Gorman Positions Morgan Stanley to be "The Next Big Thing" in Wealth Management

Matthew Smith

23 July 2007

Morgan Stanley’s global wealth management operation appears to have more direction now than ever before under the leadership of James Gorman. Almost two years into an initiative to turn around a business that was lagging its competitors, Mr Gorman is now in a position to talk with WealthBriefing about the firm’s future and a little about his own past. Analysts in the US pointed to Morgan Stanley’s second quarter results posted late last month as an indication the giant US investment bank had begun to reap the benefits of a major management overhaul and subsequent turnaround instigated by chief executive officer John Mack when he rejoined the bank two years ago. For the head of global wealth management, James Gorman, that turnaround began when he joined Morgan Stanley about 16 months ago from rival US broking giant Merrill Lynch. Since then Mr Gorman has been navigating the investment bank into relatively uncharted wealth management waters, along the way making his mark on the organisation and expressing his thoughts about the previous management. “This was a heck of a challenge. This so it’s quite fluid, it’s not a very bureaucratic place. As someone who has been working on Wall Street for a while I haven’t felt any resistance or lack of fair treatment from colleagues,” he says. Mr Gorman may have felt more accepted at Morgan Stanley than he did during his tenure at Merrill Lynch. His relegation to a position on Corporate Acquisitions, Strategy and Research within Merrill Lynch after being replaced by his then boss, Robert McCann, as head of the brokerage business, directly preceeded his departure from Merrill. The press at the time reported Mr Gorman was shifted sideways because he was never a broker and therefore could not understand the business having never been one of them. Mr Gorman joined Merrill in 1982 from consultancy firm McKinsey. Mr Gorman admitted he was on a different footing at Merrill Lynch where he ran the private client business before taking the top job at the brokerage firm in 2003 before handing it over to Mr McCann in 2005. “A lot of financial advisors at Merrill were not outright hostile, but I could tell they were deeply cynical. I understand I would have felt the same way,” he said. His approach to wealth management and understanding of advisors has been unquestioned at Morgan Stanley. Giving further insight into his insight into financial advisors Mr Gorman said his wife is a former financial advisor, although he declined to say which firm she worked for. Since selling Quilter, Morgan Stanley’s UK affluent advisory business, to Citigroup late last year, the firm has been clear in its intention to go after the high net worth and ultra high net worth client market both at home and abroad. However, it is still relatively unclear how the business intends to grow without acquiring advice businesses already in the space. He said he is looking at a lot of acquisitions in wealth management, especially high-end private wealth management businesses, and he is hoping to get some deals done both domestically and internationally. Overseas he said the firm was unlikely to add to its existing locations, which include Singapore, Hong Kong, Dubai, London, Zurich, Geneva and Milan. “Internationally we have a lot of areas we’re poised for growth,” he said. “We don’t need more locations, we need more people in the existing locations.” In the fee versus commissions debate he admits Morgan Stanley is behind other brokerage firms more heavily weighted to fees like Merrill and Smith Barney as transaction costs come down and fee business continues to grow. That he said will continue to change organically. His influence within the organisation and his ability to get things done is unquestioned. Having been hand picked by former colleague Mr Mack, Mr Gorman sits on the management committee at Morgan Stanley and is in constant contact with all the decision makers of the firm. He genuinely believes we are at the beginning of a boom period for wealth management services that will last a number of years and he is positioning Morgan Stanley to be the next big player.