Q4 2020 Canaccord Genuity Group Inc Earnings Call
[music].
Welcome everyone to Canaccord Genuity group Inc. fiscal 2024th quarter and year end results conference call.
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I would now like to turn the conference over to Mr., Dan Debbie Jones, President and CEO. Please go ahead Sir.
Thank you Carol and thanks, everyone for joining us for today's conference call as always I'm joined by Dawn Mcfayden, albeit remotely our chief financial Officer.
Following an overview of the fourth quarter in fiscal 2000 results. Both on lied be pleased to answer questions from analysts then or institutional investors.
A reminder, that are remarks and responses during today's call may contain forward looking statements involve risks and uncertainties related to the financial and operating results with Canaccord Genuity group Big companies actual results may differ materially from management's expectations, especially these days for various reasons that are outlined in our cautionary statement and the discussion.
Of risk in our M.D. and day our discussion today May also include certain non I FSR non <unk> F. R. S financial measures a description of these non I F. R. S financial measures and the reconciliation to comparable I F.L.R.S. measures are contained in our earnings release Center Mdna for the.
The third quarter fiscal quarter.
By now you've all likely had a chance to review these documents and our supplementary financial information, which were made available yesterday evening, they're all available for download on sees our or on the Investor Relations section of our website web site at Canaccord Genuity Dot com.
We've also posted our quarterly investor presentation to our website I will cover the entire presentation. This call, but I will refer to certain slides the guide or discussion.
[noise] given the dramatic change in our operating environment I'll discuss the relevant highlights of our financial performance in the context of what we've experienced in our business since mid March as well as our expectation for the coming quarters.
The coal was 19 virus has significantly impacted the economy and our daily lives are not no I think it's important that I'd like to start by thanking our employees for their remarkable efforts and their unwavering commitment to support our clients at a time when our clients need us most.
Well, we are operating under very different circumstances than anyone could have predicted we are fortunate to have entered this environment with a solid financial position and the strong foundation to support our businesses through Unprecedent market turmoil.
I encourage you to review slide four of our Investor presentation, which summarizes our preparedness efforts.
In all fiscal 2020 was a good year for our business.
With higher contributions from our global wealth management operation and increased capital raising an advisory activity in all in our U.S. and Canadian operations, we posted strong revenue and pre tax earnings.
This is the third consecutive year that our firm wide revenues have surpassed 1 billion dollar Mark and Weve increased 2.8% year over year to 1.2 billion.
Despite the dramatic downturn that occurred in the final weeks of March. We also delivered a solid fourth quarter performance on an adjusted basis net income for the fourth quarter improved by 29% year over year to $21.4 million.
And full fiscal year net income was flat year over year at $106 million, excluding significant items diluted earnings per share amounted to 17 cents for the fourth quarter and 81 cents for the full year, which is a modest improvement to the 80 cents from a year ago.
Underscoring our commitment to enhance shareholder returns, we successfully returned almost $80 million to our shareholders during fiscal 2020.
In addition to our common share dividends, we reduced our common shares outstanding by 7% since the beginning of fiscal 2019 through share buyback activity, which we will continue to pursue as excess capital is available.
I'm also pleased to report that our board of directors has improved another quarterly dividend of five cents per common share.
Looking at expenses.
We expect to be able to accelerate our previously disclosed strategy of reducing our annual cost base by approximately $20 million, which will help us achieve our sustainable margin growth objective when conditions improve.
Given the continued uncertainty in the broader business environment. We've conducted a thorough review of all aspects of our compensation and non comp related expenses. The current environment also provide some natural cost savings with respect to travel and entertainment expenses and the trends.
Addition of some conferences the virtual events.
And finally, we've taken steps to defer some significant costs by six months potentially more until we have a better sense of activity levels.
As a result of these efforts, we anticipate making substantial progress on our cost savings in the first half of this fiscal year.
In recent years, we've invested in our people and we've also invested in our infrastructure, which has enhanced our operational resilience.
The speed at which we were able to pivot to a remote working model has been invaluable and we've had no material technology disruptions.
Over the course of my career, it's been my experience that how you respond in a crisis like this defines your relationships going forward and the response from our employees across our organization as almost to a person been extraordinary it's been incredible to see our core values represented so strongly our teams.
Move swiftly to share ideas and best practices, among geographies and the collective focus on helping.
Our clients in their best possible ways.
Slide five provide some additional context about the initial business impact following the abrupt changes to the market.
Many of the strategic decisions that we've made in previous years has helped us during this crisis and I'm confident that these decisions will continue to prove valuable well beyond.
We are certainly not immune to the economic and financial impacts of go with 19, but we are preparing for significant near term headwinds if they happen.
That said, we have a much more resilient business than we did before the last crisis.
Business mix limits, our reliance in any single business or sector, our financial position provides us the flexibility to operate effectively and managed through the market turmoil.
Turning to slide six you'll find a brief overview of our continued progress over the course of fiscal 2020.
So now let's review the contributions from our business segments, starting with our wealth management business.
As many of you are aware that at cornerstone of our efforts to increase from wide stability has been our strategy to grow our wealth management business. This continues to be an important priority.
Our combined global wealth businesses contributed adjusted pretax net income of $80.2 million for the fiscal year.
This translated to an adjusted diluted earnings per share contribution of 46 cents or 57% of the diluted earnings per share for our combined operating businesses.
Fourth quarter adjusted pre tax net income was flat.
Year over year.
And we attribute this sequential decrease to the impact of Cobot 19 market decline on the value of our client assets.
Total client assets at March 30, Onest amounted to $61 billion decrease of 17% compared to our peak of 73 billion at the end of the previous fiscal quarter. Accordingly fee based revenues based on the value of these assets decreased during our fourth quarter.
But this was partly partially offset by increased commission revenue generated by obviously higher trading activity.
Fourth quarter revenue earned by our global wealth businesses.
Improved by 7% sequentially 238 million.
As that May 30 Onest.
A few days ago total assets have risen to approximately 66 billion, reflecting improved market prices and contributions from net new assets.
Although we anticipate continued fluctuations as we progress through the cobot 19 environment. We're pleased to be reporting positive inflows in all of our geographies, reflecting the demand for advice based solutions.
The adjusted pre tax net income contribution from our UK and European business improved 17% year over year to a record $56.5 million.
Despite the market driven setbacks in the fourth quarter. This business achieved a slight margin improvement compared to the previous fiscal year and if we and we've continued our margin enhancement activities in place for the year ahead.
In Canada, the reduced pre tax net income contribution is primarily attributable to lower new issue revenues that flow through that business.
I will note that the fee based revenue accounted for 40% of the revenue in this business during fiscal 2020, a year over year improvement of 5.3 percentage points.
As you would expect the abrupt market downturn in March put downward pressure on the value of securities held as collateral in our margin loan book.
Accordingly, the provisions recorded were higher in our fourth fiscal quarter.
We continue to be very disciplined in managing our exposure to risk with prudent oversight to ensure compliance with best practices and regulatory requirements.
Well well the recruiting environment remains competitive.
We havent active and growing pipeline and we see and we expected our continuous improvement efforts will drive further success in selected markets.
However, even with a strong pipeline, it's reasonable to expect some delays until restrictions are lifted and people feel comfortable traveling and meeting in person.
Speaking of our ongoing improvement efforts two weeks ago, we announced at Canaccord Genuity has been selected as the platform provider.
For the launch of Morgan Stanley's wealth management business in Canada.
This development is a testament to the breadth and quality of our capabilities and the investments we've made to advance our platform in the recent years.
We are certainly looking forward to a positive and production and productive partnership with Morgan Stanley.
And finally I'll highlight the growing contributions from our Australian wealth business in the second half of the fiscal year.
We have had an excellent experience integrating the pattersons business and this is reflected in the fourth quarter revenue contribution of $13 million, an improvement of 16% sequentially.
Looking ahead, we will leverage our differentiated offering to grow assets organically and also pursue targeted recruiting in the region.
As you can see we've made excellent headway in all our wealth management businesses. Despite the challenges presented by Koeppen 19.
Responsiveness of our teams in each of our geographies has helped us attract new clients limit outflows in the period and limit outflows in a period of extreme volatility.
We remain constructive in our outlook for this segment and we are committed to investing prudently in its growth to support our priority of enhancing stability for our business and adding value for you our shareholders.
Having said that.
We're also navigating and unprecedented an evolving situation and we are acutely aware of the impact that another market downturn can have on the value of our assets and the financial performance associated with those assets.
Additionally, a prolonged environment of low to negative interest rates will negatively impact the profitability connected with our lending activities in this segment.
We do not see there are these is long term threats and our decisions will be guided by our long term priority of increasing assets from new and existing clients and advancing our product offering to meet the increasingly complex needs of our clients.
Turning to the performance of our global capital markets business.
Healthy levels of client engagement and cross border collaborations supported a productive fourth quarter and fiscal year for all our activities in our global capital markets business.
Our efforts to diversify our revenue mix in this segment have improved our resilience in uncertain markets.
Fourth quarter revenue from this segment increased by 10% year over year attributable to stronger advisory revenue higher trading in commission and fees.
Earned from supporting our clients through the increased volatility.
In the context of lower overall volumes for capital raising full year revenues amounted to 698, sorry, 689 million a solid result by historical standards.
Adjusted pre tax net income for the fiscal year was a healthy $60 million, but did decrease by 26% compared to the exceptional year in 2019.
For the fourth quarter adjusted pretax net income contribution from this segment uproot improved by 36% year over year full year advisory revenue improved by 46% year over year to a record $206 million.
In recent weeks, we completed several mandates that were initiated before the cobot 19 Lockdowns began.
Our us capital markets business contributed more than 50% of our for firm wide capital markets revenue for both the fourth quarter and the fiscal year.
Notably this business achieved 97% year over year increase in advisory revenue, reflecting organic growth and contributions from our expanded operation in that region.
In Canada capital markets revenue was 22% lower compared to the exceptionally strong prior year, but we continue to be a topped rate domestic equity underwriter in this country.
For both fourth quarter and fiscal 2020, Canaccord Genuity capital markets was ranked number one for Ipos and the number one equity underwriter for number of deals based on league table provided by FP info Mark.
Encourage you to look at the league tables on slide 20, and 21 of our Investor presentation, which highlights the strength of our franchise in North America.
Looking outside North America activity levels in our Australian capital markets business improved markedly during the fourth quarter and the fiscal year.
Revenue contribution improved by 22% from the previous year.
Im also pleased to report that our UK in European capital markets business achieved profitability for the full fiscal year, excluding significant items. The business earned net income of $3.6 million for the fiscal year.
We take very seriously our role in helping small and mid cap companies access capital and and relationships that are essential to help in the move forward.
And can front new challenges.
In the days and weeks that that fall following the historic.
Im sorry in the days and weeks following the historic market route our teams mobilize quickly to identify the clients that needed us most and we put forth remarkable efforts to support them are trading and specialty deaths successfully manage through the volatility placing.
Canaccord Genuity ahead of our Midmarket peers as well as many of the bald firms, we created thousands of virtual touch points for our clients. Despite the volatility of uncertainty our capital markets teams in all regions had been very successful in closing several transactions.
Today today, we have not experienced any material declines in our capital raising activity.
Secondary and follow on offerings amongst our clients, particularly in healthcare technology and mining have been increasing as issuers prepare for new challenges and opportunities in preparation for a less certain future.
Our restructuring and fixed income practices have also won several new mandates and we expect that strategic activity will increase over the coming year.
Unbiased advice is critical in markets like this and we simply not conflicted by the balance sheet issues that are vaults bracken competitors are.
By staying focused and playing to our historical strengths. We built a very healthy pipeline of investment banking advisory and restructuring mandates heading into our first quarter that said, we do expect significant near term disrupt disruptions across our industry.
Certainly.
For at least the next couple of months.
The longer term outlook for activities in our capital markets business remains constructive, but we will carefully balance our near term investment with our expectations for profitability.
We've always maintained a level of agility in our business that allows us to stay competitive and meet the evolving needs of our clients will taking steps to control our expenses.
And finally award on our infrastructure and technology platforms.
In recent years, there's been a rigorous effort to strengthen and modernize our technology and systems infrastructure globally.
We could have never obviously predicted this virus or the environment is at act or the environment. It created but we could not have been better prepared our investments have provided both resilience and flexibility for today, but they also support our ambitions for the future.
Getting people out of the office was easy, but getting them back to work will obviously be a lot more challenging lockdowns are easing in some of our regions. We're committing to we're committed to supporting our employees and our clients and at work from home environment, because we believe it's the safest option for the time be.
That said, we are actively preparing for an eventual return and implementing advanced safety and hygiene protocols and all our locations. We've not established that return date in any of our markets.
When we are confident that conditions are safe, we will endeavor to welcome back our colleagues to their offices in a careful and phased manner.
Until then we are using this experience to advance our collaboration and client engagement practices as we adjust to the new market realities.
We're prepared for an extended period of dislocation, but also for better times ahead, im not going to try and predict the shape of the cover the recovery, but I am confident that we have the appropriate business mix competitive position and most importantly culture to make fiscal 2021 very productive year.
We'll continue to be guided by our long term values and manage our business for stability and predictability.
We will commit to staying agile in of innovative so that we can continue to move swiftly into new areas of opportunity and we'll protect the strength of our balance sheet Emmanuel manage our capital prudently just as we would in any market backdrop.
No matter, what the environment presents we will remain committed to aggressively adding value for our clients in creating long term shareholder value as we strive to emerge from this crisis as a stronger company.
Thank you for your continued support and with that Don and I would be pleased to take questions. Operator. Please open the line.
Thank you.
Ladies and gentlemen, we have on that conducts a question and answer session.
She would like to ask your question Press Star then the number one on your telephone keypad.
If you would like to try your question press the pound cake.
There will be a brief possibly compiled like you and thereafter.
Your first question comes from Rob Goff from National on wealth partners.
Please go ahead.
Okay. Good morning, and thanks for taking my question.
Thanks, Ron.
Very good results in tough times.
Perhaps could you talk to us capital markets in terms of the strength of the revenues across all categories on how you might have seen that spill over into the first quarter.
Yes, I mean, you just look through.
Great question, great leading into where we'd like to go here, obviously, but.
When you look through the us.
Deal logic or whatever stats you want to look at I mean may was a record month in the US I mean record capital raising money. So we're obviously part of that market. So we continue to be incredibly active in the capital raising arena and no different than we were in the in the quarter that you saw.
Our trading businesses, either are just cash equity business or related businesses or principal trading business or I EG business they benefit in periods of volatility.
People change their positions and trade a lot and one's a flow business, we make a lot of money in that the others just a.
You know a principal position business, an overnight type of business and we do well in that so that environment Hasnt change, we expect that to slow down in fairness Im not sure we've seen it slowed down yet, but we expect that to slow down the business is probably negatively impacted and I don't think thats different anywhere else is is the M&A bill.
Business.
Not that.
M&A is not happening it's just we book revenue when we close deals.
And it's hard to close deals in this environment right now things seem like they're a little pushed out to the right. So to speak we continue to have an incredibly robust pipeline and change creates opportunity, but I think what we'll probably see at some point and I'm not sure and lost on if we've seen that lately, but.
I said at some point there has to be a lull in that revenue booking activity, but Don I'm not sure. If you got a more sophisticated and some that on the M&A side.
No I think thats right I mean, with the with the sort of new valuations in the marketplace number the deals that we have in the works so naturally get pushed out a little bit.
Hi, flying continues to get filled with.
Sort of.
New transactions or new mandates under the current valuations, but they naturally take time to.
To close and have the revenue recognized so I think we'll probably see some setting pause in the revenue recognition on the advisory front.
But thats religious.
Quarter, two I think.
Thank you if I may as a follow up you mentioned are looking to diversify your revenues for stability.
Are you seeing opportunities to play offense here and make tuck in acquisitions, the U.S. and.
I would be along the advisory business.
Yes.
I don't I don't think Thats, a priority right now I mean I.
I would love to be in a position that allowed us to play offense, but I think the more prudent route right now is to manage your capital we still believe.
Our shares are probably the most undervalued thing we could buy.
And.
I wouldn't see us doing have big material acquisition, and the capital market side, even with.
Deflated valuations and opportunities that could arise we did a large acquisition of Petski pruning a that's worked incredibly well for us that become very strong good partners in our business.
I think we've got some were one year into that acquisition I think we're still integrating that through and realizing all the revenue synergies that we see in that business before we do something else material at this stage in that market.
Okay. Thank you and good luck.
Thank you thanks for the question.
Your next question comes from Jeff Sandmaxx from Cormark Securities.
Go ahead.
Hi, good morning, everyone.
So Dan when we start with a wealth management.
Maybe just characterize what you're seeing in terms of differences around client.
Asset levels through the quarter when I when I look at to move into Canada directly track. That's what I would have expected I think it fell off a bit more maybe in the UK market and what were you seeing in terms of things like clients pulling a pulling funds out of accounts and things happen. So quickly I'm not sure. There was a lot of time to react versus.
Maybe just a difference it and mix across debt equity between the different regions.
Yeah that was a big broad question.
Let's start with the Canadian business, because I think everyone's most familiar with it just because it's here I mean, the decline that we suffered in our Canadian book was.
Less than the overall market that being said, it's not all in equity book, so you'd expected to be less than the overall market and that was we didn't see any material outflows and being a little cautious when I say of X. I don't know that off the top of my head, Jeff, but I don't there was no material outflows and our book and in fact, there was significant net.
Inflows, so when I look through.
And we obviously track that waterfall very carefully there was significant net inflows into our Canadian book and non recruiting net inflows. So that's pretty remarkable what we found that you'd expect me to say this is that in these periods of volatility you know people don't like self managing their money and we probably saw.
The advisory based model perform relatively better than say.
The robo offering or some kind of electronic self managed offering so we saw and I suspect, that's probably true and other firms as well as ours. So we saw that increase as of yesterday and.
Tried to give you the updated stats I mean, we're right back at our peak asset levels are very close to our peak asset levels in Canada. So March 30, Onest was a bad day to measure asset levels.
No. It was in the heat of the decline. So we've recovered that business substantially and when I look again and I don't want to give forward looking information per se, but when I look at our daily financials and monthly financials. I mean may was a yellow April and May we're very very good months for wealth business. So I think absent.
Another market correction I think we're in a place where we feel very confident that are this was a one time event as opposed to an ongoing event for the quarter and you'll notice our our profitability in our Canadian business again, I don't want to call something special charge or onetime charge I mean, it was a charge we have to take a margin charge in that.
In that business for the quarter, which impacted our profitability our profitability would have been very good without that charge. So I think we're back in a place in Canada, where I'm feeling very confident apps in another market correction.
The UK business has performed exceptionally well I mean again, a big gas a decline, but that business has a lot of transactions and that our UK wealth business as we transition that business.
And it's been a very active mining market has been very active small cap markets. So we've been incredibly active in that business. We made a million dollars adjusted in our UK wealth business last quarter remember, that's a business that we bought for $25 million. So.
Yes, it is working very well from our perspective and notwithstanding a.
Massive market correction and again, the UK business the impacts on the UK business, Yes, there was some acid impact and yes.
A fair amount of that has been recovered I don't think we've had again I know instances of of inflow of net inflows I think gone from a overall perspective.
There is there was no net outflow I think the inflows were washed out by the outflows for the most part I think the they fair to a balance each other off in the UK that's right.
So you know again, not net up but not net down it's just market down and ill in that business. The bigger impact is on the interest into.
We've kind of alluded to it with interest interest rates going to zero that does not help our business thats.
Theres good income there in interest in interest.
And holding clients cation right now, we're not making any money on that carry if short term rates will ever go up but right now we're not making any money on that and that that ultimately does impact the profitability of that business and.
You've seen a little in the Q4 and you'll continue to see that as we go through.
That being said Weve expedited a lot of cost savings in that business and we'll continue to expedite a lot of cost savings in that business to recover that.
Okay, and then you did touch on it in Canada, you had some charges I guess it was a bad debt expense against some margin called the add there.
Maybe a Don maybe you could speak to just the mechanics, what happens there may have the margin call you get the clients so to the under their underlying assets.
Can you just it was this is one or two accounts for someone was way upside just couldn't fully collect or there is more about just a broader general provision that you're taking.
No it's fairly I, it's fairly isolated I mean, when you have the rapid market deterioration like we saw at the end of March.
There is naturally pressure on March and accounts and and.
There's always going to be a small number that are going to be more challenging than others.
So it wasn't like it brought swept abroad swept.
Systemic kind of the problem, it's isolated and this naturally a regular level margin.
Our provisions that we take for that kind of activity and they just become a little bit higher when you get that kind of market.
Market penetration going on like we saw in March it's just kind of normal course, just a little higher than normal that's all.
And with Jeff So, even even a charge like that in the context of a multi hundred million dollar margin book.
Bad don't get me wrong, we get on where hopefully hope to recover a debt down the road, but it's a relatively small charge given the size of our margin book.
Yeah, I totally understand it wasn't sure if it was a specific isolated event, which it sounds like versus something more broad so.
That's that's good color.
And then one area. We wish you touched on I guess is Australia I mean, they are obviously helped pressure there too. This is still in early stage venture for you guys that does the.
What we saw over the last few months change at all your approach into that market or what's happening there.
No nothing nothing's really changed I mean, we didnt buy.
Patterson Securities on the back of we thought there was a huge market correction and we also didn't buy and on the back of we thought there'd be a massive mining market and both things have happened one negatively one very positively to the results. There so I think.
Were you know we're cautiously optimistic about that business I think it's performing better than what we anticipated. It's very very early so I don't want to over play it but the integration is going well the teams are jailing incredibly well.
No. It's the premise in line that business you remember was not only to grow our wealth business and stabilize our wealth business what was to improve our capital markets business and we've seen that as well the synergies of putting those two businesses together and having a bigger operation there feel very early like it's working really well.
And.
Again based on the activities, we're seeing in April and May, particularly in the resource sector, but elsewhere.
We anticipate continued good results strong results in the in that region.
Okay and.
You mentioned buybacks over the last year that is off to a pretty big factor for you in the fiscal year.
As you mentioned the stocks are not not behave the way you wanted it to you I would say a little held in quite well through this period. How are you feeling in terms of the potential here, maybe doing another substantial issuer bid.
And continuing to buyback your stock.
Yes, I mean buying back our stock continues to be a priority notwithstanding the uncertainty in the market that being said the market's uncertain.
So I wouldn't want to be in a position where at the buyback our stock and then have another massive market decline in worry about where capital is that we're going to keep a healthy balance of capital.
In this period of volatility so when we have the liquidity we will.
Obviously continue to do our normal course issuer beds.
You know, whether we do another substantial issuer bid or not will really just depend on the volatility in the market and our how much money we've made.
In the last in the couple of quarters proceeding that buyback.
Certainly continue to be confident in our dividend and certainly we do believe our stock to be materially undervalued last time, we bought back stock I think we bought it backed on it 550 550, that's right and that's kind of where the stock is today. So you know.
No nothing has fundamentally changed we feel increasingly confident about our business today than we did a year ago or less than a year ago. When we bought back stock so that or other substantial issuer bid.
Okay, and I guess that sort of cautious approach just given the environment is that what.
Vision.
Doing a special dividend this year.
Yeah, I mean, we what we found Jeff and maybe we didn't articulate this well and communicate it well enough and if we didnt than my apologies the.
We we didnt find that we were getting the benefit of special dividends. We didn't find that we were we'd we'd rather have a regular dividend and increasing regular dividend I think the way we tried to communicate it to our investors was we pay a dividend and we'd grow it as our wealth profitability grew because our wealth.
For the ability was more predictable obviously in our capital markets profitability and certainly I think you can expect as as our wealth profitability growth, which didnt happen this quarter because of coal bed.
Yes, you would expect to see our dividend grow as well commensurate with with that with that profitability. So thats kind of the position, we're taking a last year we.
We did do special dividends. This year, we increased our dividend to five cents and ideas to continue to grow that dividend over time.
Yes, so there really was never contemplation of a special dividend. This year this quarter and my apologies, if we led to believe otherwise.
Okay. Thanks, Thats, all I had all that I Ricky.
Your next question comes from Graham writing from TD Securities. Please go ahead.
Thanks Graham.
Morning.
Recoveries in the quarter around.
The incentive and acquisition related cost UK wealth business.
But acquisitions, where those related to and could those.
Recoveries reverse if you if you continue to see sort of a recovery in your and your assets there.
With some of the acquisitions that we've been making over the last year. There is a contingency consideration. There is a part of the can situation is contingent on various performance metrics out.
Into the future based upon revenue assets that kind of thing. So we measure those at the time at the acquisition and constantly remeasured them and and true it up depending upon what we think the ultimate contingent consideration is gonna be so what the market activity over the last quarter.
Actual reduction in that.
And what that.
Considerations going to be so we just true it up.
We true it up which we.
We expect that it's going to change, but it might change a little bit in which case there would be a true up either either increase or decrease to the provision that we've currently got record.
Okay.
Jump into the expense side, so I guess theres, a couple of things going on.
First of all you talked about lower cost this year and just due to this sort of remote environment that you're working in and deferring some costs.
But then you also have a 20 million dollar in expense savings target should I think of those as two separate items and not related to each other.
Yes.
Oh it all at Dawn give his color as well.
We had always had $20 million targeted as a cost saving measure and we're well along the lines of realizing that that is planning on that and doing what we needed to do to get there and then covert hit.
I think you know.
Unfortunately, we just don't know with the new normal as yet.
And I don't mean to.
I wish we kind of been through cobot, and we're kind of sitting here and we knew where new business level should be and then we can manage our cost and budget appropriately, but we don't know that's that's the debt honest truth. So what we're doing right now is saying, let's cut all those cost right now, but we don't have to kind of ease into it through the year, let's just kind of guy.
Got it all Dod and to be clear its non comp costs and comp costs. So read in headcount. So we're going to trying to get that done now and then once we understand where new normal is I'd like to give you a bit better visibility. It's hard to do you know maybe we'll have some more cost cuts maybe we walt.
But but you know until right now when I look at our business levels in the quarter ended March in the quarter, we're going to end in June there pretty good but you know what's the quarter ended in September going to look like and what's the quarter after that going to look like that it's hard to have visibility and not at this stage given.
Volatility so I.
I think we're just going to kind of manages dynamically for a little bit I know thats not the precision you're looking for but I think you'll see that cost number come out of the organization virtually immediately and and then we'll see if we need to do more after that.
Okay understood.
[noise] jumping to the Canadian wealth platform, just a good recovery in your assets.
In fiscal Q1 any color on sort of what degree of the client flows had an impact over the past couple of wells.
Can you just I'm not sure. What's my line are yours, but I didn't I didnt hear the end of the degree of what what were you, saying the client flow is how much of it impacted.
Flows actually haven't.
Over the last couple of months in a way recovery.
Yes, there was definitely inflows.
That Don I don't know if you know the exact number you want articulate the exact number we definitely had net positive inflows in that recovery.
Non you want to give some color I don't I don't have yeah, I don't have the exact number I mean, the the increase.
Since we from the asset levels at arch is a combination of net new assets being added as well as market growth I think as Dan mentioned earlier, what we've definitely seen.
[music].
Has been sort of a.
Clients moving away from the more self directed platforms into more advisory platforms, and we've been enough that beneficiary of that as a as our advisors have been able to.
You know attract additional assets from existing clients as well as new relationships.
Okay, and then you took some provisions which you talked to can you quantify what those were the K wealth platform.
So much.
Well I think those those flow through our DNA line on the Canadian wealth.
Page and I think.
I think you've kind of look at the differential from what it run rate and normally to sort of what we experienced in the quarter and that would kind of give you a pretty good indication of so what would what that are.
Kind of went from an average of two and a half to step in the house. So that's probably indicative of what was what that level was I want to I don't want to I don't want to tell you that that that adds up to five [laughter].
And then just my last question, you've got a target of 20% pre tax margins for your global wealth business. Yeah. Just you know with the lower interest income with this low rate environment and then you've also brought in Australia platforms like that that target still there's potentially a revised or pushed out.
No I mean.
No we still we're not changing or targets I mean, yes that that interest income is very high margin business for us 100% margin actually.
So, but you know we're talking about a business that has almost 500 million plus in revenue. So yes, 10 millions bad if it disappears or whatever that number is.
At high margin, but we were not changing our overall margin assumptions will just more aggressively cut cost to get to those margins. That's a that's a hard number that we that we will get too.
Okay. That's it for me thank you.
[noise] [noise] Mr., Jeff you know there no further questions at this time please continue.
Well great. Thanks, Thanks, everyone for joining us today, and we certainly look for look forward to providing another update when we released our Q1 results, which we are relatively soon.
In early August until then pleased they sell safe and and and healthy and operator I think we can close the line. Thank you.
Thank you ladies and gentlemen, just concluded the conference call for today [laughter]. Thank you for participating you may now disconnect your lines.
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