What Morgan Stanley Is and Isn’t Saying About Greg Fleming

Morgan Stanley (NYSE:MS) is denying that its brokerage chief Greg Fleming has been told that he is the firm’s de facto No. 2 and heir apparent to CEO James Gorman.

Or is it?

A spokeswoman for the big Wall Street firm Michele Davis offered contradictory statements Thursday on firm-wide speculation that Fleming has been guaranteed the top spot after the Gorman era is over. According to Davis, Gorman himself has not promised Fleming the top spot, but she wouldn’t deny that in the firm’s current succession plan, Fleming would be named CEO if Gorman somehow left.

“I have no comment,” Davis said when asked if Fleming has been chosen to lead Morgan Stanley under succession circumstances.

“The rumor that James Gorman has informed Fleming he is the de facto No. 2 is false,” Davis added. But when asked to deny that Fleming is already the de facto No. 2 at the firm and doesn’t need to be told by Gorman, she had no comment.

With the recent success of Morgan Stanley’s brokerage operations, the 51-year-old Fleming is seen as the clear front runner if and when Gorman decides to step down, and he may be waiting for a while. Gorman, 55, has been running Morgan Stanley as its CEO since 2010, and has been getting high marks for transforming the company from one that focused on risky trading strategies before the 2008 financial crisis to one that focuses on dispensing financial advice through its brokerage unit, which is Wall Street’s largest.

Fleming is seen by senior executives inside the firm as the natural replacement for Gorman because he has been Gorman’s point man behind this transformation, and because of his experience running financial firms. It was Fleming, while the No. 2 executive at Merrill Lynch, who devised its financial crisis sale to Bank of America (NYSE:BAC), long considered one of the shrewdest moves in recent Wall Street history.

Without the sale, Merrill would have in all likelihood faced the same fate as Lehman Brothers and would have filed for bankruptcy. Morgan Stanley, with the rest of Wall Street, later received tens of billions of dollars in aid from the federal government to remain in business.

Another factor in favor of Fleming is his age; he is six years younger than Colm Kelleher, another potential replacement for Gorman. Both Kelleher and Fleming are presidents, running Morgan’s institutional and wealth management businesses, respectively. People inside Morgan say Gorman may offer Kelleher a spot on the firm’s board as a consolation prize. Davis declined to deny that possibility.

Since late 2009, when Gorman was named to replace former Morgan Stanley chief John Mack, shares of the firm have risen 20%, compared to 14% for rival Goldman Sachs (NYSE:GS). Analysts attribute much of this success to Gorman’s vision of building out Morgan Stanley’s brokerage division that he cobbled together in large part by purchasing the Smith Barney unit from Citigroup (NYSE:C) following the banking crisis.

Fleming has been his right hand in this effort since 2010, when he was tapped to lead the firm’s investment management division.

Davis also said whatever management changes are in store, they are not imminent. “James isn’t leaving anytime soon” she added.