IGM Financial Inc.

Paul Hancock - Vice-President, Finance and Investor Relations Kevin Regan - Executive Vice President and Chief Financial Officer Jeff Carney - President and Chief Executive Officer Barry McInerney - President and Chief Executive Officer, Mackenzie Investments

Gary Ho - Desjardins Capital Markets Geoff Kwan - RBC Capital Markets Paul Holden - CIBC Tom Mackinnon - BMO Capital Graham Ryding - TD Securities Scott Chan - Canaccord Genuity

Thank you, Patrick. Good afternoon and welcome to the IGM fourth quarter earnings call.

Joining me today on the call are Kevin Regan, Executive Vice President and CFO of IGM Financial; Jeff Carney, President and CEO of Investors Group and President and CEO of IGM Financial; Barry McInerney, President and CEO of Mackenzie Investments. Before we get started, I'd like to draw your attention to our cautions related to forward-looking statements on Page 3 of our presentation.

Non-IFRS financial measures that we’ve used in this material are summarized for your reference on Page 4. And finally, on Page 5 we provide a list of documents that are available to the public on our website related to the fourth quarter results for IGM Financial.

And with that, I will turn it over to Kevin Regan, who will take us a through a summary of IGM Financial’s fourth quarter results and the industry environment. Kevin?

Great. Thank you, Paul.

Starting on Page 7, you see IGM’s fourth quarter results. Net earnings were $233 million and included a favorable change in income tax provision estimates of $34 million related to certain tax filings.

Operating earnings were $199 million or $0.83 a share compared to $198.2 million or $0.81 a share for the same period last year. Earlier today, the Board declared a dividend of $0.5625, maintaining the level of the dividend.

This reflects a dividend yield of 5.62% based on yesterday's close of $40.07. AUM and flows were both strong in the quarter.

Fourth quarter mutual fund net sales improved significantly to $233 million at both Investors Group and it can be experienced positive momentum in sales activity. There were a number of important corporate developments in the quarter, including the announcement of our strategic investment in China Asset Management, one of the leading asset managers in China.

We were active in FinTech space making an additional US$25 million investment in Personal Capital bringing our ownership interest to 15%. We also made an investment in WealthSimple and Portag3 Ventures, which is a partnership with Power Financial Corporation and Great-West Life to invest in early stage innovative financial services companies for a total of $35 million.

And lastly in early January, we had a very successful debt issuance of 10-year and 30-year debentures to finance the China AMC acquisition. On Slide 8, you see a brief review of the operating environment within the space during the quarter.

Financial markets were strong in the quarter with the S&P TSX Composite Index rising 3.8% and most of the global equity in the season joined similar games. Net sales for the industry were $5.7 billion with balance and income categories continuing to capture majority of the flows.

Gross sales in the advice channel rose 1% while net sales declined from $3.4 billion to $500 million On Page 9, many of you have seen this slide. This is a summary of the presentation we had in January where we discussed IGM’s announced to acquire a 13.9% interest in China Asset Management for CAD$647 million.

IGM and Power’s combined interest in China AMC will be 27.8% once this transaction closes, representing a meaningful ownership position in a leading Chinese asset manager. We believe this as a compelling strategic opportunity for IGM based on four key points: The acquisition enhances the diversification of IGM’s business outside of Canada into the second largest economy in the world with an emerging asset management industry poised for significant growth.

China AMC is an industry-leading asset management company with AUM of RMB1.1 trillion or CAD$250 billion. It ranks as one of the largest asset managers in China.

It’s diversified across asset class and institutional and mutual investors and is a well respected and recognized brand in the industry. This is a compelling standalone investment with the additional opportunities it creates strong partnerships with China AMC to focus on distribution and product synergies in both our geographical locations.

And as the leading asset manager, China AMC has experienced growth in both AUM and earnings and is well positioned to participate in the growth of the asset management industry in China over the long-term. Slide 10 provides an overview of recent regulatory developments.

The CSA Consultation Paper on the Option of Discontinuing Embedded Commissions was published in early January. The CSA is seeking comments on the potential impacts that a ban on embedded commissions could have on Canadian investors and market participants with the submission of June 9, 2017.

An important consideration for any regulatory change in Canada is to preserve access to financial advice and products and it’s important to point out that no regulatory decisions or rules have been put in place at this time. We believe that the regulators and the industry all have the same objective of achieving the best outcomes for investors and we look forward to continuing the active dialogue with regulators and industry colleagues on this subject.

As we highlighted last quarter, the CSA issued a Notice and Request for Comment a proposal that would broaden access to alternative funds. We fully support this initiative as it expands access to alternative funds, which is an important product category for both Investors Group and Mackenzie given their focus on product innovation and alternative solutions.

Mackenzie and Investors Group both submitted responses to the CSA in late December support this proposal. I will now turn the call over to Jeff Carney for his highlight of Investors Group.

Thanks, Kevin, and good afternoon, everyone. Thank you for joining us today.

Slide 12 presents Investors Group’s highlights for the quarter, which I will discuss further on the next several slides. We had strong finish to the year as our Q4 growth and net sales were up significantly compared to the industry.

The decision DSC purchase option and the lower fees on our no-load series has contributed to the momentum we are experiencing and this decision enhanced our value of proposition for clients and removed comparative barriers making it easier for our consultants to do business every day. Increasing our consultant network quality to drive consistency in our offering is another important element of our strategy that I’ve been working and it’s to enhance our competitive position within the marketplace and we have few developments to share with you on this front, which is will discuss shortly.

Finally, we had a successful initial rollout of our new nominee dealer platform in November, which was first discussed with you in Investors Day in late 2015. This new platform will enhance the service experience to clients and consultants and it’s a growth enabler allowing us the efficient introduction of new products to enhance our high net worth investment planning capabilities such as our recently launched Azure Managed Investment SME program and fee-based accounts.

Turning to Slide 13, the elimination of DSC has had a significant impact on our gross and net sales. This was the best fourth quarter on record for gross sales which were up 15% and substantially all our sales were in the no-load series.

This was achieved in environment where the industry growth was only at 3%. Our net sales were $261 million, which was the best result since 2007 and our redemption rate declined as well.

Turning to Slide 14, our high net worth business continues to perform accounting for approximately 40% of our total mutual fund AUM, over $2 billion in gross sales in 2016 with 45% of our high net worth growth sales going into unbundled structures in the fourth quarter. AUM and the unbundled fee structures continue to expand in the quarter to $7.7 billion, which is up approximately 50% of last year.

You can see on Slide 15 that the clients continue to experience positive returns, 2.2% for the quarter and 6.8% for the 12 months. These returns were helped by improved investment performance in our mutual funds as our-year asset-based percentile rankings increased to 61.4% helped by our value bias.

Turning to Slide 16, the highlights within our insurance and mortgage business for the quarter are presented on Slide 16. New individual insurance sales were strong in the quarter and ended the year up over 36%.

The strength in the quarter was primarily attributable to the new tax rules coming into effect in 2017, which increased demand for policies in the quarter. In 2016, our consultants wrote on average approximately 11 cases each and experienced very good growth in the insurance sales.

We feel there’s significant potential to grow this business in the future. Turning to the mortgage business, we wrote almost $3 billion in mortgages in 2016, up 7.9% from the prior year.

Mortgages outstanding rose to $12.8 billion, a 7.9% increase compared to the prior year. As we’ve highlighted in the past, our mortgage operation has high underwriting standards, strong credit metrics, which are the results of the long-term relationships we have with our clients.

Turning to Slide 17, we are providing new detail on the components of our network to give you a better understanding of the key business metrics that drive our growth. The chart on the slide segments our network into three main groups.

Consultant practices, which are teams lead by consultants with greater than four years of experience; new consultants, which are recently hired individuals with less than four years of experience; and associates and regional directors. Associates make up the largest portion of this group and are licensed individuals who are members of a consultant practice that provide financial planning and advice to the client sales and help service with the lead consultant.

The number of consultant practices is the core of our financial planning model in the market representing 95% of our AUM and client relationships and with approximately 80% having or enrolled in the CFP program. Our goal is for our consultant practices to have a CFP.

We are very focused on growing that number and productivity of our consultants in this segment through enhancements to our recruiting and development model and through greater use of technology, innovative products, improved dealer platforms and our commitment to providing market leading financial planning. We respect to recruiting, we’ve tightened our recruiting standards to ensure a greater likelihood of success of our new consultants while also enhancing our culture, our brand, and our client experience.

As part of our new focus, we made the decision to accelerate the departure of approximately 400 consultants, who were not expected to develop a successful practice. This acceleration of departures was a one-time event, and we feel confident that this was the right decision for individuals involved in the company.

We look forward to the impact of the new recruiting standards, driving our new consultant success rate and expanding our greater than four year consultant base. This decision had nothing to do with costs, it had everything to do with the quality of the advisors.

Turning to 18, we also focused on building our leadership strength in the advice and financial planning, Investors Group currently has 1,500 CFPs, which is more than any other firm in the country, according to the recent publication by the Financial Planning Standards Council. Going forward, all of our advisors will have CFPs.

We believe this is the high-level of professional accreditation is a key differentiator for us in the marketplace and ensures the consistent delivery of our brand promise of financial planning excellence to our clients. Turning to next slide, Investor Group’s management and admin fee rate has been relatively stable over the last 12 months.

Movement within the fee rates are reflective of growth of our high net worth business. The proportion of mutual fund AUM in the high net worth series continue to increase over the quarter rising to 39.8% from 38.8% last quarter, as we attract new and existing clients.

Finally, on Slide 20, you can see Investor Group’s EBIT for the quarter up $200 million, which was up almost 6% from the prior year. Distribution fees were up 30% in the quarter reflecting strong insurance sales primarily as a result of that tax change we touched on earlier.

I’d also like to the note the increase of our non-mutual fund commissions relates to the strength of our insurance sales. Net of compensation, our insurance revenue was up in the range of $3 million to $4 million from Q4 2015 and Q3 2016.

Non-commission expenses for the full year of 2016 were in line with my guidance of approximately 8% excluding the second quarter $5 million extraordinary item related to the leadership transition last year. For the full year of 2017, I expect the increase in non-commission expenses to be below 6.5% with the amortization associated with the investment of our new dealer platform and accounting for a significant portion of that increase.

For IGM Financial, I expect the non-commission expense growth of approximately 5.5% to 6% for the full year 2017. With that, I'll turn it over to Barry to review Mackenzie's results.

Thank you, Jeff. 2016 was a year of momentum for Mackenzie and we finished the year on a strong note in terms of mutual fund flows, advisor engagement and investor performance so Slide 22, I’ll compare it to these four bullet points.

First off, we had our best Q4 in terms of gross and net sales for 2016 excluding rebalancing transactions and we captured significant sales share as mutual fund gross sales were up 22.5% versus advice channel peers up only 1%. Mutual fund AUM of $51.3 billion represent the highest quarter and AUM in Mackenzie’s history.

Second bullet, our core balance funds continue to drive the improvement in our gross and net sales bringing in over $0.5 billion in gross sales in the quarter and contributing $128 million to the improvement of net sales. Thirdly, investor performance improved in the quarter on the both a percentile Morningstar ranking basis.

41% of our AUM is now 4 star and 5 star rated funds up from 25% last quarter and up from 31% a year ago. And this 41% represents our highest levels since 2013.

In addition, three of our investment teams were awarded the prestigious LIP award for their industry leading fund performance. And finally, on our ETF business, we experienced continued growth in our ETF business with AUM ending the year at $113 million, a 59% increase compared to the third quarter of 2016, and this momentum has continued into January, as our ETF AUM has grown to $177 million.

This placed Mackenzie in the top 10 firms in terms of ETF net creation for 2016, even though majority of our ETF products were launched in the second-half of the year. Slide 23 highlights Mackenzie’s quarterly mutual fund flows along the historical trends in the gross sales redemptions.

Mutual fund gross sales in the fourth quarter were up 22.5% relative to last year, primarily due to strong sales of the balance funds, particular our core balance spending and as mentioned this was a strong result as industry sales were only up 1% within the advice channel. Mutual fund net flows improved by $164 million relative to Q4 2015.

And as per the chart on lower left, Mackenzie’s redemption rate on long-term mutual funds remain below peers at 15%, the average of the peer group being 15.5%. On Slide 24, we provide a breakdown of total mutual fund gross sales in the quarter.

As you can see in the table, the strong momentum in our balanced and foreign equity categories continue to drive Mackenzie’s gross sales. Mackenzie’s balance funds had gross sales in the quarter of $889 million, with sales of symmetry funds up 25% and our core balance fund up 55% compared to the same period last year and we now have six of our eight core balance funds with over $500 million in assets each rated four and five stars of Morningstar and these funds are driving the gross and net sales improvements.

Our foreign equity fund led by the Ivy foreign equity fund and the Mackenzie U.S. midcap growth fund experienced strong gross sales of $509 million in the quarter.

And also noteworthy, our sector fund category was up relatively due to the success of our diversified alternative funds, which was launched in late 2015. Slide 25 provides the details on Mackenzie’s total investment product net sales by category.

Mutual fund net sales improved by $164 million due primarily to strong sales in Mackenzie’s core balance funds, which had net sales of $53 million, an improvement of $128 million, compared to Q4 of 2015. Net redemption of $134 million in the foreign equity category was primarily the result of rebalances from asset allocation programs that occurred over the quarter, institutional business had net redemptions of $26 million, after adjusting for a loss of $1.5 million MD mandate, which was tied to MD’s original decision of 2015 and took a little while for the moneys to leave and the revenue associated with this loss was [indiscernible].

And after adjusting for the effective institutional rebalances, overall Mackenzie had a small total redemption of $7 million in the quarter, which was an improvement of $120 million compared to Q4 2015. Let’s turn to Slide 26 on our ETF business.

As you know in 2016 just last year, we introduced our suite of active and smart beta ETF products beginning in April with the launch of four Mackenzie active fixed income ETFs followed by June and September launches of the Mackenzie maximum diversified smart beta ETFs through our partnership with TOBAM, an award-winning global asset manager based in France. As we highlighted last quarter, we had a very successful cross-country road show in the fall to educate advisors on our maximum diversified suite of ETFs.

In response to our innovative ETFs has been very strong and we’re pleased with the initial success we've had in 2016 growing this business to $113 million. In January, we enhanced our suite of smart beta ETFs further with the launch of Mackenzie’s maximum diversification emerging markets index ETF and Mackenzie high diversification emerging markets equity fund, which provide investors with innovative options to invest in emerging markets with enhanced diversification.

The next slide, Slide 27, highlights the improvement Mackenzie mutual fund quartile and Morningstar ratings over the quarter. The proportion of assets in first or second quartile is approved in all-time periods.

And for the 12 months ending December 2016, almost 60% of Mackenzie’s mutual fund AUM was ranked second quartile or better. Our Morningstar rankings also improved as illustrated in the lower chart.

As mentioned before, we now have 41% of our mutual fund assets in four and five start rated funds, which is up from 35% in last quarter and above industry average. Slide 28, the flows and investment performance of our 10 internal investment teams along with our third party managers are shown in this slide.

The color bars on the top represent Morningstar Rankings with green representing the proportion of assets at each team with the Morningstar Ranking of four and five stars. And you can see we have strong performance across multiple boutiques.

Our Ivy, growth, global equity and income, fixed income teams have a good proportion of Morningstar four and five star rank mandates which in turns result in capturing the majority of net flows as depicted in the bottom chart. And we can follow Cundill with the blue box on the top left, Cundill continues to face some performance challenges based on the Morningstar Ranking and short term for central ranking that have improved very, very significantly.

Cundill is now ranked the 96th percentile on a three month basis, 94 percentile on a six month, and 73rd on a one year basis as the Cundill value investment production moved back in favor. Slide 29 shows our net revenue rate expressed as a function of average total AUM and illustrates how relatively steady over the quarter at 77.3 basis points and this rate does fluctuate with changes in mix in our assets under management including asset class and client mix such as institutional and high net worth.

And finally on slide 30 represents Mackenzie’s earnings before interest and taxes. Non-commission expenses for the full year 2016 came in rather below our guidance or approximately 6%.

We came in at 5.5% for the quarter and 5.4% for the full year. And for the full year 2017, we expect a growth in non-commission expenses to be below 5%.

I’ll now turn it back over to the operator for questions.

Thank you. Good afternoon.

First, just wanted to follow-up on the consultant network enhancement, just want to make sure that I have this right. So 95% of IGs AUM are with consultants that’s been with you for greater than four years.

And I think this change shouldn’t have a big impact on AUM or shouldn’t have any financial impact at all? Is that the right way to think about it?

It’s Jeff Carney. When I got here and I used to be an analyst in my early days, so I wanted to make sure that we are giving you the information you need to look at our company and value our stock.

And so when I looked at this and the numbers that we are into the public market, I don’t think it was showing the true value proposition that we had in the market. And so, when you break it out like this, you can see that 95% of our AUM is coming from the 2,300 advisors in 2016 there you see and going back.

And so they are the drivers because they’ve got four years of experience or more, they’ve been in the business for a number of years and established their practice, they’re going to referral from their clients and they’re growing a reasonably size book at the average level of 34 million. And without this transparency, you would think that we are averaging – you take the 5,380 and you divide that into our asset base, we look like we don’t have big practices.

We don’t have lot of mass affluent and high net worth clients in our base and all of those kinds of thing. So I really felt that this was the way to show how we run the business and the light grey is critical to us because that’s our future and we want to make sure that we are bringing in really strong people that can then achieve strong growth in their careers going forward as they evolve.

But it’s a very transparent way to help you to better evaluate our company and to understand how we run the business.

Absolutely, thanks for that. And then can I draw the same parallels if you do have that chart on net sales or growth sales with 95% be coming from consultants with greater than four years?

I’m sorry, what’s the question?

If I look at net sales or gross sales with majority of that 95% would be coming from those agents with greater than four years experience?

Absolutely, the majority would be coming from the plus four.

Perfect. And then may just for Kevin, there shouldn’t be any financial impact, restructuring charges?

I think you mentioned there is no big cost savings coming from this?

You’re right Gary. Their commission based up to recently given our products, so they earn basically commissions when they sell, they sell very little but they are all across Canadian regions, the infrastructure is an incremental cost, think of it as an average of four for region, so there is really no restructure cost to come in like that.

Okay, thank you. And then just for Jeff again.

I assume this is part of your strategy putting changes through investors group, can you give us an update on where you stand with that? When we’ll a full picture with all the changes?

And I think you mentioned last call that you don’t want price to be a factor for losing a client. Our client is comfortable with what they are paying for the service that they are receiving?

Yes. I’ll just share that with you and I’ve done more work since I’ve taken over and I’m actually feeling more optimistic about that because we’ve been – as you know, we’ve been launching a number of new structures to our mass affluent and high net worth clients.

And so we’ve already seen a significant migration of assets by advisors moving them into these new structures. That’s really repricing our business as we speak and that’s already running through the P&L.

So I feel very good about that and we will always continue to monitor all developments in the market, but I think our pricing actually isn’t going to be an inhibitor as much as I thought it was.

Great. And then maybe to fund flows, nice uptick since the removal of DSC from Investors Group and we have seen improvement from Mackenzie as well, and I know we are in the heart of peak season.

Just any qualitative comments you guys can provide both on the IG and Mackenzie side?

I’ll go first and then to Barry, but it’s been a fun time around here. I mean the advisors by eliminating the DSC would have better conversations with prospects and with our clients, but as you played out even more than I would have imagined.

And I think we were 65% of the net flows for the non-banks in the first few months here and so I think we’re doing pretty well against the market and we are seeing our gross sales jump significantly. So I feel very good about that and this is just the beginning of the work that we’re going to be doing to continue to evolve our model.

And what’s most exciting about this organization is the value add that we bring. We have more CFPs than anybody in the country.

We are getting deeper relationships with our clients than anybody else because we are asking all the right questions and then we’re helping solve challenging issues for families and helping them educate their children and safer retirements and any health issues they want to safe or whatever it is. So I think we are really well positioned for growth.

There is more work to do and I’ve got lots of things to share with you as we go forward, but we got a great foundation and we’re going to be driving hard to serve more Canadians and help solve their problems. And I think our model can do a lot for mass affluent and high net worth clients, and we’ve been putting a lot of initiatives in place over the last few years to enable that.

And so that’s going to allow us to penetrate that 500 plus market more than we have historically even though we have a lot of assets today, there is lot more we could get. So I do see a lot of opportunities for this model to grow organically going forward.

I think on the, it’s Barry McInerney on the Mackenzie side. As I mentioned, our momentum really built very nicely throughout 2016 and almost every quarter was better than the prior quarter both gross and net sales and [indiscernible] very strong in Q4 as we just outlined.

It’s really is a combination of our sales team particularly on the retail side of wholesalers, just getting traction, and we made some terrific hires last 18 months and so they are relatively short-tenured at Mackenzie but now they are not and they are in the products and the territory, getting traction and that combined with our strong performance – the best performance obviously has resulted in some really nice momentum quarter-by-quarter. That has continued in January.

Our gross sales for our mutual funds from Mackenzie in January were 37% higher than the January 2016. So momentum continues this year.

Great. And maybe just lastly if we can sneak one more in, IPC, average management fee dropped was there a pricing change there?

Maybe what caused that change this quarter?

Yes, there were pricing changes. As you know, they have different series of price available for clients based on different thresholds.

And so what they did is they took advantage of that and made those products and pricing available to clients so going forward, so you did see a price change as well.

Okay. So the average management fee, it’s a good run rate to use this quarter?

I would suggest, yes, you’re right.

Perfect. Okay, thanks very much.

Thank you.

Hi, just wanted to follow up back on the consultant count. You were talking about for the bucket of less than four years that went down roughly about 400.

Just I was wondering because IT over the years has always been trying to look at refining, how they attract and also how they train. I was wondering with this latest in terms of changes to the consultant count.

Maybe what – some of the things you picked up as to what you might want to do differently going forward?

Yes. I touched on the CFP so we are busy making that mandatory for every advisor here and so there we got a lot already with 1,500 but you see here that there is 2,300 that are in the plus four, so there will be a lot more people sign out for CFPs right now as we speak and steadying on the weekend to get there but CFPs will be mandatory for this firm.

And you might look at the numbers and say like we went from 2,359 to 2,300. What happened there was, there were some people greater than four, they’re just aren’t going to get to where we want them to get and so that was like that decline there.

But it doesn’t mean that won’t climb back up when we find new talent in the marketplace and continue to drive for growth. And then we are doing a lot more on the gray to make sure that they are set up for success, and obviously the elimination of the DSC is a helpful one right out of the gate because it’s an easier sale but we are putting more training programs in that are professionally run, we have tests they have to write to make sure that they are moving along in their learnings and bringing the focus abilities.

I think, for us, our long term advantage is going to be around gamma [ph] and helping make sure that each individual that we serve capitalizes on all the opportunities that are available to them and whether that there are RFPs and making sure they maximize those and that they are probably diversified or other structures you can save in but helping them to understand what they need to save in order to live the life they want to live in retirement or whatever goals they have. And CFPs have the skill set and the technical capabilities to be able to deliver that and that’s part of their oath as being a CFP is to put the client first, and that’s the other big thing that’s really been the focus since I've arrived is it's all about the clients and making sure that the client is getting their best possible outcomes and then making sure the advisors have the resources and the training and the motivation and the energy to bring that to life, and it’s not all easy to coach individuals.

I’m sure all of you experienced that in your own life to get there, but with the passion that we have in this organization and the breadth of reach we have in this organization, that’s exactly what we are trying to do.

Okay. This is for you, Jeff.

You’ve been at the helm of IG for maybe nine months or so give or take, can you maybe provide some thoughts in terms of your view of the business like are there – what sort of things are you looking to do in terms of trying to improve and increase the growth that IG whether or not stuff like technology or processes or other things if you have any examples.

Yes, I think I’ve got great timing because there is a lot of structural work that happened in the last three years here as you heard from Taylor and his updates along the way. So I'm the beneficiary of new system that we just launched that allows to serve high net worth clients and mass affluent clients more effectively.

We’ve got products that have been build that are starting to really garner lot of assets to bring in new clients with those capabilities. So there is a lot of foundation that’s been laid but there is a lot more to do.

And so if I think about where we go from here, I’m a big believer in segmentation and really understanding clients and getting closer to them so we’ve got a lot of work to do on that. So we started that now with the high net worth channel but there is more sophistication we can bring to that as we go forward and that what segmentation does is, it determines where do you spend your scarce resources and what’s the most effective way to do that.

And so you want to make sure you’re making your strategic bets on the rates opportunities and the rates in the right order. And so we are in the process of organizing all of those ideas as we had our initial upside, we have a good year where our direction is going which we think will be differentiated in the marketplace.

And at some point along the way here, I’m sure we will have at events where we sit down with all of you and share all of that. But right now we are still a little early to do it but I see a lot of structural opportunities here in this platform to drive differentiated value propositions for our clients and ultimately for our share price.

Okay. And if I can maybe just ask one last question, when I think about the M&A landscape with respect to the Canadian asset managers doing acquisitions, there hasn’t really been a lot I would say from the domestic perspective at least of size and we've seen of the deals tended to be outside of Canada.

Just wanted to get your thoughts on that, is it limited opportunities within Canada and going forward we should probably expect to see more call it international acquisitions or investments like with your China AMC transaction?

Yes, I think you should think that we are looking across the globe. And we run a boutique model and so we are very flexible in the way that we operate with Mackenzie, and it’s pretty easy to – as we find the right skill set and right team in the market, and we can just bold them on as another team for Mackenzie, we’re going to do that.

But we do have relationships, globally we look for unique and differentiated value proposition in the marketplace and if we can find something where we think we can add value, and they can add value, then we will certainly take a look at that.

Okay.

I just want to reiterate what Jeff said with the overall IGM Financial strategy is obviously what we at McKenzie deploy in terms of looking for opportunities. Again that’s looking for potentially investing select high growth geographies which obviously we did very strongly in China to innovation so just as we’re looking for innovation and scale.

We are positioned very well in Canada, we build our scale organically again from the expanding sales force to our strong investment performance to launch some really neat relevant best products and our strong brand. So we think we are very well positioned to continue to build our scale in Canada overnight, but always looking for opportunities that fit in one of those three criteria.

Okay, great. Thank you.

Thank you. Good afternoon.

Jeff, with respect to your decision to reduce the number of consultants plus four year is pretty clear the strategy, there is to high grade the quality of those people. Is there any actions you are taking or plan to take to do something similar with respect to consultants to have more than four years experience.

I’m not taking about reducing headcount but putting in more programs or other actions to improve quality and effectiveness there.

Absolutely. I touched on the CFP and making that mandatory, so that’s huge.

And then we’ve built new systems for them. We’ve got better tools for them.

There is lot of different ideas in the hopper that people are bringing to me but we’re going to do everything we can to make them as productive as possible and we are using our resources to do that. That includes having products that are performing well so that they are easier to sell and includes some great work we’ve done on insurance and then obviously new products with fee based accounts and everything else.

We have a lot of tools to with now and it’s really just getting them comfortable with all of them and getting used to using these new structures. But we’ve already seen a huge tick up from some of our bigger advisors and I’m sure that will translate through the whole organization.

So there is a lot more opportunity now for this firm and then with this new platform, we can host every product you can imagine and so it gives us the breadth now to serve high net worth clients as well as there should be significant productivity left over time.

Okay. And this is a very important philosophical change in terms of how the company is run.

It used to be drive gross sales through numbers and now it’s drive gross sales through higher quality and you believe we can do better sales under this strategy versus the prior strategy.

Exactly. It’s just a more simple model to run.

And but think about sorting of going up market a little bit and then a simple model run you’ve got advisers with the resources that they need to be successful. And just the fact that our average assets are at 34 versus what your math might have suggested was much smaller.

That advisor has resources available to them to be successful.

Okay. And then I understand the motive wasn’t to reduce cost but imagine there are some savings associated with this decision.

I asked that question when I made the decision and I didn’t get a lot of support so I'll keep trying but really because of the way the structure works, it really – we own the ramps so we got visas according the country that are kind of there. So maybe overtime you could reduce some a little bit, but it really is fixed cost environment and then there is a variable with advisors.

And so it doesn’t give us a lot of expense reduction.

Okay, understand.

It gives you productivity across your mangers, your branch managers, your region directors, all of that stuff gets better. Hopefully they are taking that time that we are giving back to them and putting them into productive efforts to help support their field.

Understand. And then Jeff, I’m going to ask you a question on McKenzie because roughly a year ago, your thinking for this year was you could get into positive net sales.

So you did see a big improvement in the net redemption picture and certainly its trending better every quarter but you didn’t quite get the positive net sales. So maybe you can reflect on some of the reasons for the variance there and actual and expectations.

Well, we are getting close as you know and again the improvement has just continued to build quarter-by-quarter. So clearly if you extrapolate that momentum, you will see where we’re going to hit very shortly.

So, no real concerns, we have a strategy, we execute the strategy. The industry was overall little soft last year so and one thing that has been [indiscernible] because you see this momentum building with our gross sales.

And as I outlined within the depth, our gross sales growth is much far in excess of the market. So we are gaining subsequent market share actually.

So that sounds good and the sense of us getting where we want to get to, we are almost there, we are going to continue to grow gross and redemptions are going down, gross is going up so that will transfer into strong positive net sales going forward. And right now, it’s the market share is really what we are focused on and that market share is increasing quarter-by-quarter.

Okay. And then last question is with respect to sub-advised assets.

Are there any more with MD management post the Q4 redemption and with what is remaining, is there any more concentration risk there? Is it relatively well spread out?

It’s again MD is a great find and we’ve got plus $2.5 billion with them and stable and they’re happy, we’re happy and that last $1.5 billion coming out as I mentioned before not being repetitive, but that was just part of the original decision in 2015 that MD took to change the sub-advisory relationship with their fixed income. It just took year or so for that last tranche to come out.

So everything is no problem at all. It's all systems go.

And we have such a well diversified clientele at Mackenzie, both retail and institutional, both internal channels and external. When these more good things happen overtime then some withdrawals, the withdrawals happen and it's very easy to tour because we’ve got some of the other relationships that are growing.

And so no concerns from our end in that whatsoever.

Okay. Thank you.

That’s all the questions I had.

Yeah, thanks very much. Good afternoon.

A question for Jeff. Now that with the decision to discontinue the DSC purchase option for funds, how should we be looking at redemption fees and commission amortization going forward?

Like are these all going to disappear over the next five to seven years and if so how rapidly?

Yeah, they will just roll off with the amortization.

So what should we – I'm trying to get help in terms of how to model a run-off of that. Is it sort of straight line over the next five years or have you got any input there?

They are on their – I mean, right directions. It’s more like seven years.

Seven years? So whatever the numbers at right now we're just going to run that down straight line over the next seven years?

And that’s – so net it's a boot to earnings really because the redemption fees…

Trailers…

…are less than the commission amortization.

Yeah, but the trailers will go up.

Okay, but then we have – okay, then we just work – but the trailer stays that we just work that thing through too.

Yeah.

So net-net would you see it as an earnings lift by getting rid of that or neutral?

It’s neutral.

Okay thanks for that help.

Great question. Thank you.

Hello. Maybe I could start with your FinTech investments.

Could you just confirm how much you've invested in those three different areas to date and more importantly, do you have a plan yet that you're willing to speak to on how you think you could leverage those investments across your platform, thinking more at the Investors Group level?

Yeah, so there’s been three investments, one is in for Portage, which is a venture capital new startup that’s got power heavily involved in that and we are partner with the other power financial companies and we’ve got $30 million in there. And then we invested initial $50 in Personal Capital and we had thresholds in relationship where if they had certain hurdles that we would put another $25 million in and they pass those hurdles rapidly.

And so we are now at $75 million with personal capital.

Okay. And the well simple is just through the Portage or is there another investment there?

It’s through Portage and another investment.

Okay, great. And the second part of my question?

Sorry. Can you say it again?

I was so focused on the first one.

Yeah, I was more focused on the second part. How do you plan or can you speak to at this stage on the potential to leverage these investments across your existing platform.

I mean best practices or can you adopt some of this technology across Investors Group that sort of thing?

Yeah, great question. I mean, part of the reason we did this or side benefit of doing these investments has been learning.

So I’m on the Board of Personal Capital and I get to attend all those meeting and hear what they say and [indiscernible]. We are – your question is exactly what I think about a lot and how we – what works and what could work within Investors Groups model and how does that fit and how can we bring more technology and scale through that to our advisors at Investors Group and that’s something that we will share with you as we make those decisions going forward.

But it’s great to be surrounded with a very innovative group of people in the ecosystem of Portage and everybody is involved in that and then with these individual companies that we are now part. So, it’s – it will influence our decisions, it’s – we are seeing leading-edge technology and strategies in front of our eyes and it’s something that we are going to consider as part of our value proposition as we go forward.

Great. Sticking with the Investors Group side, you talked about there's been an increase growth in high net worth series AUM and that's having some impact on your fees.

Can you give us an idea of the pricing differential between your high net worth series and your – I guess your normal base fund series?

It’s between 25 basis points and 40 basis points depending on asset size and the size of the client.

And what is your threshold for what you consider the high net worth client? Is it 500,000?

It’s 500,000, yeah.

That's what I thought. And then with the 400 or so approximate consultants that departed, how much AUM was associated with them?

It was immaterial, meaning, there are people that are – yeah, it was immaterial.

Okay. The insurance sales is it right to think about the strong quarter as there was some sales being pulled forward out of the tax changes is it reasonable to expect that there will be a little bit of an impact on the early part of 2017 in insurance sales?

You will likely return to relatively if you look back in 2016 at the beginning of the year, you’d see kind of a return to normal growth level, we still emphasize insurance. This was a real peak in terms of permit insurance because of the MTAR rule change.

So to your point, a lot of people will take advantage of almost – they had a few months left to get in some of the deals, so that’s going to diminish, but we still expect insurance sales to be growing robustly as you’ve seen in the last while.

Great. And my last question just with the Mackenzie side.

With the growth TF platform, how do you plan to sort of position or I guess protect the fees and your mutual fund business, just given these ETF products are priced at a lower level than your mutual funds?

Well, first of all, very excited of our ETF business, it’s growing very nicely and focused on just leveraging our investment capabilities that we have at Mackenzie on the active side and at core again we have the TOBAM partnership on the smart beta side. So you will see more launches coming out from ETFs.

And as you saw already the 10 that we have launched, we have 10 mutual fund – very similar mutual funds that near the ETFs and vice versa, so it points first of all to a strategy of – we are really agnostic, we want to distribute our investment capabilities depending on how the advisor wants to access it. If they want to access it through mutual fund or through ETF, that’s their choice or both, we've seen the experience in the U.S.

And the pricing side we don’t expect any cannibalization, we are pricing it competitively first of all on mutual funds and ETFs and our mutual fund ETF, the ones that we have mirrored one or the other there's no slight differences in the process of the investment composition, but we don’t have any concerns.

Yeah, the only thing I'd add is when we made that decision, we knew that it was going to be a one plus one equals two and half by offering both and that I don’t think we are cannibalizing ourselves, I think, because someone else would cannibalize this if we didn’t do it. And so it was really – we’ve got this amazing skill set of 10 boutiques, they’ve got these capabilities that we can work in within a structure like an active ETF and we are seeing the benefits of that now with the results we have so far and we’ve just started, so it’s an exciting space, but I think I’ve said this when we had the Investor Day that we should be structurally neutral and we are just trying to help advisors to serve their clients and whatever vehicle they think is the best.

And I’d think the ETF strategy has really opened doors for us in certain [indiscernible] offices across the country and that’s created opportunities to sell our other great products and – so we’ve seen some of that lift. So it’s had multiple impacts on our business, but we have a long way to go and we are very optimistic about our growth rate.

Yeah. And I think that Jeff has a very important point.

It's early days still, right, but the advisors that are starting to invest in our ETFs, a good proportion of them we haven’t done business with them ever, so – because – perhaps they have preference for ETFs whereas a lot of advisors they preference for mutual funds. So it’s early days, but has been as Jeff said very complimentary in terms of accessing a broader array of advisors in terms of their interest in these two types of deals.

Great, thank you.

Good afternoon, guys. Barry, just following up on the ETF side, obviously very early days.

What do you think about kind of that product within your own proprietary channel like putting in managed solutions, or Jeff I think you alluded to high net worth, perhaps with ETF as alternative how do you think about that medium term or is that something that may not – that is not in discussions?

Yeah, so in answer to your question, again, we're early days we're building in the ETF platform, but what we are building out are just a wider array of component parts ETF mutual fund that we can – advisors can use obviously individually or yes, we can use something building out managed portfolios and we already doing that. Our mutual funds are allowed to invest in our ETFs, so you can access that way in terms of again building out portfolios.

We have some of our managed asset accounts already within Mackenzie are using ETFs and mutual funds. So it’s really again component parts, build about like to when we launch new ones as we kind of with the past 10 launch same time mutual fund form of it as well as ETF form of it.

So we can just – we can really reach a broad array of advisors, but that solutions orientation that we have in terms of you can access Mackenzie as I always say through slices or through pies, either way we get all the component parts to keep on growing. But it’s all leveraged too because we are leveraging our existing capabilities at Mackenzie or using again very valued partnerships like the TOBAM.

Got it. And then just on the Cundill side, performance has been fantastic within the team, but they are still in that redemptions or pretty big net redemptions.

Is there a certain inflection point that you're looking at if fund performance improves that flows could stabilize and how is the value proposition in this market right now with advisors and clients relative over the last few years, has there been any significant change?

Yeah, the sentiment is totally perverse to the positive. Our new team Richard and Jonathan are out there talking to advisors, very well received by the advisors the story.

Obviously the value play has come back very strongly with investors and understanding that the – obviously the metrics of the value investing approach to complement obviously growth as well. So value is coming back, new team is gelling very nice over last year.

Obviously you can see the performance. It’s truly very, very strong.

And it takes time sometimes. The redemptions have reduced significantly quarter-by-quarter, at the same time, as those will continue to reserve and stop.

We are actually out there with our whole selling team selling Cundill, it's a new investor new advisors rather because again this is an exciting new team, performance is strong and the value investment has come back in space. So we – and we also – that the Cundill probably the process, it’s a value team as it always has been, but it’s really kind of Cundill 2.0.

We have tweaked the value approach. You will see less swings up and down, which is probably good for advisors and their clients, but we actually think that the little adjustments we’ve made to the prior Cundill value approach that again the two new PMs have really embraced and executed extremely well has been resonating very strong into the advisory community in early days.

Okay. And Jeff, just sorry going back to the consultants.

It's just about 4,000 right now or just below 4,000. If you were to kind of target one year later or say the end of 2017, would the target be around where the consultants is right now or do you think you can actually grow the consultants with new recruitments?

I’d like to grow the consultants so – and it’s going to come down to the gray that’s left and making sure that they graduate and then we have very few departures in our model, so we don’t have to worry about that too much, which is great because I’m not used to that and then – so it’s really the gray that's our future growth feeding into the ones below and we're doing everything we can as I said to make sure that they have the training, the success, the CFP, all other things to be successful. And based on what we see with the long-term consultants, the ones that are successful in that blue are because they have invested in their education and they’ve invested in their value proposition with the clients, so I am optimistic on that, but I’m going to hold the standard.

And so I think there is going to be that tension of the quality of the advisor and I’m not going to comprise the standard to just meet a number of number of advisors. That’s not the game that I want to play.

Now if I can find 5,000 outstanding advisors, tomorrow I’ll hire them all. So we will always be looking and we’ve got to really rebuilt way of bringing them on.

We’ve redefined what the right attributes are for advisors going forward and what we are looking for in their character and in their skills and in their passion, in their energy, in their willingness to work, this industry it’s a lot work and so, hopefully, that will grow. But mostly the biggest thing I can do is take that $34 million and turn it into $50 million and that’s kind of what I’m focused on is how fast can I continue to accelerate the average assets of the blue because they’ve already got the skill sets, they have clients, they are productive already, they have resources, they have all of our infrastructure behind them and so I think there is definitely leverage with the blue.

Okay and just lastly, just Kevin. Just on the $35 million tax provision, related to certain tax filings, can you just elaborate on that and what it was related to?

Not a lot of detail other than we have longstanding issue in terms of a position that we were taking on some tax matters that we resolved with CRA, it was a win on our part. I’m not going to go into the detail with exactly what it was, but it – these things happen in a corporation’s life and we worked our way through it through really effective tax team at our end here.

Okay, thank you very much.

Thank you, Patrick. At this point, we will conclude our call and we thank you for your participation today.

Have a good day.