Market volatility in the second quarter took a toll on Morgan Stanley, which reported that profits in wealth management were down 8% year-over-year due in part to stagnant growth in client assets.

Net income dropped to $516 million for the recent quarter from $561 million for the year ago period. Client assets were flat at $2.034 trillion.

"Even though we have not seen a pickup in retail engagement, this business continues to provide a source of stability against macro uncertainty," CFO Jonathan Pruzan told analysts during a conference call.

This year has presented a challenging business environment for wealth management firms. For instance, Wells Fargo recently reported that profits for its wealth management unit were down 2% for the recent quarter. Bank of America said its net income for its wealth management unit, which includes Merrill Lynch, grew 8% – but that figure was boosted by cost cutting, as revenues were down 2%.

Read more: BofA's cost cutting pays off for wealth management

For his part, Morgan Stanley CEO James Gorman has been pursuing a companywide cost cutting program.

"We are now a simpler organization and therefore must be leaner and more efficient in our expenses," Gorman told analysts.

(Bloomberg News)
"We are now a simpler organization and therefore must be leaner and more efficient in our expenses," Morgan Stanley CEO James Gorman told analysts of his cost cutting initiatives. (Bloomberg News)

Lower costs in wealth management helped offset a 2% drop in revenues , which fell to $3.8 billion. Noninterest expenses fell 1% to $2.9 billion.

Pruzan noted that Morgan's wealth management business kept its pretax margin at 23%, and said that executives were confident that the firm would reach its target range of 23% to 25% for 2017.

Looking ahead, Pruzan noted that there could be additional headwinds for the wirehouse this year, including the outcome of the presidential election.

He said that "the world continues to experience geopolitical uncertainty and with the potential for weaker economic growth."

Lending continues to be a bright spot for wealth management, as Morgan reported that interest income grew 18% to $920 million. The wirehouse's bank deposit program grew 14% year-over-year to $152 billion. However, that figure was down 1% from the prior quarter.

Fee-based asset flows were down 14% year-over-year, droppingto $12 billion.

Morgan's adviser force grew by 21 from the prior quarter to reach 15,909.