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Morgan Stanley: James Gorman Will Step Down as CEO From a Company He Helped Transform

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We are maintaining our $91 fair value estimate for narrow-moat-rated Morgan Stanley MS after James Gorman announced he will be stepping down as CEO in the next year. Gorman created significant value for Morgan Stanley shareholders; he was instrumental in transforming the firm into a more balanced financial institution with significant investment-management operations from an investment bank that was on shaky ground in the global financial crisis. Wealth and asset management have recently contributed about 55% of net revenue compared with closer to 40% before the financial crisis, and these businesses will likely be material drivers of the company’s long-term growth. While Morgan Stanley’s investment-management business has grown as a proportion of net revenue, the investment bank has continued to thrive with high league table rankings for underwriting and merger advisory and growth in trading market share.

A good portion of the strengthening of Morgan Stanley’s investment-management business came from acquisitions, which is why we increased our Morningstar Capital Allocation Rating for the company to Exemplary from Standard several years ago. Acquisitions include Citigroup’s Smith Barney wealth-management business, online brokerage and bank E-Trade, and asset manager Eaton Vance. We believe that these acquisitions were done at reasonable prices and contributed synergies to the Morgan Stanley ecosystem.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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Michael Wong

Director of Equity Research
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Michael Wong, CFA, CPA, is director of equity research, financial services, North America, for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc.

Michael previously served as chair of the valuation committee. Before assuming his current role in 2017, he was a senior equity analyst, covering investment banks and brokerages. Before joining Morningstar in 2008, he worked in corporate and public accounting.

Wong holds a bachelor’s degree in business administration, with concentrations in accounting, corporate finance, and financial services from San Francisco State University, where he graduated summa cum laude. He also holds the Chartered Financial Analyst® designation and is a Certified Public Accountant. Wong has also passed the Certified Financial Manager (CFM) and Certified Management Accountant (CMA) exams.

Wong won the “Technology Thought Leadership” award at the 2016 WealthManagement.com Industry Awards for his report, The Financial Services Observer: The U.S. Department of Labor’s Fiduciary Rule for Advisors Could Reshape the Financial Sector. In 2011, he ranked second in the Investment Services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey. Wong was awarded the summer 2005 Johnson & Johnson Institute of Management Accountants CFM Gold Medal.

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