Morgan Stanley CEO Gorman will step down within the next 12 months

James Gorman, the longtime CEO and chairman of Morgan Stanley, said he will step down and transition to executive chairman within the next 12 months.

The board of directors has named "three very strong senior internal candidates" to succeed him, Gorman said at the Wall Street investment bank's annual shareholder meeting on Friday.

He didn't name those individuals. 

Andy Saperstein, the co-president of Morgan Stanley and the head of Gorman's oft-praised wealth management unit, is widely considered to be among those in the running, along with co-president and head of Institutional Securities Ted Pick and head of Investment Management Dan Simkowitz, Bloomberg said earlier. A person familiar with the matter confirmed they were the likely names. 

"An issue of paramount importance to shareholders, employees and clients, is of course succession," Gorman said on the call. 

"And no, I'm not just talking about the TV series, and I have definitely no plans to go out like Logan Roy," he said. He was referring to the aging octogenarian CEO on the hit HBO show, who refused to step down and announce a replacement, a rigidity that held even up to the moment of his shocking death in the fourth season and set off a tumultuous power struggle amongst his children.

Succession is a risk for firms of all sizes in wealth management. A recent study by Dimensional Fund Advisors found that lack of succession planning was the biggest drag on organic growth for advisors. 

Read more: Surviving succession: Navigating the emotional minefield of transition planning

"​​Advisors struggling with that challenge exhibit, on average, nine percentage points lower AUM growth and seven percentage points lower revenue and client growth in that year," the report authors wrote. 

Firms that continued to lack such a plan also saw an average of "five percentage points lower growth in AUM, revenue, and clients in the following year and a similarly lower growth two years into the future," the report said.  

Gorman, who will have been at the helm at Morgan Stanley for around 14 years when he departs, said he was regularly asked about the who, when and how of his eventual transition.  

"As we've said previously, the board has a very thorough and rigorous succession planning process led by the compensation, management development and succession committee," he said. "That committee in turn reports to the full board headed by our lead independent director." 

The specific date of the CEO transition has not been announced, Gorman said.