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.

Bank of America, Merrill's parent company, and Morgan Stanley, controlling owner of Morgan Stanley Smith Barney, both report their quarterly results on Thursday.

(Reporting By Joseph A. Giannone; Editing by Walden Siew and Maureen Bavdek)

By Joseph A. Giannone