IN THE depths of the financial crisis in 2009, when banks were sacking employees left and right and cutting all costs that were not related to compliance, Morgan Stanley turned heads by buying a big stockbroking unit from Citigroup. Jaundiced observers rolled their eyes.

Stockbroking was seen as a dubious business, devoted less to working with the customer than to working the customer. Worse, the rapid rise of index funds and cheap online share-trading platforms seemed to be rendering the whole industry redundant (see chart).

After a wobbly start, Morgan Stanley’s expanded stockbroking operation has put paid to such sceptical assumptions. The unit’s pre-tax margins have risen steadily and now exceed 20%, without much volatility (unlike other divisions, such as securities trading) and without prompting the kind of concerns about systemic risk that lead to new capital charges and regulations (unlike almost everything else big banks do). Partly as a result, Morgan Stanley’s share price appreciated more than any other big American financial firm in 2014. Almost uniquely among bankers, James Gorman, its chief executive, has emerged from the crisis with an enhanced reputation.

Wealth-management units, as stockbroking arms have been rebranded, are boosting returns at other American banks, too. Merrill Lynch, which collapsed during the crisis thanks to an ill-timed foray into proprietary trading, is now earning pre-tax margins of 25% as a division of Bank of America.

Industry-wide data collected by Aite Group, a consultancy, indicates that by 2013 big American wealth managers had more than recovered from the pronounced shrinkage of assets during the crisis and have since continued to grow. Their profitability has also been bolstered by a shift from charging for individual transactions to levying an annual fee of 1-2% on all the assets they manage.

In theory, wealth-management units are still redundant. There is plenty of academic evidence to suggest that retail investors are better off with index funds. In practice, however, many individuals follow the pack, and so sell when they should buy and buy when they should sell.

Wealth managers, in contrast, draw up an investment plan with clients and then stick to it. So the benefits may come more from avoiding panicked shifts in strategy than from any special skill. At any rate, a study on behalf of Merrill by Dalbar, a research firm, concluded that returns to individuals who invest on their own trail those who hire financial advisers by three percentage points a year—a vast sum, if accurate.

Wealth-management firms provide another benefit that Americans value very highly, in the form of handling the reams of paperwork needed to file taxes or handle inheritance—something online brokers do not do as well. That helps explain a dramatic reversal since 1999, when Merrill was stunned to find its market valuation had been surpassed by that of Charles Schwab, a discount broker.

Now Schwab and others like it, including Vanguard and Fidelity, are trying to become more like Merrill and Morgan Stanley, by offering more than bare-bones service.

Earlier this month, for example, in an effort to broaden its offerings, Fidelity announced the acquisition of eMoney, which provides wealth-planning products to a large number of small advisory firms who use them to bring in and retain clients. The fittest, it seems, are mimicking the unfit.