Morgan Stanley underwent a major management shakeup yesterday. Effective tomorrow, December 1, James Gorman, president of the firm’s Global Wealth Management Group will take on a co-president role at Morgan Stanley alongside Walid A. Chammah, CEO of Morgan Stanley International.

Gorman and Chammah replace Zoe Cruz, whose retirement is effective immediately, and Robert Scully, who has been assigned to a newly created Office of the Chairman, where he will focus on the firm’s key clients-with a particular emphasis on global sovereign investors. He will report to Mr. Mack.

It’s not yet clear what it will mean for Morgan financial advisors to have Gorman in a co-president role. According to a Banc Of America Securities analyst report, as co-presidents, Gorman, 49, and Chammah, 53, will work together on all aspects of the firm. On a day-to-day basis, the wealth management department will continue to report directly to Gorman. Owen Thomas, the head of the investment management department will also begin to report to Gorman. Down the road, it’s possible that someone will be hired to take over as President of the wealth management division, reporting to Gorman.

Zoe Cruz’s departure from the firm is a big surprise, considering CEO John Mack said only recently that she would not lose her job over the firm’s mortgage-related writedowns and that she was still a potential successor for him. Cruz, who has served as co-president of the firm since February 2006, headed up the firm’s risk and trading operations. She has been at Morgan for 25 years. Her departure, some speculate, may be a sign of further turmoil at Morgan regarding its credit and mortgage-related businesses. Richard Bove, a Punk, Ziegel analyst, told Forbes “there might be a sizeable write-off coming for the firm.” Morgan took a $3.7 billion write-down in the third quarter and has announced it expects additional writedowns in the fourth quarter to total $1.2 billion. Analysts are speculating the number could be much higher than that.

Cruz, 52, is one of a handful of executives to step down from their posts in recent weeks. Early this month, Citigroup’s Chuck Prince stepped down after a poor third quarter including a $6.5 billion mortgage-related write-down. In October, Merrill Lynch Merrill Lynch fired CEO Stan O’Neal and hired John Thain, NYSE Euronext’s CEO, weeks later to replace him. Smith Barney is still on the search for Prince’s replacement.

A Merrill Lynch analyst report states, “Chammah and Gorman both have long and distinguished track records, and the firm’s ability to swiftly promote them into new leadership roles is indicative of the firm’s bench strength, we think. The environment is challenging and they’ll have their work cut out for them; a key task for Chammah will be to improve the firm’s risk management infrastructure and stress/ scenario testing to lower the probability of future huge trading losses. But we think the team is solid, and the franchise remains sound.”

In March, when asked whether he’d be able to sustain the strides Morgan’s wealth management group had made since he joined the firm, Gorman told Registered Rep. “Absolutely. I'm more confident now than I was back then, because then I was looking at it largely as an outsider…And now, nearly a year later, we know exactly what we've got and what's strong and what's not, and what can be changed and what can't. And I think we're at the beginning of a five-year run of expansion of this business, which will be terrific.” (read the full interview.)

In a statement yesterday, CEO John Mack, said, “James has led a dramatic turnaround of our Wealth Management group—revitalizing its culture and transforming it into one of most dynamic competitors in the industry. He also has played a key role in better integrating our securities businesses, and most recently, has begun to play a key role in developing strategy for the entire firm,” according to a spokesperson for Morgan Stanley. (read the full press release.)