James Gorman has risen to the top at Morgan Stanley. The former head of Morgan Stanley’s retail brokerage division, now co-president of the firm, is slated to take over the CEO job on Jan 1, 2010, when John Mack retires, the firm announced Thursday. Mack, who told Morgan’s board of directors he wanted to step down after turning 65 in November, will continue to serve as Chairman of the firm. Meanwhile, co-president Walid Chammah will become Chairman of Morgan Stanley International at year end.

The move could be very good for the retail brokerage unit, as Gorman’s familiarity with the division could help shape his strategic decision-making from the top.

“This move is a significant positive,” writes Richard Bove, banking analyst with Rochdale Securities, in an email. “It should give Morgan Stanley the strategic direction it needs. It will stabilize the business. It is the right move for the company.” In recent months, Bove and others had speculated that Gorman was first in line as Mack’s successor .

Gorman has an excellent record at Morgan Stanley’s retail brokerage, which was underperforming and in disarray when he arrived from Merrill Lynch. During his nearly two years at the helm of the retail brokerage, between early 2006 and late 2007, he significantly improved morale and profitability.

And yet, one Morgan Stanley advisor was relatively unmoved by the news. “I’m not particularly concerned or elated, but I think you could only take it as good news and not bad news.”

In a release, lead director of the firm’s board, Robert Kidder, praised Gorman’s record at Morgan Stanley. “John and the Board believe James Gorman is ideally suited to lead Morgan Stanley forward. James has a long track record of developing aggressive strategies backed by strong operating skills and relentless execution. He is a proven leader who has shown the ability to attract and retain top talent throughout his career.”

Gorman, who began his career as a consultant at McKinsey & Co., where Merrill Lynch was a client, began working at Merrill in 1999. In 2001, he was named the head of Merrill’s retail brokerage, and in early 2006, Morgan Stanley's John Mack hired him away to head its retail brokerage. Gorman was named a co-president of the firm in November, 2007.