Raymond James Financial (NYSE: RJF) reported higher revenue and net income for the fiscal third quarter, due primarily to the addition of Morgan Keegan, but the combined firm’s advisor count and client assets dropped slightly below expectations.

In previous announcements on its acquisition of regional broker/dealer Morgan Keegan, Raymond James said the combined firm would have 6,500 advisors and $372 billion in total client assets. But the quarter report shows a total of 6,367 advisors and $356 billion in client assets.

“We anticipate somewhat minimal accretion from this transaction for the first year or so,” said Jeffrey Julien, chief financial officer, during a conference call Thursday morning.

Prior to the acquisition, finalized in April, Raymond James had $292 billion in client assets and 5,398 advisors in the fiscal second quarter. Client assets took a 1.5 percent hit this quarter, which the firm attributed to the 3.3 percent decline in the S&P 500 Index. Not counting the 940 Morgan Keegan advisors that came on board this quarter, Raymond James recruited a total of about 29 advisors.

Costs were also high this quarter because of $21 million in acquisition and integration-related expenses. CEO Paul Reilly said the firm will be cost-heavy through the integration, as they’re still running two different broker/dealer systems and have some overlap in staff. They also have incremental costs at the corporate level, such as debt the firm issued and retention dollars.

Despite the costs, Morgan Keegan did add to the firm’s bottom line. Net income increased 63 percent to $76.4 million from $46.8 million for the year-ago quarter.  Net revenues were up 28 percent to $1.09 billion from $850 million in the same quarter of last year.   

Reilly said the firm’s goal right now is to keep support levels high and retain top producers; cost savings will come later.

“As you try to look at the balancing act of maintaining the culture, you do want to factor in the Morgan Keegan advisors’ perspectives and want to retain those assets and those advisors,” said Greg Cherry, a senior analyst with Aite Group. In an integration such as this, there are a lot of moving parts.  

The firm expects to see annual cost savings of about $60 million to $80 million, when the firm is fully integrated. The integration of the private client group is expected to happen in the first half of 2013.

During the conference call, Reilly admitted that he was concerned the Morgan Keegan merger would negatively impact outside recruiting, but so far it’s had the opposite effect. The number of home-office visits has accelerated from last year, especially from wirehouse advisors whose retention packages are winding down.

“The wirehouse brokers are constantly re-evaluating their own firms’ retention packages and weighing their options elsewhere,” Cherry said.