April 21, 2010 / 1:36 PM / in 8 years

Morgan Stanley brokerage steadies after stormy year

* Net new assets $5.8 bln after year of outflows

* Broker headcount flat at 18,140

By Helen Kearney

NEW YORK, April 21 (Reuters) - Morgan Stanley Smith Barney said its assets and advisers increased in the first quarter, stemming a flood of withdrawals and departures since the brokerage joint venture was formed last June.

Investment bank Morgan Stanley MS.N, which combined its wealth management unit with Citigroup Inc’s C.N Smith Barney, said on Wednesday that the venture took in $5.8 billion of net new money. By contrast, Morgan Stanley Smith Barney saw $4.7 billion of net withdrawals in the fourth quarter.

Financial adviser headcount also stabilized at 18,140, up by five people from the fourth quarter. Morgan Stanley, like all of its big-bank rivals, had seen brokers leaving in droves amid a frenzy of recruiting last year.

Morgan Stanley for the past year blamed the declines on departing Smith Barney brokers who, unsettled by the merger, fled to rivals or independent firms and took clients with them. Executives contend that trend has played out.

“There’s always angst that occurs in a combination, but when people see the the power of the platform, given our scale, it settles down,” Morgan Stanley Chief Financial Officer Ruth Porat told Reuters.

Morgan Stanley said its brokerage and wealth management businesses generated revenues of $3.1 billion for the quarter, flat with the fourth quarter. Pretax profit was up 20 percent at $278 million.

The firm also shut down 25 branches during the quarter, leaving 870 at the end of March.

One sore point: Average revenue per adviser fell slightly to $685,000, which is still well below market leader Merrill Lynch. On Friday, the Bank of America BAC.N unit reported average revenue of $807,000 for the first quarter. (Reporting by Helen Kearney; Editing by Lisa Von Ahn)

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