MWD Morgan Stanley

By Liz Hoffman 

A change atop Morgan Stanley's giant retail brokerage holds clues for the race for succeed Chief Executive James Gorman and shows the firm leaning into the type of plain-vanilla banking activities it once avoided.

Shelley O'Connor, who co-heads the firm's wealth-management division, will give up that role and become CEO of its two regulated bank entities, where it is pushing mortgages, deposit accounts and other Main Street products, Mr. Gorman said in a memo to staff Tuesday reviewed by The Wall Street Journal.

Her move will leave Andy Saperstein as sole head of the division, which generates about half of Morgan Stanley's revenue and is increasingly valuable for its stability and growth.

A handful of executives are seen as possible successors to Mr. Gorman, 60 years old, and he likely to shift them around over the next year as part of an extended audition process..

The race heated up last month when Morgan Stanley No. 2 executive, Colm Kelleher, retired.

Ms. O'Connor started her career right out of college at a Morgan Stanley retail branch in California. Since 2014, she has overseen wealth management's field operation, managing 15,700 brokers across 600 offices selling hundreds of products. She is the only woman atop a major business line at the firm.

Morgan Stanley is making a concerted push into plain-vanilla banking a decade after it, along with rival investment bank Goldman Sachs Group Inc., was forced to convert into a bank holding company during the financial crisis. It has slowly grown traditional banking services like loans and deposits and has about $225 billion in assets in its two regulated banking entities.

Unlike rival Goldman Sachs, which has hung out a shingle online and partnered with third parties such as Fidelity Investments to find customers, Morgan Stanley is focused on rolling out bank products to existing brokerage clients. The firm manages $2.5 trillion in client assets and estimates there is at least another $2 trillion that those same clients keep at other commercial banks.

Morgan Stanley recently built an in-house mortgage origination business and aims to lift the percentage of its wealth clients who take out mortgages from the bank, currently around 2%. It has a $45 billion portfolio of loans backed by its clients' investment portfolios, and a smaller book secured by art, boats, jewelry and other valuables.

"Given the criticality of the banks to the future growth of our business, I have asked Shelley to dedicate her full-time efforts to leading them," Mr. Gorman said in the memo.

Write to Liz Hoffman at liz.hoffman@wsj.com

(END) Dow Jones Newswires

April 23, 2019 17:57 ET (21:57 GMT)

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