MS Morgan Stanley

   (FROM THE WALL STREET JOURNAL 10/2/15) 
   By Justin Baer 

It's getting crowded at the top of Morgan Stanley.

The Wall Street firm on Thursday elevated two of its rising stars to bigger jobs while narrowing the responsibilities of one of its most prominent executives, Gregory Fleming.

The moves offer some clues into Morgan Stanley's succession plans, a primary focus for its chief executive, James Gorman. He has said he is determined to make the firm's transition to new leaders far less tumultuous than they'd been in the past.

That doesn't mean he has eliminated all of the palace intrigue. Mr. Gorman, 57, is nearly six years into a turnaround plan that has gained momentum and has shown no signs of wanting to leave soon. It may mean his top lieutenants may ultimately are passed over when Mr. Gorman is ready to move on.

That dynamic, not unique to Morgan Stanley among large banks, may open the door for people like Edward Pick, one of the big winners in Thursday's management shuffle. Mr. Pick, 46, has overseen the revival of Morgan Stanley's stock-trading arm, which took a big hit during the crisis. Thursday, Mr. Gorman named him global head of sales and trading, which also gives Mr. Pick oversight of fixed-income trading, a key profit driver for banks now challenged by new regulations.

What the moves mean for Mr. Fleming is less clear, analysts said, since he was the only one that lost something in the latest shuffle. The former No. 2 executive at Merrill Lynch & Co., Mr. Fleming played a central role in the Wall Street firm's emergency 2008 sale to Bank of America Corp., and is often cited as a potential CEO candidate at other financial-services companies.

Mr. Fleming will now focus solely on wealth management. Morgan Stanley tabbed Dan Simkowitz, an investment banker who co-led the firm's stock- and debt-underwriting business, to be head of the investment-management unit Mr. Fleming has been running. Mr. Simokowitz will report directly to Mr. Gorman, said an employee memo signed by Messrs. Gorman, Fleming and Colm Kelleher, the president of Morgan Stanley's investment banking and trading business.

Overshadowed by Mr. Fleming's wealth-advisory business, which had doubled in size in recent years through the acquisition of Citigroup Inc.'s Smith Barney brokerage, the money-management division had shrunk with the 2010 sale of the firm's retail asset management unit to Invesco Ltd.

Still, Mr. Fleming remains a top lieutenant to the CEO and, at 52, is five years younger than Mr. Gorman. Mr. Kelleher is one year older than Mr. Gorman. People familiar with Morgan Stanley executives' thinking rejected the notion that Mr. Fleming was losing favor with Mr. Gorman or the firm's board.

Messrs. Gorman and Fleming, who worked together at Merrill Lynch in the 1990s and early 2000s, had discussed since early 2014 a plan to hive off Morgan Stanley's money-management division from Mr. Fleming's main responsibilities running the wealth business, a unit that comprises more than 40% of the firm's revenue.

Mr. Fleming is expected to push hard in building out the wealth unit's banking arm, considered one of the firm's most-promising growth areas.

Investment management now accounts for just 10% of the firm's revenue. The gradual strengthening of Morgan Stanley's balance sheet, and its improved standing with regulators, has emboldened its executives to consider more aggressive ways to build out the unit, including acquisitions and a push into retail money management, people familiar with the firm said.

The unit's new boss, Mr. Simkowitz, 50, will join Mr. Pick on the firm's operating committee, said the memo.

The changes underscore a common theme at large U.S. banks these days. As the tumult of the financial crisis fades into memory, a range of chief executives from James Dimon at J.P. Morgan Chase & Co. to Lloyd Blankfein at Goldman Sachs Group Inc., have settled into their roles, leaving a generation of senior lieutenants with no way to ascend to the top spot.

That has increased interest on boards to increase the experience of the next rung of executives who are more likely to take over if the current CEOs stay 3-5 years or more.

"They're grooming the next generation, and the only way to do that is to give them more responsibility," said Glenn Schorr, an analyst with Evercore ISI.

Messrs. Pick and Simkowitz each ran one of the firm's flagship businesses, and both joined Morgan Stanley in 1990. They will now be tasked with overseeing divisions with less impressive track records, fixed income and investment management.

Their promotions follow other moves Mr. Gorman has made this year to cultivate a group of managers who may one day succeed him or his top two deputies, Messrs. Kelleher and Fleming.

As Mr. Gorman's turnaround plan gained steam, lifting the firm's returns and its stock price, the CEO has increasingly focused on ensuring the orderly transition to a new generation of leaders.

In the years before the crisis, Morgan Stanley's merger with Dean Witter gave way to a bitter power struggle, an exodus of senior executives, and the return of its former chieftain, John Mack.

While Mr. Gorman was Mr. Mack's choice as Morgan Stanley's next CEO, the decision seemed far from settled when the former management consultant and brokerage executive had arrived at the firm from Merrill Lynch in 2006.

Mr. Simkowitz's appointment marks the latest Morgan Stanley investment banker to cross over into another division.

Morgan Stanley executives had privately speculated for months that Mr. Gorman would promote Mr. Pick, whose group has overtaken Goldman Sachs Group Inc. as Wall Street's biggest equities business in recent quarters.

Mr. Simkowitz had worked on some of biggest initial public offerings in history, including Alibaba Group Holding Ltd. and Facebook Inc. and served as a key adviser to the U.S. government on General Motors Co.'s share sale.

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(END) Dow Jones Newswires

October 01, 2015 19:55 ET (23:55 GMT)

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