WHEN JAMES GORMAN took the helm of Morgan Stanley it was barely afloat. His tenure as the bank’s chief executive began on January 1st 2010, in the teeth of the global financial crisis. After the failure of Lehman Brothers, in 2008, fear had spread that other dominoes would soon topple. Morgan Stanley seemed a likely candidate. Hank Paulson, then treasury secretary, is rumoured to have offered it up to JPMorgan Chase for free (Jamie Dimon, JPMorgan’s boss, apparently declined). The firm then took a government bailout. In 2009 its return on equity, a benchmark measure of profitability, was just 4%.

Fourteen years later Mr Gorman has handed the wheel of a far finer vessel to Ted Pick, the former head of its investment-banking and trading arms. “We had our moment before the abyss,” said Mr Pick on January 16th, during his first earnings call in charge. “We are determined never to face anything like those days again.”

Mr Pick described Morgan Stanley’s progress after 2009 as a “classic ‘self-help’ story”. It started out as a highly leveraged, volatile outfit specialising in trading and investment banking. In the years since it has transformed itself into Wall Street’s pre-eminent wealth manager, through a series of well-chosen deals.

Mr Gorman has often described this strategy as building a “ballast” to balance the “engine room” of the traditional investment-banking business. He started by scooping up Smith Barney, a wealth-management business, from Citigroup for a song during the financial crisis. In 2019 a small stock-plan administration company followed. Then in 2020 Mr Gorman pulled off two mammoth deals in just three months, buying E*TRADE, a brokerage firm, and Eaton Vance, an asset manager.

The result is that Morgan Stanley is sitting on $6.6trn in client assets, the biggest pot of wealth in the world. It now earns almost two-thirds of its profits from that pot, and has posted a juicy return on equity, averaging 16% a year since 2020. Other global banks are now aping its push into wealth management. Analysts making the bull case for UBS’s recent acquisition of Credit Suisse, a firm with a large wealth business that ran into trouble in 2023, point to Morgan Stanley as an example of how such a merger can pay off.

Could the firm become a victim of its own success? On the earnings call on January 16th one analyst asked Mr Pick if he anticipated fiercer competition in wealth management, as other banks attempt to beef up their operations. Margins in Morgan Stanley’s wealth-management business in 2023 were around 25%, a drop from the 30% or so the firm has posted in prior years. The share price fell by some 4.5% in the hours following the earnings call.

Mr Pick himself seems set to stay the course. Those who have worked with him describe a disciplined, straight-talking, no nonsense kind of man—a steady pair of hands who can keep things sailing smoothly. “There may have been a change in leadership,” he told investors, “but there has not been a change in strategy.”

He did not rule out that Morgan Stanley might grow through acquisitions, either. “We have made five different acquisitions. The view inside the house is: that’s good for now.” But if opportunities come up, especially outside America where the firm has lower market share, “we could staple them on,” he said.

In a sign of how far Morgan Stanley has shifted from its past identity, Mr Pick added that he thinks the “ballast” and “engine room” analogy Mr Gorman favoured might need updating. “At one point we called the wealth and investment management business ‘the ballast’, which was the right word because we wanted to convey stability,” he said. But now he thinks “it is actually the engine for future Morgan Stanley growth.”

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