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When the financial world was coming apart last year, it seemed that Morgan Stanley's (NYSE: MS) CEO, John Mack, was making prudent strategic decisions. That is, he tried to lower the overall risk-taking at the firm. Mack had to contend with a deteriorating balance sheet, angry shareholders, a steep drop in business and intrusive regulators.
This was in stark contrast to Mack's prior strategy. If anything, he was a risk junkie. And yes, he made some huge bets on real estate investments that turned sour. In fact, they almost destroyed Morgan Stanley. But somehow Mack was able to wrangle a $9 billion investment from Mitsubishi UFJ Financial Group. There was also a TARP loan for $10 billion (which was actually paid back).
Unfortunately, Mack's turn to cautiousness was another a dud. The upshot is that rivals -- especially Goldman Sachs (NYSE: GS) -- got aggressive and Morgan Stanley became a laggard.
Well, Mack is now going to step down as chief. In January, his position will go to James Gorman (Mack will remain as chairman).
It's an interesting choice. You see, Gorman's background is in the brokerage industry. For example, he once was the chief marketing officer of Merrill Lynch, where he was key in building the wealth management business.
While at Morgan, Gorman also has been leading the integration of the brokerage joint venture with Citigroup (NYSE: C). It's the largest brokerage force in the world, with 18,444 advisors.
In other words, the choice of Gorman is an indication that Morgan wants to focus more on the advisory/asset management side of the business -- which certainly appears to be a growth sector for the long haul.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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