Morgan Stanley’s new chief executive officer says that current financial advisor recruiting is at the lowest level he has seen in his decade of overseeing wealth management businesses.

James Gorman said that the industry went through a “frenetic period” of deals, dislocations and mergers. “I truly believe that the industry is moving to a more rational recruiting model,” he said on a conference call Wednesday announcing Morgan Stanley’s fourth quarter results.

Morgan Stanley Global Wealth Management, which includes Morgan Stanley Smith Barney and Morgan Stanley Private Wealth Management, had 18,135 advisors at the end of the fourth quarter, a net loss of 25 advisors from the previous quarter.

Chief financial officer Colm Kelleher said that advisor turnover among its top two quintiles was under 1%. This is in line with a similar report from Bank of America’s president of wealth management, Sallie Krawcheck, last week.

Gorman said part of the reason for the slowdown in activity was that most high-producing wirehouse advisors were on retention packages, as a result of all the mergers in the industry. However, he said that recruiting should stay “low and stable” going forward.

However, Morgan’s wealth management unit continues to bleed assets, with $4.7 billion in asset outflows over the quarter. Kelleher said this was a “lag effect” from Smith Barney advisors who left prior to the closing of the joint venture on May 31. The outflows were down 47% from the third quarter, when the firm lost to $8.8 billion of client assets.

Gorman said he expects positive asset inflows this year, and has a target of $50 billion in asset inflows in 2011.

The firm reported full-year integration costs for Morgan Stanley Smith Barney of $280 million. Gorman said the executive team was focusing on getting the management structure right, and had already harmonized compensation plans and pricing differences between the two firms. He added that they had also made decisions about integrating the technology between the two firms and were planning to dispose of excess real estate.

Annualized revenue per financial advisor was $692,000, up 5% from the third quarter. The pre-tax profit margin for the quarter was 7%. Gorman said he was confident the unit could achieve its goal of a 20% pre-tax margin.

Overall, for the fourth quarter, net revenues were $3.1 billion versus $1.3 billion a year earlier, prior to the closing of the joint venture. Pre-tax income was $231 million versus a loss of $51 million a year earlier.