Stephen Foley: Little change as Gorman joins Morgan

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US Outlook: The appointment of James Gorman as chief executive of Morgan Stanley will provide no great cheer for the traders there, who look longingly at fat profits generated by Goldman Sachs and argue that Morgan Stanley, too, should juice its profits – and their bonuses – by taking on a bit more risk.

Good. In contrast to John Mack's background as a hard-scrabble bond trader, Mr Gorman runs the much more staid and stable retail broking side of the business. More importantly, he is not steeped in Morgan Stanley or Wall Street lore, having spent most of his career as a consultant at McKinsey & Co. He's a lawyer by training, an Australian by birth, and a pragmatist by nature.

All of which means he is unlikely to be seduced by the shortsighted arguments being used by those who fear the 85-year-old investment banking colossus is falling behind its arch-rival. It is true Goldman put more of its balance sheet to work in the bruised credit markets of the first half of this year, reaping profits from trading when others had pulled back. But it is likely Goldman's short-term trading profits will be clipped dramatically under a new regulatory regime, while Morgan Stanley is building the sort of diversified financial group that might better withstand financial shocks. As a broader and less volatile firm, its shares should ultimately win a higher multiple from investors.

Mr Gorman's consultancy background bodes well for weighing future options. They might run the gamut from turning Morgan Stanley into an integrated financial supermarket to breaking it apart completely. For now, his appointment is the no-change change. And that is as it should be while regulators and executives begin to rewire Wall Street.

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