Q4 2024 IGM Financial Inc Earnings Call

Good day, and welcome to the IGM Financial 4th Quarter 2024 Ripple Conference Call and Webcast.

All participants will be in a listen-only mode.

Conference Specialist by pressing the star key followed by zero.

After today's presentation there will be an opportunity to ask questions.

To ask a question, you may press star then 1 on a touchtone phone. To withdraw your question, please press star then 2.

Please note, this event is being recorded.

I would now like to turn the conference over to Kyle Martens, Head of Investor Relations. Please go ahead.

Kyle Martens: Thank you, Betsy. Good morning, everyone, and welcome to today's call.

Kyle Martens: Joining me on the call today, we have James O'Sullivan, President and CEO, IGM Financial.

Damon Murchison, President and CEO, IG Wealth Management

Kyle Martens: President and CEO McKenzie Investments, and Keith Potter, Executive Vice President and CFO of IGM Financial.

Speaker Change: Before we get started, I would like to draw your attention to our cautions concerning forward-looking statements on slide 3 of the presentation.

Speaker Change: Slides 4 and 5 summarize non-IFRS financial measures and other financial measures used in the material. And on slide 6, we provide a list of documents that are available on our website related to IGM's Q4 results.

James O'Sullivan: I'll take up to slide 9 and turn it over to James.

with important progress and success across all our businesses.

James O'Sullivan: We achieved adjusted EPS of $3.95, up 12% relative to 2023, and our second highest year on record.

James O'Sullivan: And we returned over $650 million of capital to shareholders through our common dividend and share repurchase program.

James O'Sullivan: We grew our client assets, including our proportionate share for strategic investments, by 24%, reaching over $480 billion at the end of the year.

James O'Sullivan: Our core businesses, IG Wealth and McKenzie, made up a large portion of our growth in assets and drove the majority of our earnings growth in the year, demonstrating the strength of our core.

Our strategic investments also delivered strong client asset growth.

including significant new inflows across each of the four businesses.

James O'Sullivan: We have the businesses that we want and 2024 results support our belief that we are well positioned and an architect at IGM to deliver growth.

Thanks for watching!

Turning to slide 10.

James O'Sullivan: As we look ahead to 2025, we will continue to invest in our wealth and asset management businesses, building on recent success and supporting their long-term growth.

James O'Sullivan: At IG Wealth Management, we will leverage our leading advisor platform and strong momentum to drive further gains in the mass affluent and high net worth segments.

James O'Sullivan: And McKenzie remains focused on delivering investment excellence, leveraging and expanding our distribution advantage, and elevating the client and advisor experience.

James O'Sullivan: We will continue to return capital to shareholders with our Strong Dividend and Share Repurchase Program.

James O'Sullivan: And as we've said for over a year, from an M&A perspective, we expect to be most focused on investing in the strategic investments that we own today.

Thanks for watching!

Shifting to our fourth quarter results on slide 11.

James O'Sullivan: Adjusted EPS of $1.05 was up 22% relative to the prior year and was the second best fourth quarter on record.

James O'Sullivan: Quarter-ending assets at each of our wealth and asset management companies reached record period-ending highs.

James O'Sullivan: During the fourth quarter, we renewed our normal course issuer bid and continued returning capital to shareholders.

James O'Sullivan: During the quarter, IGM Financial was once again recognized as a top sustainable company, as well as one of Canada's top employers.

James O'Sullivan: We are proud of these awards and view them as a reflection of the dedication and commitment that our employees deliver each and every day.

James O'Sullivan: Turning to slide 12, financial markets remain strong throughout 2024 with positive returns in all major equity markets.

James O'Sullivan: IG and McKenzie's average client return, which represents our diversified asset mix across global asset classes and currency exposures, was an impressive 15.5% for the year.

James O'Sullivan: As shown on slide 13, the industry backdrop clearly improved during 2024, helped by strong financial markets that supported investor confidence as the bite of high inflation and interest rates began to ease.

James O'Sullivan: Absent financial market volatility, we would expect 2025 to show continued improvement.

James O'Sullivan: But, the prospect of volatility is real and has been experienced this week.

James O'Sullivan: with the announcement and then delay of tariffs on Canada and Mexico.

James O'Sullivan: Across IGM, we are prepared for uncertainty surrounding how the U.S. chooses to engage with Canada and the rest of the world, and the potential financial impact, market volatility that may come from it.

James O'Sullivan: Our client assets are well diversified and our clients will continue to benefit from our focus on financial planning and advice.

James O'Sullivan: ITM also benefits from a range of growth drivers, both within our core businesses and our strategic investments.

which continue to position us for near and long-term success.

Thanks for watching!

James O'Sullivan: Keith will speak more to our earnings results later in the call.

Speaker Change: So on slide 14, I'll just quickly highlight that IGM's double-digit earnings growth for the quarter and the year were both driven by the wealth

and Asset Management Segments.

Speaker Change: And on slide 15, we see how each of the six wealth and asset management businesses contributed to IGM's asset growth over the course of 2024, which Damon and Luke will each speak to next. So, Damon, over to you.

Damon: Thank you, James, and good morning, everyone. Turn to slide 17 in Wealth Management's fourth quarter highlights, including IG Wealth, Rockefeller, and Wealthsimple.

Damon: During the quarter, we saw record high ending AUMNA as well as fourth quarter records for total gross inflows, total sales, and inflows from existing clients.

Damon: The fourth quarter set another all-time record for inflows for new clients.

Damon: IG Wealth entered the quarter with AUA of $140.4 billion of a solid 16% year-over-year and 2.9% during the fourth quarter driven by financial markets.

Damon: Gross inflows from the fourth quarter were $3.9 billion with gross sales into IGM products at $3.8 billion.

Damon: Net inflows from the quarter were $553 million and net sales into IGM product were $384 million.

Damon: January was a strong month, ending with a record AUM&A, record gross inflows, and record gross sales. As we continue momentum, we start in the second half of 2024.

Damon: Total gross inflows from newly acquired clients were $1.3 billion with clients with more than $250,000 in financial assets representing 78% of these flows.

Damon: During the quarter, we elevated our advice experience by giving our advisors and clients access to a leading-edge estate planning, settlement, and executive services platform through our strategic partnership with Clear Estate, a leading FinTech estate planning provider.

Damon: Also during the quarter, we rank number one in earned media share of voice in the Canadian wealth marketplace.

Damon: And during 2024, IG was the most prominent wealth brand for earned media share of voice among both independent firms and bank-based wealth advisors.

Damon: This ranking confirms our voice is being heard by both our current and prospective clients as we share our views on leading financial planning and investment topics. This further validates that our thought leadership and best-in-class advice platform is resonating in the marketplace.

Damon: Both Rockefeller and WellSimple have strong quarters, and I'll speak to both in coming slides.

Turn to slide 18, you can see IG's Q4 flows.

Damon: As you can see on the left, in January and the fourth quarter, and in 2024, we delivered strong growth inflows with both fourth quarter and 2024 being records for IG.

Damon: On the right hand side is our last 12 months net flows.

Damon: As you can see, all lines are moving solidly in the right direction as IGM product net flows return to positive territory and approach total net flows.

Damon: As it's removed through 2025, our advisors will continue to build on the investments we've made and extend the momentum as we work with our clients to both build, quantify, preserve, and distribute wealth.

Turn to slide 19, I'll make two brief comments here.

Damon: On the top left, you will see strong increase in gross inflows, which were up 27% during the quarter, and once again, complemented by year-over-year decrease in our gross outflows rate.

Damon: On the bottom right, you can see continued upward trend in our 2024 net flows rate, which returned to positive territory during the fourth quarter.

Turn to slide 20.

Damon: In 2024, our gross inflows from newly-acquired clients exceeded $1 billion per quarter on average, while new clients with more than $250,000 in financial assets have represented over three-quarters of those flows over that same period.

These solid growth inflows have helped contribute to our AUA.

Damon: For clients with over $250,000 in financial assets, which now stands in excess of $117 billion, while clients with financial assets greater than $1 million represent 44% of our total AU&A.

which is up 38% from a year ago.

Damon: Turn to slide 21, and our strong momentum in mortgage and insurance. Two quick points I'll make on this slide.

Damon: One, our mortgage funding was up 17% during 2024, a strong result given the heightened competition and sluggish growth in this market.

Damon: And two, along with the strong growth in new annualized insurance premiums of 31%, I'll also highlight that both our average case size and the number of cases were up in 2024. We have more advisors selling insurance and our advisors selling larger policies as we go up market.

Turn to slide 22.

Damon: and an update on how we intend to capitalize on the industry's key wealth drivers.

Damon: Our partnership with Clear Estate provides multiple opportunities to further address these drivers and our conviction in these opportunities is supported by a minority investment in this company.

Damon: Half of Canadians do not have a will, and those that do, approximately one-third, need to have their estate plans and their wills updated.

Damon: Clear Estate's intuitive, state-of-the-art platform is a key market differentiator that can help us further address the financial needs of mass affluent and high net worth Canadians.

Damon: Access to a leading edge of state planning, settlement, and executive services can give our advisors a complete view of our clients' wealth, providing opportunities for share of wallet growth and insurance protection, while helping clients bulletproof and execute their financial plans as they prepare for a wealth transfer to the next generation.

This partnership will further extend our best-in-class advice platform.

Turn to slide 23.

Some updates on Rockefeller's progress.

Damon: Client assets were up 24% during 2024, driven by inorganic and organic growth, as well as capital markets.

Damon: OrganicGrowth drove $6.6 billion in client assets in 2024, while Rockefeller continues to add to their private advisor network with 54 new advisors being added in 2024.

Damon: Turn to slide 24, it was another record-setting quarter of AUA growth at Wealthsimple.

Damon: WellSimple AUA increased by $11.9 billion during the quarter, yet another new quarterly record with assets ending in 2024 up an absurd 106%.

With that, I'll turn it over to Luke Gould.

Thank you, Damon. Good morning, everyone.

Speaker Change: On page 26, you'll see a few highlights for McKenzie and asset management for the quarter.

Damon: Record quarter end high AUM of $213 billion is up 9% versus last year and approximately 1% in the quarter driven by client return.

Damon: Investment fund net redemptions of $377 million in the quarter were a significant improvement relative to the $826 million last year. And January continued this trend with net redemptions of $65 million improved from $172 million last January.

Damon: In the top right, I'd highlight that we had some meaningful institutional wins of around $4 billion in aggregate, which are expected to fund during February and March.

Damon: I'll speak a bit to this in coming slides and would note here that they primarily relate to our global quantitative equity team and they are diversified across mandates, client types and geographies.

Damon: I'd also highlight that we continue to scale our McKinsey Northleaf private asset products for retail with over $300 million at year end. The products have had very strong performance and we're going to continue our focus in 2025 in bringing these important asset classes to retail investors.

Damon: Also noteworthy, you can see that we launched a U.S. small cap fund managed by our quant team, as well as two liquid alt funds, our McKinsey Global Dividend Enhanced Yield and Enhanced Yield Plus funds.

Damon: These funds are managed by our Global Equity and Income team and use an option writing strategy to enhance income while reducing volatility.

Damon: We've also highlighted that we've launched our U.S. All-Cap Growth Fund to our Pramerica FuturePath Fund family.

Damon: This fund is a five-star mandate that we're excited to bring to Premerica.

Damon: And at the bottom, you can see China MC had strong growth during 2024, with long-term investment fund assets up 42%, and market share increases from 5.1% to 6.2%, largely as a result of strong net sales of $225.1 billion, or $45 billion Canadian.

Damon: And Northleaf continued its consistent trend of new commitments of around $1 billion per quarter in each quarter since our partnership began four years ago. And they had just under $5 billion in new commitments in 2024, diversified across private equity, private credit, and infrastructure offerings.

Damon: Turn to page 27, you can see the trended history of McKenzie's NetFlows.

Damon: As mentioned, we've continued to see year-over-year sales improvements, and our growth sales are up 26% in Q4, and these improvements have continued in January in the context of a continued improving industry environment.

Damon: Redemption rates are stable, and on the right you can see this is translated into improving net sales.

Damon: On page 28, at the top, you can see that retail gross sales were up 24% from last year, and Morningstar ratings overall were relatively unchanged from September.

Damon: In the table at the bottom left, you can see improvements across client segments in the quarter.

Damon: Turn to page 29. Here you can see our performance and net sales for our retail mutual funds and ETFs by boutique.

As we've spoken to over prior quarters,

Damon: In the current environment, we're seeing short-term relative underperformance in our blue water growth and green chip boutiques.

Damon: These teams continue to manage in line with their proven approaches.

Damon: Across all of our other boutiques, we continue to see improvement in net sales on a year-over-year basis, and in our quant and global equity and income boutiques, they continue to deliver compelling performance within large product categories, and we're seeing growing positive net sales.

Damon: We're also seeing improvement in sales within our fixed income ETF mandates and have a very strong U.S. all-cap growth mandate advised by Putnam that we're going to continue to emphasize in 2025.

Damon: Turn to page 30. We're turning the spotlight on our global equity, which we last profiled at our investor day about a year and a half ago.

Damon: This team was added in 2017, and over the seven years they've built exceptional track records across 25 mandates using their Holistic Quant approach, promoting all-weather, risk-adjusted outperformance across cycles and environments.

Damon: The team is now managing over $13 billion, diversified across client types, and pro forma for recent awards, they're at $17 billion.

Damon: On the top right, we've highlighted the early and growing momentum we're seeing in retail under the banner of trailblazing quant in Canadian retail. We have launched nine new mutual funds in ETFs for this quant team in retail in 2024, and we have another four coming in early 2025.

Damon: And in retail, we've had net sales of just over $500 million in 2024, and we see significant upside here with regards to the large categories these mandates compete in.

Damon: We've also highlighted in the bottom right the $4 billion in partnership and institutional awards that are funding in early 2025.

Damon: As mentioned, these awards are across five different mandates, diversified across client types and geographies. And I'd also highlight that our quantitative approach is really well suited to customization to client needs, and we're very pleased with the pipeline we have here as we enter 2025.

Speaker Change: I'd also highlight, before Keith takes it, I'd remind that these wins, this $4 billion, these are large blocks of business.

Speaker Change: And so when you think about pricing, on page 40, we've got the trending of our fee rates and you can expect these to be obviously higher than the fee rates at IG and Canada Life, but lower than the average third-party fees that we enjoy.

Speaker Change: Go to page 31, a few comments on the Chinese investment fund industry.

Speaker Change: On the left side, the fourth quarter exhibited modest net flows, driven almost entirely by money market funds.

Speaker Change: Industry long-term assets were flat during the quarter and up 17% year over year, driven by both market and strong net flows during the year.

Speaker Change: And on the right, I'd remind and highlight that ChinaMC's position remains very strong as the second largest fund manager in terms of both long-term and investment funds, and they did experience market share gains in both long-term funds and overall in the past year.

Speaker Change: On page 32, you can see continued growth in China MCs AUM, with year-over-year long-term investment fund AUM up 42%, more than twice the industry rate, due to strong net sales of $225 billion won, or $45 billion over the last 12 months.

Speaker Change: I'd also highlight the growth of 5% overall relative to Q3.

Speaker Change: China MC is a leader in ETFs in the Chinese marketplace and in this space they enjoy a market share of 17%.

Speaker Change: We're very supportive of these changes and believe it positions China to see well to continue its leading position and to capture ongoing growth in this space. The impact of these changes was included in the fourth quarter, half of which was included in the fourth quarter, and Keith's going to provide more detail and an outlook on a later slide.

Speaker Change: On page 33, you can see another quarter of strong growth at Northleaf with 0.9 billion in new commitments in the quarter and 4.9 billion over 2024.

Speaker Change: One noteworthy item I'd highlight is that 2024 was a milestone year for Norfleet in expanding their distribution reach globally. This reflected the first year where a majority of their new third-party commitments were from clientele outside of Canada, and we're really pleased to see this effort in them executing on this strategy.

Speaker Change: As mentioned earlier, the fundraising during the quarter and year was across infrastructure, private credit, and private equity, and we're pleased with this continued strong growth. I'll now turn the call over to Keith Potter. Thank you, Luke, and good morning everyone. On slide 35, you can see key highlights for Q4.

Keith Potter: Adjusted EPS was $1.05, up 22% year-over-year, our second-highest fourth quarter on record. It's driven by strong results at both IG and McKenzie.

Keith Potter: We return a total of $180 million to shareholders in the quarter. In addition to the quarterly dividend, we continue to be active with our NCIB program, repurchasing $47 million in shares.

Speaker Change: As noted by James, we have a renew in our NCIB during the quarter. Our operations and support business development expense growth over 2023 came in at 3.8%, versus our guidance of 4%. We are guiding to 2025 expense growth of 4%. I'll speak to this in a moment.

Turning to slide 36.

Speaker Change: You can see our AUMNA in flows, as seen on the left-hand side. 2024 was a solid year for asset growth, with ending assets up 12.6% year-over-year and 2.1% in the fourth quarter. And during 2024, average assets were up 10%.

Speaker Change: January saw continued solid growth with ending assets at an all-time high of $278.1 billion.

Speaker Change: Turning to slide 37, as I mentioned, we have our consolidated earnings of 22% year over year, 2% sequentially, driven by our wealth and asset management businesses.

on slide 38.

We present...

Speaker Change: the key profitability drivers for IG Wealth. I'll highlight a few points here.

Speaker Change: Driven by investment returns and net inflows and on the right the advisory free rate is in line with our guidance and reflect market returns during the period

as clients moved up wealth bands.

Speaker Change: And looking into 2025, we continue to expect about 0.5 basis point downward pressure on the rate per quarter driven by a mix shift toward high net worth and mass affluent clients. And this rate may also be impacted by product mix shifts such as cash and cash-like deposits.

Speaker Change: Products and program fees remain stable and we expect this trend to continue moving forward.

Speaker Change: And finally, asset-based compensation rate was up during the quarter, and as we move into Q1, we do expect this rate to come down and be closer to Q1.

Q3 levels.

driven by our annual grid reset.

and Q4, up 33% year over year and 7.8% sequentially.

Speaker Change: On point one, advisor and product and program fees are up year over year relative to last quarter driven by asset growth.

Speaker Change: On point two, other financial planning revenues reflect strong performance in our insurance business.

Speaker Change: and Mortgage Results that were in line with our expectations. And looking forward, we continue to expect the mortgage business to contribute six to eight million dollars per quarter, and that would be excluding the impact of any fair value adjustments. And the insurance business, we expect continued growth.

Speaker Change: Moving to slide 40, we have McKenzie's AUM by client and product type as well as net revenue rates.

Speaker Change: On the left, you can see average AUM was up 3.1%. On the right, we continue to see strength in our wealth management partnerships, contributing to a mixed-shift and third-party rate excluding Canada Life, while the overall rate remained relatively flat versus last quarter.

Speaker Change: As a reminder, as we look forward to Q1, we have two fewer days upon which we charge revenues. However, our asset-based compensation paid to distributors and advisors

Speaker Change: is based upon one quarter of the year, and the combination of the two will have a negative impact on our revenue rate in Q1, and just for some context, historically, in Q1 this has had approximately a 0.3 basis point impact on that rate.

Speaker Change: Turning to slide 41, you can see McKenzie's earnings of $61.9 million, up 25% year-over-year, and 4.2% sequentially.

Speaker Change: Year-over-year and relative to Q3, net asset management fees were up, driven by higher assets. And on point two, higher net investment income was primarily driven by seed capital returns.

Speaker Change: Turning to slide 42, we are guiding to 4% growth in operations and support and business development.

... in 2024.

Speaker Change: With respect to IG, we've made meaningful investments in the business over the past several years and during 2025 we will leverage the momentum we are seeing. Our investments will build out our advisor technology leadership.

Speaker Change: enhance our segmented device model, and build out solutions to focus on key wealth drivers that Damon spoke to.

Speaker Change: IGU expense growth of approximately two and a half percent also recognizes efficiencies we have gained through real estate optimization and decommissioning old systems and processes that we've replaced with new technologies.

McKenzie's expense growth of 6%.

will drive progress on a number of fronts during 2025.

Speaker Change: including client and advisor experience through enhancements to the back office, advisor portal and other technologies, investment management through mid-office platform development, and investments in distribution and product capabilities.

Slide 43 has Chinese key results, first on the left.

Speaker Change: AUM increased by 4.5% versus last quarter, and on the right you can see China's earnings of $25.4 million.

Speaker Change: for the fourth quarter. I have three main points here relative to Q3. First, as I spoke to on last quarter, there were significant seed capital gains.

Speaker Change: In Q3, and excluding these one-time items, Q3 earnings would have been more in line with Q2 of $20 million.

Second, as we look to Q4 results.

Speaker Change: Earnings were lower as well due to seasonality of higher expenses. And finally, as Luke mentioned, in the quarter, mid-November, Chinese EMC did announce fee reductions on broad-based market ETFs, which impacted earnings.

Speaker Change: These changes were made to better service clients, enhance the company's number one position in the ETFs, and capture future growth. As we look forward to 2025, our best estimate is that we expect full year earnings to be aligned with 2024.

Speaker Change: Slide 44 has the earnings contribution from the companies in each segment. A couple of comments on strategic investments. First, Rockefeller had strong performance through its core global family office business during the quarter. It was offset somewhat by lower earnings in asset management and investment banking segments.

Speaker Change: Northleaf's earnings of $3.1 million reflect continued investment in the business.

Speaker Change: to globalize its distribution and reach its clientele. As a reminder, the Q4 2023 Comparative Period has a positive one-time adjustment for a lower effective tax rate in this quarter. It actually had a negative adjustment on the tax rate.

Speaker Change: Slide 45 provides a summary view of earnings and the ownership and value of our strategic investments by segment.

Speaker Change: The first main point is that the carrying value of Northleaf's increase in the quarter, reflecting earnings,

and the change in the fair value estimate.

The year out related to our 2020 purchase transaction.

Speaker Change: The estimate net of non-controlling interest is $32 million, which you can reference in the notes of the financial statements. And just to be clear, the urinal is capitalized in adjustment to cost and does not have an impact on earnings.

Speaker Change: And finally, at the end of Q4, our strategic investments now represent $6.2 billion in value.

Speaker Change: Slide 46 highlights execution against our capital allocation priorities. Our 12-month trailing dividend payout ratio is 64% of adjusted cash earnings at the end of the quarter, and we've added a slide in the appendix with details of the calculation.

Speaker Change: We continued to execute on our share repurchases during the quarter while maintaining our financial flexibility and IJM's leverage ended 2024 at 1.6 times debt to EBITDA, an unallocated capital increase of 531 million dollars. That concludes my remarks and I'll turn it over for questions.

We will now begin the question and answer session.

Speaker Change: To ask a question, you may press star then 1 on your touch-tone phone.

Speaker Change: If you are using a speakerphone, please pick up your handset before pressing the keys.

Speaker Change: If at any time your question has been addressed and you would like to withdraw your question, please press star then 2.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Thanks for watching!

Speaker Change: The first question today comes from Nick Preeb with CIBC. Please go ahead.

Speaker Change: I just wanted to go back to the remarks about pricing changes that were enacted at China AMC in the quarter. Just a couple of questions on that. One, was that driven by competitive considerations as opposed to any further regulatory action? And two, are you able to quantify the expected impact on run rate earnings to China AMC?

Speaker Change: Yeah, it's Luke, Nick. Yeah, I'll stand those two dimensions. One, those are competitive changes.

Speaker Change: And so again, to attain their leading market share position, they want to make sure that their prices are competitive and in line with all those others competing.

Speaker Change: So that was the nature of them. On the magnitude, you can expect for Q1, earnings just down very slightly from Q4.

Keith Potter: And so I think Keith gave full year guidance that 2025 should see an earnings full year in line with 2024s and then continue growth beyond. So you shouldn't expect material changes.

Speaker Change: Yeah, Nick, just a different key here, just adding that, you know, just on page 41, you can kind of expect a pattern or what we'd expect similar to Q4 from 2023 as we move through the year.

Nick Preeb: Okay, and then I also want to drill into the economics attached to AUA growth at Wealthsimple. You know, a very strong quarter and a very strong year, but can you just expand a bit on how balanced that growth is across product lines and what I'm really trying to understand is whether, you know, the revenue growth has been essentially commensurate with the asset growth.

Yeah, it's James.

You know, like most growth companies,

Nick Preeb: You know, what I'd observe is companies often start by focusing on growth in clients, and then growth in assets, growth in revenue, growth in EBITDA, and ultimately, kind of it reveals itself in growth in IFRS earnings.

Nick Preeb: Wealthsimple is demonstrating remarkable growth in clients, in assets, in revenue, and in EBITDA. As I've described or said in previous calls, I think they are fully, fully in control of their financial future, Nick.

Nick Preeb: So we're seeing growth not just in those items that we disclose quarterly, but we're seeing it right down through EBITDA.

Speaker Change: Okay, very good. And just last one for me, just a quick point of clarification. I think there was a comment made on the economics attached to the $4 billion of mandate wins.

Speaker Change: that will be funded in the future months. And I think the comment, if I caught it correctly, was that the economics attached to those would be somewhere between the Canada Life fee rates and the overall third-party fee rates at McKenzie. So that would put it somewhere between

Speaker Change: you know, 15 basis points and 50 basis points. Did I catch that correctly?

Speaker Change: So in that range of kind of 50 to 16, you can think of it being closer to the 16 than the 50.

Speaker Change: in line with what these mandates are with these large institutions.

Thanks for watching!

Speaker Change: Got it. Okay, that makes sense. All right, that's it for me. I'll pass the line. Thank you.

Thanks for watching!

Speaker Change: The next question comes from Tom McKinnon with BMO. Please go ahead.

Tom McKinnon: Yeah, thanks. First question is just with respect to the buybacks.

Speaker Change: It's 3 million share buyback fully utilized and that was Offset any kind of you know potential dilution from option exercises, so no change in share count you've upped it now to 5 million

Speaker Change: Is the thinking here that this would be more than needed to offset any dilution from option exercising, and you'd actually fully utilize this and possibly decrease the share count going forward? And I have a follow-up. Thanks.

James O'Sullivan: Yeah, Tom, it's James. That's exactly what I'd like to see us do. As you notice, we now disclose quarterly and annually the capital that we've returned to shareholders, which is the sum, obviously, of the dividend and the share buyback, and I would very much like to see that.

James O'Sullivan: That number increased and we've also disclosed this quarter, you know Cash earnings and we show the dividend and the payout ratio on a couple of different bases

James O'Sullivan: And so cash earnings minus the dividend is a growing number. Unallocated capital is a growing number, and so I think we're in a position here where we have optionality, we have some flexibility.

James O'Sullivan: And so, as we look at a year ahead that may present some volatility, I would view that volatility as an opportunity for us to buy back more and return even more capital to shareholders in 2025 than we did in 2024.

Speaker Change: Okay, and just with respect to the dividend, as I think you had mentioned before, that

Speaker Change: If that payout ratio on cash got around 60, you'd have a look at the dividend. Thoughts there? I mean, we've got volatile times, you've got flexibility with the buyback. How's your thinking there?

Speaker Change: Yeah, I mean, as we approach that, Mark, and we're getting closer, to be sure, as that page discloses, we'll take that question, that discussion, to our board.

Speaker Change: But my, you know, I don't know how much more upside there is in the share price from a higher dividend relative to share buybacks, I think.

Speaker Change: Again, in a world of volatility, opportunistically, buying back shares, I think, is a powerful way of supporting both the share price and ongoing shareholders. So sitting here today, Tom, there's a bit of a bias towards share buybacks.

Okay, thanks for that.

Speaker Change: The next question comes from Graham Riding with TD Securities. Please go ahead.

Graham Riding: Good morning. Could I just ask you to maybe just elaborate a little bit? You said you're at McKenzie, you're looking to invest in your

Graham Riding: product and distribution capabilities, and then you're also looking to invest in your middle office solution for investment management. Can you maybe just give us some examples or further context on what that means?

Graham Riding: Yeah, it's Luke, absolutely. So I'll start with the middle office, and we profiled it a bit at an investor day.

Graham Riding: So we're excited. In 2025 and 2026, we're bringing to you a multi-year program.

Graham Riding: We've been working with BNY Mellon to really provide a world-class environment for our investment teams to do the rest of the work.

Graham Riding: So that is adding some extra cost in 2025 and in 2026, which is in these numbers. And of course, those changes are meant to enhance alpha capabilities and really provide our investment professionals with, you know, the best data and the best environment to generate alpha.

Graham Riding: The other big piece of investment we're making is really around the theme of enhancing client experience.

Graham Riding: and making sure we administer a lot of plans for advisors and their clients across Canada and we want to make sure that every touchpoint with McKinsey is an excellent one. And so that's where the investment is happening is primarily in the web access.

Graham Riding: that advisers and clients enjoy at McKenzie and in the broader client experience processes to make sure, you know, every experience with us is delightful.

Thank you for watching!

Speaker Change: Okay, understood. And then there was also a reference at McKinsey about growth within your wealth management partnerships, of having an impact on your net asset management fees.

Speaker Change: Is this a reference to growth sort of within Wealthsimple and Primerica, or, you know, is it beyond that, and is the suggestion that, you know, these are slightly lower fee mandates, so that's what's having an impact on your overall?

Speaker Change: Those business lines or those relationships have been growing at a faster rate than retail that that's put that that's had a consequence on the effect if you rate

Speaker Change: And do those flows get captured within your retail investment funds or do they get captured within that institutional investment funds line?

Speaker Change: Those flows, I don't know which slide you're looking at, they are in our investment fund numbers though.

Speaker Change: So, and we actually do have two numbers on a bunch of the line graphs. One has retail and one's the overall. They are in our overall investment fund numbers. And on page 28, there's a line, Institutional Investment Funds. They're included in that line.

Yeah, that was my question. Okay, perfect.

Thank you. Bye. Bye.

That's it for me. Thank you very much.

Thanks for watching!

Speaker Change: The next question comes from Arya Samarzada with Jeffrey. Please go ahead.

Arya Samarzada: Thank you. Can you provide an update on your expectations for Rockefeller and Northleaf's earning contribution in 2025? For Rockefeller, do you still anticipate its contribution to replace the income lost from IPC this year? And for Northleaf, could we just assume the 15% annual growth implied at your investor day?

Arya Samarzada: On Rockefeller, we'd expect early, you know, going into Q1, you know, in a similar range where we're at right now in earnings positive in 2025.

Arya Samarzada: I don't know if it's going to fully replace the IPC earnings in 2025, but make progress toward that. What was the second question that relates to Northeast?

Speaker Change: Yes, for Northleaf, should we expect like a 15% annual growth for their earnings as it was implied in your investor day?

Speaker Change: Yeah, I think for Northleaf, if you look at this past quarter, if you're going into Q1, somewhere in the range of about $5 million per quarter would be a reasonable estimate. So that's a reasonable estimate for now.

Speaker Change: And I would just add to those two points, first on Rockefeller.

The Core Wealths franchise.

Speaker Change: which is what principally attracted us to the business is performing very, very well.

Speaker Change: They have a strategic advisory business, an M&A business if you will, that like every M&A business on the planet these days is a bit slow.

Speaker Change: And they have an asset management business that has grown a bit slower than we might have initially expected.

Speaker Change: But I want to emphasize the core wealth franchise is performing very, very well. And so, you know, we're seeing great growth in Rockefeller, not just on the basis that we disclose in our DAC,

but also in down to down to Ipitha.

Speaker Change: Northleaf has a five-year board-approved strategic plan that I'm very excited about. They want to do three things over five years. One is double their assets.

Speaker Change: Two is position, the next generation of leadership within Northleaf. That business is 20 years plus.

Speaker Change: And there's a next gen that will be assuming important roles in the coming years. And the third I would describe as finishing the globalization play. I mean, this is something that Luke spoke to a little bit.

Speaker Change: But you know we have been very supportive of Northleaf actually increasing their expenses in the past few years They've hired up They've opened offices in in Japan and Korea

in Australia.

Speaker Change: several offices in North America and Europe. And this is increasingly a business that is global in nature. And so that's been a choice. I think the board would have had an opportunity to focus more on short-term profits.

Speaker Change: But we really want to see Norfleet positioned for success over the long term.

Speaker Change: And so, finishing that globalization play is a priority for Northleaf, and it's one that has our wholehearted support. And to a certain extent, we should acknowledge that has been reflected in the earnings.

Great, thank you for taking my questions.

Phil Hardy: Next question comes from Phil Hardy with Scotiabank. Please go ahead.

Hey, good morning.

Phil Hardy: Just looking at slide 20, what do you attribute to some of the accelerated penetration of the high network clients? It looks like clients with over a million contributed more than maybe 30% of growth sales last year. I'm just kind of wondering, has that reached its natural share or where do you see that going?

Phil Hardy: You know, we believe our capabilities, there's an intersection between what we're providing and where there's traffic in the marketplace and will there be traffic in the marketplace going forward.

Phil Hardy: So we're quite excited about that, you know, it's clearly the business has momentum and we've caught our stride, there's no doubt about that, but when you take a look at where we are relative to where we will be in the future, our penetration of the high network space is still.

Very, very small.

Phil Hardy: So, we have a very long runway here and we're building this business to really execute against that runway. So, I believe that over the next five years you're going to see significant growth at this organization in both the mass affluent and high net worth space.

Speaker Change: So maybe if I can turn it over as well, I mean, what are the opportunities for McKenzie to capitalize on that trend, again, either directly with IGE Wealth or maybe more broadly into that third-party advisor channel?

Thanks for watching!

Speaker Change: We're so fortunate to be a provider of choice and a key investment manager fueling the shelf at IG. So we're cheerleading and helping every single day to make sure that they're winning for their clients and they've got the most competitive investment offering that they can possibly have to serve these client segments.

Thank you for watching!

Speaker Change: Excellent. Well, great. I'm Adam, and I think that's it for me. Thank you.

Speaker Change: As a reminder, if you would like to ask a question, please press star and 1 to join the question queue.

Speaker Change: The next question comes from Jamie Goyne with NBF. Please go ahead.

Jamie Goyne: Thanks, good morning. Just wanted to clarify on the China AMC guidance for flat growth in 2025 versus 2024. Is that entirely driven by the fee rate changes on ETF or are there some other factors that we should be thinking about?

Keith Potter: It's Keith here, James. Yeah, you know, part of it is, you know, changes to the to the fee rates, but there's also China, ANC has demonstrated an ability to really grow their assets. They're up 35% this year. We expect strong growth next year.

Keith Potter: So they're diversified and we continue to expect, you know, strong asset growth. When you kind of net the strong asset growth, what that does to your revenue.

Keith Potter: plus the fee changes, that combination we expect earnings to be in line in 2025 or 2024. And you know, James, it's James. I'd just add if...

Keith Potter: If earnings, you know, are flat in 2025 to 2024, I'll be very pleased. I will view that as...

Keith Potter: As a strong result, of course, earnings were up 9% in 24 versus 23.

Keith Potter: When you consider what's happened to equity markets in China, top to bottom, and they've recovered somewhat clearly, and you also take into account

Keith Potter: You know, reductions in fees for active equity, as well as more recently, passive products. I think for China AMC to grow earnings in 2024, which they did, and to have flat earnings in 2025, overall is a really good result, and it speaks...

Keith Potter: It speaks principally to the quality of the franchise and the quality of the management. We've always said it was a remarkable asset in what is currently a challenging market, and we stand by that. It's a special property.

Okay, and follow-up on the fee rates.

Keith Potter: You know, I understand competitive versus the Chinese market, just wanted to get a sense of the industry as a whole.

Keith Potter: Out of fee rates in China, maybe across ETF and other products, compared to global fee rates, like if we look at the U.S. for example. So just trying to understand whether there's potential for more pressure in future years on those fee rates.

Keith Potter: Good question on that. It's Luke. On Active Equity and Ballast, Proforma for the changes made about two years ago, they're competitive in retail space with global markets.

Keith Potter: On passive, the changes they just made really put them more in line with global, where I'd say prior to these changes, it was a bit expensive in China relative to what you'd expect, and these changes actually put it in line with, I'd say, global levels.

Keith Potter: And then separate, thinking about the the CapEx outlook and the focus for capital allocation after dividends and buybacks on reinvestment in in the businesses and strategic investments.

Keith Potter: Obviously, we should expect some acceleration, I guess, in that CapEx. But, you know, in terms of the unallocated capital as well, is there sort of like a base level of excess capital that you're looking to hold?

Keith Potter: And would increasing stakes in some of these investments be an alternative that is at the top of the list as well?

Yeah, I mean, we would probably look to hold.

Keith Potter: maybe $200 million of unallocated capital. I mean, we're well through that north of five and we expect it to grow from here.

Keith Potter: So, you know, as I said earlier, I think we're sitting on a fair bit of optionality and

Keith Potter: and financial flexibility. I would expect that to be expressed through, we do have an ongoing program of investment in the business and this year's levels will be similar to last year's.

Keith Potter: But I would expect us to express that flexibility through a higher level of share buybacks this year. We said in December of 2023 that we'd be focused internally for a couple of years.

Keith Potter: strengthening our core businesses and we'd be less active in M&A and as we as we sit here today that very much remains our outlook and our expectation.

Keith Potter: So, sitting here today, I'm not expecting this to be a year of M&A, I expect it to be a year of ongoing investment in the business, support the current dividend, and do more share buybacks opportunistically.

Thanks for watching!

Understood, thank you.

Speaker Change: The next question comes from James Shanahan with Edwards Jones. Please go ahead.

You know quite good relative to other North American

Speaker Change: asset managers, wealth management firms at standing. So my question relates to Northleaf.

Speaker Change: I think that Keith had said $5 million per quarter potentially, but I recall that...

Speaker Change: There was some seasonality with regards to the earnings at Northleaf at Q1.

Speaker Change: was often higher than other quarters due to incentives compensation. Is that still the case?

Keith Potter: Yeah, that's right Keith here, there is incentive fees that are part of the Q1 earnings. They are, Northleaf are also growing their AUM that will drive, you know, future quarters beyond that, but Q1 can be a little bit higher with incentives fees.

Thanks for watching!

Speaker Change: It's just still on average so five million per quarter is what you were guiding for? Yeah, you know I'd say that's a Would be a good estimate

Thank you very much.

Speaker Change: This concludes our question and answer session. I would like to turn the conference back over to the company for any closing remarks.

Speaker Change: Thank you, Betsy, and thanks everyone again for joining us on the call this morning.

And Betsy, with that, we can close out today's call.

Thanks for watching!

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