* Declining customer balances, brokers exit

* Morgan Stanley management repeats support for deal

By Elinor Comlay

NEW YORK, April 22 (Reuters) - Morgan Stanley's retail brokerage is losing advisors ahead of a planned combination with Citigroup Inc's (C.N: Quote, Profile, Research) Smith Barney unit, but it is not smarting as much as Bank of America.

Smith Barney and Morgan Stanley lost roughly 6 percent of their combined brokers in the first quarter. Bank of America, by comparison lost almost 12.5 percent of the advisors from both its own wealth management group and the Merrill Lynch business it acquired.

The comparatively superior retention at Morgan Stanley and Smith Barney implies the joint venture is on target to surpass Merrill Lynch, once the largest brokerage in the world.

"The market is in flux, but we're pretty comfortable with our dominant position," said Kelleher, in response to analysts' questions about the unit's ability to attract brokers during a call on Wednesday, calling the joint venture "a game changer."

Some analysts remain skeptical of the joint venture, given that investors, spooked by fluctuating stock markets, have been pulling cash from brokerage accounts and both Citi and Morgan Stanley have lost advisers this quarter.

"How do you think about (the joint venture) if your partner might not be as strong as you thought before?" asked Mike Mayo, an analyst at Calyon Securities, noting that Smith Barney clients pulled $40 billion from Smith Barney accounts in the quarter.