UBS headquarters (Photo: AP)

UBS Group says it plans to grow sales of banking products and lower its level of recruitment loans to advisors in the Americas.

The firm, which released its first-quarter earnings last week, said its overall net income rose 80% from a year ago to nearly $1.3 billion as the global bank and wealth-management firm saw clients add over $20.6 billion to their accounts worldwide.

Its wealth management business in the Americas increased its total operating income by 8% from last year to $2.05 million thanks to higher recurring net fee income, net interest income and transaction-based income. The group’s pretax profit soared 42% year over year to $302 million.

While by some measures the U.S.- and Latin America-based financial advisors continue to top the charts, its FA headcount is shrinking.

As of March 30, the group has 6,986 registered reps, down from 7,025 in December and 7,145 a year ago.

As CFO Kirt Gardner said on a conference call, “Last year, we introduced a new operating model in Wealth Management Americas, and we now focus more on increasing retention and productivity and are de-emphasizing recruiting.”

Strategic Shift

Gardner says that compared to rivals like Morgan Stanley, Wells Fargo and Bank of America, UBS has a lower level of sales of bank products. Part of the reason for this, he points out is that, these competitors serve as the “primary bank” for its wealth clients – a role that UBS does not have.

Going forward, the firm is “doing a number of things to address that,” he says, such as growing the number of loans to clients.

In the first quarter, the average mortgage balance of UBS Americas’ clients grew close to 20% year over year, while the average security-backed bending (SBL) balance increased 3%.

Recruitment loans to new advisors are moving in the opposite directions. These loans “have already come down to below $3 billion, and you’ll continue to see those volumes come down,” the CFO said on the call.

UBS Americas built up a “higher concentration of recruitment loans … after the [financial] crisis when we had a high degree of recruitment,” he explained.

Wealth Performance

“I would finally just note that we continue to have the highest level of productivity amongst our FAs in the industry, and we expect to continue that as we look at focusing on productivity of our FAs rather than the number of FAs we have deployed in the business,” Gardner said.

Average yearly fees and commissions (or production) per advisor in the Americas stands at $1.174 million while the average asset level is $165 million.

The roughly 14,500 reps at Merrill Lynch had annual advisor production of $999,000 in Q1’17. Its veteran reps, though, hit $1.3 million as of March 30.

Morgan Stanley, with nearly 15,800 FAs, said its average yearly production is $1.029 million.

UBS Wealth Management Americas’ clients have close to $1.2 trillion in assets with the firm, up from roughly $1.1 trillion a year ago.