The Morgan Stanley Smith Barney joint venture is finally beginning to pay dividends for Morgan Stanley’s bottom line.

Despite the decline in trading that has hampered rivals’ fourth quarter result, Morgan reported Thursday that its profits rose 60% as gains from its retail brokerage units offset other woes.

Earnings rose to $600 million, or 41 cents a share, from $376 million, or 29 cents a share, from a year earlier.

Morgan Stanley Smith Barney, the retail brokerage joint venture with Citigroup, generated $166 million in the fourth quarter, up from $29 million a year earlier. Morgan Stanley holds a 51% stake in the business.

These gains offset the 38% decline in trading revenue for the quarter. Other large financial services companies, including Goldman Sachs, Citigroup and JPMorgan Chase suffered similar trading losses.

The results came as Morgan Stanley continues to work on the integration of Smith Barney, slated for completion in 2012, Morgan Stanley CEO James Gorman said during a conference call Thursday.

“With regards to the Smith Barney integration, we are pleased with our progress,” which included increased fourth quarter profitability and net new money for the year, Gorman said. “Revenues and margins will continue to improve as individual investors further engage.”

In 2011 and 2012, Morgan Stanley plans to improve its global wealth management business performance by growing its transaction and advisory business, increasing deposit on lending revenue and seeing commensurate cost reduction once the integration is finished in 2012, Gorman said.

Morgan Stanley's advisors ranks continued to decline. The company lost 76 advisors during the fourth quarter. It now has 18,043 globally.

That current financial advisor head count falls between a targeted range of 17,500 to 18,500, Gorman said. The firm is also carrying around 2,000 contractors working on the wealth management integration, he said.

“It may be down a couple of hundred from this year, it may not be,” Gorman said of the firm’s advisor force. “I wouldn’t draw too much from that one way or the other, if it’s up or down, as long as it stays in that band.”

Morgan Stanley’s advisors were more productive, generating an average of $742,000 in annualized fees and commissions, up 8% from the previous quarter.