IGM Financial Inc.

Thank you, Betsy, and good morning everyone and thank you for joining us for our Q3 earnings call. Joining me on the call today we have James O'Sullivan, President and CEO of IGM Financial Damon Murchison, President and CEO of IG Wealth Management Luke Gould, President and CEO of McKinsey Investments and Keith Potter, Executive Vice President and CFO of IG Financial.

Before we get started, I would like to draw your attention to our cautions concerning forward looking statements on Slide 3 of the presentation. Slides 4 and 5 summarize the non IFRS financial measures and other financial measures used in this material.

And on Slide 6, we provide a list of documents that are available on our website related to our Q3 results. I'll now turn it over to James.

Thank you, Kyle and good morning everyone. Turning to Slide 9, we continue to execute on our growth strategy across IGM and we demonstrated great progress during the Q3.

Adjusted earnings per share for the quarter were $1.03 up 12% year over year and our second best adjusted Q3 EPS on record. Total client assets including our proportionate share of strategic investments increased 23% year over year to $462 billion at the end of September with each of the companies achieving all-time record high asset levels.

Wealth Managers IG Wealth, WealthSimple and Rockefeller continue to execute on their strategies to deliver their client value promise, acquiring new client relationships and driving scale through asset expansion. Specifically, on IG Wealth, I am particularly pleased with the growing evidence that they have successfully pivoted to delivering financial planning and investment management services to high net-worth Canadians.

Many years of investment are now clearly bearing fruit. Asset managers Mackenzie, ChinaAMC, and Northleaf continue to drive strong asset growth leveraging their competitive advantages to deliver relevant investment solutions to retail and institutional clients in Canada and across the globe.

Damon and Luke will speak on these points in a moment, while Keith will also speak to how Wealthsimple's ongoing success drove an increase in the fair value of our ownership position in the company. We continue to invest to drive further growth, while returning $160 million of capital to our shareholders through our attractive dividend and our share buyback program which continues to be active.

Turning to the current operating environment for our businesses, starting with recent financial market conditions on Slide 10, both equity and fixed-income markets continued to reflect and support improvements in investor sentiment. Our clients achieved investment returns of over 5% during the quarter.

On an LTM basis, our clients experienced an average return of over 20%. This is an important point that emphasizes the value of long-term client relationships centered around financial planning and advice especially considering the uncertainty that clients faced over that period.

Continuing on Slide 11, the operating environment in Canada continued to improve during the quarter with positive long-term mutual fund net sales overall. With improving investor sentiment, lower inflation, and moderating interest rates, the macro industry backdrop is likely on the cusp of becoming a tailwind for our Canadian retail-focused businesses after what has been a challenging 2-year period.

We continue to expect gradual improvement persist over the coming quarters provided financial markets remain steady and interest rate cuts continue to alleviate some of the pressure felt by Canadian households over the past 2 years. On Slide 12, you'll see how our year-over-year earnings growth was driven by both the Wealth Management and Asset Management segment of 10% and 16% respectively.

I want to pause on Slide 13 to emphasize the strong double-digit plus asset growth across each of our businesses, which together drove the 23% increase at the consolidated IGM level. Each of our wealth and asset management businesses are executing well and driving growth within their unique industry context, and the horizontal connectivity across these businesses continues to unlock new learnings and opportunities to add value for our clients and other stakeholders.

With that, I'll turn the call over to Damon, who will speak to the performance in our Wealth Management segment. Damon?

Thank you, James, and good morning, everyone. Turn to Slide 15 and Wealth Management's third quarter highlights including IG Wealth, Rockefeller, and WealthSimple.

During the quarter, we saw record high ending AUM&A as well as third quarter records for total new clients and existing client growth inflows. The record existing client inflows are important.

We have proven our ability to acquire new clients through various market conditions. This quarter we also demonstrated our investments are supporting our ability to expand share of wallet with our existing clients.

This is an outcome that we're focused on and expect to continue going forward. Focusing in on the numbers, IG Wealth ended the quarter with AUA of $136.4 billion up a solid 19% year over year and up 5.2% during the Q3 driven by financial markets.

Within that figure, $1 million plus clients now represent $58.3 billion or 43% of our AU M&A, up 43% from a year ago. Gross inflows during the quarter were $3.4 billion with gross sales into IGM product at $3.3 billion.

Net inflows from the quarter were $330 million and were $144 million during October. Net sales into IGM product were $313 million for the quarter and $177 million during October.

It's now three of the last 4 months where net sales have exceeded net inflows. As we spoke to while interest rates and cash balances were rising, we knew this point would come as our advisors work with their clients, we're confident that we will see clients continue to actively dollar average cost back into the markets driving net sales.

Total gross inflows from newly acquired clients were $1 billion with the masterful and high net worth segments representing almost 3 quarters of these inflows. We continue to see strength in our insurance business and positive progress within our mortgage business and once again this year we ranked as leaders amongst our peers in the investment executive dealer report card.

Both Rockwell and Wealthsimple had very strong quarters and I'll speak to both in the coming slides. Turn to Slide 16, you can see IG's Q3 flows.

As you can see on the left, both October and Q3 represented our best growth inflows on record while on the right-hand side you can see a continuation of positive momentum in both our net inflows and IGM product net sales. This kind of dollar average cost back into the market, we are now seeing decreases in cash, GICs and HISAs.

This quarter proves that we have and continue to make the right investments to allow our advisors to work with their clients to build, quantify, preserve and distribute wealth as we move towards a more positive operating environment. Turn to Slide 17, two brief comments here.

The top left, you will see an increase of approximately 11% in gross inflows, which is complemented by year over year decrease in our gross outflows rate, the first decrease since Q1 '22. In the middle of the top, you can see the decrease in cash, GICs and high net balances.

Turning to Slide 18, as mentioned, the $1 billion of gross inflows from new the Q3 represented our best Q3 for new client acquisition in our history. We continue to execute well on growing our AU M&A within our target market.

We fully expect to see further progress as Canadians needs for financial planning advice continues to rise. Turn to Slide 19, an illustration of our progress within our targeted client segments.

2018, we directed our focus to massive fluid and high net worth clients focusing our investments, partnerships and business processes to support these two important segments. Through new clients and expanding our share of wallet with existing clients, both of these segments now represent AU M&A, which is well above $50 billion.

The massive flow and high net worth clients now represent 83% of our AU M&A, up from 69% at the end of 2018. Correspondingly, these two important segments now represent 37% of our total clients, up from 23% over the same period.

We expect to see a continuation of this growth as we build our business to align with the industry's wealth drivers. Turning to Slide 20, we've introduced a new slide here which focuses on our mortgage and insurance business.

While there are no new disclosures on this slide, it's important to surface these metrics and show the important progress that we're making in both businesses, businesses that complement the needs of our target segments and support our expansion for share of wallet. We'll continue to provide updates for these businesses on a quarterly basis.

Move to Slide 21, IG Wealth ranked extremely well in the Investment Executive 2024 Dealer Report Card. Including a net promoter score that continues to place us among the top half when compared to the full-service brokerage arms of the big five banks.

Overall, we continue to rank above average versus our peers, this slide also illustrates the categories where IG ranked in the number one position. These are meaningful as these categories represent where we have invested to build capabilities to elevate our advisory and client experience against the maximum and high net worth segments.Turning to Slide 22, some updates on Rockefeller's progress.

Client assets are up 33% year-over-year and 6% during the quarter driven by strong inorganic and organic growth. Over the last 12 months, organic growth has driven $6.8 billion in client assets.

Rockefeller also continues to add to their private advisor network with 52 new advisors being added over the last 12 months. Turning to Slide 23 and Wealthsimple.

It was another record-setting quarter of AUA growth at Wealthsimple. Wealthsimple's AUA increased by $8.5 billion during the quarter ending with over $52 billion in assets, up 20% sequentially and 109% year on a year-over-year basis.

Client count also expanded by 16% year-over-year to CAD2.6 million.With that, I'll turn it over to Luke Gould.

We also watched three mandates advised by our global quant equity boutique in the period, and we've launched 9 year to date for this boutique as we trailblaze quant investing in retail with our very strong Boston-based quant team. In the bottom left, you can see we established a partnership with CGI during the period on back office processing to ensure an industry-leading client experience.

Through this expanded partnership with CGI, we will automate and improve our platform to ensure a leading client experience for the 1,000 advisors, and over 1 million retail clients who rely on our plan administration and processing capabilities. This partnership builds on our proven track record of partnering-to-leverage the scale and expertise of global leaders, and we're proud to partner with CGI, a Canadian firm with such strong capabilities and similar values to our own as an employer.During the quarter, we continue to see strong net sales at ChinaAMC where long-term investment funding is up 46% in the year and 23% the quarter.

Noteworthy in the quarter obviously with government stimulus focused on domestic equity markets which led to stolen investment returns at the end of the quarter with equity markets up 25% in the last week of quarter and about 15% during the full quarter. Also noteworthy was continued market share gains at China MC driven by their ¥96 billion or around $18 billion in net flows this quarter.

And in the bottom right, you can see Northland continues its trend of averaging around $1 billion in fundraising each quarter and this quarter they raised $1.5 billion and nearly $5 billion over last year diversified across their private equity, private credit and infrastructure offerings. Turning to Page 26, you can see the trended history of Mackenzie's net flows.

As mentioned, we started to see a year over year gross sales improvements with a 20% improvement in Q3 and a 30% improvement in October. This has been accompanied by a peak in redemption rates and we've seen net sales starting to improve in the context of an improving industry environment.

While we've seen while we have year over year net sales declines within a few of our larger boutiques with softer near-term best performance which I'll view, we're seeing very good sales momentum in many of our other offerings that have very compelling performance within very large categories. Turning to Page 27, just a few quick remarks.

In the top right, you can see that overall Morningstar ratings at September 30th by share of assets remains relatively consistent with June 30th. In the table in the bottom left, you can see we have seen improvements in both retail and institutional investment fund net sales.

I want to call it institutional where institutional investment funds have been quite strong with improvements through our partnerships with Primerica, Laurentian and Wealthsimple. And while retail starts to improve, it remains the net redemptions are slightly behind the industry net sales rate as we referenced in the last slide.

Turning to Page 28, you can see our performance in net sales for our retail mutual funds and ETFs by boutique. As we spoke to last quarter, we are seeing some short-term relative underperformance within our Bluewater and Greenchip boutiques though I will reiterate gross sales remains resilient and these boutiques continue to manage in line with their disciplined approaches and continue to have very strong long-term track records.

Across other boutiques, I'd highlight the growing net sales within the global quant equity and the global equity and income boutiques where we have very compelling performance within very large product categories. I'd also highlight the top right, the strong performance of our Putnam advised US all cap growth mandate, which is included in this column and is a very strong 5-star fund.

Turning to Page 29, you can see the regular view of the Chinese investment fund industry. On the left-hand side of the bottom, you can see that the Q3 saw slight net redemptions overall driven by money market funds and this was partially offset by long-term fund net sales of 59 billion.

Industry long-term fund AUM grew by 6% during the quarter and is up 18% year over year. And I highlight while domestic equity markets generally increased by 15% in the quarter driven by the government stimulus, over 55% of industry long-term fund assets are actually fixed income and so that muted part of the increase that you'd expect from the stock market increases.

On the right, you can see China MC's continued strong market position ranked number 2 in both long-term funds and overall investment funds with very good increases in market share in the quarter and in the last year. Turning to Page 30, you can see continued growth in China MC's AUM with investment fund assets of 11% in the quarter and 34% year over year.

Total investment fund that flows in the quarter were ¥30 billion and as mentioned earlier, long term fund that flows were ¥96 billion or CAD18 billion. As reviewed at Investor Day by our CEO, EMEA Li, China AMC is the market leader in ETFs in the Chinese domestic industry and strong close to ETFs in the period was the key contributor to these strong net sales.

And on Page 31, you can see another quarter of continued strong growth at Northleaf with $1.5 billion in new commitments in the quarter and $4.8 billion over the last 12 months. The fundraising during the quarter was well diversified across Canadian and international investors and spread fairly equally across private credit, private equity and infrastructure investments.I'll now turn the call over to Keith Potter.

On Slide 36, we present the key profitability drivers for IG Wealth. I'll highlight a couple of points here on the left.

You can see average AUM&A was up 3.7% over last quarter. And on the right, the advisory fee rate is in line with our guidance and reflects the quarterly increase in market returns as clients moved up well band.

This includes our continued success with the acquisition of mass affluent and [indiscernible] clients and strong flows from existing clients that Damon spoke to. On Slide 37, IG overall earnings were $125.5 million in Q3, up 10.8% year-over-year and 12.3% sequentially.

And on point one, advisory and product and program fees were up year-over-year relative to last quarter driven by AUM&A growth. On point 2, other financial planning revenues reflect continued strong performance in the insurance business and are impacted by fair value adjustments in the mortgage business.During the quarter, the downward movement of swap rates drove a negative fair value adjustment of approximately $4 million from hedges on mortgages pending sales that did not qualify for hedge accounting, but were effective economically.

The insurance business had another quarter of growth relative to Q3, 2023, and was in line with our expectations following a very strong growth in the first half of the year. And as a reminder, other product commissions will move in a similar direction as revenue.

And you can see in the table under 0.2 that this is 64% of revenue this quarter. Moving to Slide 38, we have Mackenzie's AUM by client and product type as well as net revenue rates.

On the left, you can see average AUM was up 2.8% and on the right, all rates remain relatively unchanged versus last quarter. Turning to Slide 39, you can see Mackenzie's earnings of $59.4 million is up 5.1% year-over-year and 6.3% sequentially with higher AUM net asset management fees are up year-over-year and relative to Q2, and higher net investment income reflects seed capital returns from positive market growth in the quarter.

Slide 40 has Chinese New Year results. First on the left, AUM increased 9.2% versus last quarter and growth came from very strong market returns in the last few days of September.

And given the timing of the market rally, average AUM increased by only 2% in the quarter. And on the right, you can see China MC's earnings at $32.9 million.

As called out in the slide, the late quarter market rally resulted in positive fair value adjustments from seed capital. There were also some other onetime items impacting the quarter.

And adjusting for this, Q3 earnings would have been more in line with Q2. Slide 41 has earnings contributions from companies in each segment.

A couple of comments. First, Rockefeller was close to breakeven this quarter and expect to see continued progress toward positive earnings and north of the earnings of $2.7 million are up from 2023 and also reflect continued investment in the business.

Slide 42 provides a summary view of earnings and ownership and value of our strategic investments by segment. On WealthSimple, we have revised the fair value upward based on public peer valuations and revisions to revenue expectations.

And in addition, and as noted in our press release, our valuation of WealthSimple is also informed by a secondary transaction with a third-party investor that is expected to close in the Q4. From an IGM valuation perspective, our strategic investments now represent approximately $5.9 billion in value.

And as a reminder, WealthSimple is fair value through OCI and Rockefeller currently does not contribute to earnings, but both have significant value. Slide 43 highlights execution against our capital allocation priorities.

We continue to execute on our share repurchases during the quarter, while maintaining financial flexibility with leverage remaining at 1.6 times and unallocated capital increasing to approximately $450 million during the quarter. That concludes my remarks, and I'll turn it over for questions.

Yes, thanks. Good morning, everyone.

Question with respect to if you can give us any indication as to what you're thinking about for the expense guide for 2025. It might be a little bit premature, but is the 4% that you had sort of guided for 2024, what would is there any maybe you can give us some color as to whether that should apply for 2025 as well and how that might be related to if we had better markets or worse markets, how that might impact what you'd be thinking about for the expense guide for 2025?

Thanks.

Great, Tom, it's Keith here. We're currently working through the 2025 plan and we'll share more details in February.

But we have been pretty consistent commenting that in the next couple of years, we do expect to invest in the businesses as we have this year. And I think as you're thinking about 2024 and modeling 2024 expense guidance like you mentioned 4% is we're going to be in a reasonable range to that.

So that'd be a good assumption as you think through 2025. To the extent that we continue to have market rally or we continue with that perspective.

And as we've demonstrated in the past with extreme volatility in the marketplace, we make decisions at that point in time depending on the circumstances. But we are committed to growing and strengthening our businesses.

Yes, I think there's a few areas. Technology continues to be an area of investment.

Luke commented on our back-office expansion with CGI, we've commented on middle office in the past, so we're going to continue to see investments there. At IG Wealth Management, it would be similar for advisor client platforms.

We have a leading technology platform for advisors today and we'll continue with that. And then there's also commitment to build out our mortgage banking and insurance platforms.

Tom, we're achieving what we want to achieve in terms of investments in these parts per business within that guidance that we provided in 2024 and just finding efficiencies along the way and reinvesting those to achieve these investments in these areas.

Understood. Thanks for the color.

Hi, Graham, It's Keith again here. Yes, in terms of the fair value increase, maybe the last point, the first thing we'd look to is an identifiable transaction.

It is a meaningful third-party transaction and you can think about the value that we're placing on Wealthsimple being right on top of that particular transaction.Having said that, we do look at the performance of the company, revenue expectations, as well as just what's happening in the industry in terms of market multiples and it's all aligned. But really the value that we put on Wealthsimple is much in line with the third-party transaction.

So, I would say to you over the last 12 months we've made significant progress.

Okay, so that 43% of assets that are in households greater than 1 million that's slightly higher than what it was last year?

It is definitely higher than it was last year.

And then great. And then my next question would just be for Luke.

It looks like your ETF sales are solid, your mutual fund sales, long term fund, they tend to be they seem to be lagging the industry long term fund sales trend. And maybe just what needs to happen in your view to get that those Mackenzie mutual fund flows to sort of catch up, is it heavily dependent on the performance here at Bluewater and Green Chip or is it more than that?

On Page 28, you can see the boutiques and I remind we have this boutique approach and again we believe it inhibits a whole bunch of things like group think which are very good and gives us diversified roster to have something relevant compelling for all client needs and in all market environment. Right now, you hit the nail on the head, We've got some softness in Blue Water and in green chip in terms of flows and that's what we need is for the places we have strength in places with compelling performance in the umbrella categories to overtake it and we're starting to see that happen.

So, we've got both of those tailwinds, one being an improving industry environment combined with a bunch of stuff on the shelf that has some real compelling performance in really relevant categories. So, we think we are on the right track, but those are the two things that's going to take right now.

Yes, thanks. Yes, just wanted to dig in a little bit more on that Mackenzie question again.

Obviously like number 2 brand in Canada, number 2 sales penetration, we've heard about the Bluewater and Greenchip I think for a few quarters now, but like where is the gap here? Like why is it lagging so significantly over the last few quarters here basically since 2024 relative to the industry?

Good question, Jimmy. So right now, we've got about 6% of our assets in five Star Funds and when you look at flows right now in this quarter and the last one, those have been extremely concentrated within very few products in the industry.

Right now, we are very fortunate with our global equity team, global equity income team, the public advised mandates. We have some very strong performance in these categories and we're pushing.

But right now, if you wanted one single tagline is we don't have as many five-star funds as we typically do and there has been a lot of concentration in a very few key mandates in the industry.

And is there anything from like let's say like a distribution channel where you're seeing that miss the rest of the industry?

Yes, I'd say we're very close to the industry right now Fidelity is doing very well. They've got they're the industry leader, and they've got very strong performance in a lot of mandates, a lot of five-star funds.

And so, they've captured a lot of the flows in the last period. If you look PIMCO is another fund company that's obviously done quite well.

and Dynamics had success in their premium yield offering. So, we're focused on what we do well.

We've got a very broad offering. And yes, there's been some very concentrated flows in the industry last two quarters.

Okay. Great.

And then last one for Keith, just to refresh on the dividend payout ratio, I believe you've kind of said you want to see it get to adjusted cash earnings of 60% or below. Is that something you will look at more on a, like a retroactive?

So, looking backwards as opposed to maybe looking out at the next year and having some more confidence in markets and the potential earnings coming off of that cash earnings coming off of that? So, what's your frame of mind?

Is it looking backwards or will you look forwards in terms of thinking about that dividend?

Jaeme, it's James. I would just add that it continues to be my view that we need more growth more than we need more yield.

And so, you should expect our focus to continue to be in growing EPS.

Great. Thanks, guys.

Thank you, Betsy. And we'd just like to thank everyone once again for joining us on the call this morning and wish everyone a good weekend here.

Thanks, Betsy. And with that, we'll end today's conference call.