IGM Financial Inc.

Good morning, and welcome to IGM Financial's 2020 fourth quarter earnings call. Joining me on the call today are James O'Sullivan, President and CEO of IGM Financial; Damon Murchison, President and CEO of IG Wealth Management; also 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 the cautions concerning forward-looking statements on slide three of the presentation. Slide four summarizes non-IFRS financial measures used in this material.

On slide five, we provide a list of documents that are available to the public on our website related to the fourth quarter results for IGM Financial. And with that, I'll now turn it over to James.

Well, thank you, Keith. And good morning, everyone.

Before we jump into the quarter, I'll start with the highlights for the full year 2020. As we reflect on the year, it was certainly unlike any we've seen.

Yet despite the challenges, our business and people face during the pandemic, we continued to build momentum. We achieved record high AUM&A of $240 billion, which was up 26% from last year.

We achieved record high new flows of $7.1 billion, up from net redemptions of $1.7 billion. And we delivered strong adjusted EPS of $3.20, which is up slightly from 2019.

As I spoke to on the Q3 call, we also made significant progress on business transformation initiatives with the objectives to enhance back-office efficiency, and elevate the client and advisor experiences. To build on this, I'd say we are about halfway through our modernization journey, and as much to do in 2021 and beyond to digitize our back-office and hit full stride on our outsourcing and productivity focused initiatives.

Finally, we were very active adding scale and new capabilities to drive future growth through acquisitions. And in the case of personal capital, monetized an investment that we believed was the best way to create value for our shareholders.

We were able to achieve these results by quickly transitioning to a work from home environment in March, and focusing on the health and well-being of our people and clients during 2020. On behalf of the leadership team at IGM, I'd like to thank our employees, consultants and advisors for their commitment and resilience throughout 2020.

Turning to slide eight on Q4 2020, highlights for IGM. Overall, I would say business momentum accelerated in Q4.

We achieved record AUM&A in the quarter of $240 billion, up 6.7% excluding acquisitions. We also achieved record high total net flows of $2.2 billion with strong results for IG Wealth Management and record high net sales at Mackenzie.

IGMs Q4 earnings per share were $0-96 and adjusted earnings per share were $0.86, up slightly from last year. EPS included a non-IFRS adjustment, primarily consisting of a gain on the sale of the Quadrus Group of Funds.

I'm proud, I'm very proud in fact that IGM was recognized by Corporate Knights, as one of the top 100 most sustainable corporations globally. And as the top rated investment services company.

The Global 100 assesses several performance factors, and IGM strong showing was based on above average results for clean revenue, female representation at the board and executive level, racial diversity, carbon and energy productivity and certain important HR practices. Finally, to close out a busy year, we closed the acquisitions of GLC, Greenchip and Northleaf during the quarter.

Turning to slide nine on investment returns. Q4 2020 saw a strong equity market increases across all major indices with low volatility.

While fixed income returns were flat. Overall IGM's average client investment return of 5.5% was strong during the fourth quarter.

We've seen equity markets increased further so far in 2021, with client investment returns averaging approximately 2.4% year-to-date, February 9. Turning to slide 10.

Q4 long term mutual fund net sales were $16.4 billion for the total industry, and $7.2 billion for the advice channel. This is the best fund industry Q4 net sales in history.

We’re encouraged by the momentum of the industry and at IGM as we complete the RSP season, and look forward into 2021. Turning to slide 11 on results for the fourth quarter.

Average AUM&A of $202.2 billion increased 7.9% year-over-year. With the closing of GLC on December 31, we had scale to our platform, and ended the year with AUM&A of $240 billion.

IGM's Q4 2020 adjusted net earnings per share of $0.86 were up slightly from last year. As I commented, net earnings per share of $0.96, primarily reflects a gain on the sale of the Quadrus Group of Funds.

Slide 12 highlights quarter-over-quarter and year-over-year EBIT contributions from our segments. The year-over-year increase in adjusted EBIT was driven by the asset management segment, and China AMC, which are up 14.5% and 63.9% respectively.

Slide 13 details the strong improvement in net flows across all segments, during both the fourth quarter and full year 2020. Q4 2020 consolidated net inflows were an impressive $2.2 billion and $7.1 billion for the full year.

I've spoken before about the momentum that is building across our businesses. This slide very well demonstrates it.

We are well-positioned to complete the modernization of our businesses and business processes. With a strong focus on net flows, net sales and expense management, we look forward to delivering a strong year for our shareholders.

I'll now turn the call over to Damon to review IG's results.

Thank you, James. Turning IG Wealth Management's Q4 2020 highlights on slide 15.

We are pleased to report record high AUM and AUA. AUA ended the year at $103 billion, up 5.9% during the quarter, driven by strong client returns and net flows, record high gross inflows for the period were driven by a combination of new client acquisition and contributions from existing clients into IGM investment accounts.

From a consultant productivity perspective, gross sales per Consultant Practice increased 19% relative to the same quarter last year. And as we've talked about in the past calls, we are attracting more experienced advisors with existing client relationships in AUA that is being transferred to IG Wealth Management.

IG's fourth quarter net sales were positive $485 million, the best Q4 in over two decades. We want to turn to slide 16.

It demonstrates the building momentum in net flows across various time periods and on a 12-month trailing basis. The chart on the right illustrates how COVID has masked some of the momentum we have in this business.

We entered 2020 with a strong upward momentum in both gross and net flows, until COVID sent - send everyone home. We had a transition period and allow us to develop tools, skills and the expertise to provide advice remotely.

And our mental - momentum returned in August through to the end of the year has continued into 2021. In January, we had net inflows of $182 million and over $1 billion on a 12 trailing month basis, fueling our net sales of $105 million in this past month.

Turning this slide 17. This shows our typical overview of operating results for the quarter.

Here you can see positive net flows momentum is driven by higher gross inflows and lower gross outflows rate. Our IG net flow rate was 1.1% on a 12 month rolling basis, showing our progress, but let's be clear here.

It's still early days and we're building momentum, and we have not hit our stride yet. Turning to slide 18, I'll take you through a deep dive into our AUA growth and net flows and explain how AUA transitions into AUM.

To orient you to this slide briefly, we have a table on the left, which shows a change in our AUA during 2022. On the right, we break down our Q4 2020 net flows into two key components described - to describe what we're seeing.

The first component of net flows or buy, sells and switches within IG client accounts. The second component are incoming transfers from other dealers.

And just as a reminder, we are an advisory [ph] on AUM, which represents 65% of our revenue. So looking at the first point on the page, we're hauling the net buys of $140 million into Mackenzie investment funds.

IG consultants and clients have access to an approved list of select Mackenzie products to cover categories where IG currently does not offer solutions. IGM earns full margin on these assets.

But these flows do not show up as mutual fund net sales at IG. And as you can see, 95% of the total investment solutions sold at IG Wealth Management are IGM solutions.

The second and third point deal with third-party funds and security. So let's go to point number one.

And we'll highlight the $373 million in third-party funds and securities transferred in-kind to our firm. This is directly connected to our success in building new client relationships and consolidating existing client investments at IG Wealth.

With our focus on mass affluent and high net worth, we expect to continue to see momentum here. Point three, as we continue to transfer in securities in-kind, we expect to see a significant portion migrate to our IG Managed Solutions.

As you can see, in the quarter $125 million migrated to our solutions. And the fourth item on our AUA growth, as expected, we are seeing an increase in cash balances, as we migrate our clients to our nominee dealer platform.

While we had a migration with the high interest savings account in the first half of 2020, in cash transition to client accounts in December from year end distributions, we do expect this level of transfer in cash balances to increase over time, given our attractive rates. This provides a tremendous opportunity to put this cash to use as our consultants work with their clients.

Turning to slide 19, I want to focus on the productivity growth of our network, something that is key to our strategy. We are more focused business driving to work with more mass affluent and high net worth Canadians.

Our belief is that, as we match our financial planning, skill and expertise, with the complex financial planning needs of the segments, our consultants productivity will grow, as we bring more clients on board with more meaningful assets. We continue to see significant increases in productivity across the board.

Productivity over one to four year consultants was up 8% versus Q4 2019. And our experienced consultants up 19% year-over-year.

We're just getting started here and have lots of upside, as we continue to execute our strategy to go up market, recruit experienced financial planners and complete our transformation focused on in - the advisor and client experience. Turning on the last slide, slide 20.

Our customer value proposition is rooted in marrying the benefits of a dynamic living plans with a strong long-term advisor relationship and well-constructed managed solutions. Being able to deliver on dynamic living plans is core to who we are.

I'd like to highlight the rollout of our next generation of the IG Living Plan. We rolled it out in December to elevate our client experience and consider it to the leading-edge.

The tool allows us to show our clients their entire financial picture in ways that are easy for them to digest. It enables us to work with What If scenarios with our clients in a simplified, accessible way.

And it empowers us to use Artificial Intelligence to determine planning strategies, which are deeply customized to each individual. It's this combination of leading-edge financial planning tool with a deep expertise of a credentialed advisor that we believe gives us our competitive edge, as we strive to work with more mass affluent and high net worth Canadians, who have complex financial planning needs.

Now I'll turn it over to Barry.

Thank you very much, Damon, and good morning, everyone. I'll take up to page 22, where I'll begin my comments on Mackenzie's Q4 results.

So AUM reached a record high of $186.8 billion, up 10% for the year with a total annual net sales of $6.25 billion. The percentage increase excludes the incremental $30.3 billion relating to the acquisition of Greenchip and GLC and the impact of a disposition of the Quadrus Group of Funds.

Net sales were a record high $1.7 billion during the fourth quarter. The momentum we're seeing is truly broad-based across Mackenzie, foreign equities, Canadian equities, balanced and fixed income categories, all generating positive net sales.

Both our retail & institutional channels delivered positive net sales in this quarter, marked our 17th consecutive quarter of positive retail investments fund sales. We enhanced the capabilities of our investment management organization with the completion of a number of initiatives during the fourth quarter.

We executed our succession plan for pass Chief Investment Officer, Tony Elavia, who retired on December 31, by appointing Steve Locke, CIO of Fixed Income and Multi Asset and welcoming Lesley Marks to Mackenzie to take on the role of CIO Equities. I have full confidence that Lesley and Steve will lead our investment management team to build on Tony's legacy of success.

As James touched on earlier, Mackenzie acquired Greenchip Financial this past quarter, a highly regarded Canadian firm focused exclusively on the environmental economy since 2007. The Greenchip team is now set up as a Mackenzie Investment Boutique, focused on environmental thematic investing, and continues to manage the top performing Mackenzie Global Environmental Equity Fund.

And lastly, with the close of the GLC transaction, we added a new Canadian equity investment boutique and welcome a number of new investment professionals to the Mackenzie family. Slide 23 demonstrates the exceptional Q4 and full year 2020 investment fund net sales at Mackenzie and how we've seen this momentum extend into the RSP season.

January investment fund net sales, excluding institutional fund allocation changes were a record high $779 million, reflecting a continuation of our success in the retail channel. Slide 24, highlights Mackenzie's Q4 2020 operating results.

Total mutual fund gross sales of $4.5 billion were up 74% year-over-year, the strong increases in both retail and institutional channels. Retail investment fund net sales were $1.3 billion, including $1 billion for mutual funds and $300 million from primarily active and strategic beta ETFs.

Mackenzie's long term investment fund net sales rate was 5.5% at January 31, 2021. This represents significant organic growth at Mackenzie.

And finally we had 60% of AUM rated four, five stars by Morningstar, which continues to be close to a decade high levels. Slide 25 displays the investment performance and retail net sales across our investment boutiques.

I won't review this in detail, but you'll see us - you get a sense rather for the breadth of our momentum from the information on the slide. And you'll note the new Greenchip boutique experienced strong retail net inflows during the quarter.

Slide 26, relates to two of our growth catalysts, sustainable investing and private markets. As announced in December, we acquired Greenchip Financial to form a new sustainable investing boutique focused on environmental thematic investing.

The team's expertise and energy transition and climate change will help us meet a growing retail and institutional demand that has accelerated in 2020 and into 2021. The Mackenzie Global Environmental equity fund has net sales about $200 million in the fourth quarter, and additional $194 million in the month of January alone.

We are excited about this offering and our plans to expand upon this new global balance fund and global sustainable bond fund that we expect to launch shortly. And this isn't just a large opportunity for growth at Mackenzie, but also an important step to address climate change and to support the IGM Group of companies commitment to the recommendations of the Task Force on climate related financial disclosures.

I also talked about Northleaf on our last call and as a brief update, and very excited to announce, that Mackenzie now has Cetus [ph] a private credit offering memorandum fund in January with Chris Levis [ph] in place and the first capital call is expected on April 1. We also launched the Mackenzie Private Equity Replication Fund which will be used as the liquid component of their private equity OM we plan to launch later this year.

And we also have plans to bring infrastructure products to life in the near term. Standalone, northeast experienced solid net commitments in Q4 and has made great progress work with IG Wealth, and Great-West Life to bring additional private market strategies to their respective businesses.

Another driver of growth is China, and China AMC on page 27. While we are extremely proud of the momentum we are seeing in Mackenzie, China AMC was in the league of their own in 2020.

China AMC organically grew their AUM by 42% in the year and China AMCs fourth quarter 2020 earnings grew an impressive 49% year-over-year. And as James mentioned, the earnings contribution to IGM in Canadian dollars increased 64% over the same time period.

We remain very optimistic about the long term growth profile of China AMC and the Chinese asset management industry as a whole. I'll turn the call over to Luke.

Thanks, Barry. Good morning, everybody.

So a few quick comments on slide 29. First on the left, we closed the period with $240 billion.

This was a very strong quarter and a quarter we're proud of and excluding the $30 billion in acquired assets, our AUM&A grew by 6.8%. Year-to-date 2021 has obviously been good to us.

And we were up over another 3% due to financial market increases and continued strong net flows. On the right, I'd remind in the quarter we had record high net sales of $2.2 billion, which was an annualized net sales rate of 4.4%.

And on the left, I'd remind you that as a result of huge D [ph] that we all live through during 2020, our average balance at AUM&A during the year was relatively unchanged for the balance in 2019. And with things where they are right now, we're rolling in meaningful growth into 2021.

Going to page 30, you can see our quarterly EBIT on the left and our EBIT margins as a percent of AUM&A on the right. On the left chart, I highlight here that we have an additional $70 million in our fourth quarter expenses.

They're driven by strong sales performance during the quarter. The first item we've highlighted is wholesale and commissions at Mackenzie, which were up by $10 million.

This is $10 million is a true-up for a full year of activity, and it's driven by retail gross sales and net sales to Mackenzie. As you'll see in a couple slides, retail sales were up over 50% in the quarter and net sales quadrupled.

I'd also remind that these commission's are not capitalized, but are expensed as incurred in spite of the fact that we're going to earn revenues over the holding period in units, which tend to average seven years. Similarly, a component of the corporate bonus is driven by market share net sales activity.

And as a result of strong sales activity in the fourth quarter, this element of compensation increased by $6.5 million. On the right hand side, you can see that our net revenue rate was stable at 103 basis points.

And excluding the expense items I described just a second ago, our EBIT margin was similarly very stable in the period. Going to page 31, you can see the consolidated income statement for IGM Financial.

First, we've highlighted IN the first two points, the geography of the wholesaling commissions and the corporate bonus adjustment in our business development line and our operation and support expense lines respectively. In the business development line, I'd also remind you that this lines up seasonally in the fourth quarter, as we ramp up advertising in advance with the RSP season.

In points three in the bottom right, we're also highlighting that the tax loss consolidation arrangements that we've enjoyed with our parent company for a number of years, has discontinue in the fourth quarter of 2020. This was running at about $2.8 million for quarter.

Turning to page 32. I'm going to apologize in advance.

This is a very busy slide. But it's something I want to make sure we spent a moment on walking through how our Mackenzie business development expenses should be expected to behave in relation to the retail sales activity we're putting on, given the significant momentum we're seeing in the business.

First, I'd like to highlight in the top half of the page, the retail sales results, and then I'm going to pivot to the bottom, where we talk about the expense and how it interplays. So on the left you can see our last four months trailing gross and net sales for retail mutual funds at Mackenzie, you can see in the light blue line, we've been trending at about a $1 billion per year in net sales for the last four years.

And you can see starting in August, something's happening. And we start to see very meaningful improvements.

In fact, we net sold a $1 billion in the fourth quarter, which is where we've been trending for the four previous annual periods. We're pushing with what we got right now.

And you'll see we're running it over $2 billion, and the line continues to steepen as we travel through 2021. We've added four dots there to give you four possibilities to help you understand how expenses will behave in 2021.

In the chart in the middle on the right, you can see our quarterly and annual retail sales results on mutual funds. And this gives you the context to see how Q4 was a breakout quarter.

And why we did have this unexpected true-up for a full year retail sales commissions. On the very right, we show those four sales possibilities for 2021.

And you can see in the charts, we are up 53% year-over-year on Q4 gross sales. And you'll see from our January results that that's continued into 2021.

On the bottom, we've highlighted the business development expense line. This line is comprised about 20% to 25% commissioned their sales base, about 25% advertising, which is discretionary, and the remainder is other people and promotional expenses.

As mentioned, all of this is expenses incurred and generates retail sales that contribute a margin of about 1% of assets per year over an average seven year holding period. If you follow the business development expense line across, you'll see that extra $10 million true-up into for 2020, as the expense was $28.3 million, up from $60 million [ph] in the prior quarter.

I'd also highlight if you keep falling across to the right, you'll see that this line item was $80 million for the full year, unchanged from 2019. I note when considering commissions, we reset the bar every single calendar year.

And for 2021, the bar has been set much higher than 2020. At the right, you can see how this expense is going to vary based on sales activity.

If gross sales improved by 20%, you can expect this expense to go up by five. If gross sales improve by 50%, this expense will go up by 20.

And we'll keep engaging with you on a quarterly basis to help you understand how this expense is traveling in relation to sales we put on. Last point before leaving this slide, I should highlight, we're obviously pushing for continued 50% year-over-year growth.

As you heard from Barry, we have all the conditions for success and we're leading in. We have the number one sales organization in the contrary.

We have a broad range of compelling and relevant products. We have very strong investment performance, and we have a very stable market environment.

Turning to page 33, and bridging on those last comments, I am giving some guidance help you understand how expenses will travel in 2021. As mentioned, in business development expenses, there is variability based upon sales and other volumes and results of meaningful discretion that management has to manage expenses.

At IG, we expect this to be under 3% this year, and we're going to manage this. At Mackenzie, we're given guidance for 5% growth, and it's highly in the prior slide.

There's a lot of variability with sales and meaningful discretion in this line. And we'll keep you posted as we travel through the year.

You'll see in point one at the bottom that there's a theme on expenses next year, that there's significant business momentum at Mackenzie, and we're leading in. In the operations and support line for Mackenzie, you'll see that we're planning for 5% growth before the expenses from acquisition.

And this growth has been driven by investment in a number of product opportunities that we'll bringing to life. We'd encourage you to do the math on Mackenzie's earnings trajectory.

There's a lot of operating leverage in this business, and we're expecting significant earnings growth based upon where we're traveling and where we're sitting right now. And then operations and support expenses.

You can see we're expecting IG Wealth expenses to grow by less than 0.5%. We believe we have the resources we need to compete and win.

And as you saw in the intersection, there's strong momentum in the business traveling into 2021. Moving to page 34, you can see our fee rates for IG Wealth, I have a few remarks.

First, you can see their advisor fee rate was 105 basis points during the quarter. I’d remind, that this weighted average fee rate varies based upon the composition of our clientele.

As we bring on more high net worth mass affluent clients, it puts downward pressure on this rate. Similarly, as our clients migrate into higher wealth tiers, as result investment returns generated for them, it puts downward pressure on this rate.

Over the coming two quarters, we'd expect this rate to decline by about 0.7 to 0.9 basis points per quarter. And we will keep you apprised of developments on high net worth client acquisition as the quarters travel through 2021.

Second, at the bottom, you can see our sales based compensation rate. While commissions at IG capitalized and amortized, we want to remind you that we have one final year of these commission rates dropping, as part of our migration away from deferred selling commission products a number of years ago.

In 2021 and beyond, you can expect this rate to be closer to 105 to 110 basis points of gross inflows, down from 120 basis points its been trending at. Moving to page to 35.

You can see the income statement for IG Wealth. The only comment I’d make on this slide is to highlight that sequentially both our other financial planning revenues and our other product commissions are up as a result of the seasonality in the sale of insurance products.

I'd also highlight an increase in business development expenses from Q3, as we did ramp up advertising heading into the RSP season. On page 36, we've another busy slide.

And I do apologize, but we've added this slide to help you understand how our AUM at Mackenzie has changed with the acquisitions of GLC and Greenchip, as well as the divestiture of the Quadrus Group of Funds. And you'll see there's a lot of moving pieces.

I'm not going to walk through the waterfall chart in the table, but I would make the point, that is part of the divestiture of the Quadrus Group of Funds, and as part of Canada [ph] like establishing their own mutual fund complex. We've had a $13.4 billion transfer out of our investment fund reporting.

And we've added $43.5 billion into our sub-advisory reporting of institutional SMA. We put a footnote right at the bottom that pro forma for these transactions, Mackenzie now still advises $47.2 billion to Canada Life.

And this represents 42% of their Canadian individual and group channel assets under management. On ongoing basis, we're going to call it - this is an important relationship for us and we're going to share - the share of their AUM that we represent and the associated revenues that we're generating, and you'll find these disclosures coming in Q1.

I'll also advise that you can find the detail of how Canada Life’s individual and group businesses are traveling in their entirety within the Great-West Lifeco supplemental information package that's available on a quarterly basis. And this will allow you to see how Mackenzie is addressing their AUM.

Moving to page 37, you can see Mackenzie's operating metrics. And we've given some guidance on the slide how to model the impact of the GLC and Greenchip acquisitions.

On the left, you can see our pro forma AUM at December 31 was $186.8 billion. And on the right you can see their net management fee rate is stable at 71 basis points.

Just to the right of this, we've given a couple of dots, where we provided the pro forma net management fee rate of 54.5 basis points, including the $30 billion in net assets acquired as per the GLC acquisition. You'll see in the comment bar at the top, the annualized net revenue we've added at December 31 2020, was $33 million, and the incremental [ph] expenses coming on in 2021 at $20 million.

On page 38, you can see the Mackenzie income statement. First point here, as discussed, there's an additional $10 million wholesale and commissions within the business development line, and this is conspicuous.

At the bottom, I highlight in that third, that column from the right, you can see Mackenzie’s earnings were at 14.5% year-over-year, excluding that incremental wholesale intermission item, we're up 30%. And I would remind you, there's a lot of operating leverage in this business as the business continues to grow.

Page 39. I'm going to conclude my comments on our strategic investment.

A few quick remarks here. First, you can see on the right, the carrying value, or the trading value in the case of Great-West is now $2.9 billion.

We haven't made any revaluation for Wealthsimple, as that you'll see the appendix that continues to put on considerable growth. I highlight in the fourth row from the right, we closed the acquisition in Northleaf during the quarter as Barry mentioned, it contributed $800,000 in the week since closed in the fourth quarter, and we give guidelines for expected contribution of approximately $10 million after minority interest in 2021.

As you saw from barely [ph] China AMC growth continues to be considerable and our share of its earnings were up to 63% year-over-year. One last call I'd leave, as I conclude, is that we are continue to evolve our disclosures.

And we have one more enhancement that we're going to be launching during the first quarter based upon feedback I've received from several view and several of our shareholders. Specifically, we're going to bring our statement disclosures down to the net income line from the EBIT line where it is currently.

We think its going to be very helpful for those wishing to assess valuation on a PE basis and play some of the parts approach. And we are going to provide this disclosure retrospectively for two years within the quarter.

That concludes my comments. I'll turn open - over to questions.

Okay, Thanks. Wanted to start with a question on dividend policy, is dividend has been relatively stable over time?

But in the context of - it pretty consistent market strength and from the momentum that you're seeing on the net flow side? How do you think about dividend policies?

Is there target payout ratio, either at earnings or free cash flow that you would be kind of comfortable with there?

Nick its James I'll start and Luke will have a comment. You know, my observation would be that the dividend is strong.

And the payout ratio is at a very reasonable level currently. So that dividend I think is, I would describe it as well supported by earnings, well supported by capital.

Our focus now is on earnings growth. And as we grow earnings, obviously, the capacity to increase that dividend will emerge.

And that's very much a topic that we will take before our Board, as we execute on our 2021 financial plan.

Okay, that's helpful. And then appreciated the color on China AMC, strengthen that close, the AUM growth trajectory there.

I wondered if you could share your thoughts on you know, how you plan to realize value on that investment over time? I think you are receiving a dividend.

And you do participate in earnings growth of that business. But just from a longer term perspective it would be helpful to understand how you're thinking about that one?

Well, you know, what I say Nick is, it is a very attractive investment. We're very proud to have it.

It has been a source of very impressive earnings growth in inside our strategic investments portfolio. But I kind of vies, I would do China AMC, as I view many of the investments inside that division or that segment.

For each of those investments over some reasonable period of time, we have what I would describe as strategic optionality. And I like that, because these businesses generate free cash flow.

We can we can commit that free cash flow to investments in the business to dividends, or to M&A. And so as I look across that strategic investments portfolio, I see optionality over some reasonable period of time.

And that's kind of how we're viewing it. We're - we love it, we're open minded and time, time will tell.

In the interim, it's generating a very impressive and growing stream of earnings for our shareholders.

And if I could add on, its Barry, if I could add on China. The partnership between Mackenzie and CMC [ph] has been so strong the last four years now.

And we continue to look for areas of collaboration and cooperation. So as you're probably well aware, in Canada, we've launched a Chinese equity mutual fund couple years ago, which is five star now and bringing in about 2 million a day, it's starting to get some half, but a quarter billion dollars in size.

We plan to launch a Chinese Fixed Income Fund in the very near future because the search for yield always, as we all know continues for not just key investors, but all investors and looking for other opportunities to bring their capabilities to the second largest stock and bond market in the world to Canada. And the same time, they continue to look for opportunities for us in the institutional world in China and we've been making some good progress there.

We're exchanging ideas on AI, on data management and technology. So it's a really strong partnership.

So as James points out, standalone, it's a compelling investment for IGM. But also what adds to its attractiveness is also the strong business cooperation between the two companies.

Thank you.

Okay. That’s good color.

That’s it from me. Thank you.

Hi, good morning. My first question is on IG Wealth, just with the focus having moved to high net worth investors, and I know it's hard to generalize, but just wanted to understand how their behavior kind of differs, whether or not it's gross sales redemptions relative to the typical client that IG Wealth would have had from, you know, before there was the move to focus on high net worth.

So for example, like, is there any more or less seasonality around their AU flows? You know, is RSP season less important for these high net worth investors, because they may have, say higher paying jobs and with pensions, and therefore, the RSP contribution limits are lower, do they invest in different types of funds, use insurance more that sort of thing?

Hey, Geoff. It's Damon.

So I would say that on the whole and generalizing, but the mass affluent and the high net worth space, would be less influenced by RSP season, you're generally dealing with larger non-registered accounts. So they would tend to invest on, you know, whenever they had money to invest.

Now, that being said, you're dealing with a lot of individuals, executives, that get year end bonuses. And so you're dealing with that, it's obviously at year end or early in Q1.

In terms of the full gamma [ph] portfolio, generally, as you get to mass affluent and high net worth, you're dealing with more insurance, with higher face values, you're dealing with more tax type situations, because you're dealing with individuals that are self-employed, or own small and medium sized businesses. So I would say to you that the profile looks different than mass affluent.

But the big, the big takeaway is more non-registered, less registered assets, higher account balances and more complex financial needs.

Okay, thank you. And just my other question was, Barry, I know, you talked about it earlier in the call, just essentially, the sales performance has been really strong.

I know, the overall performance of the fund versus peers has been good. You're also I think, exposed to a lot of the fund categories that are selling well.

But kind of looking into that 2021, where do you see the greatest opportunities to drive in better numbers as a distribution, is it, you know, selling more into kind of the key accounts that you're doing right now? Yeah, any insights would be helpful.

Yeah. Sure, Jeff.

A great question. So we're - we do expect as Luke mentioned in 2021, if you know, markets hold and conditions hold, which is not in our control, we should nicely exceed 2020 levels.

It's just gone very, very well. The industry flows are strong, risk on, zero interest rates, savings rates were up.

And then we're gaining market share in an environment where the industry flows are strong. That’s a perfect environment for an asset management firm.

And as I mentioned in prior calls, it's broad-based, and we look at a kind of two prong, we're really at Mackenzie, really accelerating, our market share and the really deep pools, global equities, global fixed income, global and domestic balance have gone very, very well. And I might add, by the way that one of the advantages we feel Mackenzie is the fact that, we do have some very strong growth, equity offerings, but we actually are more core in value, in our offerings, value, of course, has been disadvantaged for quite some time.

So when the market starts to broaden out and normalize, I think we're well - we're going to be well-positioned to take advantage of those types of markets, even though the markets as we speak today, we're taking advantage of. And then of course, as I mentioned before, the growth catalyst, the sustainable investing, the China, the ETF, these are and the alternatives.

All these areas are seeing significant growth across Canada investors and advisors are well positioned. And so we're seeing growth across the board.

In the RSP season, it started clearly, so strongly from day one, as you know, normally ramps up a little bit into January and gets going in February. But it's been gone consistently day in day out with significant growth and that's gross and net sales for us, broad based, every day, even through February.

And again, as we remind ourselves, markets holding conference halls [ph] with investors. March was a very difficult month last year, significant industry outflows that we experienced too.

So again, if we can avoid that occurrence, then you should see a very strong Q1 across the board. Thank you.

Great, thank you.

Thanks. Good morning.

Maybe just follow on the same theme, the last question. So what do you attribute the industry strength that we've seen over the last few months, particularly in the advice channel, any anything that you guys can point to?

Well, I'll start, and I'm sure my colleagues will jump in. As I mentioned, with the prior question, again, if you just see what the environment is, right now, we've got, you know, historic monetary fiscal support, right?

So that is getting confidence in the stock market. And the stock market looks forward looking and looking at earnings a year out.

And of course, if we can get through this year, and then the economy, a little bit more and obviously the vaccine distribution and efficacy holds, then that's a positive thing. Second of all, the monetary policy liquidity obviously is forcing trade to be very, very low.

And so it's a relative game. And again, investors are coming into the marketplace, there was a lot of cash on [indiscernible] there still is, and they're going into this risk on environment to get into the stock market.

So again, you probably have noticed the industry flows have been record highs. And at Mackenzie we’re again, gaining market share and so that’s a great combination.

We're not to say that the markets won't be volatile this year, they will be, they were last year, there'll be this year, nothing's perfect. But this is shaping up to be a very, a very robust year, actually across the board.

And so we're just really focused to make sure that when these events occur and this conditions occur, they're not always in place, when they're in place, risk on, it's for us to harvest it and we're just completely 100% focused on doing that. That's why we're leaning a little more this year with Mackenzie in terms of some investments to take advantage of this phenomenon that we're experiencing.

Okay, great. And then my next question for Luke, its two part question.

Which is going back to slide 37, for a bit, now at the top you mentioned, I think $33 million revenue, $20 million expenses, so 13 EBIT, let's call it. I thought GLC when you guys announced it, that was closer to $20 million by itself, are you netting out maybe Quadrus in there or what's changed?

And then second, just you know, relate to expenses as well. In 2020, you benefited from kind of lower travel and entertainment costs that's across all your peers.

So what are you building in, in your fiscal ‘21 guidance? Are you expecting some of that to ramp back up later this year?

Or what's in that plus 3% number?

Thanks, Gary. So first one on GLC, you you've got it absolutely right.

So $20 million was the guidance on GLC itself. We did have the divestiture of Quadrus.

And that's the $7 million difference and the loss revenue on this divestiture of that – of Quadrus, that's something that tapers-off over time, meaning it's more in years and it tapers-off to nothing over seven years. So that's the impact there.

On the T&E, the travel and entertainment expenses, we're expecting very little ramp up during 2021. We're going to navigate the year as we - as it comes.

Right now I know the whole organization has adopted remote in a very effective way. And so as we've said our 2021 plan, the first eight months of the year we have very minimal ramp up in travel and entertainment and in the back quarter we have some, that I call it slight.

Got it. Okay.

Thanks. And then next question maybe for Damon, just saw the consultant count hit a bit in the quarter after an increase in Q3.

But obviously, you know, we've seen the productivity trending higher. Can you give us your outlook for this year?

What's the recruitment environment like today?

Yeah, I would say that with our slight drop in consultancy in Q4, it was primarily driven by seasonal retirements. You generally have your advisors, your consultants retiring in late in Q4, some in early Q1.

Our pipeline of high quality financial planning candidates is double what it was last year at this time. So we feel really good about where we are.

We continue to see signs that our value proposition is resonating in the marketplace for talent. That being said, and you mentioned it, our primary focus is on increasing the productivity of our existing consultants.

Average consultant practices was roughly double the size of the average MFDA advisor practice right now. But we're still only 40% of the average size of the average IIROC advisor practice.

So we have a significant opportunity to grow our existing practices, as we continue to kind of enhance our client experience and focus going on up market in mass affluent and high net worth. So you know, in terms of guidance, we selectively look to add financial planners to our network, we're not in a hurry.

It's more about getting the quality and doing it right and making sure that they're a fit. But our clear focus in KPI is on productivity.

Okay, perfect. And then if I can just sneak one more in, Barry, can you talk about the new fund launches at Northleaf?

You know, what's your expectation for fund size? And also kind of remind me, if there's any on balance sheet fee capital that's required to get these funds off the ground?

Sure. The – yeah, its great question, because as you know, this was the final leg of a democratization of alternatives to get the private investments in the hands of individual investor.

So it's really exciting. Live education, I do want to mention, Jeff, as you could probably imagine live education that we're rolling out, working with the dealers to get approvals.

But we will have a full suite this year of OM funds for Mackenzie, Northleaf private credit, infrastructure and private equity. So there'll be in market, though, they're being structured so that they can support liquidity, if need be.

And each of them have a liquidity sleeve. For instance, their private credit that's up and running, the liquidity side uses our actually our high yield ETF and our floating rate ETF, and then it uses the private credit as an example of Northleaf.

So they'll all be in place, education, but there are strong interest early days, because just take private credit, for instance, the search for yield, you have to - fixed income is a terrific asset class, right, it just has to work hard over the next 20 years, that did last 40 years. To do that, you need to look for additional yield opportunities, corporate yield.

Obviously, emerging markets, China, fixed income, as I mentioned is very high and private credit now. So it's a very nice sleeve in a fixed income portfolio, overall portfolio to allow you to meet your retirement needs going forward.

So - and then in infrastructure and private credit has had their own attributes. And I will if I put a quick little plug in, which is an interesting one, so the private credit OM, when we launch it, we'll have obviously the direct private equity capabilities Northleaf in that fund.

But the liquidity sleeve will be the mutual fund we just launched last month, which is the private equity replication fund, which is a really unique way of replicating private equity returns using the public markets. So more to - more coming on that one, but we're really excited by it and after, obviously, initial pair of education and dealers getting comfortable with the risk profile, we expect some strong flows.

And I think minimal capital requirements on…

Yeah, it is actually, yeah, that's great.

Okay, perfect. That’s it from me.

Thank you.

Thank you.

Yeah, thanks very much, morning. Just a couple quick number questions for Luke and then a follow up.

The additional $20 million in expenses associated with GLC in Greenchip. If – well, I'm looking at slide 38, where should we put those expenses?

Are they sort of sub-advisory business development operations to support, just to help with the modeling?

Good question, Tom. All of them are in operations and support.

Okay. And then…

You can think of all those expenses, substantively it's people, it's the investment teams.

Okay. And then the 0.7 to 0.9 guidance in terms of - I think I missed that, that was in when you were discussing slides 34.

Was that on advisory fees? The 0.7 to 0.9 bps per quarter reduction in advisory fees.

Was that was that what you're referring to?

Yeah. Right, right on Tom, on page 34.

It was the advisory - the weighted average advisory fee rate, and you can see it was 105 basis points in Q4. And you can see the trend from Q2 to Q4.

And so I was just giving guidance that where markets are at going into Q1. And with the continued trend of bringing in high net worth and mass affluent.

We expect 0.7 to 0.9 basis point decline during Q1 and Q2. And we'll be circling back at, you know, in May, on how that travel is going.

And that - there's - but there's no impact on product and program fees. Is that correct?

Yeah, that's right. So advisory fees varies based upon the composition of the clientele, product and program fees varies based upon the nature of the underlying product.

And I hold the product program fees relatively stable.

Right, even though – and there's no benefit for higher net worth people in terms of product and program fees?

No, everyone pays the same thing on product and program. We differentiate our pricing on advisory fees.

Okay. And then a question with respect to the, you know, the movement up in the mass affluent and high net worth, at IG with the consultants in terms of - and then its certainly more complicated financial planning with more insurance involved and more tax planning involved.

How are you coping? And this seems to be a lot of training, and mentoring, and how are you coping in a COVID environment with respect to that?

And is there a point in time where, you know, the ability of these advisors to, especially the new ones that are brought on to really get a grasp of the complexity of dealing with a high net worth client, and sort of as they just sort of, you know, sit at home or sit in their basement and do this. To what extent do you have to kind of get back to work and get training and mentoring people into that?

Hey, Tom. So in terms of your question, and we call it gamma, just being able to provide advice across the spectrum, whether it's investments, insurance, tax planning, cash management, you name it.

So it starts with the fact that we're deeply committed to having accredited advisors. And we're pretty much leaders in terms of the number of advisors that we have, that have their designation, their financial planning designation.

So when you have that you're already off to a start, you have a foundation. That being said, we've invested a lot in IG University, which we believe is – it is industry-leading, knowledge sharing practice, management sharing and training component of our business.

And, you know, it goes into kind of all the things that you need to do to be a true financial planning shop. And throughout IG University, which predominately started as a face-to-face program, we've migrated over the years to digital.

So we were ready for the pandemic, without obviously forecasting the pandemic that was going to take place, where we've been able to train all of our new consultants, and our existing consultants on a multitude of things. Because obviously, we're going through a transformation and we're changing how they're interacting with their clients on a daily basis, all throughout IG University.

So we believe it puts us in an enviable position. Now, that being said, if you're new to the industry, this year, and in a pandemic, it's tough, it's going to be tough.

And we know that, but the fact that, that the new consultants have so many other consultants and leaders that they can rely on, that they can rely on all of our training, we do believe it puts them in the best possible position to succeed. But I'll remind you, our recruitment efforts, have steered over the last few years to really focusing on recruiting experienced advisors.

And…

And as you recruit more experienced advisors, doesn’t just the average age of the consultants go up. Like, are you eventually missing, you know, or eventually just having older and older advisors and then kind of missing out on emerging affluent people that way or?

Well, if you were just recruiting, anyone, it could. But we're selective as to who we're recruiting.

First off, we're looking for someone that fits our model, which means they have to have a financial planning mindset. And not just managing the investment side of the business.

And number two, we want someone that wants to grow with us, and that we want to grow with them. Generally, an advisor would come to IG Wealth Management because they see this as the go forward platform that they want to be a part of, to be able to compete effectively against the competition, the competition out there.

So when you look at it, and theoretically it could, but for us, that's not the case. And in order to make sure that we continue to have a nice farm [ph] team, we've really expanded the number of associates within our network, that's continued in this segment within our population that has grown, it's going to continue to grow, because ultimately, we believe that the consultant practice teams as they grow in size, their capabilities will grow.

And as their capabilities will grow our ability to provide better gamma to our clients will grow.

Okay. Thanks…

Tom, its Luke. One thing I would add to Damon’s point, I think you asked a really important question.

And I do want to highlight the advantage of IG. It's our specialist support.

So we've got a team of advanced financial planning specialists. We've got a team security specialist and insurance specialist, estate planning specialist.

And so when you take this environment of specialist support that each of our consultant practices has, and the value that specialists bring to high net worth, and mass affluent Canadians, what the pandemic has done, and this ability to work remotely, it's really amplified, that the way our specialists and advanced financial planning team can engage in client relationships. And you and I would have seen these people in airports, traveling to meet high net worth clients.

That's done. We've been able to pivot to a way that we can really leverage these people in ways that we couldn't before.

And we have the best minds in the country, when it comes to advanced financial planning. It is a real asset of the organization.

And it's been a real good amplifier of this talent, having the pandemic and having this pivot to remote.

Great, thanks for the color.

Hi, good morning. Damon, maybe start with you, just thinking about IG market share, who do you - how do you benchmark yourself?

On slide 17, you showed your net flows rate relative to the advice channel, but I'm just wondering is that the most relevant benchmark for you or the banks, the channel that, you know, you're trying to increasingly compete with, both at the branch level and the full service broker channel?

Yeah. Our benchmark is truly all the wealth management dealers out there.

The key here is that, that information is not readily available. It's pretty interesting in this country, the information on asset management is out there, it's out there, you know, from daily to monthly, and you can get it, you can access it, you can benchmark yourself, you can track your progress for various business.

But on the wealth management side, it's not like that, a lot of these numbers are closely - held closely to the best. And, you know, we're working with our competitors, and with industry organizations to try to open up the reporting, so that we can truly have a benchmark that makes sense.

Ultimately, at the end of the day, we believe that we should be benchmarked against all of the wealth management organizations across the country, whether it be the banks or the independence. And then we are going to hold ourselves accountable to gaining share against those organizations.

Okay, understood. And then, when I look at the recruitment, you talk about recruiting experienced advisors, is there any context perhaps of, you know, your 1,837 I think is what you have, with greater than four years experience.

How many of those you've recruited from external firms or perhaps in 2020 how many advisors were able to recruit relative to past years? Is there any sort of color on that front?

Well, I would say to you that we just really started recruiting experienced advisors over the last 12 months, so it will be little too early to start benchmarking that. But I will say this is that, our level of recruitment has dropped substantially over the last four or five years, where we were recruiting significantly, is the primary driver of our business in KPI to a point where it's important, but it's not a core KPI.

It's something that of course, we believe in, and we're going to continue to do, but we're going to do it at a measured pace, because we want the right people. So it's about getting the right people, the right way.

But our core focus is on productivity. Because if we can drive productivity with the 1800 plus teams that we have out there, that are located across the country and everyone's communities, where the clients are, we will drive this business and get to a net flows rate where everyone can see that this business is quite healthy.

Okay, great. And then one last, if I could.

Luke, just on slide 34, you mentioned sales based comp, I think is coming down in 2021. What about asset based comp?

Is that going to be steady at 46 basis points, or is there another uptick again this year?

Good question, Tom. So you can see on page 34, asset based comp has been relatively stable.

Right now, you know, we're almost at the end of the migration where the legacy deferred selling commission balance has fully matured. I've gotten my calendar, it's October 1 of 2023, it will all be matured.

So we will have some upward pressure on asset based comp, as the maturity - you know, the units can either mature and they're entitled to a higher trail, but you've seen that, that's been slight in the past quarters. We really haven't seen a lot of quarter-by-quarter basis.

And so I wouldn't model or expect any meaningful increase in that line. And I would highlight as well, the unmatured [ph] GLC, it's a relatively small part of our asset based right now.

Okay, great. Thanks.

Good morning. Luke, maybe going back to slide 37.

And looking at the $33 million annualized revenue number based on the net $30 billion from GLC and Greenchips, so that would imply I guess, just over 10 bps in management fees, is that correct on kind of that [indiscernible] platform, on 10 bps

Yeah, I say two things. So one, as we - as Gary had asked the question too, so that includes the divestiture of Quadrus, as well.

But I think you're doing the math, the net is $4.33 billion [ph] and there's $33 million of revenue coming on. But we will start doing in the coming quarters is we’ll give the transparency on GLC, here's the $47 billion and rising, here's the revenue.

But just over 10 basis points that's the right number. I would highlight that this is a - an almost $50 billion relationship.

And that's important to seize. I highlight that the transfer pricing framework is the same one we're using for IG phase [ph] and Mackenzie, and I would highlight as well, there's a lot of fixed income in the business that we bought.

Okay. So the transfer fee pricing for Mackenzie for IG is pretty similar as well, low double digits, I believe, right?

Yeah, that's right. And you can think of the IG rate being a little bit higher, because it's more weight to equities.

Okay. Okay, that makes sense.

And one of your competitors yesterday, you know, had more noticeable performance fees this year than ever. When I look at your platform, specifically on Mackenzie, with your alt - ultra liquid alt, and perhaps Northleaf, you know, within the strategic investments or kind of future funds.

Is there, like in the future is there ways that IGM could potentially earn performance fees that we can kind of see in the financials or any kind of thoughts on that? And on how to think about that?

That's good question. It's Barry's, its great question.

We’re always looking for - when we price products, we're open to any type of pricing mechanism. But we're very thoughtful, again, to your point to see what's competitive, also see what's the future trend, and particularly transparency, right.

So, sometimes you see, transform institutional work in the retail world, and probably the performance fees are a little more relevant than institutional world. But I wouldn't say that that trend is accelerating.

In fact, I think that probably transparency as they are and ensuring you have alignment between the investor and the asset manager of that, you know, that's probably not something that we – you could see a lot of us doing going forward, we're always open to, we're always look to see if it's appropriate to align the interests of the investor and the asset manager going forward with new products. Right now, we don't have that structure in our products.

And then even our, you know, some of our new liquid alt and others, we decided not to do that for transparency purposes, it was best just to price it with a – the normal mechanism without the promise fee element to it.

And I add to that, the one place you mentioned alt and private, the one place we do have performance fees and you can expect to see them is in Northleaf. And so that in many cases will be us and distributing or including their products within the IG, Mackenzie in another solution, but that is an area where we do have performance fees.

And we - it will show up through our share of ownership of Northleaf over time.

And that share of Northleaf, we saw the first contribution this quarter, I think it was about two months $0.8 million. Is that kind of a good quarterly run rate?

And is there like potentials for special dividends or anything in certain quarters that we should be aware of?

Yeah, so I’d say, right now the guidance that we were planning for and you should expect about $10 million to be our proportionate share of Northleaf earnings during the year. To the extent that there are performance fees, it would be in the fourth quarter, the calendar fourth quarter of the year.

So Q4 2021 would be the next time that will be at reporting on that.

So this Q4 2020, you guys weren't in the position to earn performance fees, because the number was low and the acquisition closed. Is that fair?

No. Our share of performance fees was trivial.

We had a few weeks of having the acquisition. And during 2020, there weren't meaningful performance fees that flew through the products that we participate in.

So if I quarterlize [ph] I guess, the Q4 and Northleaf it would be over $1 million, but you're saying it should be about a $2.5 million contribution per quarter, excluding performance fees?

Yeah, and I say it's going to be $10 million next year. We don't have a lot planned for performance fees, and they could surprise and if there was a surprise, it would be in the fourth quarter 2021.

But right now our guidance is that our 56% ownership of Northleaf will give us an earnings contribution of $10 million over the full year.

Okay. Perfect.

Thank you very much.

Yeah. You're welcome.

Thanks, everyone, for joining the call today and for the engaging questions. We wish you all a great weekend.

And with that, Erion, I'll close the call.