In a big change to its retail brokerage leadership, Morgan Stanley announced it is naming Greg Fleming president of global wealth management, replacing Charlie Johnston.
First reported by Bloomberg, the move comes as Morgan Stanley Smith Barney continues to integrate the joint venture that was announced in January 2009. The story was confirmed by a Morgan Stanley spokesperson.
According to the internal memo obtained by On Wall Street, Morgan Stanley’s president and chief executive officer James Gorman said: “Charlie Johnston has informed me of his desire to retire from the firm at the end of 2011 and spend more time on family and charitable pursuits. . . Charlie believes it is the right time to make this change.”
Johnston will become vice chairman of Morgan Stanley Smith Barney for the next year, according to the memo.
Fleming, who the memo said would become president of global wealth management, currently runs the firm’s asset management business. He will continue to handle those responsibilities, according to the memo.
“I am confident that under Greg's ongoing leadership of MSIM, we will continue to see tangible progress toward our goal of building a leading asset management business,” Gorman said in the memo. “I believe Greg is also ideally suited now to build on the tremendous momentum in our wealth management business. He brings vast experience and a proven record of leadership to this role.”
Fleming’s appointment also comes with other management moves at Morgan Stanley. Ken deRegt, Morgan Stanley’s chief risk officer, will now serve as global head of fixed income sales and trading. Jack DiMaio, head of interest rates, credit and currency trading, will leave the firm to work on the buyside. Keishi Hotsuki, head of Morgan Stanley’s market risk department, will serve as interim chief risk officer.
Fleming’s appointment in particular reinforces the stronghold that former Merrill Lynch executives including Gorman have at the firm, said Aite Group Research Director Alois Pirker. The transition also marks a shift away from existing management prior to the 2009 Morgan Stanley and Smith Barney combination, he said.
“Johnston leaving is certainly unfortunate in a way because he was a former Citi Smith Barney person,” Pirker said. “Even if it’s only symbolic, it’s important to have some sign of retaining management from both sides, and that’s obviously less the case with him leaving now.”
The appointment also comes at a critical phase for the firm, as it continues to absorb that merger and looks ahead to possible increased investor interest this year, Pirker said. Coupled with other appointments, including the expansion of its Co-Presidents Colm Kelleher’s and Paul J. Taubman’s roles to focus on international markets earlier this month, Gorman is definitely working to put his own team in place, Pirker said.
“I could see more coming,” Pirker said. “There’s definitely some design behind getting the management structure in place that he would like to see.”
The management appointments come ahead of Morgan Stanley’s fourth quarter earnings call scheduled for next Thursday.
In a Dec. 30 report, Credit Suisse downgraded its fourth quarter earnings estimates for Morgan Stanley to $.20 per share from $.60. The weaker than expected forecast was due to “choppier than expected” market conditions and numerous one-time items, Credit Suisse said.
“Of note, we anticipate a stronger finish to 2010 for Morgan Stanley’s investment banking franchise,” with strong underwriting and M&A, Credit Suisse’s report said, “and some signs of retail re-engagement in global wealth management results.”
Morgan Stanley’s global wealth management will have $3.2 billion in fourth quarter revenue, Credit Suisse forecasts, a 4% increase from the third quarter and a 3% increase from the previous year.
“While retail activity is picking up, we think pre-tax margins and ROEs (returns on equity) in wealth management could remain lackluster in the near term,” Nomura Banking Analyst Glenn Schorr said in a report written in response to Thursday’s management changes.