BY JOHN FOLEY

When’s the right time for a Wall Street titan to leave? Probably when the company’s fortunes are on a high, and with an oven-ready successor teed up. By that logic, Morgan Stanley’s James Gorman will be the first of the long-standing bank chiefs to go.

The Australian who has run the New York bank since 2010 has turned in a better performance than most rivals. Every $1 invested in Morgan Stanley back then is worth over $4 now, including dividends. That’s less than JPMorgan, but beats Goldman Sachs, Citigroup, Wells Fargo or Bank of America. Gorman’s peers are all either newish to the job, like Citi’s Jane Fraser, or plan to stay on, like BofA’s Brian Moynihan or Jamie Dimon at JPMorgan.

Gorman also bet on wealth management while peers focused elsewhere, acquiring brokerage E*Trade Financial and asset manager Eaton Vance for $20 billion during the pandemic. Unlike banks with big lending businesses, Morgan Stanley wasn’t worried about consumer loan defaults.

Quitting while he’s ahead would be another way for the former McKinsey consultant to peel away from the pack – except it’s not obvious who’ll replace him. Gorman doled out new roles to four potential successors in May, all long- serving senior lieutenants. Only wealth management boss Andy Saperstein and institutional securities head Ted Pick have run Morgan Stanley’s major profit engines, though, suggesting a two-horse race.

Since wealth is where Morgan Stanley’s future lies – Gorman has said he wants to grow client assets to $10 trillion, from just over $6 trillion – Saperstein might seem a shoo-in. Wealth could account for two-thirds of revenue if Gorman hits his target.

Pick has an edge in other ways. He fixed up stock trading after the crisis. The markets arm he oversees has seen its share of the big five trading houses’ revenue grow from 13% to 18% over the past decade. While that hasn’t been without hiccups – like the $1 billion in trading losses from hedge fund Archegos in 2021 – Pick was also the highest- paid executive after Gorman according to an April filing, reflecting the fact his division carries more risk than others.

One catch: Pick hasn’t previously run brokerage. Then again, Gorman will probably copy his predecessor, John Mack, and stick around as chairman for a spell. There’s probably time for another reshuffle before then to fill in some gaps in his successor’s résumé.

First published December 2021