How A Small Team Of Morgan Stanley Wealth Managers In Alabama Quietly Amassed Just Under $1 Billion In Assets

The business of Wall Street is changing - trading desks are shrinking while once-"boring" businesses are bringing in the revenue banks need to pull through quiet markets.

This is the kind of environment where all kinds of unexpected things can happen if the right person sees an opportunity and seizes it.

It's how four partners in a Morgan Stanley wealth management office in Tuscaloosa, Alabama, The W H M Z Group, quietly amassed just under $1 billion in assets under management in four offices across the southeastern United States.

Consider this as a case study of the changing landscape of finance - of what's working and what isn't since the crash of 2008. There are new challenges. Offices like W H M Z are regional and independant, but have to be sophisticated and strategic on the business side as well.

Of course, it always helps to think ahead and see these kinds of changes developing.

"Michael [Warr, Executive Director] was very early to recognize that the role of the brokers and financial advisors as just an access point and was not the future," said Alistair Harding-Smith, a CFA and Senior Portfolio Manager at W H M Z. "It was not going to be the foundation of our practice. The complexity of families managing wealth was going to get harder and harder."

What that means is that when Warr started out as a sole practitioner in financial advising 15 years ago, he saw that the industry and market conditions were changing rapidly. Investing wisely for the future was about to get more intricate no matter who or what you were investing for.

To Warr, that meant building the right team, one focused equally on risk management and investment expertise, as well as relationship building.

"The team concept, when we built the team, was still new to the industry," said Warr.

That's where Harding-Smith came in. British by birth, he spent much of his career at Barclays and BlackRock as an investment strategist and portfolio manager for pension funds. He focused on hedging strategies and risk management.

Combining Harding-Smith's sophisticated investing experience with Warr's local relationships proved to be a hit with clients, and became the cornerstone of their business.

And there's a lot of business to be done. Like Warr, after the financial crisis, Morgan Stanley CEO James Gorman saw that Wall Street was shifting away from riskier operations like trading, toward more stable ones like wealth management.

Thus, becoming a leader in wealth management became the firm's focus.

Now Morgan Stanley's wealth management division has $2 trillion assets under management. In Q2 2014 the division brought in $3.7 billion, up from $3.5 billion at the same time last year. Pre-tax income came in at $767 million compared with $655 million in the same quarter of 2013.

Additionally, profit margins hit 21% for the first time since Morgan Stanley bought brokerage Smith Barney. The purchase was as a joint venture with Citigroup (Morgan Stanley bought Citigroup out of the venture last year).

But again, not all of this can be run out of New York City and other regional financial centers. To succeed in a business like this, have to get to clients where they feel comfortable.

Warr was able to get the importance of Harding-Smith's knowledge across to clients who may or may not have heard of the CFA exam at all. That's important, but what W H M Z found was that their clients really just wanted to deal with the right advisor close to home.

"We really like to hang our hat on a very impressive background in investment strategy," Warr added, "but at the end of the day people do business with people they like and they trust."

There are additional challenges away from the mothership in New York City - one is the daily operations of an office itself and its business development. As the market becomes more competitive, it's more important than ever that clients know who you are and what your business is about.

Things need to run like a dream.

Every office has to come up with its own strategy to do that. Each year the W H M Z goes through a rigorous evaluation of its operations - how the office's 16 employees communicate with each other as well as the clients.

"We're not trying to build something to be the best down here, we're trying to be the best," said Warr.

That's part of how, from an office in the deep South, W H M Z Group was able to snap up clients from not just regional centers like Charlotte, North Carolina, but also New York City and Los Angeles.

It's a whole new world, people.