocation on a monthly basis for any drift. Michael and I also lead our internal investment committee to talk about what markets are doing, and how we reposition if we need to.

Our challenge has been the byproduct of our model, in that we are effectively buying practices and running three businesses serving ultrahigh-net-worth, high-net-worth, and mass affluent clients. Our goal has been to make portfolios bespoke to each client, so a $25 million portfolio is going to look different from a $2 million portfolio. A lot of the customization happens around alternative investments.

Thanks, Michael and Katie.

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May 09, 2025 16:00 ET (20:00 GMT)

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