UPDATE 2-Charles Stanley FY underlying adj pretax profit falls

* Says has some optimism about outlook for next 6-12 months

* FY underlying adj pretax profit down 35 pct

* FY rev falls 4 pct to 101.8 mln stg

* Funds under management drops 18 pct to 9 bln stg

* Shares fall as much as 5 pct (Adds analyst's comments, updates share movement)

June 11 (Reuters) - British independent stockbroker Charles Stanley (CAY.L) posted a 35 percent decline in full-year underlying adjusted pretax profit, but said it had some optimism for the next six to 12 months.

The quality of Charles Stanley's recurring income and discretionary funds under management is below the average amongst traditional wealth management peers, Numis Securities analyst David McCann said in a note.

McCann, who has a 171 pence price target on the stock, cut his rating to "sell" from "reduce," saying Charles Stanley is overvalued on both a relative and absolute basis.

Shares of the company have gained 56 percent in the last three months, outperforming the FTSE Small Cap Index .FTSC that has gained 41 percent during the period.

"The stock market has held up very well, in the circumstances, and there are increasing signs of recovery," Chairman David Howard said in a statement.

"It is too early to say if this is a short-lived bounce or if the gathering momentum is the beginning of a cyclical upturn," Howard said, adding that he veered toward the latter view.

In May, British broker Collins Stewart (CLST.L) said it was cautious about the outlook as market conditions remained uncertain, while rival Evolution (EVG.L) said it was trading profitably. [ID:nLJ734722]

Charles Stanley said funds under management fell 18 percent to 9 billion pounds ($14.8 billion) as of March 31.

The company raised its final dividend to 6.65 pence per share from 6.50 pence per share.

For the full year ended March 31, Charles Stanley posted an underlying pretax profit, before special items, of 10.8 million pounds, compared with 16.7 million pounds a year ago.

Revenue fell 4 percent to 101.8 million pounds.