Gorman, who has run the Wall Street giant since 2010, announced last month that he would step down within a year, setting off speculation about which executive would be chosen to succeed him in one of the most powerful roles in finance.
The bank's directors will deliberate over three internal candidates at a meeting in London in July and later gatherings in New York in September and October, the person said, on the condition of anonymity because the process is confidential.
Morgan Stanley co-presidents Ted Pick and Andy Saperstein are widely viewed as the front-runners for the top job, with Pick seen as having a slight edge, the person said.
Dan Simkowitz, the firm's head of investment management, is also a contender, the person added, but no final decision has been made.
A Morgan Stanley spokesperson declined to comment, as did Gorman, Pick, Saperstein and Simkowitz when contacted directly.
The timing of deliberations, which has not been previously reported, shines fresh light on the status of one the most closely watched CEO successions on Wall Street.
Gorman will become executive chairman for a period when the new CEO takes over, he said in May, and be on hand in case turmoil resurges in the banking sector.
REGULATORY MATTERS
Before Gorman hands over the reins, he wants to wrap up several regulatory matters.
"There's a whole range of things that I wouldn't mind either getting set, or dealing with, before I step down, so whoever replaces me has a complete clean sheet," Gorman told investors at a conference earlier this month. "Most of that will happen within a year, and then we're off to the races."
Among the issues is an investigation by the U.S. Securities and Exchange Commission and the U.S. Attorney's Office for the Southern District of New York into Morgan Stanley's practices around block trading, or large sales of shares. The bank is in talks to resolve the probes, it said in a May filing.
Block trades are typically placed by institutional investors. The investigations focus on whether the firm or its employees broke the law by sharing or using information about impending block transactions, it said in a February filing.
Gorman also wants to deal with international regulations expected to be proposed this summer, the person said. The tougher rules could require major banks to hold as much as 20% more capital.
Regulatory stress tests, another one of the outstanding matters, were clarified this week. Major banks aced the tests, according to results published on Wednesday, which showed big lenders have enough capital to weather a severe economic slump.
SUCCESSION PLANNING
Since taking the helm, Australian-born Gorman, 64, has transformed Morgan Stanley through a series of major deals into a wealth management powerhouse that aims to manage $10 trillion in assets.
The company has deliberately prepared executives over a decade to take over, which gives them an advantage over any external candidates, Gorman said last month.
Pick, 54, heads Morgan Stanley's institutional securities group, overseeing areas including investment banking, equities and fixed income. He formerly led sales and trading.
Saperstein, 56, is in charge of the wealth management unit that has bolstered Morgan Stanley's profits in recent years. He previously worked at Merrill Lynch and McKinsey.
Simkowitz, 58, jointly leads corporate strategy alongside his role running investment management.
"I know how hard it is to do these jobs and how much complexity there is," Gorman said at the conference. "You've got to have a lot of resilience - I think physical resilience, mental resilience - and I think you've got to be prepared to make the call" on major decisions.
Wall Street succession plans have come into focus in recent months as the tenures of financial crisis-era leaders stretch on. Peter Orszag, a banker and former White House official, will take over as Lazard's (LAZ.N) CEO in October from his predecessor Kenneth Jacobs, who held the role for 14 years.
By contrast, JPMorgan Chase (JPM.N) CEO Jamie Dimon said last month he has no plans to leave after 17 years atop the largest U.S. lender. Brian Moynihan, who was named Bank of America (BAC.N) CEO in January 2010 at the same time as Gorman, signaled in 2021 he would drive the firm through a second decade.
The appointment of Gorman's successor will be watched closely, both for its significance at the firm, and more broadly in an industry that faces a weaker economic outlook, rising geopolitical tensions and sweeping technological change.
"I feel great about handing over - 14 years is a long time to do anything," Gorman said at the conference.
