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Morning Coffee: Morgan Stanley’s most likely new CEOs are very different characters. The 35 year old BlackRock MD who quit for his family still has no regrets

Andy Saperstein since he cut his hair

American Presidents, according to one theory, can always be classified as either “jocks” or “nerds”, and the two types usually alternate.  British Prime Ministers, similarly, are either bishops or bookmakers.  When it comes to bank CEOs, however, the choice is almost always between “folksy” and “flashy”.  You either get a regular guy like James Gorman of Morgan Stanley, who gives the impression of not thinking he’s any better than the rest of us.  Or you get a larger than life character like John Mack, his predecessor in the CEO and chairperson role, someone who quite visibly does think he's better than anyone else, but gives the impression that they might be able to back it up.

Looking at most likely candidates to succeed Gorman, the folksy/flashy distinction isn’t so difficult to spot.  Andy Saperstein, the son of an inspection officer, has an “aw-shucks demeanour” and a “disregard for Wall Street status symbols”.  He's not a big fan of the Hamptons, famously refused to get his hair cut when working for Salomon Brothers in his 20s and is a massive fan of Disney World, particularly the Avatar ride.  Ted Pick, on the other hand, is from a financial family, had his wedding written up in the New York Times and is renowned for being “a fun guy to have around” and having a way with words (particularly swear-words).

This might suggest that having gone folksy last time, MS is ready to go flashy again and pick Pick.  But that doesn’t seem to be the way that the smart money is currently guessing.  Although Pick is a genuine Morgan Stanley lifer, having joined the company in 1990 straight out of business school, Saperstein is Gorman’s long term lieutenant, coming across with him from Merrill Lynch in 2006.  And James Gorman isn’t actually leaving the firm entirely – while stepping down as CEO, he will continue to be chair for a while more.

More to the point, Pick is from the trading side of the business, while Saperstein is head of wealth management.  (Interestingly, it’s more than three decades since Morgan Stanley was run by someone with a background in advisory banking).  Although Ted Pick has done well and his traders have gained market share, the real story at MS for the last several years has been the growth of the wealth management franchise.  Partly by a series of well-timed acquisitions, and partly by picking off wirehouse brokers team by team, Saperstein has managed to develop a strong base of high-quality recurring earnings and create most of the shareholder value. 

On the other hand, it’s well known that promoting the head of the most valuable division to CEO is always a risky thing to do.  It creates a cascade of succession struggles which have the potential to destabilize the golden goose, and all too often means the rest of the business gets neglected or mismanaged.  And wealth management might not be the star forever; in many ways, Morgan Stanley’s domestic wirehouse franchise could be seen as a roll-up in a basically dying industry rather than a true growth sector.  Perhaps the next CEO could be the “third man”, investment management head David Simkowitz, who is only given a “2% chance” by insiders, possibly because it’s not yet known whether he’s folksy or flashy.

Elsewhere in the world, once upon a time, Khe Hy was the youngest ever managing director at BlackRock at the age of 31.  However, he was working so hard that it was causing him to suffer from stress-related alopecia, and when his daughter was born in 2014, he realised that his lifestyle was utterly unsustainable.  So he quit, with (at the time) no job to go to, on the assumption that “the riskier thing is my kid watching their dad be checked out and doing something just for money”. 

It all turned out OK in the end (these days he runs a productivity blog with 40,000 subscribers), but even if it hadn’t, he says it would still have been the right choice.  The problem was that he’d fully internalized the idea that the annual bonus was the way of keeping score and the ultimate measure of self-worth, and only realized that this might have been a bit of a limited way to see the world when his hair started falling out.

Meanwhile …

You need the shareholders’ approval to execute the deal, but when the business being taken over is a fund manager, you need the employees’ consent for there to be a business left to acquire.  The top managers at GAM have looked over their future bosses at Liontrust, and written an open letter confirming that matters are satisfactory to them.  (FT)

It might not be the most glamorous location in the EMEA time zone, but the mayor of Birmingham is keen to point out that Goldman Sachs now has space for 1,000 employees in his city, and wants other global banks to move in alongside them. (Bloomberg)

The projects are not particularly interesting or glamorous, the culture isn’t Californian enough and the money isn’t quite where it needs to be.  These are apparently the main reasons why, although they’re doing their best to recruit AI coders, banks are losing them just as quickly. (Business Insider)

Having said that, given the sheer volume of job cuts in the tech industry, graduates and younger coders are beginning to appreciate that even if they might have preferred to head to Silicon Valley, Wall Street is more secure. (Bloomberg)

It’s not the profession it used to be, it’s hard work and it’s more dependent than ever on being cross-subsidised by other business units, but the job of a sell side research analyst is still a great way to learn a lot. (FT)

Some people just love to march toward the sound of cannon – after a 20-year investment banking career at CMBC and Mirae Securities, Matt Jin has moved to join Credit Suisse’s Greater China private banking team.  Presumably he has either received assurances about the integration, or is very confident indeed in his own ability.  (Finews)

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AUTHORDaniel Davies Insider Comment

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