MWD Morgan Stanley

By Liz Hoffman 

Morgan Stanley's second-in-command, Colm Kelleher, is retiring, opening a seat whose filling will signal the Wall Street firm's likely heir apparent.

Mr. Kelleher, who joined Morgan Stanley in 1989, is older than Chief Executive James Gorman and wasn't considered a candidate to succeed him. As the firm's president, he has overseen its restructuring from an undisciplined and error-prone investment bank to a stabler financial-services giant.

Mr. Gorman praised his lieutenant's "fierce competitive streak" and candor. "I just trust the guy," he said in an interview Thursday.

Mr. Kelleher, 61 years old, was Morgan Stanley's chief financial officer during the crisis, when he helped pull it back from the brink -- by shrinking its balance sheet, negotiating a $9 billion lifeline from Japan's Mitsubishi UFJ Financial Group Inc. and working with regulators to convert the firm to a bank holding company.

He won an internal power battle in the lean postcrisis years, outlasting rivals for Mr. Gorman's favor, including investment banker Paul Taubman and asset-management chief Greg Fleming. He turned down offers of CEO jobs at banks including Barclays PLC and Lloyds Banking Group PLC, according to people familiar with the matter.

He had come up in the trading businesses and understood risk management, areas less familiar to Mr. Gorman, a former McKinsey consultant who ran wealth and asset management.

Mr. Gorman elevated him to president in 2014, and he quickly assumed the role of enforcer, executing the strategy set by his more analytical boss. He led the move to lay off one-quarter of the firm's bond traders in 2015 and pushed the firm's retail brokers and investment bankers to work more closely together.

"James steered the ship, Colm ran the engine room," said a top Morgan Stanley executive.

Mr. Gorman said he is in no rush to fill Mr. Kelleher's seat. He aims to stay on as CEO for three to five years and is determined to avoid the messy succession battles that roiled Morgan Stanley in the 2000s. The firm might name co-presidents, said Mr. Gorman, who himself shared that title before becoming CEO in 2010.

Leading candidates include Ted Pick, the trading chief who last year was also given oversight for investment banking; Jonathan Pruzan, the firm's finance chief, and Andy Saperstein, who co-runs its giant retail brokerage and has known Mr. Gorman since they were both at McKinsey in the 2000s.

Born in Ireland but raised in England, Mr. Kelleher is a literature-quoting, classical music-loving, nattily dressed bon vivant, as quick to discipline an underling as to invoke a Napoleonic battle to make a point. Fiercely loyal to the firm, he refers to JPMorgan Chase & Co. as "Chase," insisting that Morgan Stanley alone has the claim on the venerable Morgan name.

After the worst of the financial crisis had passed, he had commemorative ties and scarfs made for a group of senior executives. They memorialize the stock's lowest point, $6.71, with rows of geese, swans and partridges, corresponding to the birds' assigned numbers in "The Twelve Days of Christmas."

He will retire June 30. He joined the board of railroad Norfolk Southern Corp. earlier this year in a sign that he plans to stay involved in business. He plans this fall to walk the Camino de Santiago, the 500-mile pilgrimage in the Pyrenees.

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

(END) Dow Jones Newswires

March 28, 2019 19:30 ET (23:30 GMT)

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