Like many Australians, James Gorman is blunt. With a good sense of humour.
When Gorman arrived in New York City as a business student in 1985, his first letter home shared details of his arrival.
“Dear All, Well, I arrived safely after 36 hours of flying via Auckland, Honolulu and Los Angeles. The former tenant of my room is still asleep in my bed. Let’s say the changeover was finely tuned.”
Gorman is hoping for a better-timed handover at Morgan Stanley. After 13 years as chief executive, he announced on Friday he plans to step down some time in the next year.
He is the second-longest serving CEO of a major Wall Street bank, but Gorman is not intending to leave the scene – he plans to stay as executive chairman at the US$137bn Wall Street powerhouse.
“Gorman will be a tough act to follow,” said Darko Kapor, partner at investment banking analysis firm Tricumen. "He identified the opportunity in wealth management and executed it with panache."
Kapor said equally impressive was that it was achieved while also strengthening Morgan Stanley's investment bank despite cutting jobs and costs in fixed-income trading.
Gorman transformed Morgan Stanley after the 2008 financial crisis in a calmer but more substantial way than arguably any of its rivals – and probably to the envy of most of them. He cut reliance on trading and investment banking, and made bold acquisitions in wealth and asset management. It made earnings less volatile and created sustainably high returns spread across three market-leading businesses. It took time to convince investors; but from 2017, the share price has surged.
It was a deliberate shift. “Our strategy revolves around demonstrating stability in times of serious stress and delivering strong results when markets are active,” Gorman told IFR when Morgan Stanley was named IFR Bank of the Year for 2020.
When Gorman arrived at Morgan Stanley in early 2006 to run wealth management, it faced a dilemma of whether to cut or expand that business. Gorman opted to twist, and bought 51% of Smith Barney from Citigroup in early 2009. The success of that joint venture helped him land the CEO role at the start of 2010, and Morgan Stanley took full control of Smith Barney in 2013. In 2020, Gorman doubled down by spending US$13bn on wealth manager E*Trade and US$7bn on asset manager Eaton Vance.
All have been widely praised, and were struck when rivals were wary of big deals.
“People who are hanging around and trying to buy great companies cheaply never get anything done,” Gorman told analysts in October 2020.
The following year, he was even blunter about the need to get staff back in the office after the Covid-19 pandemic: “If you can go to a restaurant in New York City, you can come into the office,” he told them.
And for staff who now wanted to be based in Florida: "If you want to get paid New York rates, you work in New York."
"Buzzing with energy"
Gorman, 64, was born and raised in Melbourne, Australia, as one of 10 children. His father was an engineer and his mother was a nurse. Gorman is now a dual Australian-US citizen and lives in Manhattan, where Morgan Stanley is based.
He likes cricket and golf, and is a keen music fan. He was also previously co-chairman of the business committee of the Metropolitan Museum of Art.
Gorman earned bachelor’s and law degrees from the University of Melbourne and worked part-time to help pay his way through. After starting at a law firm in 1982, he headed to the US for a Masters at Columbia University's business school, staying at International House in Manhattan, the private, non-profit residence for students that promotes international cooperation.
In a speech at International House in 2016, Gorman recalled how he sent letters home each week to Australia, and explained why his first letter home began “Dear All”. “That might not feel very personal, but if you had nine siblings like I did, you were not about to spell out their names every week,” he said.
Another letter said he was making friends and getting used to life in the US. “Tonight, I studied with a Spaniard, a Filipino and a Frenchman. It sounds like the beginning of a joke. The Yanks are incredible, loud, happy, friendly and buzzing with energy. They ask questions in class continuously, many of them needlessly. As participation is graded, I’m forced to do the same, adopting the simple rule, when in Rome, put your hand up.”
A later letter described how his path into banking began: as part of a student trustee link programme, he had been matched with Shelby Cullom Davis, a renowned Wall Street banker who formed investment firm Shelby Cullom Davis & Co in 1947.
“He took me to lunch at a fancy club in Midtown New York, and at the end of the lunch he turned and pointed at me and he said, ‘You, son, should pursue a career in finance’,” Gorman told his family.
That’s what Gorman did, but not immediately. He returned to Melbourne and joined McKinsey & Co, where he became a senior partner and spent years on the Merrill Lynch account. That led to him joining Merrill in 1999 as chief marketing officer, and within two years he was running the brokerage business. He was lured to Morgan Stanley in February 2006 to run wealth management and was named co-president in December 2007.
In those roles, he worked closely with John Mack, who had been ousted from Morgan Stanley in 2001 after a power struggle with Phil Purcell, only to return in 2005 as CEO and chairman. Mack steered the firm through the 2008 financial crisis, and secured a crucial investment from Japanese bank MUFG.
Gorman took over from Mack and set about making his mark in a new era of higher capital requirements and less risk-taking. He bought stock in the bank to show his confidence, and set out his strategy with targets and transparency each January, unusual for a Wall Street bank at the time.
Morgan Stanley’s shares have almost tripled during his tenure as CEO, easily outpacing the 92% rise by the US banking index and a 93% increase by arch-rival Goldman Sachs over the same period. Gorman has been well rewarded for his efforts: he was paid US$31.5m for 2022 and has been paid US$301m for the 13 full years he has been CEO, according to regulatory filings. Much of that was paid in stock, so is now probably worth far more.
Gorman made succession planning an important issue – probably after seeing how badly it was handled by Purcell, which ended with a mutiny. Gorman said on Friday there are three strong internal candidates to replace him. They are Ted Pick, who runs the institutional securities business; Andy Saperstein, who leads wealth management; and Dan Simkowitz, head of investment management.
All three are male, however, reigniting criticism that there is a lack of diversity at the top levels at Morgan Stanley.
Even when he announced his plans to step down last week, Gorman couldn’t resist a joke, and told shareholders that succession was not just an issue around the media company in the HBO TV series. "I definitely have no plans to go out like Logan Roy,” he said, referring to the lead character who dies without having chosen a successor.