NEW YORK (Reuters) – Morgan Stanley Smith Barney continues to lose ground to rival Merrill Lynch, and both brokerages suffered declines in revenue and client assets in the fourth quarter amid choppy markets.

Bank of America (BAC.N: Quote, Profile, Research, Stock Buzz) on Thursday said Merrill Lynch wealth management revenue fell 2 percent from a year earlier to $3.21 billion in the quarter, while total client balances — assets, loans and cash — fell less than 1 percent to $1.50 trillion.

Morgan Stanley (MS.N: Quote, Profile, Research, Stock Buzz), which owns a controlling 51 percent interest in Morgan Stanley Smith Barney, said its wealth management profit fell 45 percent to $149 million, resulting in a margin of just 8 percent. Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz) owns the rest of MSSB.

To be fair, Bank of America does not disclose detailed performance figures for Merrill, U.S. Trust or its corporate retirement services, making comparisons difficult. And Merrill Lynch declined to comment on the profit of its individual wealth businesses.

By at least one measure, Merrill Lynch had more advisers than its rival at year-end. But Morgan Stanley Smith Barney also provided an “adjusted” number that kept it No. 1.

Many individual investors pulled back from the stock market last year, anxious about the U.S. economy, Europe’s debt crisis and political tensions worldwide. The S&P 500 Index ended 2011 essentially unchanged after a roller-coaster year.

Large U.S. stocks rose 11 percent during the fourth quarter, but S&P’s downgrade of nine European nations last week shows financial markets still are not out of the woods.

NEW YORK, Jan 18 (Reuters) – UBS AG (UBSN.VX: Quote, Profile, Research) hired a team of Morgan Stanley Smith Barney brokers in Washington, D.C. who generated $2.5 million of revenue in the past year.

Joining the Swiss bank’s U.S. brokerage arm last Friday were Anthony Connor and Bryon Fusini, who oversaw client assets of $330 million, according to Glenn Taylor, whose California recruiting firm advised on the move.

Connor, a 27-year veteran in the business, started his career with Dean Witter Reynolds, a retail brokerage later renamed “Morgan Stanley.” He spent nearly a decade at CIBC World Markets and Oppenheimer & Co before joining Citigroup Inc’s (C.N: Quote, Profile, Research) Smith Barney in 2007, according to his FINRA records.

He became part of Morgan Stanley Smith Barney in 2009, when Morgan Stanley (MS.N: Quote, Profile, Research) and Citi merged their brokerages into the nation’s largest retail wealth management business. That joint venture has lost hundreds of brokers to rivals in the past three years, mostly Smith Barney alumni unhappy with new ownership as well as frustration with the integration of the two businesses.

Morgan Stanley also has been aggressively culling its broker ranks as it tries to boost the venture’s profit margins and fulfill its promises to investors. From a combined 20,000 advisers when the merger was announced, Morgan Stanley Smith Barney’s broker ranks had slipped to 17,291 by September.

Connor was the subject of two customer disputes, according to FINRA records, including a 2001 complaint he failed to liquidate an account as instructed. CIBC agreed to pay the full $21,330 in alleged damages in a settlement.

Two years later, he was accused of omitting information about an investment that led to alleged damages of $250,000. The customer’s claim was denied by arbitrators.

NEW YORK (Reuters) – A slowdown in trading by individual investors put a dent in Wells Fargo & Co’s fourth-quarter brokerage results, the largest U.S. bank by market value said on Tuesday.

Wells Fargo Advisors said its client assets fell 3 percent to $1.13 trillion during an exceptionally choppy 2011, when the benchmark S&P 500 Index ended the year unchanged. U.S. stocks rose 11 percent during the fourth quarter, but Standard & Poor’s Friday downgrade of nine European nations shows that financial markets are still treading thin ice.

The number of advisers rose by 75 to 15,263 compared with last year, essentially flat, but still indicating the No. 3 U.S. retail brokerage held on to earlier recruiting gains, but may have lost more ground to Merrill Lynch, the second-largest U.S. brokerage with 16,722 advisers at the end of September.

The San Francisco bank does not disclose financial results for its brokerage, high-end wealth management and retirement services businesses. Together, these units earned $325 million, up 65 percent from last year due to a one-time $153 million gain from Wells’ sale of H.D. Vest, an independent brokerage.

Total revenue in the broader wealth division rose 1 percent to $3.07 billion from a year ago. Excluding H.D. Vest, revenue was down 4 percent due to lower commissions and a reduction in fees as client balances fell.

Wells, the first of the major brokerage houses to report its December quarter results, shows that individual investors have pulled in their horns as questions about the U.S. economy, Europe’s debt crisis and political tensions worldwide have even market veterans scratching their heads.

Also on Tuesday, online brokerage TD Ameritrade said its quarterly earnings rose but revenue fell as small investors stepped back from choppy markets.

NEW YORK (Reuters) – Brokerage Raymond James Financial Inc (RJF.N: Quote, Profile, Research, Stock Buzz) is taking a rare swing for the fences with its move to acquire Southeast rival Morgan Keegan, yet investors worry the $1.2 billion takeover won’t translate to big gains until markets rebound.

The Florida-based regional brokerage known for its conservatism landed its biggest ever deal on Wednesday, outlasting rivals and private equity firms in an auction that lasted nearly seven months. Raymond James , led by CEO Paul Reilly, also is set to create the largest investment bank and brokerage outside Wall Street.

With more than 6,100 brokers, the new Raymond James will leave regional rivals Stifel Financial (SF.N: Quote, Profile, Research, Stock Buzz) and RBC Wealth Management (RY.TO: Quote, Profile, Research, Stock Buzz) behind and puts itself within striking distance of UBS (UBSN.VX: Quote, Profile, Research, Stock Buzz), which saw its U.S. brokerage force shrink to less than 7,000 advisers after the financial crisis.

“From our perspective, it really helps us to dominate market share in the south,” said one Raymond James adviser, who was not authorized to speak publically about the firm.

Raymond James Executive Chairman Thomas James, as CEO between 1970 and May 2010, helped the firm expand from 165 brokers to more than 5,000 through hires and small acquisitions. He also developed the firm’s reputation for conservative growth, which helped Raymond James avoid the pitfalls that forced some bigger Wall Street competitors out of business and prompted taxpayer funded rescues in 2008.

Firms like Raymond James and Morgan Keegan, a Memphis-based firm founded in 1969, are “regional” brokerages that promise better service for customers and more intimate surroundings for employees than at banking giants like Bank of America Merrill Lynch, Morgan Stanley Smith Barney and Wells Fargo.

By being the largest of the second-tier firms, Raymond James hopes to be a stronger draw for advisers, bankers and customers.

By Rick Rothacker and Joseph Giannone

(Reuters) – Raymond James Financial Inc (RJF.N: Quote, Profile, Research, Stock Buzz) said on Wednesday it agreed to acquire Southeast investment bank and brokerage Morgan Keegan from Regions Financial Corp (RF.N: Quote, Profile, Research, Stock Buzz) for $930 million in stock, concluding a drawn-out auction for the unit.

For Raymond James, it was the largest acquisition it has ever made and a chance to expand both its brokerage and capital markets business at a bargain price.

“We prefer organic growth, but this is a once-in-20-years opportunity,” Raymond James Chief Executive Paul Reilly told Reuters.

Regions Financial, eager to raise capital to repair a balance sheet battered by the financial crisis, will also receive a $250 million dividend before the closing, which is expected to come in the first quarter of this year.

The acquisition adds about 1,000 advisers to St. Petersburg, Florida-based Raymond James’ U.S. brokerage force, which had roughly 5,400 advisers.

With approximately 6,000 brokers, Raymond James would be one of the largest U.S. wealth management firms, vaulting past rival Stifel Financial (SF.N: Quote, Profile, Research, Stock Buzz) though still trailing national powerhouses such as Morgan Stanley Smith Barney (MS.N: Quote, Profile, Research, Stock Buzz) and Bank of America’s (BAC.N: Quote, Profile, Research, Stock Buzz) Merrill Lynch.

NEW YORK (Reuters) – Oppenheimer & Co must repurchase nearly $6 million in auction rate securities from a client, a securities arbitration panel ruled.

A Financial Industry Regulatory Authority arbitration panel in New York found that investor Nicole Davi Perry, was entitled to recission of $5.98 million in New Jersey Turnpike auction rate securities she bought in 2007, according to an award posted in FINRA’s arbitration database on Monday.

Oppenheimer must also pay Perry $134,000 in legal fees, according to the award.

Auction rate securities were sold as highly liquid short-term instruments similar to money-market funds, but with slightly higher returns. When the $330 billion auction-rate market failed in 2008, as large investment banks that ran the auctions ran into liquidity crunches, thousands of investors were left with securities that could not be sold.

Perry filed the claim against Oppenheimer in 2010 with her father, Ronald Davi, alleging breach of fiduciary duty and negligence, among other things, according to the award dated Friday.

But Davi’s claim involving another type of auction rate security he bought through Oppenheimer was ultimately dismissed after his security was cashed out by its issuer, according to Glenn Gitomer, a securities lawyer for McCausland Keen & Buckman in Radnor, Pa. who represented the pair.

Perry tried to resolve the matter with Oppenheimer prior to filing the claim, said Gitomer.

NEW YORK, Jan 5 (Reuters) – With every new year come a new round of bold predictions for financial markets.

Bill Gross, the manager of the world’s largest bond fund, kicked off the year calling the current market “paranormal.” He forecast a 2012 characterized by “credit and zero-bound interest rate risk.”

Blackstone Vice Chairman Byron Wien, among the securities industry’s best known prognosticators, on Tuesday unveiled his latest crop of 10 “surprises” for the coming year. BlackRock Vice Chairman Bob Doll is bullish on stocks, while one well-known forecaster even waved the surrender flag.

Among some predictions: Doll foresees double-digit U.S. stock returns, while Wien sees benchmark oil prices plunging to $65 a barrel.

In the past — before U.S. housing prices fell and kept falling for first time since the Depression or the future of Eurozone was at risk — their educated guesses had a good chance of being right.

But these days, market volatility is the norm and far-flung political events can send U.S. markets into a tailspin. Skeptics contend it is hard to predict what the world will look like tomorrow, let alone 12 months from now.

Indeed Birinyi Associates’ Laszlo Birinyi, whose stock market forecasts were widely followed, told clients this month that he would not be making predictions this year.

NEW YORK, Jan 3 (Reuters) – Independent brokerage LPL Investment Holdings Inc on Tuesday said it would acquire Fortigent LLC, a firm that provides investment services and practice-management advice to high-end financial advisers.

The acquisition is expected to give a boost to LPL’s efforts to attract independent investment advisers, particularly those who cater to high net-worth clients.

LPL is already the largest provider of technology and investment services to more than 12,000 self-employed broker-dealers.

Closely-held Fortigent handles about $50 billion of client assets for some 90 financial advisers. The firm will retain its brand and its headquarters in Rockville, Maryland. Fortigent’s CEO and president Andrew Putterman will continue in that role.

Terms of the deal, to be completed during the first quarter, were not disclosed. Shares of LPL were little changed at $30.48 in midday Nasdaq trading.

Founded 15 years ago, Fortigent is one of the largest third-party firms handling the nuts and bolts of investment management, manager selection and asset allocation on behalf of financial advisers, banks and trust companies.

The firm also provides research and performance reporting for RIAs. Advisers using such a service then, theoretically, have more time for clients and new business development.

Dec 22 (Reuters) – In just seven months, Genworth Financial , which sells fund-management services to financial advisers, has attracted more than $500 million to its new Portfolio Solutions product.

The program, marketed as a simplified approach that invests across a range of strategies, lets people gain exposure to a broad mix of strategies and different fund managers through one investment.

By narrowing down thousands of investment options to a handful of strategies, Genworth is trying to attract investors who are overwhelmed by choice and are uncertain about how to approach today’s volatile markets.

“Clients are scared; they’ve lost their footing,” Gurinder Ahwulalia, chief executive of Genworth Financial Wealth Management, said in an interview. “There are so many choices, people don’t know what to do.”

Investors with a minimum $25,000 can choose from four approaches to investing — such as strategies that seek absolute returns in any market. Or they can pick funds that make adjustments to short-term market moves. Each strategy is invested by Genworth with outside fund managers, including Goldman Sachs or State Street.

“This takes our entire platform of different strategies and asset allocations and combines it into one portfolio,” he said.

In industry parlance, Genworth is a turnkey asset management platform, or TAMP, overseeing about $25 billion of assets through portfolios sold through 6,000 advisers at independent brokerages and other firms.

By Suzanne Barlyn and Joseph A. Giannone

(Reuters) – A U.S. judge on Wednesday denied a request by Citigroup to overturn a $54.1-million arbitration ruling in favor of a group of investors for losses incurred in a series of municipal bond funds which plunged in value between 2007 and 2008.

Judge Christine Arguello in Denver, Colorado, disagreed with Citigroup’s arguments, including the latter’s assertion that a Financial Industry Regulatory Authority arbitration panel disregarded the law in its award, in April, to venture capital investor Jerry Murdock Jr., retired patent attorney Gerald D. Hosier, and Brush Creek Capital.

The $54.1 million securities arbitration award was among the largest that a brokerage firm has had to pay individual investors, according to the Securities Arbitration Commentator Inc., a newsletter in Maplewood, N.J. The investors’ losses were tied to six different leveraged municipal bond arbitrage funds sold by Citigroup Global Markets.

Of the total award, the FINRA panel ruled that Citi must pay nearly $34.1 million in compensatory damages, $17 million in punitive damages, and $3 million in legal fees.

Citigroup sold a series of funds through an entity called MAT Finance LLC. The MAT, or municipal arbitrage trust funds, borrowed at low short-term rates and invested proceeds in longer-term muni bonds. But the strategy was ultimately shown to be flawed and left investors with losses of as much as 80 percent.

Citigroup had argued to the court, after the FINRA panel made its ruling in April, that the investors could not have relied on certain oral statements that the firm made about their purchases, because they had signed agreements which disclosed that they could lose all of their money.