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The Legacy of James Gorman: A Look Back at His Tenure at Morgan Stanley

The Legacy of James Gorman: A Look Back at His Tenure at Morgan Stanley

  James Gorman is a corporate pragmatist. With his ramrod posture, modulated voice, and professional demeanor of an experienced lawyer and McKinsey consultant. He took over a Morgan Stanley that suffered during the credit crisis, and has shifted it away from riskier areas like trading to focus more on wealth management instead of trading. That strategy has proven fruitful. How He Got There Gorman first joined Morgan Stanley as co-president during 2008, during its near train wreck of global financial turmoil. Since 2010, when he became CEO, Gorman has become one of the longest-serving bank executives. Since becoming CEO, he has prioritized stabilizing Morgan Stanley; building out its wealth management business to generate fee income instead of lump sum dealmaking fees; as well as expanding it through acquisitions such as E*Trade and Eaton Vance which now account for about 50% of revenue generated at Morgan Stanley. Gorman has substantially reduced risk and created a more balanced investment bank during his tenure, which investors have recognized with one of the highest valuations among large bank peers - due to steadier revenues from wealth and asset management compared with more volatile fees for trading and advisory services. At a Wharton Leadership Lecture Series event earlier this month, Gorman provided insights into what has been learned from the banking crisis and outlined his vision of its future. A soft-spoken man with deep financial knowledge - unlike Jamie Dimon at JPMorgan Chase or Lloyd Blankfein from Goldman Sachs. He exuded calm yet exuded authority. As for his business acumen, he does have an intuitive sense of what will work in the financial industry and what won't. He understands what people want and isn't afraid to try something different if he thinks it could be successful. Gorman has learned the hard way that having a positive reputation allows companies to weather many storms, while an adverse one can be harder to recover from. That is why he's so dedicated to improving Morgan Stanley's image; his legacy will live on. Watch the video above for more from Gorman. The Strategy James Gorman transformed Morgan Stanley from an almost bankrupt financial services provider during the 2008 crisis into a wealth management powerhouse with steady client assets. Through strategic acquisitions he has helped shift revenue away from investment banking and trading towards steady sources such as asset management and wealth planning services. Gorman also transformed its culture, infrastructure and technology systems. Morgan Stanley's stock has seen dramatic returns during his tenure and now trades at a premium to its book value - testament to both its strategy and investors who prefer asset management/wealth planning revenue streams over volatile trading/investment banking fees. Morgan Stanley has taken an aggressive stance recently, emphasizing its top-performing wealth and asset management businesses - which contributed 55% of revenue last year - as an antidote for higher interest rates that have reduced investment-banking revenues and hindered deal making. This strategy has helped neutralize any adverse effect from higher interest rates that has reduced dealmaking revenues. Gorman has made several strategic moves during their tenure at Smith Barney. These decisions include buying it from Citigroup during the crisis and adding thousands of financial advisors. Most recently, Gorman expanded its nontrading revenue streams with purchases like E-Trade and Eaton Vance as nontrading revenue generators; additionally in 2020 they established an alliance dedicated to improving children's mental health. Gorman's announcement to step down as CEO and move into executive chairman status has launched an intense competition among senior leaders at the firm to fill his role. Andy Saperstein, co-president and leader of wealth management division Andy Saperstein are considered leading candidates; Ted Pick and Dan Simkowitz are other potential successors who all hold key positions within the firm. Born and educated in Melbourne, Australia, Gorman earned both his undergraduate degree in law and economics as well as an MBA from Columbia Business School. Additionally, he currently sits on the boards of directors for Partnership for https://richpeoplemall.com York City and Institute of International Finance as well as being part of US Federal Reserve Bank Advisory Council and Monetary Authority of Singapore International Advisory Panel memberships. The Execution James Gorman arrived at Morgan Stanley following a financial crisis that had brought it to its knees, determined to revitalize and stabilize it for long-term survival. To do this, he focused on rebuilding talent within securities while improving profit margins in wealth management and asset management - two crucial functions. To meet his objective he made astute personnel decisions like hiring former Merrill star Greg Fleming as head of asset-management division which now accounts for roughly 50% of overall revenue contribution; additionally he expanded wealth-management business by purchasing E*Trade and Eaton Vance businesses to accelerate growth within those divisions and business units accelerated significantly by buying E*Trade and Eaton Vance respectively. Last year was perhaps his crowning achievement during his time with Morgan Stanley: two major public offerings led by Gorman were completed successfully thanks to strong stock markets that propelled their prices skywards. Gorman appears unperturbed by the thought that his tenure at a firm that still needs work to come back into health is coming to an end, stating his optimism for its continued success in future endeavors. Confidence emanates from his calm, cerebral approach to an industry that can often be highly emotional. He's no fan of J.P. Morgan Chase's Jamie Dimon or Goldman Sachs' Lloyd Blankfein's bombastic style or disdainful mannerisms of many of his peers; instead he speaks softly and deliberately while projecting an air of authority with an almost military posture. McKinsey senior partners Vik Malhotra and Asheet Mehta recently hosted him for this episode of our Inside the Strategy Room podcast, discussing his journey reshaping Morgan Stanley, why culture is essential to any successful company, and how his years as an avid poker player help him think through resource allocation challenges. Our McKinsey podcast series serves as a monthly conversation on issues and ideas that matter most to our clients, colleagues and you - subscribe through Apple Podcasts, Spotify or wherever you get your audio shows for monthly conversations on issues and ideas that matter most - subscribe on Apple Podcasts or Spotify or wherever your audio shows come from for monthly discussions that matter most! The Results Gorman's leadership of Morgan Stanley during the financial crisis nearly brought it to its knees, yet afterward he focused on stabilizing it for long-term survival by expanding Morgan Stanley's wealth-management business - providing steady fee income rather than unpredictable revenue from trading securities or making deals - and adding assets through purchases of E*Trade and Eaton Vance to create one of the highest valuations among big banks. Investors rewarded his effort, giving Morgan Stanley one of its highest valuations among big-bank peers. Gorman has also proven an adept capital allocator. Since taking over in 2015, Morgan Stanley shareholders have seen returns of more than 180%, surpassing the S&P 500's nearly 270% increase and significantly outstripping KBW Bank Index's 80% surge. He also reduced risk taking that contributed to Morgan Stanley's troubles during 2008. He did so by cutting down fixed income trading operations which were losing billions annually and by restructuring them significantly to reduce risks at riskier divisions within Morgan Stanley - these changes helped reduce risk-taking that was previously taking advantage of in 2008 which caused Morgan Stanley to go bankrupt. Gorman may leave his most lasting mark as CEO by his succession approach at Morgan Stanley. He announced he will step down as CEO within one year and become executive chairman, promising that one of Morgan Stanley's existing internal leadership will take charge and lead it forward. This stands in stark contrast to the management turmoil seen during the 2000s that left Morgan Stanley crippled due to internal rivalries and infighting among top management, including an incendiary feud between then-CEOs Phil Purcell and John Mack who both sought control. Gorman has been setting the foundation for an orderly transition since earlier this year. He elevated two lieutenants to co presidents earlier this year and indicated his readiness for them to assume CEO responsibilities by making this clear in January. Furthermore, Gorman has gradually relinquished various board seats while delegating day-to-day operations further to these new lieutenants. Gorman lived by his own personal credo of honesty and hard work while giving back to the community. Together with Tena, they donated generously to charities supporting children's healthcare, medical research, education, public television broadcasting in San Antonio as well as being active members of their church congregation. Gorman believed strongly in sharing blessings he received throughout life - his son writes this is something his grandfather believed firmly.

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