James Gorman addresses the House Financial Services Committee in April 2019Aaron Bernstein (Portal)
James Gorman, who transformed Morgan Stanley after the bank nearly collapsed during the 2008 global financial crisis, plans to step down as chief executive and take over as chief executive within a year. “The board and I anticipate that it will happen at some point in the next 12 months,” Gorman, 64, said at the company’s annual meeting on Friday, reports Bloomberg. “That’s the current expectation as long as the external environment doesn’t change significantly,” he said. Shares were little changed when Friday’s session opened, down 0.5%.
Gorman, who became CEO in early 2010, noted that there are three possible candidates who could replace him at the helm of the company. Though he didn’t name any possible candidates, Ted Pick and Andy Saperstein, the New York-based firm’s co-chairs, are in the running, along with chief investment manager Dan Simkowitz.
Gorman added that after retiring from the frontline, he will serve as chief executive “for a period of time.” “We believe this structure will ensure Morgan Stanley’s continued stability while positioning it for a decade of exciting growth under new leadership.” Like its competitor Goldman Sachs, the Gorman-led investment bank saw profits fall in 2022 due to the economic deterioration , fueled by the Federal Reserve’s rate hike, after a record-breaking period: Morgan Stanley earned 47% more in 2018 than a year earlier.
Originally from Australia, Gorman is now 14 years old and is at the helm of Morgan Stanley. His direction was shaped by a comprehensive strategic review of the company, accelerated by two of the largest deals by one of the largest US banks in the years following the 2008 financial crisis.
These transactions, the acquisitions of virtual broker E*Trade and fund manager Eaton Vance, and equity plan manager Solium Capital, and its commitment to diversifying the business with a dual role as an investment bank and wealth management firm. equity, have made the company’s stock the best performer in the industry over the past decade. Gorman was the primary architect of Smith Barney’s purchase by Citigroup, an investment advisory and brokerage firm that became the bank’s wealth management arm.
Morgan Stanley’s value has more than tripled during Gorman’s tenure as he turned the company into the world’s largest wealth manager since acquiring Smith Barney, reports Bloomberg. These moves came as new banking rules were tightened following the collapse of several banks in 2008 and a massive bull market made the growing business of advising wealthy clients significantly more attractive and profitable for shareholders, as well as a more cost-effective business. Morgan Stanley now trades at the highest premium to book value of any major US bank.
Gorman spent the early years of his tenure resolving issues arising from the financial crisis, dissolving the Fixed Income division and restoring client confidence who feared the company’s near-collapse in 2008. In recent years he has worked for the company on the offensive, seeking and exploiting opportunities for expansion. Gorman has spearheaded this trend ahead of any of its peers, with decisions that “accelerated Morgan Stanley’s transformation into a company with a sustainable business model.”
Morgan Stanley’s growing distance from its original business, investment banking, is evident in its recent results. The wealth management unit, which now has about $4.5 trillion under management, topped the investment bank’s reported revenue last year and, combined with the wealth management division, accounted for about 55% of the company’s revenue.
“Of course, one of the most important issues for shareholders, employees and customers is succession. I mean Succession the TV series. Gorman joked this Friday, Portal reports, displaying his signature humor, alluding to the internal struggles to succeed fictional magnate Logan Roy at the helm of his empire on the hit HBO series.
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