Two managers with sterling track records have ascended to new roles at two of Wall Street's premier banks.

James Gorman, 49, moved into the job of co-president at Morgan Stanley. That puts him in line as a potential successor for Chief Executive and Chairman John Mack. Meanwhile, John Thain, 52, former CEO of NYSE Euronext, Inc., and former president at Goldman Sachs Group, takes over as chief executive at Merrill Lynch.

In the face of billions of dollars in writedowns recently at Morgan due to the subprime mortgage implosion, Gorman might make a bold move to separate the firm from the rest of Wall Street, says Charles Roame, managing principal of Tiburon Strategic Advisors in Tiburon, California.

Gorman is "very strategic-minded and will do big things," says Roame, who once worked for the Morgan co-president when they were financial service consultants at McKinsey & Company.

Under Gorman, Morgan Stanley's wealth management unit has consistently reached high double digits in terms of profitability. In the third quarter of 2007, Morgan's retail pretax margin was 17%. When he arrived at the firm in early 2006, it had an 8% unadjusted margin.

Meanwhile, at Merrill, Thain has his work cut out for him placating Merrill's army of 16,000 brokers after the resignation of the firm's former top honcho, E. Stanley O'Neal, in the wake of an $8 billion writedown.

Thain has an impressive resume but lacks experience in the wealth management business. Analysts expect him to heed demands from Merrill's top producers and give a stronger voice to Bob McCann, the firm's head of wealth management.

Many of Merrill's reps have been frustrated by the fallout from the firm's multibillion-dollar losses. Indeed, twenty-one of Merrill's so-called "Circle of Champions" wrote a letter to the board before Thain's appointment demanding greater representation. "We believe that a team effort at the highest executive level of the firm is required and that the Private Client business should be represented at the presidential level," the brokers reportedly wrote. They added that McCann would be an "outstanding leader of the firm."

In an interview with On Wall Street, McCann acknowledged he was flattered by the letter but was confident in Thain's leadership going forward. "John Thain has made it clear, both behind closed doors and in the interviews he's done, that wealth management is a great business," McCann said. "He wants to cherish and grow the business."

More recently, Merrill reportedly was among at least four firms to receive subpoenas from the New York State Attorney General to determine whether they had conducted sufficient due diligence before selling mortgage-based bonds. The other firms were Deutsche Bank, Lehman Bros. and Bear Stearns Cos., according to press reports. The four investment banks declined to comment on the case. The New York State Attorney General's office did not return telephone calls.

Wall Street Firms Boost Retirement

Wall Street firms have improved their 401(k) offerings, even if the moves are driven by their self interests.

According to a recent report from PlanSponsor, a publishing and research firm for the retirement plan industry, financial firms rank No. 7 out of 28 industries in matching contributions. This represents a marked improvement over last year when financial firms were in the bottom half of 25 industries.

Moreover, financial companies ranked No. 2 in terms of fund performance in their retirement plans. They are third in proportion of employee participation in retirement plans, and sixth in automatic enrollment.

Other industries in the research included real estate, insurance, healthcare, education and government.

The improvement at financial firms isn't as altruistic as it might seem. "They're not being more generous, they're just shifting the focus," says Charlie Ruffel, chief executive officer at Stamford, Conn.-based PlanSponsor. "Financial firms have been quick to drop defined-benefits [pension] plans. When they freeze their DB plans they increase [contributions to] 401(k)."

Oddly enough, when it comes to having brokers explain 401(k) programs to employees who work at Wall Street firms, financial service firms rank near the bottom. They are 22nd out of 28 firms this year. But Ruffle considers that natural. "The new generation of 401(k) plans tend to move away from the use of advisors," he says. "They're more focused on advice online. You'd expect financial services firms to be on the sharp end on everything in the space."

Morgan Stanley Levels Playing Field

In the wake of a recent class-action settlement between Morgan Stanley and its women brokers, the firm will make a better effort to level the playing field for its employees. Morgan Stanley will train managers to recognize bias, divvy up customer accounts more objectively and post all field management job openings at the company.