Merrill Lynch's fourth-quarter revenue surged as the No. 2 U.S. brokerage bolstered its ranks of financial advisers and added client assets.

Merrill, snapped up by Bank of America Corp two years ago, said its financial adviser force rose by 22 to 15,498 from the third quarter and was up 2 percent since the end of 2009.

But this was not sufficient for Chief Executive Brian Moynihan, who told analysts on a conference call that the number of advisers recruited in 2010 was somewhat disappointing and felt that they could hire more people given the company's success in the wealth management industry.

Merrill's advisers became more productive over the quarter generating an average of $916,000 in annual fees and commissions per adviser, up from $843,000 last quarter.

Merrill Lynch has long been the industry leader by this measure. Morgan Stanley reported on Thursday that its advisers generated an average of $742,000 per adviser during the fourth quarter.

Total client assets, buoyed by rebounding markets, climbed 6 percent to $1.58 trillion at the end of December from a year earlier, leaving Merrill in second place, behind Morgan Stanley with $1.7 trillion in client assets. Wells Fargo & Co reported on Wednesday that it oversaw $1.2 trillion of client assets in its retail brokerage arm.

Higher asset balances, plus a growing sense of optimism among investors, helped drive Merrill's revenue up 13 percent to $3.55 billion from the year-ago period.

Moynihan told analysts that the wealth management division was the bank's biggest opportunity for growth in the U.S.

Bank of America does not disclose quarterly asset flows for Merrill Lynch, nor does it break out profit and other financial performance data for its various wealth management businesses: Merrill, private bank U.S. Trust and retirement services.

Together, BofA said its wealth and investment management division nearly set a new record during the quarter with $4.28 billion of revenue.

The bank did provide some details on its Merrill Edge offering, an online service launched in June targeted at customers with less than $250,000 to invest.

Merrill Edge brought in 4,600 new accounts and $340 million in assets during the year.

Alois Pirker, research director with Aite Group, expects to see those numbers jump this year. So far the bank has concentrated on moving its own customers over to Merrill Edge but this year he expects it to start targeting clients of other online brokers such as Charles Schwab Corp and TD Ameritrade Holding Corp .

BofA's bid to boost cross-selling of products and services across its businesses also continued. Its financial advisers sold 281,000 banking and credit products to clients during 2010 and also provided over 6,400 client referrals to the commercial bank, more than double the 3,100 they provided in 2009.

On the flip side, commercial bankers also provided over 5,100 referrals to their financial adviser colleagues.

That's a good-start, but those numbers need to go up, said Pirker. If cross selling is not the reason for this combination (of BofA and Merrill) then what is the reason?

The final months of the year helped Merrill's strong finish.

Brokerage fees increased by $86 million from the September quarter, fueled by increased trading activity.

Investment and brokerage revenue combined rose by $155 million from the fourth quarter with higher asset management fees and brokerage income.

Net income at BofA's wealth division, though, fell to $332 million in the fourth quarter from $529 million a year earlier, reflecting a $102 million increase in loan-loss provisions and a 14 percent jump in expenses.

At U.S. Trust, a private banking unit, client assets fell 4.3 percent to $368 billion from a year earlier while revenue rose 9.8 percent to $708 million during the same period.

U.S. Trust added a net 9 advisers over the quarter.

(Additional reporting by Joe Rauch in Charlotte; Editing by Phil Berlowitz)

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