* Banks benefit as investors get back into market * Assets under management drive profits, but fee revenue up * Outlook strong as market gains seen driving volumes By Andrea Hopkins TORONTO, March 5 (Reuters) - Strong wealth management returns boosted profits at Canada's big banks in the first quarter of 2013 as healthy gains in global stock markets drove investors back into the market and powered the fees lenders charge for advice and trading. While weak financial markets held back wealth management in recent years, the segment has bounced back as stock markets regain record peaks, setting the stage for more gains in the services Canada's big six banks offer in mutual funds, investment advice and full-service and discount brokerages. "Wealth management showed some exceptionally strong results this quarter. The operations of largely all the banks benefited from not only the growth in valuations in the markets, but also on apparent improvement in sentiment in investors," Barclays Capital analyst John Aiken said. "And while we may see continued volatility through 2013, rising equity markets definitely bode well for increasing profitability within the banks' wealth management platforms." Assets under management rose across the board for the six big banks that have reported first-quarter earnings - Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia, Bank of Montreal, Canadian Imperial Bank of Commerce and National Bank of Canada - as rising markets boosted investments. Assets under management (C$ bln): Q1 2013 Q4 2012 Q1 2012 RBC 353 340 313 TD 211 207 196 BNS 131 115 106 BMO 167 164 155 CIBC 92 89 84 National 37 36 59 With both retail and institutional investors returning to trading, the banks capitalized on higher volumes and an ability to raise fees, freedom they lacked as markets slumped after the financial crisis. RBC, Canada's largest lender, said its wealth management net income hit a record C$233 million, up 24 percent from a year earlier, "mainly due to higher average fee-based client assets resulting from net sales and capital appreciation, increased transaction volumes reflecting improved market conditions and higher semi-annual performance fees." Analysts said the Toronto-based bank, which has the largest wealth management business and the most global wealth exposure of its peers, will benefit from that as retail bank business threatens to slow as Canada's economy underperforms. Cross-town rival TD Bank, which has expanded strongly down the U.S. east coast, notched up a smaller but still impressive 15 percent growth in wealth management profit in the year. "Strong asset growth is driving earnings growth in our Wealth business, despite low trading volumes and the low interest rate environment," TD head of wealth management Mike Pedersen said in a statement. Wealth management profits (C$ mln) Q1 2013 Q4 2012 Q1 2012 RBC 233 207 188 TD* 165 148 144 BNS* 310 300 288 BMO* 163 164 104 CIBC 90 84 100 National 56 50 46 * TD's results exclude TD Ameritrade. BNS and BMO results include insurance. While global economic clouds remain, the U.S. stock market's record high on Tuesday will tempt more investors back into the market. "We've had lower macroeconomic instability in the sense of some of these larger issues - Europe, slower economic growth - have been less of a headwind in investors' faces, which has caused them to move more towards riskier assets and increased investment activity. And that is nothing but positive for a wealth management business," said Tom Lewandowski, a St. Louis-based analyst at Edward Jones. He said Canadian banks have gobbled up boutique asset managers and smaller firms, doubling their market share in mutual fund sales over the past 10 years. With Canadians seeming to prefer all their banking services under one roof, the future for wealth management growth looks bright for the big banks, who face headwinds in other domestic banking services as Canadian consumers pay down debt. "I think we will continue to see good wealth management results," Lewandowski said. "We like this business. It's relatively low capital requirement, high return and relatively consistent."