MS targets RIA growth with integrated structured solutions approach

The rise of concentrated equity positions among wealthy investors is creating new opportunities for structured solutions, according to Morgan Stanley, which has launched an integrated coverage model aimed at better serving registered investment advisors (RIAs) and family offices.

Historically, many of the largest RIAs had separate relationships across Morgan Stanley - Lou Mandia

Earlier this year, the firm introduced its Integrated Firm for RIAs and Family Offices initiative, bringing together its Advisor Solutions team within the Institutional Equity Division (IED) and colleagues from Morgan Stanley Investment Management to provide a more coordinated approach.

Lou Mandia (pictured), head of RIA strategy and distribution at Morgan Stanley, said the move was designed to address an underserved segment where clients increasingly require solutions that span multiple parts of their portfolio.

“Historically, many of the largest RIAs had separate relationships across Morgan Stanley,” Mandia said. “They worked with our team on equity derivatives and also with our investment management colleagues, but those teams were not always fully aligned. That can create gaps when you are trying to solve complex portfolio problems.”

Under the integrated model, Morgan Stanley approaches clients as one team, combining capabilities across structured products, hedging and monetisation strategies for concentrated positions, quantitative investment strategies (QIS), tax-efficient strategies and alternative investments.

Concentrated positions

One of the biggest challenges Mandia is seeing among advisors is the growing number of clients holding significant low-cost-basis positions in individual stocks, particularly among current and former employees of high-growth technology companies and early investors in artificial intelligence and semiconductor names.

“These clients are trying to balance diversification, wealth preservation and tax efficiency,” he said.

For investors with substantial exposure to a single company, selling shares can reduce concentration risk but may trigger significant capital gains taxes and remove future upside participation.

Morgan Stanley’s approach combines structured solutions with investment management capabilities, including those from affiliate Parametric, to provide investors with alternatives to outright selling.

“We can identify the concentrated position, provide defined downside protection, preserve upside participation and unlock liquidity against the holding,” Mandia said.

The resulting liquidity can then be deployed according to the client’s objectives, including tax-efficient strategies, direct indexing or funding lifestyle needs.

Rather than exiting a position completely, investors can hedge downside exposure, maintain ownership and use borrowed funds against the holding.

Portfolio tools

Mandia said the role of structured products has evolved from being primarily product-driven solutions towards becoming part of broader portfolio construction.

“When I started in the business, the discussion was much more product-centric,” he said. “Today it is far more portfolio consultative because the tools have become increasingly customisable and clients are seeking more institutionalised solutions.”

Rather than beginning with a specific product, conversations now focus on the client’s portfolio challenges.

“Do they have low-cost-basis stock? Are they seeking income? Are they underexposed or overexposed to a sector or theme? We build solutions around those objectives rather than starting with a pre-packaged product.”

For clients already holding concentrated positions, structured products can serve a different purpose from hedging strategies.

A client with a large single-stock exposure is unlikely to add another structured product linked to the same name, Mandia said. Instead, once liquidity has been created through a hedging or monetisation strategy, structured products can provide a separate allocation focused on income generation or defined outcomes.

“Clients can retain their concentrated stock, hedge the downside and allocate liquidity into broad-based index autocallables or other defined outcome strategies,” he said.

Technology, thematic investing

The growth of technology platforms has also helped accelerate adoption among RIAs by making structured products easier to analyse, implement and monitor.

A decade ago, advisors relied heavily on spreadsheets and manual processes, whereas today portfolio analytics and modelling tools allow advisors to evaluate portfolios with and without structured products.

“As a result, RIAs running model portfolios are using structured products more consistently,” Mandia said.

In some cases, structured products represent around 10% to 15% of client portfolios alongside traditional allocations such as equities, fixed income and alternatives.

Morgan Stanley has also focused on integrating with technology platforms including Luma Financial Technologies, Halo Investing, CAIS and iCapital, allowing advisors to access, implement and manage structured solutions more efficiently.

The firm has also integrated with custodial platforms such as Fidelity Investments and Charles Schwab Corporation, where many RIA assets are held.

Beyond portfolio construction, Mandia highlighted growing demand for thematic investment strategies, particularly around areas such as artificial intelligence.

“If a client believes in artificial intelligence, the next question is what part of the value chain they want exposure to,” he said. “Is it infrastructure, semiconductor manufacturers or the broader ecosystem benefiting from AI adoption?”

Structured payoffs can then be used to translate those investment views into diversified portfolios with defined outcomes.

Expanding the wrapper

Looking ahead, Mandia said one of the biggest opportunities for the structured products market is expanding beyond the traditional note format.

“A structured product is ultimately a defined-outcome payoff delivered through a particular vehicle,” he said. “Historically, that has usually been a note, which contributed to the perception that structured products sat apart from the rest of the portfolio.”

Morgan Stanley expects products delivered through alternative wrappers, including exchange-traded funds (ETFs) and separately managed accounts (SMAs), to play a growing role.

For advisors seeking ongoing exposure to income-generating autocallable strategies, ETFs could provide continuous exposure, while SMA structures could allow managers to reinvest maturities into new strategies without requiring advisors to manage individual trades.

“Notes will continue to play an important role, but ETFs and SMAs provide additional flexibility and scalability,” Mandia said.

For Morgan Stanley, the evolution represents a shift in how structured products are positioned within wealth management, moving from specialist instruments towards becoming a broader component of modern portfolio construction.

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