Abigail with attitude: What has Morgan Stanley's Gorman achieved after 3 years at the top?


Abigail Hofman
Published on:

Pandit and Havens used to work at Morgan Stanley. In fact, at one time, Pandit was president of the firm. As James Gorman struggles with John Mack’s legacy, a wild thought crosses my mind. Might Pandit one day return to run his alma mater? Over at Morgan Stanley, Gorman is facing the third anniversary of his ascension to the chief executive throne. And the going has not been easy.

"It’s a mixed bag," a source grumbled. "Revenues are probably a bit light. Costs are arguably too high and they have too much capital, so the return on equity is poor. You have to ask: is the strategy working?" Gorman is trying to rebalance the volatile institutional securities business with a complementary wealth management platform. Ironically, in the third quarter of 2012, institutional securities’ revenues rose some 20% whereas wealth management’s net revenues were static.

Morgan Stanley still has some excellent businesses, such as its advisory and equity capital markets franchises, but the wealth management road remains bumpy. Gorman’s targeted 20% pre-tax profit margin for the division is still a mirage and there have been problems with integrating technology. At the end of the summer, Reuters reported that a group of high-profile advisers were threatening a mass exodus due to problems with a new technology platform. That revolt seems to have died down. "Brokers are always grumbling about technology," my mole hissed. "And with 17,000-odd brokers, there will always be a few departures."

However, in other parts of the greater Gorman global empire there are signs of simmering unrest. The chairman of the Russia office, Rair Simonyan, and its president, Elena Titova, left at the end of the summer. It is rumoured that they will work for a big Russian oil company. And in late September came news that British investment banker Simon Robey, head of the UK and co-chairman of global M&A, would leave the bank in January 2013 to set up his own firm.

Strawberries and cream. Gorman surely doesn’t want to let go of an ‘exceptional banker’ like Robey
Strawberries and cream. Gorman surely doesn’t want to let go of an ‘exceptional banker’ like Robey
The memo announcing this departure is all strawberries and cream – insisting that Morgan Stanley and New Robey plc will continue to work harmoniously together. Gorman states: "Simon is an exceptional banker with an unparalleled depth and breadth of experience as a strategic adviser. We look forward to continuing to work with him."

Fifty-two-year-old Robey, a Morgan Stanley veteran, says pompously: "I am very proud of the firm and will continue to be a passionate advocate for its capabilities and values. But 25 years is a long time and I need to challenge myself with change."

This to me is fulsome but futile guff, although it did make me smile on a dreary October day. The elephant in the room is that if everything is so wonderful at Morgan Stanley and working relationships are so harmonious, why is Robey, the rainmaker, off? Could it be compensation? Could it be the heavy hand of the regulators? Might the joys of Paul Taubman as a boss have palled? Answers to Abigail@euromoney.com. One thing I know is that when people are happy in their jobs, they don’t "challenge themselves with change!"