IGM Financial Inc.

Keith Potter – Investor Relations Jeff Carney – President and Chief Executive Officer-IG Wealth Management and President and Chief Executive Officer-IGM Financial Barry McInerney – President and Chief Executive Officer-Mackenzie Investments Luke Gould – Executive Vice President and Chief Financial Officer-IGM Financial

Geoff Kwan – RBC Capital Markets Gary Ho – Desjardins Capital Markets Paul Holden – CIBC Graham Ryding – TD Securities Scott Chan – Canaccord Genuity

Thank you, Patrick. Good afternoon.

I’m Keith Potter, Treasurer and Head of Investor Relations, and welcome, everyone, to IGM Financial’s 2018 third quarter earnings call. Joining me on the call today are Jeff Carney, President and CEO of IG Wealth Management and President and CEO of IGM Financial; Barry McInerney, President and CEO of Mackenzie Investments; and Luke Gould, Executive Vice President and CFO of IGM Financial.

Before we get started, I would like to draw your attention to our cautions concerning forward-looking statement on Slide 3 of the presentation. Slide 4 summarizes non-IFRS financial measures that we have used in this material.

And finally, on Slide 5, we provide a list of documents that are available to the public on our website related to the third quarter results for IGM Financial. And with that, I’ll turn it over to Jeff Carney, who’ll review IGM’s third quarter results, starting on Slide 7.

Thanks, Keith, and good afternoon everyone. Turning to Slide 7 on the quarter, total leading AUM reached a record quarter end high of $159.7 billion, up slightly from Q2.

We continue to gain market share in Q3, which marks the eighth consecutive quarter of advice channel market share gains for IGM Financial with investment fund net sales of $137 million. We experienced expense growth for the quarter of 3% relative to Q3 2017 excluding restructuring provisions.

As stated on prior calls, in the fourth quarter, we will have higher expenses due to the IG Wealth Management brand launch and the ramp up of our back office transformational activity. We continue to guide the noncommission expense growth of no more than 5% for 2018 and 3% by 2020 and we are expecting expense growth of approximately 4% for 2019.

IGM Financial’s adjusted net earnings per share were $0.92 for the quarter, up 28% from last year, and the highest quarterly adjusted EPS in the company’s history. We took a pretax charge of $22.7 million in the quarter supporting transformational efforts focused on efficiency and to further streamline investment management and our product offering.

We are continuing to transform the business to enhance our client and adviser proposition and focus on back office efficiencies. Luke will speak more to financial results in his remarks.

Slide 8 provides context in the broader industry operating environment, and since Q1, market volatility, we saw a positive equity returns in Q2 and stability through the end of the third quarter. However, the mutual fund industry ended the quarter with long-term fund net redemptions of $2.7 billion down $7.3 billion from Q3 2017.

Volatility has reentered into the market in October, with IGM’s diverse asset mix, AUM is down 4.1% in the month, which has fared better than the overall global equity markets. Turning to Slide 9, on the financial results for the third quarter.

Adjusted net earnings of $223 million exceeded $173 million in Q3 of last year. As I mentioned, Q3 adjusted earnings per share were $0.92, up year-over-year and a record high for any quarter.

Investment fund net sales were $137 million, down from $829 million in Q3 2017, which reflects the challenging environment. We have just released our IGM’s October investment fund net sales of $143.8 million.

On Slide 10, we showed the segmented results and you can see growth in earnings coming from all three segments. Turning to IG Wealth Management quarterly highlights on Slide 12, AUM reached a record quarter end highs, driven by positive investment returns for the quarter.

IG Wealth Management continue to capture market share as we focus on high net worth solutions, which represents 48% of gross sales up from 43% in Q3 2017. We continue to experience solid asset retention with long-term trailing 12-month redemption rate that remains low at 8.8% and is up modestly year-over-year.

Finally, at the beginning of October, we have realized the Investors Group brand as IG Wealth Management, which I will speak to in just a moment. Turning to Slide 13 on operating results, IG Wealth Management experienced net redemption of $64 million for the quarter and $5.5 million in October.

At the end of September, you can see the trailing 12-month net sales rate for IG Wealth Management of 1.1%, resulted in market share gains. This is in the context of our new approach to recruiting, we’re seeing the consultants growing by three times the previous hires, but is offset by the onetime consultant restructurings over the last two years.

We are now through that impact on net flows. Turning to Slide 14.

High net worth solutions now represents $43.9 billion of our AUM and 48% of total sales. Our unbundled fee structures, where the clients paid the advice fee directly, now have $25.6 billion at AUM that accounts for 75% of our high net worth sales.

We also continue to make progress in delivering better beta, with our focus on managed solutions, which now represents 47% of our AUM and almost 80% of our gross sales. Slide 15, highlights our client rate of return and historical redemption rate experience.

Through the end of September, our clients have experienced positive returns over one, three and five year periods. IG Wealth Management’s trailing 12 months long-term redemption rate of 8.8% remains well below the industry average of 16.9%.

Finally, on Slide 16, we re-launched the Investors Group brand in October to better position the organization as a wealth management firm, with enhanced focus on mass affluent and high-net worth. It’s was not always common definitions, but mass affluent includes households with $100,000 to $1 million, and high net worth is $1 million plus.

As discussed in Investors Day, there is strong brand awareness, but not as good understanding of what our company does. The brand re-launch is designed to create a better understanding of what we do and contribute to client acquisition and loyalty.

The IG value proposition is grounded in gamma and the IG Living Plan brings it to life in a compelling and meaningful way. The IG Living Plan is trademarked and gives clients and consultants a clearly understood name for our personal financial planning that adapts with our clients as their goals and concerns changed throughout their life.

The re-launch is broad based through print, TV, social media and complemented by highly targeted campaigns for IG Wealth Management’s Private Wealth Management. We expect this brand investment will contribute to future growth for the company.

And I will now turn it over to Barry McInerney, to take us through Mackenzie’s results.

Thank you very much, Jeff, and good afternoon, everyone. On Slide 18, I will provide an overview of Mackenzie’s third quarter results.

Investments from AUM reached another quarter-end record high of 1.4% from June 30, 2018. We continued to gain market share, with adjusted investment fund net sales of $523 million during the third quarter.

Mackenzie’s Q3 ETF net creations of $377 million ranked fourth in the industry. In the mutual fund industry that experienced long-term fund net redemptions of $2.7 billion, as mentioned by Jeff, Mackenzie had another strong quarter of retail, mutual fund net sales of $363 million up from 2017.

Offsetting strength in the series was net redemption in the institutional channels. Turning to the third quarter, Environics published the 2018 Annual Industry Advisor Perception studies, and we’re extremely pleased that Mackenzie ranked third in both mutual fund and ETF studies, and continues to gain ground on our goal to beat No.1.

Slide 19 highlights Mackenzie’s operating results for the third quarter of 2018. We had our best ever Q3 mutual fund gross sales of $2.2 billion, up 21% year-over-year.

These figures are adjusted to exclude the impact of fund allocation changes during the period. Total adjusted net sales of $128 million compares to $612 million last year, and majority the majority of the institutional estimate net redemptions were attributable to one institutional client.

Mackenzie continues to capture market share versus peers. Our long-term mutual fund net sales rate of 0.9%, exceeded both the advice channel and the overall industry, and if you include both ETF and long-term mutual funds Mackenzie delivered in organic net sales rate of 3.7%, and we’re pleased to announce that our October Investment fund net sales were $166 million.

Slide 20, provides detail on our mutual fund sales. Gross sales improved across a number of categories relative to last year.

Positive net sales and income oriented and balance categories more than offset net redemptions in Canadian equities. Overall, adjusted mutual fund net sales were $208 million, down from $305 million during Q3 of 2017.

As I’ve touched on earlier, Mackenzie’s retail mutual fund net sales gained strength in the quarter of $363 million, up $164 million from 2017. These retail net sales are broad-based across asset classes and fund types and are driving our market share gains.

We will still see upside of having a gross sales capture rate of only 7.5%, up from 5.5% in 2017, and institutional sales experienced softness in the period with this business line continuing to near the overall industry. Turning to Slide 21, Mackenzie’s ETF AUM rather, grew to $3 billion, driven by the Q3 net creations of $377 million, ranking fourth in the industry amongst the now 30 ETF providers in Canada, and third, for year-to-date net creations.

Growth in our ETF business was primarily driven by our active and smart data, offerings and Q3 2018 was the best quarter in our history for retail ETF growth of $264 million. On Slide 22, Mackenzie’s long-term investment performance remains solid, with 64% of mutual fund assets in the first or second quartile of the 10-year period.

Overall, 38% of the AUM is in the four- or five-star rated funds, and looking at Series F, where Mackenzie has some significant opportunity to grow AUM within the IIROCK channel, 17 of our 20 large sponsor is four- to five-star by Morningstar, six of these funds are rated five star. On Slide 23, we continued to benefit from solid investments performance in net sales across our range of investment styles and teams.

On the equity side, the growth-orient teams and global equity income team continue to deliver strong performance and positive net flows. We have also experienced another strong quarter performance and flows from our fixed income offering.

We’ve entered a time of significant volatility in October, as you all know, and we believe the Mackenzie’s multi-boutique structure is well-positioned to perform in a spectrum market environments. For example, we have certain boutiques that has historically outperformed in volatile markets, such as Haiti, which have a strong October.

We offer specific strategies that delivered access to nontraditional asset classes and benchmark-agnostic strategies that will provide risk return profiles that lower correlations with the broader market. And finally, we also offer multi-asset solutions, designed to deliver smoother ride for investors.

Finally on Slide 24, which highlights results of the 2018, rather, Environics Advisor Perception Studies. We’re very pleased that Mackenzie is the only company to rank top three at both mutual funds and ETFs.

With respect to mutual funds, Mackenzie ranks number three overall and number two in brand recognition. While our ranking did not change our scores closed the gap on our target to be number one.

We’re also very pleased with the leap from number ten to number three in ETFs, our whole selling team has continued to excel, and was most recognized as being amongst the best in the country tied for – with one other firm for the first position. This progress is linked to increased penetration within both the MFDA and IIROC channels, and these results demonstrate exciting opportunity Mackenzie has to continue to increase sales and gain share.

I’ll now turn over to Luke.

Thanks, Barry. Let me turn to Page 26 and I’d first highlight the non-IFRS adjustments referenced in point one.

So first, we have restructuring charges, $22.7 million pretax relating to the reengineering of our North American equity offering at IG, and the related personnel changes. And I’d also add, these changes provide annual savings of about $7 million annually are in our expense guidance.

I’d also highlight the premium $10.7 million pretax associated with the early redemption of $375 million of debentures in August, and again, I’d highlight this redemption, along with a 30-year debenture issuance we did in July provides us with annual interest savings of about $17 million per year, and we started to experience that during the quarter. And at the bottom, I reemphasize that our adjusted EPS at $0.92 is an all-time record, quarterly high for the company, and well adjusted earnings are up 20%.

I’d also highlight in the bottom point, we did implemented was 15, January 1 of this year, and we started counting for sales commissions paid unbundled products by expenses incurring, and I’d note for it by that 2017 results, would have been largely unchanged if we’d apply this retrospectively. And on this basis earnings are still up 24%.

Turning to Page 27, a few comments on Q3 and the month of October. First, I’d highlight in the circled items you can see in the table on the right, that we had an investment fund net sales rate of 0.4% in Q3 that is adjusted, did very well relative to competitors.

And we also generated investment returns for our clients at 0.5% in the quarter. In the chart in the left, you can see – and as you saw on our results for October released yesterday.

AUM went down at 4% in October to $153 billion as a result of October’s equity market declines. I’d note that we also released investment fund net sales of $144 million, which we believe will show very well in the industry context.

And I’d also highlight that this was a record high growth sales for both IG and Mackenzie for the month of October. And as highlighted by Jeff and Barry, we’re working to several clients well in this volatile period, and this is the type of market, where we build the relationships.

Moving to Page 28. This is a new slide, and it’s got our consolidated EBIT and EBIT margin.

The only comment I’d make is, on the right, you can see that our EBIT margin of 64 basis points in Q3 of 2018 was up from 61 basis points a year earlier. And that you can also see that net revenue rates were unchanged.

And so the increase in margin was as a result of unit cost improvements from 64 basis points to 61. And as you know, we are very focused on operating leverage, while, at the same time, enhancing our advisor and client experience.

I’d change now to Page 29, and I would highlight that there’s a lot of data there. But I’m going to make one point, and the point I have is on the non-commission expense line.

So as mentioned by Jeff, you can see year-over-year, our non-commission expenses, which are just in the middle of the page, we’re up 3% from last year. We are committed to meeting or exceeding our full year expense growth guidance of 5%, meaning our growth would be 5% or less.

And we’ll continue this guidance. I’d also note, as mentioned by Jeff, some of the Q3 expense will reflect the timing, where we’ve got certain activities, like the brand relaunch at IG, as well as some of our transformation program investments occurring in Q4.

And I’d also reaffirm our guidance of no more than 4% increase during 2019. Lastly, I’d remind that while we have discretionary expenses, we are committed to serving our clients and capitalizing upon the market opportunity we have in front of us, since with the recent market volatility, we would not expect our guidance to change in any way at this time.

So we’ll hit the 4% growth target for next year. And while this discretion, the recent volatility doesn’t do anything to change where we’re focusing our efforts and capitalizing on opportunity.

Moving to Page 30. Let’s turn to IG Wealth Management, and I’d make two comments in this page.

First, in the left, you can see our revenue rate of 201.7 basis points. It’s very much in line with Q2.

It changed a little bit as a result of continued migration towards high net worth clientele, and you can see this in the row at the very bottom of the table. Second, if you look at the chart on the left, you can see that our asset base compensation rate of 48.5 basis points was down slightly from Q2 and also that our commission rate, in the chart on the right of 1.7% was down very slightly from Q2.

So I’d note that we’ve made some changes to our field management in the second quarter, where we reduced the number of regional directors we had, and we reassigned certain of the responsibilities. And as a result, our commission expense was around $3 million lower in Q3 relative to prior quarters.

And I give you guidance that about half of this expense decline is temporary and will be eliminated as we complete reassignment of activities and the remainder we view as enduring. I’d also remind you that we reviewed with you in Q1 that our sales-based compensation rate will be declining by around 40 basis points during January 1, 2019, as we continue the transition away from DSE that we started two years ago.

And as you can expect that 1.7% rate to be close to 1.3% as we enter 2019. And we’ll continue to see some upward pressure on the asset-based compensation rate just from the ongoing maturing of DSE units, but that will be quite slight.

I’d turn now to Page 31, where I start by highlighting that IG’s EBIT of $213.5 million is up 18% from last year and up 8% from last quarter. I’d remind you that if you look in the net of investment income and other line, which is the fifth row from the top, that we did have some negative fair value adjustments in our mortgage business in net of investment income last year and with the adoption of IFRS 9 this year, our mortgage earnings are much more stable.

I’d also make a comment on the sales-based commission line, which you can see at the sixth or seventh row down there. And I note in the quarter, we had $24.7 million in commission expenses, down from $27.9 million in Q2.

And I remind you that we’re commissioning – we’re expensing commissions paid onto the bundled products as we incur them. And as reviewed by Jeff, the share of our products sold into unbundled solution continues to increase.

So that’s what drove a majority of this decline in the commission expense from Q2, it’s just the fact that we’re selling a greater proportion of unbundled products and less bundled products, and the bundled ones are the commissions that we incur – expenses incurred. I’d also highlight the operating leverage we have at IG, with non-commission expenses up 2.8% from last year, and again, we’ll remind you that we have brand relaunch costs coming in the Q4.

Now turning to Mackenzie on Page 32. The key comment I have on this slide is to direct you to our net revenue rate, which you can see in the chart on the left, and it’s 80.9 basis points, this is down from 83.6 basis points in Q2.

I’d remind you that we implemented our retail pricing changes June 1 of this year. So Q3 is the first period that had the full quarter impact of these changes.

I’d remind you, these changes were worth around $50 million per year on an annualized basis at the time of announcement. I’d also remind you what these changes were.

We aligned our fees on fee-based products at the same level for all household irrespective of the level of assets. This revised structure is very well-suited to both discretionary and non-discretionary fee-based accounts and it’s been very well-received in the marketplace.

And then lastly, on Page 33, I’d highlight in the third column at the bottom, Mackenzie’s EBIT $52.7 million is up 16% year-over-year. As you heard from Barry, the business is doing very well and sales moment is accelerating in a challenging environment.

And I would remind you that this business has what needs to compete, and there’s a lot of operating leverage in this P&L. And that concludes my comments.

I’ll turn it back to Patrick, the operator.

Hi, good afternoon. My first question is on the non-commission expense growth.

So this year, you’ve got guidance of 5%. When I take a look at what you reported in Q3, it almost kind of seems to imply at investors group that the non-commission expense needs to go from $146-ish million in Q3 to almost kind of $20 million higher quarter-over-quarter, which I get, you talked about the rebranding and all, and some of these other transformational stuff that you’re doing, but it seems like a big jump.

And so I just wanted to know whether or not that’s accurate? And the reason I ask that because when I take a look at how you guys are guiding last year on non-commission expense growth of 7%, and you reiterated it at Investor Day, which is right at the end of November.

Yet when you reported the Q4 results, which would have been a month later of actual operations, you came in at 6%, which is a big delta concerning it could have only happen in Q4. So I just don’t know if its managing expectations, which is fine, but I just want to get a better sense as to how you’re looking at the Q4 non-commission expense?

Yes, it’s a good question, Geoff, and it’s onetime, like I said. So first, we are going to meet or do better in the guidance we gave.

Second, we did have a very light quarter on expenses, and actually quite well. But your real question is like, what are you spending all these additional money on the fourth quarter?

So the single biggest item is the brand relaunch, and I hope you felt the presence of the campaign in the market. And as Jeff mentioned earlier as well, we do have a lot of transformation program expenses that we’re working hard on.

And again, those activities produced, as you know, long-term savings, as we’re working to automate and really impact our client experience. And there was some timing of expenditures on those programs that reduced Q3 but will increase Q4.

So we are staying firm to our guidance. We would like to do better, but we will have more expense in the fourth quarter.

Okay. And then Jeff, on the high net worth rollout, in terms of targeting the households greater than $1 million, are you at a point where the consultant, like all the consultants are kind of fully trained and prepared to be able to go and actively target these sorts of clients?

Or there’s still some transitioning that needs to happen? And then how do you think about the timing of when you kind of see it show up in the sales numbers more visibly in the monthly numbers?

Yes. I mean, one of the powerful things about our model is, we have consultants today that are serving high net worth clients.

And then we have – and then we are a culture of sharing. And so a lot of the train that’s going on is really peer-to-peer across the organization.

And then we’re showing different models and different practices around the country, and we’re sharing those with the management team, and then, they’re training that into their organization. So it’s still early days of that execution.

And then other part of it is, the higher you go up in the market, so if you’re going up over $1.5 million, your competition is going to be higher, and your value proposition has to be even better. And so we win there on the fact that we have the technical skills.

We now have a brand that’s got more support behind it, so that gives confidence to our clients. And then, we’ve got a series of programs, as you know, that are launching, that are going to make it even better.

So I think the story there is that we have momentum and where – we’re going to have investments coming that we’re going to continue to evolve that momentum going forward. But part of it is training the consultants themselves to feel confident in serving those clients.

So do you think it’s like, I think, six months we’ll start to see it more meaningfully in the net sales numbers? Or is it more like 12 months or another timeline?

I’d say six months to 12 months, is a good length.

Okay. And if I can sneak in one last question, Barry, just the liquid alts product, on Slide 20, what category would that fit into?

And then similar on Slide 23, it would be grouped in the managed products category?

I’m just shifting over here in our Slide 20. So good question, Geoff.

This is a simple check with category that’s in. Yes, that’s in the sector Other category.

So that’s where it’s in. There’s not a separate category now that is like liquid alts, but we put that in the sector Other category.

Okay. And it was in the managed products on Slide 23?

Slide 23, that is, yes, that’s correct, yes. Very good.

Are you able to say like what the net sales on the quarter where it’s been on, on the product?

We don’t think we have that by – it’s actually – so I can just comment general, we’re very pleased with it, by the way, and particularly the fact that we’re market has been choppy, it’s exactly designed to help investors late in market cycles and of course, it’s performing well in that is uncorrelated those stocks of bonds. So that, we’re pleased with.

Bond education should go out to the platforms and the advisers who are really receptive to it, but obviously, we’re talking about our product that is akin to what is happening in the U.S., but if you can, they were using leveraging the shortage, so there’s our educational point to it. So we’re getting close.

It’s early days. We’re using at ourselves internally within our multi-asset strategies.

But the exact number I’ll have to gets you back later, but it’s not – it’s early days. Most are coming in, but it’s still early days in terms of the education cycle required for these types of products.

Okay, great. Thank you.

Okay.

Hey, good afternoon. Let me just follow-up on Geoff’s earlier question on non-commission expense, specifically the stuff that I guess like it has been working on.

Can you give us an update on that? I imagine that it’s more of a 2019 event, should we see graphs another round of restructuring cost and expense base in 2019, and if that’s baked into your 2019 4% growth estimate?

No we don’t. We’re managing our results this efficiently.

So we don’t want – obviously we have to take a charge on severance and all of those types of things. So we find people leave the company, and then we don’t replace them, and then we find out with other ways to do it.

So we have better like you always have to think we have a charge in the way we manage that, it’s how I think about it. And then just like did they are starting to get some traction, so we’re launching a new leading front accounting service, which we were going to – that’s the one we’re trying to build ourselves, and now it’s up and running, and so we’re absolutely gracious on that.

And then we’re starting to get into some digital forms and make it easier for our clients, so we’ve got electronic signatures coming and other things that are going to make it similar streamline for clients and for consultants. And so it’s good to see Mike here to be, we hired a team, they’ve got a great posture going, we’ve got a lot of talent in the company, and they start to execute.

And so you will hear more and more from us on that. But it’s still early days, but we’re certainly making progress.

And as Geoff asked, when Mike spoken at Investor Day and we mentioned, he’ll be spending $100 million over five years to generate annualized savings to $50 million a year. That $100 million is inclusive of a lot of severance and other cost and that is embedded in the run.

And then to your other point, are we realizing benefits and when we’ll start to be? We’re 40% on their kind of annualized run rate, and we’re continue to chip away during 2019, but again, what’s offsetting that is the lowest spend that was required to get those savings.

Okay, that’s helpful. And Luke, I have you, just want to get back on to that slide 30, and specifically on the asset base rate and the sales commission rate.

And I’m comparing it to the slide deck, I think you’ve provided some guidance back in the Q1 call. So I think, you said 1.3% for sales commission rate for 2019.

But on the asset based side, you had a guidance of, I think, 50 basis points for 2018 and 52 basis point for 2019. But you’re trending below that.

Can you provide some guidance on, that side?

Got it. I can.

And so especially anchoring to this quarter, where we did see a basis point decline. Part of that, as I mentioned, it is changed we meet the field management, and so we did reduce our regional director compliment by about 17% in the second quarter.

And we are seeing the impact of that in our Q2 results. Part of that is going to be offset in the coming quarters, as we’ve reassigned some of the activities you’re responsible for it, some of that is going to be permanent savings.

So when you look at the 48.5, you can think of that ramping up a little bit over time, but again, the biggest feature of that is going to be DSC maturing over the next couple of years as we discontinued in 2016. And so as it matures, as we go through that seven year cycle, we’re going to see some upward pressure gradually over the whole time.

But of course, that is offset by the sales commission rates coming down in that period. So I guess, to answer you another way, on the guidance that was provided earlier on, both the sales commission rate and the asset base comp rate from Q1, we are going to be a tiny bit south of that as a result of these changes that I have today.

Got it. Okay, that’s helpful.

And just lastly, Jeff, we’ve seen kind of more activity on the M&A side, definitely, valuation has come down across the sector. Are you seeing more imbalance in terms of M&A opportunities?

And are you interested at all? And if so, kind of what segment kind of interest you at this time?

We really did – with our boutique model, and we’ve got a great cross-section of capabilities that now enable us to launch the incredible products that are differentiated in the marketplace. So we feel very good about that.

And then we need to find something else to add to our capabilities. There’s a lineup that want to help us.

So recently, we have been using some new providers from the U.S. and bring in some more capabilities there.

And so we’ll continue to evolve that. But we also are – there’s a conversations going on in the industry about knowing your products, and we want to make sure we have enough products, but not too many, because you can’t understand every product if you have so much to cover.

And so, we’re so cognizant about it. And we really want our teams to use the solutions-based solution – products and they are.

And so it’s more complementary in using third-party products or using Mackenzie’s products as well, and we’ll constantly look at that to make sure that we have enough diversification to serve our clients.

Okay, that’s helpful. That’s it for me, thank you.

Thank you, good afternoon. I just wanted to ask a few more questions related to potential ongoing market volatility.

I know Barry, you talked to this already a bit in terms of how it might impact on specific mandates, but I wanted to get a better sense from the firm overall, how you would view the net impact of market volatility, is it something that’s disruptive to your business? Do you think you can be a relative winner?

Do you think it changes the balance of flows between passive and active and therefore, is a benefit to your firm? And maybe also as well, how it might impact the proportion of Mackenzie assets, whether first or second quartile overall, if you can come out of in that weather?

Well, I’ll start on Mackenzie, and Jeff, if you want to chime in on. So we feel that we’re well-positioned competitively in any environment.

So I’ll specifically allude to more volatile market, where we’re getting towards the end of the cycle. So my design – and Jeff mentioned this as well, by design, we’ve 14 the boutiques at Mackenzie, and that’s by design.

And they have a variety – and this differs from a lot of other models out there. It’s not the only one only model, but our model is, the boutiques on the equity side for instance hover growth, value, downside risk capture, different asset classes Cundill, U.S., North American Global, developed emerging.

It also covers quant and fundamental. So in fixed income side, we’ve got a really terrific fixed income team that has a performance coaching out there in our most categories for 5-star.

And their capabilities, they’re not just your core cost, but they high yield, they have global unconstrained, they have floating rate. So what we see is, our sales are strong and they can vary where it comes from depending on quite frankly where we are in a cycle.

So for instance, right now the last year or so, so we’ve been – the sale has been really robust with our growth managers, our fixed income and now that we have multi-asset class. It’s been weaker as you know with the Cundill’s who are value oriented and this has been almost historic growth environments.

And they are weaker with IV, which is a depth of risk protective posture. And so therefore they’re protecting the capital for the clients and that means also with a larger cash holdings.

So and then lo and behold, what happens? Well, first of all, we totally see the IV performance come back because they are positioned for down service protection.

We will see a growth rotate back to value. Never know when, when it rotates back Cundill’s like a coiled spring.

And then we’ve launched the alternatives. These are all weather portfolios that are really are good.

We think irrespective of the market cycle. But they’re particularly good during the end of our market cycle because they offer returns.

So, and then we’ve also seen a tick up in our fixed income flows quite a bit so, particularly and no surprise floating rates and unconstrained because again, rates are starting to rise. So it’s really – it’s a nice combination of almost – we are ourselves and Mackenzie almost a diversified portfolios, 14 boutiques.

And so we will see flows coming and going depending on we’re in a cycle and what the particular interest with advisors is. And then overall, probably our momentum has been broad-based across every asset class.

It has been led by multi-asset class. And so that means that our multi-asset balance teams have at their disposal all these variety – all these variety of component parts that they put together to make them these balanced multi-asset perform well.

Again, like it’s all weather dependent, irrespective of what the environment. So that makes sense.

So we’re really pleased, we like different environments because we don’t have one philosophy that’s permeating across our organization. Where some might they believe in growth, that’s all across organization.

Or some might have, they believe in growth all across our organization, and some be currently. We’ve got everything and so therefore it’s a diversified portfolio, we think is competitive strength.

And the only thing I’d add on that from Investors Group side is, for us it’s a great opportunity because of volatility and stress in markets creates opportunities for winning new clients away from our competitors. And so we will be doing that throughout this process and make sure that they’re energized to bring in the household.

My follow-up question for Barry would be Mackenzie has executed on pretty much everything it has targeted except for relative fund performance. That doesn’t sound like market volatility or downdraft and the market’s going to be the catalyst to change that.

So maybe you can refresh us on what the targets are for fund performance and the plan to get to the target.

Okay. We focused on number of measures that are metrics rather to measure, the best performance.

So we focus – that are in some of the slides, we focus on percentage of AUM for 5-star Morningstar funds. And I believe right now we’re probably at just under 40% on that number.

So to explain that number, that number actually is fine for us because it’s strong where it needs to be, like our balance multi-assets very strong. What’s in favor rate now or what’s being rewarded in the marketplace growth or blue water, mid-cap growth U.S.

boutiques, are doing exceedingly well because their styles and favor. So that’s a good thing.

What you’ll find with that percentage though, the percentage for us, we’ll never get too high because we have boutiques that are doing exactly what they should be doing and doing it well with the solid uptick. For instance, Cundill their stars are below four and five as our IG mostly because their styles at a favor.

And there’s no particular, universe in Canada like we have in U.S. that drilled down to style specific major universes or to restore process-specific universities.

We just have one universe in Camden. So with the 40% we’re fine with.

We actually think it has been a drive upwards as the market changes, because you’ll see, we do have a lot of assets in some boutiques, like in IV and come about style in favor, once the stock comes back in its favor, that will drive that number probably up higher. And what’s clearly important to us as well as I think we’ve got it in the slide, we talked about 17 of our largest 20 mutual funds in F series are four or five star.

So we have a – we are wholesalers, Mackenzie will tell us, Jeff and I, we have too much to sell. It’s actually a good problem to have because we can meet the needs of advisors to pay irrespective of market conditions.

We have strong funds in each F’s. It’s across the asset classes and styles.

So we’re very pleased our performance, it’s just that sometimes we’ve got a headline number that looks perhaps low-ish without the proper context, but it does represent an abundance of styles and boutiques and mutual funds and ETFs that are performing well. And in one more point, obviously, we focus on net sales and you can see the momentum we have in the retail sector quarter-after-quarter.

Growth is still important, because, for us, since we have several other boutiques, and some boutiques will be out of favor at times, their style. Then we get to outgrows that, right?

We just outgrows with the boutiques in the style. So we monitor both the gross and net sales, which is part and partial indication performance.

And again, that is perhaps we really on it.

And final question is maybe an update on ChinaAMC. It seems like there’s a number of moving parts.

They’re the largest money market fund. I guess, it has been forced to kind of share some of its AUM, with competitors.

Wondering if you benefited from that and also maybe an update given market fall and in Asia this year and how that’s impacted AUM, if at all?

Yes. We’re – I’ll start and Luke and Jeff can chime in.

We’re – first of all, I’m very pleased with how CAMC is performing. It’s been out a year since IGM closed transactions September of 2017.

And they retained their number one position in long term mutual funds plus institutional assets. Number one position in ETFs, strong brand, their multi-channel, they’re being innovative, they’ve got number of really strong product launches in Q1 before the market started to downtown, a little bit of confidence, step back of the industry, obviously with the markets, last six months or so.

But they’re innovating, launch of the first robo-advisor in China and launched the first [indiscernible]. The third pillar has been publicly announced in China that’s now in place in a pilot project this year.

And it’d be formally placed in spring of 2019. That’s three-pillar retirement system like we have in Canada with the social security system and the corporate system and in the individual private system, RSPs here in Canada, that’s the third pillar that they have just launched.

CAMC own the few firms, selected to participate in a pilot. So they’re just so well positioned being a primitive top three local domestic asset management firm.

So when we look at their performance last year, it’s a – they’re just – they are holding their own, despite the fact that the Chinese equity markets from their peak this year down over 30%, I think for the year, they are over 20% down. So you’ve got that going on.

They’re doing just fine. What we also like about them is that in addition to that, I’ve mentioned, their focus on risk adjusted return.

So there’s been a lot of chatter in money market in China and they’ve continues to grow strongly in China over half of the mutual fund, AUM for the industry in China are money market. And the money market funds are growing for CAMC, but they’re lagging the money, some of the bigger competitors and that’s by design, because they’re not reaching for yield.

They’re being conservative. The regulators are monitoring the money market funds.

They want to make sure no one is overstretching themselves. They would prefer ultimately that’s the industry mirror more like Canada or U.S., where it becomes more long term focus, wants to institutionalize and there’s not money going in and out of money market funds, albeit again, interest rates are still higher in China than North America.

So there still attractive yield there. So, I would tell, now our – the business case for us to get into it originally is absolutely on point, if not strengthened.

We’re very pleased with their performance. They are holding all of their industry leading positions and that despite as you suggest that there’s been market volatility.

And ultimately that will become more sustainably upwards, if one we got some of the trade issues and others gets resolved between China and U.S.

Great. No more questions from me.

Thank you for your time.

Thanks. Maybe I can start at IG.

The drop in Consultants quarter-to-quarter was, I guess, four years plus experience. Was that in part of reflection of a – you said you mentioned field management changes in your Consultant network.

Is that baked into that number there? Or maybe some color around the quarter-over-quarter drop?

It’s the goal – that wasn’t as a result of those changes. Most of those people, that’s now is very, light, well I talked about 16%, 17% it’s not a lot of people.

The bigger part of this change were just normal retirements, an the timing of people graduating into that category relative to just the normal four people exiting the business.

And we did reduce the breadth of our leadership, so there was something in there too.

As I said, it’s small. So think 15, 16 people.

Okay. So you’re comfortable with your sort of ability to retain your productive consultants and attract the people that you want to attract is, there’s nothing to read into the continued attrition of your Consultant network?

No. And there were new recruits that are coming, and like I said, we’re closing in on 400% higher than our previous recruits.

So quarter out, we’re going to continue to accelerate that if we can keep time – like that, we’ll keep hiring them.

400% higher, is that actually growth net sales that you said metric?

So by putting it on your process, we’re measuring it from that date, and so we’re looking at – historically, we would hire – our screening wasn’t as defined as it is now, and now, we’re putting in much bigger screen out and so we want to make sure that the success rate of that consulting is very high. So we’ve centralized recruiting, we’ve put professional team in place to manage it a little bit, we’re managing it much better, so you get access to talents and we just professionalize the whole thing.

So it’s got great management on it and it’s exciting. And so if we continue to see that kind of momentum, we’ll continue to hire.

And then in the metric, in the supplement is where you’re finding that number of consultants broken down, as you said. When you look at the same-store sales and the sales – gross sales per Consultant, year-to-date, gross sales are down 5%.

When you look at the same-store sales, we’re up 17% because we’ve got a fewer of them, and you parse that out, as Jeff was saying, between the new recruits and the experienced, the experienced are up 3% to 5%, but those who worked who are brand new with us, because we’re recruiting so much and more selectively, that’s when there are multiple growth sales. So we’re seeing very good performance with the new recruits.

Okay, got it. Thank you.

Maybe I could follow up on the color that you gave around commission’s expense, how’s that evolving. It sounds like in 2019, your asset retention expense is going to move higher, but not as much as the drop in sales commission expense, was that the message?

Yes. It’s just that DSC is becoming a smaller, smaller part of the business, as it’s maturing naturally.

So you remember that the guidance – we gave annual guidance, that 2018 was going to be about 50 basis points and 2019 was going to increase to 52, just as a result of that maturing of the DSC book. And offsetting that is the transitional measures that we put in place on sales commissions.

And so my guidance was that, where sales commission guidance will be 1.9% for this year, and it’s actually running at 1.7% now, the earlier guidance we gave our 2019 was 1.5%. And you could think of that is running something closer to 1.3%, and similarly, on asset base, where we gave guidance at 52 to the extent that we are a bit better as a result of some more changes, you can think of that being closer to 51 to 70.

And of course, that ebbs and flows based upon the dimensions there like who’s selling the product, and who’s advising on it? Because there’s different rates for our metric network, but these weighted averages, I think, those are the best guidance to work with.

And the key point I want to convey on this quarter is that, there is about $3 million there that are related to these changes that we made in field management and part of it will go away as we reassign that activities, but part of it will endure. So, I want to get that out there that the ongoing rates are going to be a little bit lower.

Okay, that’s helpful. And the how about the timing, if you transition away from selling bundled products.

What is the timing around that and is that baked into your guidance at all here or is that a 2020 event?

I think you remember from Investor Day, I thought [ph] asked to give guidance that we’re launching unbundled for all. So right now it’s only available in our high net worth solutions and that’s something that is coming into effect in 2019, and it’s part of that we are migrating our entire business there during 2019 and we are expecting that to be substantially complete during 2019.

So there will be no more bundled products in our offering at all.

Got it.

No unbundled.

Okay, got it. And then just my last question would be, I guess this is for Jeff.

So net sales at Mackenzie are flat year-over-year if you adjust for that asset allocation…

For Investors Group?

Yes. Well, that was the Mackenzie, I think, year-to-date, your sales are flat year-over-year, if you adjust for the asset allocation of flow this quarter, but then an Investors Group net flows are down.

So, I guess what’s driving the differential between your two divisions, it looks like Investors Group is sort of moving a little bit more in line with the industry and Mackenzie is outperforming, maybe some color around how you’re viewing the difference in that flows this year in the two businesses?

Yeah, I think, we could have done better as wherever we are. We were excited about the next 12 months are going to look like, and you’ll be the judge of success there.

But, I think it’s a combination of a lot of change in leadership and, and all other things and bringing in all the new talent we’ve brought in and they are now up to speed and are starting to deliver value for us, and so you’ll see that momentum as we go. But I’m very confident in our ability to grow this company going forward and it’s the volatility we’re outperforming most of them – the competitors on it, but in obvious space it’s not like we’re significantly ahead of everybody else, but we’re holding our own.

So, but it’s – we know we can do better and that’s what we’re going to be doing.

I think Mackenzie – it’s a good question actually, because you’ve probably seen – we’re giving you more and more disclosure and guidance on how Mackenzie is doing retail channels versus institutional channels, because they’re quite different businesses. And retail by far our biggest and as a higher margin and higher prices.

So, I think, we’ve heard back from the analysts like to know a little more specificity into them. So, our retail channel here for Mackenzie in 2018 is doing very well, way above last year of gross and net and accelerating, and so, I’m very pleased with that.

The institutional Mackenzie is lumpy, it was much better last year and this year. So, that’s why as part of the total funds Mackenzie and see – we don’t see that that breakout, we were breaking out a strong way retail and we have – actually a very strong institutional last year.

We knew it’s going to be softer this year, it’s become more pronounced the softest because of the industry flows typically financial institutions, which is a very big. And so again, some of those, a good chunk of those additional flows emanate from our partners financial institution.

So, we’re not a concern at all actually, but I think institutional is down as we expected more, because the industry malaise and the retail as it tend to accelerating. So that’s okay.

But we’ll, and we’ll, we’ll continue to show more guidance going forward and the channel, irrespective of which one’s doing better. Because both do well or read now.

Retail is leading the way for us this year.

Yes. I’d also comment under different to the distribution models and the business models, where IG is a distributor and when you look at it, net flows, it is actually gaining new client relationships and penetrating existing clients.

And so as Jeff mentioned the onset, IG did gain share when you look at the mutual fund industry, that redemption rate. But Barry’s model and Mackenzie model is very different that there’s a lot of – we call called the money in motion.

There’s a lot of gross sales going on as people rebounds within a client’s account and Mackenzie is capturing all that’s showing on and it’s accelerating as Barry mentioned to retail. So there are very different business models, and Mackenzie does have that leverage.

Okay. That’s helpful.

Thank you.

Good afternoon. Barry, just on that institutional comment.

You talked about you knew that it would be slower this year, there’s a lot of this – partnerships. But in your opening remarks, you also said the initial was a bit soft too.

So some of it, the initiative as well? And maybe you can just elaborate on that, and maybe the pipeline going forward?

I’m sorry, just to repeat, what else is soft as well?

For the industry.

Well, I guess, we can’t predict the industry. I don’t think we didn’t actually predict the industry to be soft this year.

It just happened. And as we just react to it.

We thought institutional services of this year break out, quite frankly had a breakout in the few lot of record sales of summer platform partners and we’re just more conserved to say that just can continue in 2018. So, that’s what I can skip that actually.

From that, we have forecast our further institution in 2018, simply because some of our partners did, had record years. We had records, I mean just think that was unsustainable.

But the slowdown as I mentioned has been stronger, more pronounced rather, because the industry which we can’t predict is it’s been really soft. I mean, across that and gaining market share, relative to the industry, sometimes, they’ll see our medium more modest net flows did and the exuberant – we’re very exuberant across IGM and IG, that’s just because – what we can control is market share.

We want to meet market share across the board, and right now, it’s happening. So does that answer your question?

It’s good one. But I think you’re right and we can predict the industry.

Our prediction for Mackenzie institutional to be slower this year was again, was the fact that we had such a strong year last year we want to be – screw that out over the long-term forecast had expected to be slower this year.

Yes. And then that’s good and then just on slide 24, on that Environics Advisor Perception study.

Does that rankings just include independent companies or does that include banks and quotes as well?

It includes all manufacturers, bank insurance and pretend to…

Okay. Thank you very much.

Okay. Thank you, Patrick.

And that will conclude our call for the day and just thank you to everyone for participating and have a great weekend.