Morgan Stanley's (MS) Gorman Wishes He Could Quit You, Smith Barney
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But he just can't.
Morgan Stanley's (NYSE: MS) CEO James Gorman doesn't fail at much, but his bet on retail brokerage is turning into one of those rare moments.
Gorman's bet in 2009 to acquire Citi's (NYSE: C) 51 percent stake in Smith Barney is turning out to be a dud. The move, coming just months after the start of the financial crisis, was expected to bolster Morgan Stanley through the recovery. But two-years on, the arm has become more of a sore spot.
Taking over for John Mack in 2010, Gorman had high hopes for the unit. But the unit, 17,500-employees strong, is facing some major headwinds from a low interest-rate environment and recent market volatility have contributed to investors pulling back on investments...and therefore revenues.
Further, expenses have continued to linger, not dissipate as Gorman was expecting, and margins have taken a hit as a result.
But Gorman isn't writing off the business quite yet; he's actually aiming to double his efforts to expand the branch. Gorman appointed Greg Fleming in charge of cutting costs at the brokerage at a faster rate. Fleming may also aim to direct more clients into manged accounts, which generate more fees.
Sources have said Smith Barney isn't causing as big a headache to Gorman as it did months ago. Results should be available when Morgan Stanley issues it's third-quarter earnings report on October 17th.
Shares are up 1.8 percent early Friday morning.
Morgan Stanley's (NYSE: MS) CEO James Gorman doesn't fail at much, but his bet on retail brokerage is turning into one of those rare moments.
Gorman's bet in 2009 to acquire Citi's (NYSE: C) 51 percent stake in Smith Barney is turning out to be a dud. The move, coming just months after the start of the financial crisis, was expected to bolster Morgan Stanley through the recovery. But two-years on, the arm has become more of a sore spot.
Taking over for John Mack in 2010, Gorman had high hopes for the unit. But the unit, 17,500-employees strong, is facing some major headwinds from a low interest-rate environment and recent market volatility have contributed to investors pulling back on investments...and therefore revenues.
Further, expenses have continued to linger, not dissipate as Gorman was expecting, and margins have taken a hit as a result.
But Gorman isn't writing off the business quite yet; he's actually aiming to double his efforts to expand the branch. Gorman appointed Greg Fleming in charge of cutting costs at the brokerage at a faster rate. Fleming may also aim to direct more clients into manged accounts, which generate more fees.
Sources have said Smith Barney isn't causing as big a headache to Gorman as it did months ago. Results should be available when Morgan Stanley issues it's third-quarter earnings report on October 17th.
Shares are up 1.8 percent early Friday morning.
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