Pretax profit at the world's largest stock brokerage, as measured by its almost 16,000 brokers, rose to $855 million in the first quarter from a year ago. It attributed much of the gain to fees from clients who pay brokers to manage their assets and to interest revenue from loans made to wealthy clients.

Major U.S. brokerage firms are pushing brokers to sell asset-based accounts that charge fees because they are more profitable and stable than traditional commission accounts that rise and fall dramatically with stock market volatility.

Morgan Stanley made a big bet on that theory two years ago by completing its purchase of Citigroup Inc's Smith Barney, the industry leader in selling fee-based managed accounts.

New money from clients in fee-based accounts, however, fell 30 percent from a year earlier and 36 percent from the fourth quarter of 2014 to $13.3 billion from $19 billion and $21 billion respectively. The decrease, one of the few weak signs in the quarter, occurred despite a stock market rise.

"Fee-based flows are variable from quarter to quarter," a Morgan Stanley spokesman wrote in an email.

In a conference call with analysts, Morgan Stanley Chief Executive Officer James Gorman said clients are being cautious while waiting for the Federal Reserve to raise interest rates. Brokers also had two fewer days to collect assets than in the fourth quarter, but fees and commissions also fell 4.6 percent from last year's first quarter.

By other measures, Morgan Stanley said its wealth strategy thrived. Revenue rose 6 percent from a year ago to a record $3.8 billion, while expenses increased 2 percent, reflecting a new policy of deferring more bonuses for brokers and paying them less to sell loans than to manage investments. Portfolio-backed loans grew 40 percent and residential mortgages were up 53 percent from a year earlier.

Average revenue per broker rose 9 percent on an annualized basis to $959,000 as it weeded out less productive brokers. It ended the quarter with 15,915 representatives, down 161 in the quarter, and was the first time the total fell below 16,000 since it began buying Smith Barney in 2009. A spokesman did not say how many departing brokers Morgan Stanley tried to retain.

(Reporting by Jed Horowitz; Editing by Jeffrey Benkoe)