IGM Financial Inc.

Thank you, Melanie, good afternoon. I'm Keith Potter, Treasurer and Head of Investor Relations.

And welcome everyone to IGM Financial's 2019 fourth 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'd like to draw your attention to our cautions concerning forward-looking statements on slide three. Slide four summarizes non-IFRS financial measures used in this material.

On slide five, we have provided a list of documents that are available to the public on our website, related to the four quarter results for IGM Financial. And with that, I'll turn it over to Jeff Carney, to cover IGM's full year 2019 and fourth quarter results starting on slide seven.

We finished the year with record high AUM of $166.8 billion and AUA of $190.2 billion driven by the best financial markets improvements since 2019. We had investment fund net redemptions of $142 million.

IGM's adjusted earnings per share were $3.19 during 2019, which was down slightly from our record high 2018. I'm pleased with the progress we've made in our business transformation in 2019 that is further improving the client and advisor experience.

We achieve these enhancements while managing non-commission expenses grows to 3.3% which was better than our guidance of 4%. We are maintaining our 2020 expense growth guidance of 3%.

Turning to slide eight for Q4 highlights. Total AUM and AUA, both increased 3% during the quarter.

Investment fund net redemptions were $141 million. IGM's Q4, 2019 adjusted earnings per share increased 12% year-over-year to $0.84, a record high Q4 results.

IGM was recently named to CDP's A List as leader in the Disclosure and Management of Carbon Emissions. We are the only Canadian company on this list.

We are also been names to Corporate Knights’ Top 100 Global Sustainability Leaders list. We see sustainability and climate related topics of growing importance to all our stakeholders and we'll continue pursuing opportunities to make a positive impact.

Slide nine highlights the performance of major equity and fixed income indices. Most equity markets were up during the fourth quarter of 2019 capping off a strong year during which our clients earned investment returns of 13%.

January client returns were positive 1.1% and so far February has been an even stronger month for client return. Turning to slide 10, I'll start by reminding that the industry experience just over $15 billion of net redemptions during Q4, 2018 with severe equity market decline.

This large outflow has rolled off the 12 months trailing net sales rate driving the industry net sales rate up sharply. The industry advice channel experienced long-term mutual fund net redemptions of $0.8 billion during Q4, up $7.4 billion from Q4, 2018.

Strong equity market performance and improved industry flow should support a better RSP season than we saw last year. Turning to slide 11, on our results for the fourth quarter, record high average AUM of $164.5 billion, increased 7.6% year-over-year.

Investment fund net redemptions of $141 million during Q4, 2019 were an improvement over net redemptions of $225 million last year. As I mentioned, IGM's Q4, 2019 adjusted earnings per share were $0.84, up 12% from Q4 of last year and represents the highest fourth quarter in our history.

Slide 12 contains the breakdown of IGM's quarterly results across our segment. I'd highlight that earnings at IG Wealth Management and Mackenzie were up -- both up in the quarter relative to Q4, 2018.

I'd note that the Corporate and Other segment reflects the inclusion of IGM's share of personal capital losses of $4.5 million, which we began equity accounting for January 2019. Excluding this amount, earnings increased strongly across all segments.

Turning to IG Wealth Management's full year 2019 and Q4, 2019 highlights on Slide 14, AUM reached a record quarter-end high of $93.2 billion, up 2.6% during the fourth quarter and 12.1% for the full year of 2019. IG'S Q4 gross client inflows increased 7.7% relative to last year, as we continue to have success attracting new high net worth households, which has driven improvements in consultant productivity.

We're also seeing an improvement in gross and net sales during February relative to last year. Finally, IG achieved a number of important milestones during 2019 on our journey to modernize the company and deliver better client and advisor experiences.

On Slide 15, we're introducing a new view of client activity which covers total gross and net flows from IG clients. This view is now relevant with the recent launch of the IG advisory account during Q4.

This new single fee based account enables all clients to hold our unbundled managed solutions, high interest savings accounts and other assets. Going forward, fees will be earned on assets within the account.

On this basis, gross client inflows of $2.5 billion were up 7.7% year-over-year and net client outflows were $112 million. Slide 16 include some additional perspectives of Q4 gross sales.

Sales into our high net worth solutions increased to 27% and to 1. 3 billion.

Better beta also remains a focus with Managed Solutions representing 84% of our long term gross sales. Slide 17 provides more insight into how our client segmentation has shifted since 2016.

I have two main points on the left chart. First, you can see that since 2016, we've increased the emphasis on acquiring new households with greater than 500,000.

Second, we tightened our recruiting standards and are requiring fewer mass market households. This has created some headwinds in our flows, but we're confident of our strategy and that is working with high net worth momentum accelerating in a recent quarters.

And on the right, our National Service Center now has $1.7 billion in AUM and over 200,000 clients. The center is staffed with salaried financial advisors providing clients with smaller accounts, a value proposition and great service levels.

At the same time, this has freed time for consultants to focus on segments with more complex needs. On Slide 18, first, I've mentioned that we've been focused on hiring fewer but higher quality recruits.

Gross sales per consultant with less than four years increased by 17% percent in Q4 relative to last year and we saw even stronger growth of 26% from consultants in their first year with IG. We had another strong quarter of recruiting of over 50% from the same quarter 2018.

These recruits are coming from traditional sources as well as experienced financial planning focused advisors. We're also focused on increasing sales productivity of our experience consultant practices, which saw a gross sales per practice increased by 24% in Q4, 2019 relative to Q4, 2018.

As I mentioned, IG completed a number of important milestones during 2019 on our journey to transform the company, as you can see listed on Slide 19. These initiatives will enhance our competitiveness, fee transparency, consultant productivity and overall efficiency as they get fully rolled out in 2020.

We also have other exciting initiatives planned to further transform our business. Some of these include, digitizing key processes and forms, further modernization of our client portal, enhancing our high net worth products and services, and accelerating our high net worth household acquisition with continued client segmentation efforts.

Before passing the call over to Barry, I'll close my remarks on the slide 20 by providing some perspective on the strength of IG's investment product offering. As I mentioned, we now have unbundled pricing options available to all clients.

These solutions are expected to account for virtually all of IG sales in the near future. With that context, I'm pleased to share an example of the print and digital promotions we've been running earlier this month.

The app feature the strong performance of our Managed Solutions with nine of 14 of IG Wealth Management portfolios rated four or five stars by Morningstar for Series U. Over to you, Barry.

Thank you,, Jeff, and good afternoon everyone. Turning to Slide 22, which shows Mackenzie's full year and fourth quarter highlights from 2019.

Mackenzie's investment fund AUM reached $64 billion at the end of last year, a new record high level and a 15% increase over the course of the year. We saw strong growth in a number of our categories and two, I'd like to highlight here our ETF platform and our alternatives products.

Since launching our ETF business in April 2016 just under four years ago, we've experienced rapid growth of $4.7 billion. Mackenzie has built the sixth largest ETF platform in Canada through a successful organic strategy.

We've also can be continue to be a leader in the alternative products category, which reached 1.3 billion in December. 2017 to 2019 combined with the best three-year period Mackenzie's history on a number of key metrics, including record high total mutual fund growth sales and record retail mutual fund gross and net sales were also the highest.

During 2019 alone, we generate over $1.4 billion of investment fund net sales at a timely advice channel peers experienced meaningful overflows. Mackenzie's rankings by financial advisors is among the best in the country driving strong retail net sales and increasing IIROC and MFDA sales penetration.

Focusing on the fourth quarter, Mackenzie saw record high mutual fund gross sales. We also recorded Mackenzie's thirteenth consecutive quarter of positive retail mutual fund net sales and ETF saw their 15th consecutive quarter of positive retail net creations.

Mackenzie won four Lipper Fund Awards during the fourth quarter and 12 Fundata Awards last month, which we're very proud of. These awards honor funds that lead in delivering strong risk adjusted performance relative to their peers.

Slide 23 highlights Mackenzie's operating results. Mackenzie continues to capture market share versus peers in the advice channel.

Our long term investment funds which includes both ETF and long term mutual funds had a net sales rate of 2.4% during the 12 months ending December 31st, 2019. Record high Q4 adjusted mutual fund gross sales of $2.5 billion increased 5.6% year-over-year.

Total investment fund net sales for $301 million during Q4, and last week we announced January's net sales of $338 million. Mackenzie experienced net redemptions of $86 million in the institutional sub-advisory and other category.

And I spoke on our last call about our strong institutional pipeline. And I'm happy to report that our team continued to add new wins during the fourth quarter, as the end of last year we had over $1 billion of unfunded institutional and strategic alliance net inflows that are expected to fund over the next three to nine months.

$200 million of this fund is in January and is included in the mutual fund sales reported in our January press release. Our retail results are highlighted on slide 24.

Mackenzie's retail sales captured 6.5% of advice channel long-term mutual fund gross sales during the fourth quarter and 7% for the full year. And as I mentioned earlier, mutual funds and ETF are consistently attracting positive retail net flows quarter after quarter.

And we've seen our strong retail net flows momentum continued into January and February. Turning to Slide 25, net flows in the ETF continued to be strong during the fourth quarter.

I mentioned earlier that Mackenzie ETF AUM was $4.7 billion at the end of 2019. During January we exceeded $5 billion in assets and renewing $6 billion halfway through February.

Our ETF assets continue to be diversified across client type and investment strategy with retail making up approximately 45% for Mackenzie's each year AUM. On slide 26 you will see a Mackenzie's investment funds remain strong.

At the end of the quarter, 50% of Mackenzie's mutual fund assets were above median in the three, five and 10-year periods and 47% of Mackenzie's AUM is in 4 or 5-star rated funds. And finally turning to slide 27 to look at investment performance and net sales across our investment boutique, value oriented strategies remained at a favor and a source of our retail net sales results are consistent with that.

Mackenzie's growth oriented boutiques continue to have the majority of their assets rated four or five stars and are attracting significant net sales in the retail channel. Our global equity and income team and fixed income team are also performing very well and attracting assets.

With that I'll turn it over to Luke to review IGM's financial results.

Thanks, Barry. Let's move to page 29 and I'll echo the remarks from Jeff Carney.

Financial markets were very good to our client shareholders in 2019, up 13% and that continued into January down to February with very robust market in a really confident environment. Moving to page 30, the results were pretty uncomplicated this quarter.

You can see on the right, our net revenue rate has been trending at stable at about 1.21% throughout the year. And you can also see the impact of operating leverage with unit costs going down significantly and our EBIT margin increasing 52 basis points in Q4, 2018 to 57 basis points this quarter.

Going to page 31, which is IGM's consolidated income statement, I'd highlight first the bottom left, net earnings of $248 million, up 11.6% and EPS up 12% reflecting an all time record high Q4 results. I have two comments on this slide.

First you can see in point two that non-commission expenses are down 1.1% from last year and our full year result was better than our guidance. Q4 did have some of the benefit of our fund sourcing arrangement that we announced last quarter.

And as Jeff indicated we are keeping our guidance of no more than 3% growth in this line through 2020. And we will expect to provide guidance in H1 around expense outlook for 2021 and beyond as we continue our transformation program.

Second, I would highlight one small thing that we had in Q4, 2019, A few small non-recurring adjustments in the tax provision line were just over $1 million and we would expect this line to be running closer to a 22.4% effective tax rate in future quarters. Moving to Page 32, a few quick comments on IG's debt margins and fee rates.

You can see net management and Admin fee rates of 197. 8 basis points in quarter continue to trend as expected.

We do continue to see an increase in composition of high net worth client clientele with our asset mix and this is continue to impact the fee rate. On asset base comp, I'd give guidance for next year that as DSC which we discontinued selling in 2016, but at the existing [Indiscernible] do mature, we do see upward pressure in the asset-based comp rate and would expect this to be around 53 to 53.5 basis points during 2020.

And offsetting that, on the right chart, the sales commission rate which has been running at about 155 basis points will be closer to 125 basis points through 2020. Moving to page 33, you can see the income statement for IG Wealth.

Earnings before interest and taxes of $206.3 million were up 19.9% from last year. The only comment that I have on this slide is to remind that net investment income and other in Q4 2018 was depressed because of a few fair value adjustments in the period and the $16.8 million recorded during Q4 2019 is more reflective of our run rate from this point on.

I've also given that guidance earlier about interest expenses, they were down 4.8% in the quarter. Part of this was timing of expenditures in Q4 of 2018 and we have given our guidance for 2020, keeping that within that 3% growth.

On page 34, you can see Mackenzie's net revenue rate is stable and this reflects continued strength in retail, as well as a greater proportion of assets in equity products. And then, moving to page 35, I'd just highlight Mackenzie's income statement that we had earnings before interest and taxes of $41.4 million and this was up 16.9% from last year and we do expect continued meaningful earnings growth in 2020 given the operating leverage inherent in the business and the continued growth we're seeing.

That concludes my comments. And I'll pass it back to Kieth.

Yes. Thank you, Luke.

Melanie, we'll open up the lines for call.

Melanie, is a line open?

Yes. We can hear you.

We haven't been able to hear if there's been any questions.

No. If you can repeat please.

Hi. Good afternoon.

Jeff, as we get closer to or making progress on this transformation, if we're having this confrontation a year from now, I'm just wondering how you would define a successful 2020 whether or not there's certain milestones regarding the transformation. Any sort of specific numerical metrics as to how you kind of think about benchmarking 2020?

Yes. I mean we're excited about our momentum and the quality of the work we've done and the investments that we've made into our value proposition, obviously, with the Salesforce implementation which is going really well, which is going to scale our consultants and we'll have modern technology to be able to have better conversations with our clients and be on top of all of our information.

And so, we're really excited with that. That's already in motion.

So that's being rolled out as we speak. We've got a great team working on it and working closely with Salesforce.

From a product standpoint there's lots of great things going on with our product shelf, and it's inspired our consultants by bringing in BlackRock and other big manufacturers and they've been taking advantage of those new products and makes sharing as with their clients as we go forward. But it's a lot -- there's a lot going on behind the scenes that will be coming out in the months to come and -- but we definitely have momentum.

We're landing some projects already and we're excited about what that's going to do to our value proposition.

Okay. And then just on the retail side at IG Wealth, do you have -- do you feel comfortable that at some point in 2020 you'll be able to consistently get back into the positive flows?

I'm feeling very good about this. I mean unless something happens in the market in the next month, but we feel very good about the momentum we have.

We've been building up for the RSP season and we expect to get our share and we're excited about that and our teams are ready to go and they're calling their clients and prospects. And so, we expect to have a strong couple of months here.

And then just my last question dovetailing off of that in this commentary, because you talked about having better our RSP season. Sounds like you've got some momentum into RSPs and also curious as to Barry's comments.

But when you take a look at it overall within the industry like given what we've seen in the industry in terms of improving overall flows, do you feel like it's going to be kind of a normal ish RSP season? Are you feeling this could be a more optimistic RSPs than usual?

Yes. I think it's going to be above average.

I think so. As we've had a tough year and then we sort of had some balancing and then now it's starting to get better again and the markets are giving people confidence and hopefully we'll have a long parts of their markets behaving this way so that we can get through it.

But we're optimistic. We think that there's a lot of opportunities for us to just to dislocate relationships with other providers and we're going after all those opportunities.

Our consultants are very excited about what's ahead of us and we're now having more capabilities around them. They feel more confident in going after those high net worth clients that we want and we're seeing our significant growth in our high net worth area.

And Barry, your thoughts?

Same sentiments, as we all know when we came in to the RSP season 2019 from the market downturn of Q4 2018, it was investor sentiment was the confidence was not there. And what was there was a focus quite bit on fixed income flow.

So, this time around and for a [Indiscernible] Mackenzie, you probably noticed our Q4 in 2019 was quite strong and we felt that coming back very nicely from the confidence perspective and then of course this is just continued in January and mid-February and the confidence momentum is right there. So it's a much better year-over-year certainly.

And to Jeff comment, probably yes, probably above average, a little ways ago here on the RSP season. As you know, Mackenzie being a manufacturer, we tend to get RSP flows in March as well because the advisors are taking in deposits and they deploy that March.

So we have three months to see how it is. We're feeling very, very good about that.

And if I may, because you had a great question on the IG side about how you would define success for 2020. For us as we indicated for Mackenzie we're having a good run here.

We've had three consecutive years, our best three years on many, many measures and so for success for that to continue into 2020 we don't see why that would not. It could accelerate a little bit more in 2020 versus the prior three years which would be a good thing.

We lead with performance, lead with innovation, keep advisors, investors happy. We'd like to see the flows come from multiple channels and multiple vehicles each month and each year nicely geographically dispersed across the country and also having a number of our boutiques succeed.

And so with that, that is what gives us some business diversification. So, yes, overall -- but just to echo Jeff's one on, the markets still remain quite buoyant and confidence is there.

And so, if that takes a turn then I think we're all confident we'll gain market share, but that might pull back some of the flows a bit.

Okay, great. Thank you.

Thanks Good afternoon. Just a question for Luke just on the non-commission expense, has jumped around a bit from quarter-to-quarter.

Luke, can you help us out in terms of timing of how this will trend in fiscal 2020? And also can you provide a bit more color in terms of the Mackenzie's number this quarter.

It was quite a bit higher, $92.6 million?

So, seasonality you can expect it to be similar to 2019 going into 2020, we do have normal seasonality in Q1 with it high and it does taper off and then come back a bit in Q4 given the seasonality of our business and then our promotions. Mackenzie did have some severance in the fourth quarter.

And so that's something that wasn't in the results. That said, we gave guidance for the full year and we're on overall.

And as far as Mackenzie's in 2020 we were expecting 3% growth or better. And any other seasonality it should be in line with the history.

And can you quantify that one time severance?

Yes. It's probably $3 million.

Great. Perfect.

And then just related to this, just looking up maybe beyond 2020 and into 2021, it's kind of 3% growth, how we should think about this line item looking at?

I'd say, right now, Gary, 3% or better is what we've put up there for 2020 and we're going to meet that in the first half of 2020. We are expected to give further guidance for 2021 and beyond.

And we are working through our transmission program. We have number of exciting opportunities that we work on to improve client adviser experience, but also to run our business more and more effectively.

So it will be -- we'll have greater transparency to provide to all of our stakeholders later on this year. But we do expect before June to come up with that announcement of guidance for 2020 and beyond.

Got it. Okay.

And then next question going to the IG consultant count. It was down again 3% versus Q3.

Thought the tone from the Last Call with that was going to stabilize the level off. Just want to hear kind of what the plans are looking out?

I did see offsetting this now the consultant productivity this -- didn't improve year over year?

Yes. It's Jeff.

We're excited. We've got -- historically we've been an organic organization where we brought in people from other firms that are professions that came into our organization and that's great.

But now we also are recruiting experienced consultants. And so we're seeing a lot of takeoffs on that.

They like the culture that we have and they're really excited about being a part of IG Wealth. And so, that's a new opportunity for us and the talent that's coming is generally from the banks.

But others competitors as well. So I think you'll see that continue to go.

And I said in a call before that we wanted to get to [Indiscernible] and that's still our goal and we'll be working on that as we go forward. So it'll take time obviously to get there.

And we say, get it in the first year and it'll be that over time. But we still want to hold standards.

We've done for new people coming in sort of career path versus the opportunity to have some come from industry. So I think you'll see a lot of good things coming out of that and it will elevate our competition as well.

And Gary, it's Luke. I'd add too just as justification.

The math of how we set up our field with consultant practices representing those practices over four years. I make two comments; one, we've taken to our recruiting standards significantly and sort of get that bucket requires four year graduation, and so over time we're recruiting at about 350 people per year.

We have the capacity to recruit more if they meet the standard. But they do have to graduate in four years to get in that number.

At the same time we have natural attrition of people just retiring or otherwise leaving the industry and their quite hell is being reallocated to our existing practices and it is just that those practices are focused on improving their productivity. The average practices size right now is $45 million and there's a lot of room for upside here as we care as a high net worth clientele.

So that's our focus is productivity. And there is some math going on now where there is normal attrition of people leaving the business or otherwise retiring and really recruiting at a certain level.

Now one geographical comment that's what Jeff said, is right now on recruiting experienced advisors we have been including them in the under four year line. Next quarter we are looking to reclassify them.

Over the last two years we've recruited just under 100 those people. They are very productive.

The survivorship is going to be extremely high obviously given that they have experience and we are targeting a little 2000, but there is that geographical issue that we have a very attractive proposition IG. And for the first time ever for a number reasons we are able to attract experienced people to our platform.

And we are doing that. And we'll be providing greater transparency into that next quarter.

Okay. Perfect.

And then just last question for me. Obviously, the model generates decent free cash flow.

Just in the past I know you've invested personal capital, wealth, simple, et cetera. Just looking at 2020 what are your priorities for capital or free cash flow allocation?

Will you look at buying back stock at these levels?

We always feel lower our stock is a bargain. We always -- obviously always feel that way we're very bullish on our future.

We do feel that we've got a noticeable amount of excess capital and we will be evaluating over the period how would we deploy it. Our share buybacks would be would be a consideration and we're looking at a number of opportunities to really enhance our business.

And we've tried to be clear with the things that would be attractive to us whether it be expanding distribution reach or the product and service capabilities of our core firms. So as the year unfolds we'll get guidance on how we do deploy that capital, but more than anything we do not look for it just like you done to having it sit on our balance sheet and productively.

And will you provide that in your Investor Day perhaps?

Absolutely.

Okay, perfect. That's it for me.

Thank you.

Hi. Good afternoon.

Just follow-on on the consultant conversation. You gave some color that you're recruiting experienced advisors, as well as people sort of coming from different industries.

For the advisors that are leaving IG, are they moving to other competitors or are they shifting out of the industry altogether. Is it a mixed?

It’s a mix. Like there's always people coming and going, it's humans.

But there is no material has been going on there. It's just -- people are -- we're always recruiting, so as everybody else.

And -- but there's -- we've got a very stable solid force.

Okay. Got it.

And then IG just on the sales trend. It sounds like the improvement you're seeing in the high net worth side is not enough right now to offset the lower sales from the more mass market households?

Is that the dynamic? And I guess why is it offsetting more so that you're not in net sales positive level?

Yes. It's just the math of turning over the smaller accounts into the larger accounts and that's playing out as we go.

So it takes a little bit of time. So it was a drag because we used to go after smaller accounts and now we're not doing that anymore.

So that's just rolling through and that'll go away. And then our flows go up.

And Graham, just on the strength of -- on Page 16, 17, Jeff walk through some of the highlights. Gross sales were up 6% in the quarter, but it was 27% high net worth.

And so right now that's 6% overall as we're heading into 2020, we're now running at 20% up year over year and that high net worth acquisition is really driving it. Since we have worked.

through not take on clients we should be taking on with under $100,000 and so you're seeing the headwind there and we're doing that for a longer healthier business. But the high net worth strategy is working and we see a lot of momentum there.

We try to illustrate on some of the slides.

So when I look at the market share of IG relative to the banks and the advice channel is that why you should have given us some market share, because that shift away from the mass market?

And there's two elements to that, Graham. One is not taking on the clients that traditionally we're taking on as we've changed our emphasis.

And the other is not recruiting people who otherwise when makes in the business. And those people they used to bring in the clientele and most of the clientele were in that same segment.

So that is a short term headwind. But the long term tailwind is happening with the high net worth improvement.

The other thing I would guide -- we would guide is just around comparing us to the industry that IG as a dealer and one of the enhancements that Jeff walk through is that we will be more focused on giving disclosure around our AUA as oppose to our AUM, because that is really the measure of the clientele coming into our dealer.

And on that last bit the fees that you get on the AUA. Where does that flow through on the administration line in IG or where do we see that?

I think that's a question that we're expecting. With the announcement of the IG Advisory count and move to unbundled, we are not charging advisory fees on third party business.

And so we are enhancing our disclosures at next quarter and I highlighted that a few quarters previously on the call that because the change in the character of our business we will be changing our disclosures to better reflect the fact that we're charging our advisory fees which is the largest component of our revenue on products that go beyond our AUM.

Got it. So its already in there right now where you just going to break it out?

It's a good question. Right now it's embedded to the extent that we haven't bundle.

Its embedded in the management fee line. Going forward we will have a wealth management revenues line and we'll provide the detailing of the advisory fee as opposed to the product program fees.

And we're also fully transparent in our fees.

Understood. Okay.

That's it for me. Thank you.

Yes. Thanks.

Good afternoon. Just ask me further about the transition at IG Wealth and the impact on the flows.

When you embarked on this movement more into high net worth, did you envision that the flows would suffer? And when would you declare victory in that, okay, now we have the platform that we want?

And would there be a lag impact you would see on flows like after that. Or like how long before this transition in terms of your business and then this transition in terms of flows would be expected?

Its happening right now. Like works going through it.

So it's say, well I'll take that long. But we're going through that process right now.

If you plan to ultimately just service only high net worth clients?

Yes. Clients over 500,000 [ph].

And when you embarked on this thing, did you envision this transition plans -- did you envision that it was going to hurt flows?

Yes.

Okay. Then maybe…

We -- I mean I try to say this on the calls many time, but we were competing against 500 now, like that's where we're taking the model. That's why you're investing in all this technology and Salesforce and everything else.

We believe by having -- every one of our consultants have to have CFP so that they can unlock the full potential of every one of our clients and that's our whole strategy and we're using the best resources globally to do it including Salesforce and other suppliers including BlackRock and others and we're just a puzzle that puts it all together and using all of these incredible capabilities differentiates us from everybody else. And then our consultants are going to become much more productive as a result of that.

And they'll be using the skills that they actually have that we're really using for clients we're in $100,000 now they're doing it with millions and five million and $10 million clients, because that's what their expertise is. And we think we can be the very best at that and that's why I love this company from the day I came here is that we're grounded in all the knowledge you need to unlock the full potential of every client.

And we want to make sure and I use this word, but we want to make sure there's no leakage in their savings. So we want to be able to unlock every possible capability of how they can save for their families and what they're trying to achieve with their charities or whatever else it is.

And it's by making sure that we monetize the full potential of that client. And everybody wins obviously, because if we do that the client wins, which is the most important thing in their families.

The consultant certainly wins because they're monetizing the full potential. So then they can be able to do that.

And that I'll drive their compensation and obviously the firm went huge because you've already got a lot of clients on the books and we're bringing in more clients now than we have historically in two ways went through with taking consultants away from other firms, but also our ongoing organic growth of our consultants. And when we get to that 2000 teams and they're all productive and they're delivering that value proposition, I don't know how anyone beat us.

Well, hey, appreciate the color and the passion there. Luke, I think you mentioned something on Slide 31 about tax guide.

Should we just expect the same kind of tax rate or did I hear you mentioned something different?

Right now, the tax -- the effective tax rate was a little bit elevated this quarter because of onetime items. So I just want to give that guidance that we're running close to 22.4% in effective tax rate.

So I want to make sure people are clear on that. And obviously there's a few things that cause it to bounce around including the proportionate share of equity coming for investments.

But I just want to give that guidance because it was a bit higher in the quarter.

And so, what is the guide for the tax rate then?

22.3%, 22.4%

Okay. Great.

And then the last question is we saw you were a majority shareholder restructure. And they're working towards more of a financial services focus now at least somewhat of a change in strategy or more focused strategy looking at building out their alternative asset platforms as well.

Is there any way that you guys see IGM fitting into that mix going forward? Or is it just sort of just business as usual for GM given the restructuring of your parent?

Is a question on the simplification of their structure what we thought.

Not necessarily simple, but then the more focus on financial services. Is there any kind of way of as they focus on alternative funds, is there anything that -- is there any way that you guys benefit as a downstream company from that?

Obviously, we have gone from conversations with all the power group companies and other leaders and share what is going on and if there's ways to partner with any of them we're going to definitely have that opportunity. I know that there's some work being done on that and there's certainly more demand for alternatives and sort of liquid alternatives which Mackenzie's already done a great job at.

But we want to be in that space too and we want to be able to offer that to our consultants within IG Wealth, because they’re going to -- the clients will demand it and we want to make sure we have it and Barry's got a great experience in that space and knows a lot about it. So, we will definitely be a big player in that space.

Yes. But there hasn't been any specific discussions in terms of their revise strategy now with you guys at all?

Has there?

For us it's really as a IG Wealth where we can hire any one, right. So we go and look and find places to go.

But we've already got liquid alts. So Barry is looking at that space as well.

And again, he's got a lot of experience in that space. So we'll see how that plays out over time.

But it's obviously, there's more demand for it. You can see the clients are asking for it.

We want to be a big part of.

Great. Okay.

If I could add to Jeff's comments. Just independent of that, as you mentioned, the alternative space is obviously very large and growing very fast globally and we've been trying at Mackenzie for a manufacturer perspective to continue to monitor trends globally that may or may not come to Canada.

You've obviously seen us build an organic ETF platform quite successfully. We've launched a number of social investing funds now that are growing very very nicely.

And then in the alternative space obviously we've launched and focused quite a bit on the liquid alt site because that's how the individual investor can access these return patterns. But we're always watching and looking and assessing the attractiveness of the internal space independent of our parent company, because it is a full service asset management company and it's an area that we can monitor and evaluate and then we'll get to that at the proper time.

Okay. Thank you.

You're welcome.

Good afternoon. On your 2020 SG&A 3% or better guide, if you look at an investor group and Mackenzie platform in isolation, is there one of the platforms where you're spending more, say on the IG transformation plan?

I'd say, right now, it's clearly at IG. So a lot of the things we're working on, let's just starting with the move to unbundled and that's a company with the migration of all of our clientele, our nominee, our platform, our dealer platform.

So that's been a lot of work. That's been over six years and especially the last two that will have been $140 million dollar program and we're just nearing the completion of it in the coming few months.

So that's been a lot of investment and it really does. Not only has the products that we bring to market and the ability to have a fee based account, but it really doesn't have the advisor client experience and we're so pleased that that migrations could be done mid 2020.

On top of that the advisory portal with Salesforce was another big investment for the IG network to really accelerate their relationship with the clients. And another big investment view on the brand relaunch and an enhanced marketing with the financial well-being score and all the work around helping to quantify on 100 point scale you know how optimize our clientele, our financial well-being is and we believe that's industry leading.

So those are some of the key things that we work in at IG specifically. And then on top of that it's all the transformation work around IGM's operation and we've planted a number of flags over the last few quarters and I'm giving updates on that and there is more in the works.

As Mike dipped and all of us are working on bringing that five year transformation from the life and really realizing all those opportunities to outsource or automate and really drive efficiency.

Right. Go ahead.

I'll add Mackenzie perspective. We're -- Mackenzie, we're feeling good about our ongoing investors are making n the business to remain relevance and have the curve.

We've probably seen those launch of the new products because it's all about innovation and attracting scale and so we've been watching to three years now again ETFs and SRI and liquid alternatives. We've announced late last year the information of a dedicated alternatives team under Michael Schnitman..

We announced also dedicated SRI team under a lot of work we're doing it for our Chinese partners for CMC. We continue to expand our distribution, retail distribution and our institutional institution.

So that's not been a constraint for us at all to do that. Looking at more digital wholesaling in Canada using more data and more virtual digital applications approach to enhance productivity over wholesalers.

So yes, it's -- for us the ongoing investments of the organization at Mackenzie and the firm should remain relevant and continue to fuel this nice tree and we think multi-year momentum that that we're part of that the some of the investments aren't just significance and transformational as our IG partners. But as Luke mentioned there's the IGM transformation, sourcing of fund services and other aspects that benefits all the operating companies within IGM including Mackenzie and obviously IG and others.

Thanks for the question.

And Barry, just on the institutional side, the $1 billion that's unfunded. Can you give us a flavor of what asset classes that might have been in?

Well, we're happy with that we're getting a nice variety. We don't mind getting a billion plus and one strategy any time, but we're actually -- it's been a combination of emerging market equities, global fixed income, U.S.

long short in the alternative space and global equities. So it's a nice variety.

We've got -- so the pipeline is strong -- we expect more wins in the next little while which will announce for you. But those are all wins announced and as institutional role then you want to start to show you the pipeline in terms of formal approved wins and then there's the funding period where you have to onboard those assets.

So what we'll do going forward you've done last couple calls now say here's what the wins are and here's how much is funded, here as much as unfunded. So first $200 million of that came in January.

And so we announced that in our flows January. So we still have over a $1 billion unfunded wins that are coming in Q2 and Q3.

Do you think the strong pipeline can offset the general headwinds on the institutional side including Mackenzie in terms of of depositive sales?

No. You're raise, if you don't mind raising a topic in terms of definition of institutional.

So, we probably should pass it over into two categories which we do, because we have an institutional team and they go after one group are Canadian platforms dealers et cetera, the bank platforms and others who are very sophisticated consumers and they actually evaluate and hire managers with an institutional lens, we call institutional sub-advisory let's call that. And then there's the peer is called the traditional institutional, which we're also winning and where those are pension plans and the investment consultants who are very influential in those buying decisions with their clients.

And those are in Canada. But also as I count in the U.S.

and Europe also. So I don't want to confuse you, but we could parse that out going forward.

But those are two types of institutional wins. It is common for managers to classify institutional business to include both sub-advisory as well as the traditional pension plan the domination wealth fund type and endowments foundation type of winds.

So we being able to categorize it as one also.

So, yes, definitely. And out of those two, which one is kind of more demanding.

Mackenzie, I assume it's the former sub-advisory into bigger institutions?

They're both -- we're winning in both. It's we're very focused.

Like we're not out there you know trying to be machine gun look at all of our strategies. Its a very handful selective institutional quality strategies from our boutiques that we're marketing.

And we've been actually successful right now in both of those categories. The latter one is just recently.

We've been building out up hard to get out there and speak to the institutional consultants, get on their radar screen and get on along with, get on short list, the sales cycles quite long. So we're getting some nice traction.

There are still early days and they're very focused. But yes, on the former is the one that also has been growing nicely for us the sub-advisory and has been across multiple ending.

And just last question for Jeff. In your opening remarks, you talked about -- we've seen the best equity markets in 2019 since the credit crisis.

But yet your EPS was $3.19, in the prior year $3.29. So how do we kind of think of kind of growth during this transition at IGM earnings growth?

Earnings or growth.

Earnings growth.

Yes. Well, that's foolish for all here for that.

So we're very excited about our value proposition as I said. It's -- we got our print like it at the end of the day year you'll have to see how we do.

But I can't give you a forward looking results here. So I'm not going to go there.

But we've put a lot over the last three or four years into IG Wealth to make it the leader in the industry and the value proposition as we've been told you about the clients that we're going after and we're getting traction and our consultants are getting more confidence. And so, the momentum is building.

And so you're going to yell at us every quarter and we'll see how we do. But we believe that we're going to have a long run here because of the value proposition, but also because the quality of our teams and the consultants that we have.

Okay. Thanks.

There's a lot of operating leverage here. And I would highlight with the 2019 remark, our average assets were only up 3% a result of the timing of equity markets coming down in Q4 2018 and coming back up.

So there's a lot of lift going into 2020 and with that we have fixed cost base. There is just a ton of operating leverage of that business and we're going to work here for double digit earnings growth and that's what we hold ourselves accountable to.

Okay. Got it.

Have a nice weekend, long weekend.

Thank you.

Hi. I'll try to be brief.

Two follow up questions. Just Luke, you throw some numbers.

So I'll make sure I heard them correctly. Asset based rate is going up from 52 to 53 to 53.5 basis points.

Is that right?

Yes. That's right.

And then the other one you said, I think was the sales based commission rate was dropping down?

Yes. That's right.

So, we're still going through that. We're just continued DSC in 2016.

So we still have some legacy DSC on the books as the DSC continues to mature. Asset based comp goes up at that time.

And so that's going to continue to go up. But at the same time sales based compensation is coming down.

And so that'll be about 125 basis points next year and you have the right numbers for the asset based guidance we gave.

And that compares to that sales based rate?

Yes.

156 this year?

So its 225 [ph].

Yes. Okay.

And then my last question is, do you guys provide any numbers or have you talked to about sort of the number of households that your consultants are servicing that are greater than 500,000 relative to the number of households that are less than 100,000, sort of how that's evolving?

The best disclosure we have is the -- we've obviously provided rich disclosure on the component of our sales that are high net worth solutions versus those that are not. And we have given the share of our assets that also relates to those different client segments and that's the level which will continue to do that.

And the other thing we've done in our investor materials is to actually show our market share in each of those segments and so in the -- what we call the mass afterwards being 100,000 to a million, our share is 5% of all Canadian savings. Where in the -- we call high net worth as opposed to ultra high net worth, the million to 10 million category, our share of Canadian savings is 2%.

And that's where we're focused. We know that our financial planning is most suited to those with concrete needs and it is just that we believe we're the best at it.

And so that's where we're focused is building our share in those categories and we will help to furnish you with transparency and it's where flows are coming from and growing. And right now as you've seen, we have really moved are our practices not to emphasize households with under 100,000 unless they have the character that they are going to grow into a client with more complicated needs.

So you see that headwind which is a near-term phenomenon and we're so pleased with the success we're seeing and actually seeing that amplification of acquisition of high net worth clientele, because that's what our strategy is about.

Okay.

So I said in another way. We're not we're now at 58% of our sale activity go in the high net worth solution.

And we're also over 50% of our assets with high net worth clientele. And that's going to be the continuation of a trend.

Okay. That helps.

Thank you.

Thank you, Melanie and thanks for those joining the call today. Wish everyone a good weekend.

And with that, I'll close the call.