IGM Financial Incorporated (OTCPK:IGIFF) Q4 2015 Earnings Conference Call February 12, 2016 2:30 PM ET
Jeff Carney - Co-President and CEO
Paul Hancock - VP, Finance, IR
Murray Taylor - Co-President and CEO
Kevin Regan - EVP and CFO
Gary Ho - Desjardins Capital Markets
Geoff Kwan - RBC Capital Markets
Graham Ryding - TD Securities
Paul Holden - CIBC World Markets
Good afternoon, and welcome to IGM Financial Fourth Quarter 2015 Earnings Results Call for Friday, February 12, 2016. Your host for today will be Mr. Paul Hancock. Please go ahead.
Thank you, Samuel. Good afternoon and thank you everyone for joining us today. My name is Paul Hancock, Vice President of Finance Investor Relations. I'm joined today by Kevin Reagan, Executive, Vice president and CFO of IGM Financial, Murray Taylor, President and CEO of Investors Group and Co-President and CEO of IGM Financial; and Jeff Carney, President and CEO of Mackenzie Investments and Co-President and CEO of IGM Financial.
Before we get started, I'd like to draw your attention to our cautions related to forward-looking statements on Page 3 of our presentation. Non-IFRS financial measures that we've used in this material are summarized for your reference on Page 4. On Page 5, we provide a list of documents that are available to the public on our Web site related to the fourth quarter results for IGM Financial.
Following our successful Investor Day in late November, we've continued to focus on increasing the level of transparency in our ongoing shareholder communications. As part of this effort, we have enhanced our quarterly analyst presentation to incorporate the strategic and operational elements that we shared with you at Investor Day. We hope you find this presentation informative, and we welcome your feedback.
Kevin Regan will now take us through a summary of IGM Financial’s results and the industry environment starting on Page 7, Kevin?
Thanks so much Paul. As you said starting on Page 7 just a few comments. Our operating earnings for Q4 of 2015 were $198.2 million, which resulted in earnings per share of $0.81. Within the quarter we also had as highlighted a $24.3 million after tax charge related to some restructuring and other items.
Just to elaborate a little bit on that, the chart primarily reflects severance as well as payments to third parties relating to existing or exiting, pardon me, certain investment management activities and third-party back office relationships. So these activities included the closure of a Mackenzie Investment Management office in Singapore and other personnel changes and Jeff Carney is going to elaborate on that a little bit in his comments. The introduction of a new in house dealer platform at Investors Group and the exiting of this current third-party carrying broker relationship is the remainder of the amount and Murray is going to expand on that in his comments in a few minutes. In addition to this earlier today the Board of Directors declared a dividend of $0.5625, which is maintaining the current level of dividends, and this reflects the yield at 7.1% based on yesterday’s close of $31.78.
And finally on that page, we do continue to repurchase our shares at a relatively high rate and return capital to our shareholders. You can see by our most recent filings that we've continued just through January, and really this was just opportunistic in light of relative weakness in equity markets and our share price. So if you turn to Page 8 and again a few comments on the operating environments, first of all equity market volatility was the watchword of the day for the fourth quarter of 2015. Global equity markets posted positive results during the fourth quarter, while the S&P TFX composite had declined 2.2%.
Volatility has continued into 2016. The S&P TFX Index declined 7.1% while the S&P 500 Index would account 10.5% at close yesterday. This volatility has led to a slightly softer net sales in the industry overall for the fourth quarter, as well as into January. And the net sales decline driven by the bank channel primarily where the advice channel net sales increased $2 billion to $3.5 billion during the fourth quarter. And within the advice channel that flows into the global balance and foreign equity categories, we’re particularly strong.
So with this as some background and perspective, I am going to turn it over to Murray Taylor to review the Investors Group operations. Murray?
Thanks Kevin. If you can turn to Page 10, we’ve got a number of Company highlights here, most of which I will refer to in subsequent pages. But I do want to make a few comments on several of these items, starting with number 3. During July last year, we introduced a couple of new low volatility funds and as well our Maestro family of funds, which involve three different funds, dynamic asset allocation funds, where we are overlaying some movement between equities and fixed income on a dynamic portfolio management basis. These funds have become extremely popular and we’re pleased to report that by the end of the year, in less than six months, we have seen a growth to $750 million of assets, and that growth has continued unabated into 2016.
Down to Item number 5, as Kevin alluded and as we talked about on our Investor Day, we have been moving towards the introduction mid-2016 of a new in house dealer platform for all our nominee accounts and all our IROC license consultants. We have now formally announced the introduction date of that is August 15th. It will provide quite an enhanced level of functions for our consultants and our clients. It will create an opportunity for real long-term efficiencies and sales productivity for all those who are using it and we’re quite looking forward to that significant event in 2016.
Item 6, we see continued and growing involvement of our newly launched TV and digital advertisements. We have launched further advertisements into the digital space during the RSP season. We’re pleased to see about 160 million impressions so far since we introduced that in September. So I can take you to Page 11. Our consultant network continues to grow through the quarter. We hit a new all-time high of 5,320 at the end of the year and you can see the history and the breakdown between those with four years' experience and those with less.
I’d also point out -- it's noted on the page that we’ve seen quite an increase in those preparing for their CFP designation. We have above 1,500 through the year, who are full qualified. That represents a much higher level than most of our competitors to begin with. We have put energy into assisting and helping our consultants word-to-word these designations, and we've seen an increase and most stunning growth from 300 at the beginning of the year to 722 at the end and combined with the number, who already have it, that represents a growth of 22% interested or qualified. We see this is a very beneficial competitive advantage for us as we go into the marketplace with our strong financial planning principles, and as we deal with clients at all levels of size.
If you go to Page 12, you can see a number of observations on our sales activities. In the upper left corner, you can see that for the quarter, notwithstanding some noise in the markets, we came in at 1.8 billion of growth sales for the quarter. You can see that for the entire year, we were up over last year and a new record level of sales in the history of the Company. The bottom left you can see the momentum and we see continued momentum growth in the blue line, which is our growth sales and certainly the low industry standard levels of redemption rates continuing with the green line, and the net effect of those of course gives us positive net sales for the year.
As you look to Page 13, our focus on high net worth segments, as we define that to be households with assets with us over 500,000, as you can see the significant and continuous growth in the sales activity going from the beginning of 2014 on a 12 month trailing basis to the end of 2015 and we see that again continuing very, very positively. 57% increase compared to the prior year to the sales activity in this space. In light of this we introduced in January, on January 25th, our first entree into the accredited investors space with a risk parity private pool sub-advised by PanAgora, leading and initiator of this particular space in the world. We're very pleased to see this out in the marketplace and augmenting our high network show.
Slide 14, focuses in on our insurance and mortgage businesses. You can see in the top that we had about a 12% increase in individual insurance sales in 2015 and we see that continuing in to 2016 in a very strong way. On the bottom left, you see a combination of our mortgage businesses and we are going to be reporting on an ongoing basis, our mortgage business as those that are originated by Investors Group and manufactured at whereby [ph] Investors Group, but also the component of mortgage that we have in our relationship through solutions banking with the National Bank and we've commented in our MD&A and at Investor Day on the type of product that's now available where you can have a fixed rate mortgage combined with the line of credit, all-in-one combination and we are looking towards the combined effect of those products as we serve our customers with mortgage business. We've also introduced some of the right -- the outstanding mortgage balances amounts and you can see that we've had healthy growth in that, approaching $12 billion and we're a significant player in that business.
Page 15, demonstrates our client account rate of returns, and you can see for the fourth quarter we had a median return of 1.4%. So notwithstanding the noise in the market around September of last year and through parts of the fourth quarter, and certainly since the fourth quarter -- for the quarter we had very positive client returns and this of course was quite reflective in the statements that were issued at the end of the year and received during January, we can also see here that on a one year basis, the median was closer to zero with all the ups and downs of last year, but on a three year basis we had a compound return of 6% and 3.7% respectively for five years.
As you know, we delivered to our clients, starting with the middle of last year on every single quarterly statement a new format of client account rate of return, which demonstrates their one year, three year, five year and beyond returns. This is an early adoption of CRM2 and we're finding it to be extremely well received and particularly during the time of poor challenged markets, it helps the client and their conversation with their consultants focus on the longer term. The results they've been having in the short-term versus the longer term, and it is leading to as I said a very good conversation.
Slide 16, is reporting that we began at Investor Day to reflect upon the performance of our investment management division, and we focused very heavily on alpha and that is expressed by gross return above index where each fund has its own customized index based on the principles and policies for that particular fund, and then we've our portfolio funds at the bottom which are reflected in the same way, which are fund-to-fund expressions of the other funds. You can see here, the dominant green color particularly in the one-year term. We have seen significant gains in our investment management activities. Jeff Singer, as you know became our Chief Investment Officer in October of 2013. We hired a number of new portfolio managers in various capacities including Les Grover [ph], the Head of our Asset Allocation capacities and our new Maestro products. He joined us in 2014, and we introduced product last year that he is managing on an ongoing basis. And so we’re very pleased with the developments we see in this area.
Slide 17, you can see here a combination of a few statistics. In the bars you see our average mutual fund assets under management and we saw for the fourth quarter $75.3 billion. You can see at the bottom a chart reflecting what percentage of those assets is in high net worth series, and that is representative of 37.4%. You can see how that grew, particularly through the early part of the year and stabilized into 36%, growing slowly, and we expect that to continue to grow slowly as we see momentum in the high net worth area.
You can see at the top a line that demonstrates our average management and administrative fee rates, and you can see a drop from 212 in the fourth quarter of ’14 down to the 209 level, and I would draw your attention to the guidance we provided in the fourth quarter of last year which said we would expect a decline of approximately 4 basis points starting in the first quarter of 2015 as we saw a rapid movements occurring into our lower priced series for those eligible over 500,000.
I would draw your attention to Page 18, where you can see our P&L, our earnings before tax and we’ve now shown this on a couple of comparatives to the prior year, but also to the prior quarter. And if I take you down the comparison to the prior quarter, you can see, as reflected on the prior page, that we have had very little difference over the period in terms of the rates being collected and so it's being driven very much by the level of assets under management. You can see that compared to the prior quarter, our assets under management are down 0.1%, our fee differential is zero, effectively equal.
The distribution fees you can see are up 12% from the prior quarter, and up 17% from the prior year. Certainly when we look at the prior quarter and the movement throughout the year, one of the dimensions of that is our insurance business, and how that’s been moving along. And you can see some of that reflected in the other non-mutual fund commission expenses in the line below as well.
On non-commission expenses, you can see that we are up 13.3%, compared to the prior year. I would again draw your attention to the pension adjustment that we have lived with all year. Without that pension adjustment, that number would be up about 11.2%. This reflects some timing of expenses. It is not an indicator at all of level of expense that we expect in the future.
Our full year number is below 10% and as we have been building a number of capacities through the year, we have been investing in the business, investment management, our brand development, our dealer, platform, capabilities that we’re introducing this year and growth in our consultant network. We anticipate as we move into 2016 that we will see more modest growth in our expenses and closer to the 8% level and wanted to indicate that to you.
So on that note, I'm going to turn things over to Jeff Carney to speak about Mackenzie.
Thank you, Murray. Mackenzie has continued to have strong performance across a wide range of products that are relevant and in favor in the marketplace, which I’ll touch on more later. During January, Mackenzie formed the new Canadian Growth Investment Boutique, which brings a top performing set advisor in house. We’re very pleased with that transaction.
Product innovation continued in the quarter with the introduction of the Mackenzie Diversified Alternatives Funds. It's a very unique product in the marketplace and it's very complementary to balance funds and provide better risk adjusted returns when you combine the balance funds with that product. And we’ve already sold $30 million in assets in just a short launch period. More recently, we launched 8 private wealth pools in December. This product as a whole filled the gap on our high net worth offering, and brings unique asset allocation approach to this target segment. The introduction complements our existing high net worth mutual fund series, which had $3.1 billion in AUM at December 31, 2015, and we expect sales to build in these programs overtime.
The Mackenzie brand we launched, which we discussed on the last analyst call has been -- has seen really a tremendously strong response from constituents. We actually ran an ad during the SuperBowl and we got lots of complements from many places around that. So we’re pleased to see our brands getting the exposure it deserves.
Finally, during the quarter we closed the investment management office in Singapore and implemented other personnel changes in order to redeploy to resources towards investment management talents, investment in our distribution and a planned VJF launch, which we believe will provide greater benefits to Mackenzie over time.
Turning to the next page, excluding third-party fund allocation changes, mutual fund growth sales during the fourth quarter were 1.59 billion, and that’s a 6.8% increase versus the prior year. On the same basis, mutual fund net redemptions were $188 million, a $61 million improvement relative to the prior quarter, and Mackenzie’s redemption rate on long-term mutual funds was 14.3% during 2015, which is below our peer average.
If you go to the next page, gross sales in the balance categories during the quarter were very strong at $631 million. That’s up 5.7% from the prior year. Our five-star rated Ivy Global balance fund and our four-star rated Mackenzie global strategic income mandates have both been attracting significant gross sales. And our Symmetry Managed Asset Program is continuing to generate strong flows. For energy [ph] context, the foreign equity category remained in favor in the advice channel during the fourth quarter, posting strong growth in net sales.
Mackenzie is extremely well positioned in this category. Our gross sales in this category increased 42% versus the prior year and this includes our 160% increase within our Ivy fund family alone. In particular, our five-star rated foreign equity and four-star rated Mackenzie global driven mandates have been particularly strong sales.
Turning to next slide, excluding third-party fund allocation changes, total investment product net redemptions during Q4 2015 were $127 million. Mutual fund net redemptions improved by $188 million. Looking at the breakdown by category, income oriented net sales declines driven by redemptions from floating rate funds, which as the category has been out of favor as interest rates have declined. Foreign equity net sales have improved by 140 million, which demonstrate the trend in the industry net flows as well as strong demand for Mackenzie’s product offering within the foreign equity category.
Moving to investment performance, as of December 31, 2015, Mackenzie’s overall mutual fund performance was little changed compared to last quarter. Although the five and 10-year quartile performance metrics declined somewhat, the proportion of Mackenzie’s mutual fund assets in foreign five star funds improved during the quarter to 31%, compared to 28% at September 30, 2015. We recently upgraded from a portion of five-star Ivy foreign and our Canadian fund was upgraded from a three to a four. We had no grab down rates during the January month. In context of a volatile global equity markets so far in 2016, I’m pleased to report that our relative investment performance improved during the month of January.
Turning to next page, this is a slide that we shared with you during the Investor Day. Just to give you an update, our value-oriented strategies including the Cundill family have continued to lag in the Morningstar’s calculated quartile performance and Morningstar ratings. As discussed on prior calls, Morningstar’s calculations rely on a very broad CIST category, that do not distinguish between growth equity styles or value styles and certainly don’t address deep value styles.
Over the last 12 months, the Nifty global dive index underperformed the Nifty global growth index by approximately 9%. As a result, mutual funds that employ a buyout value side suffered in Morningstar’s relative performance metrics and Cundill is deep value. We’re actively engaging with advisors to reinforce Cundill’s compelling story, which plays out over the course on the market cycle. Excluding our value oriented teams, we would have positive net flows for the quarter and the same will be true for the full year 2015.
As you would aspect, in this context our growth oriented equity strategies have experienced strong infrastructure performance and our selling well. And as I mentioned earlier, we formed new internal teams in January 2016 with the group that was previously sub advising to a number of Mackenzie’s mutual funds displayed here as blue wire. As you can see, their mandates have experienced very strong investment performance. The product managed by Ivy and global equity and income teams have also been performing very well and are attracting significant net flows.
Turning to our average total AUM, our net revenue reflects all line items that are primarily driven by AUM levels including all fee revenues less all commission expenses. Net revenue rate on this slide represents the amount expressed as a function of our average total AUM and with 78.7 basis points during Q4 2015. This rate fluctuates with a change in the mix of our assets under management, including asset class and client mix such as institutional high net worth.
As a reminder during the second quarter of 2015, MD reassigned a sub-advisory responsibility on four fixed income mandates that were previously advised by Mackenzie. Our pricing is competitive across the board. So recent and future changes in the net revenue rates are expected to be mostly driven by mix changes.
Turning to the next page in our P&L, as we covered on the prior page, lower average total assets and slightly lower net revenue rates, combined with some market decline resulted in Mackenzie’s net revenue declining 2.6% relative to the prior quarter. Non-commission expenses declined 5.2% compared to Q4 of 2014 and rose 4.7% during the full year of 2015, which is in line with my comment on past Analyst calls and certainly where we covered on recent Investor Day.
As I discussed earlier, we took actions during the fourth quarter to redeploy certain resources to our investment management talent. Investment in the distribution orientation as well as our ETF launch, which we believe will be beneficial to Mackenzie in 2016 and beyond. Looking at 2016 specifically, we expect expenses to increase by about 6%, which includes the annualization of new investments that we’ve been making over the last year and the planned launch of our ETF ever.
And operator, that concludes my remarks, and we would now be open to questions from the audience.
Thank you. We'll now take questions from the telephone lines. [Operator Instructions] Your first question is from Gary Ho from Desjardins Capital Markets. Please go ahead.
Hi, good afternoon. First for, Jeff. Just wanted to revisit the kind of funds and the redemptions we have seen. I think you've said there is a longer five to seven-year cycle for these funds. Just curious, with the pullback in the markets is this the environment where we could see sales turnaround faster for this fund category or what will it take for these to turnaround?
Yes, I don't [indiscernible] on the last month’s performance to be the big driver here. If you look back overtime, you will see the deep value instead of a 12 years span or sort of these big volatility moments, and so we certainly are sprinting one of those big volatility moments in the market, particularly the value. And so these don't happen very often, and that's why we nuanced the fact that these five to seven year cycles are important in your timeframe when you're investing these types of products. And so it's really frustration of Morningstar, because obviously in the ratings, the product doesn’t look very good right now, and two years from now, it could five stars again, but right now even though what's doing what it's supposed to do, and is doing what it's supposed to do for the portfolios and the construction of portfolios by, but it's hard for advisors when their staring two and one or three stars and explain that to their clients. And so I think that's why you see some of these redemptions but I have no doubt as this cycle ends and the performance improves, that you will see those people come back, because it's such a compelling component of a diversified portfolio for investors.
Maybe asked another way, like through I guess the financial crisis, like '09 and what not, did we see a big uptick in sales for these types of funds?
Well, let's say, I think it was a steady climb after the challenging period about 11 years ago. And then we certainly had a soft-cycle right now. But like I said these things go in cycles and they evolve. And so it's really having the patience for the advisors to have the patience to ride out these cycles, because over the long-term, it pays out for clients and our portfolios.
Okay and then my second question, I just want to hear your outlook for the year, especially given the more concern [ph] maybe your thoughts on the RSP season so far?
Obviously the markets are pretty volatile for everybody out there. I can just tell you that we're very pleased with our January end results. We've seen in certain areas double-digit or triple digit growth in our gross sales in some of our really compelling products. So we'll wait to see the industry numbers and how that all plays out, but I'd say that we're feeling going pretty good about our sales. I want to remind you too that we're up to 38 wholesalers now on our team, and 16 of those have less than 12 months on their job. So we continue to see that productivity lift as those new teams come into full productivity at their own territories, and so I think that's going to be a compelling story throughout the year as well, and you combine that with the product launches we've done and then the performance improvements that we're seeing, all those combined together should be good news for our RSP season, but at an industry level it's going to be interesting to see how it plays out.
Okay and then, Murray any thoughts on your side?
Sure, as we've watched the year unfold, certainly we've been conscious of industry numbers, which have been pretty soft in January. From a competitive context we feel we've done quite well in light of that, certainly for the month of January. We've seen fairly strong sales -- quite strong sales actually so far in the month of February, although it's short so far. Within our context, our new Maestro funds have as I said become very, very popular and may have been performing exactly as we would hope and expect them to. And they are really built to provide a fair bit of down side protection on the volatility side. And so the volatility we've seen over the last few months have simply exhibited the value of them and the attractiveness of them, and so those funds in particular are extremely popular, and in fact even more popular amidst our high net worth focus, where we have a lot of attention. So we see tremendous activity there. We see an uptick in our activity on life insurance, as well and that's not surprising. You tend to get some of that when the markets are a little bit more volatile and people are little bit worried. But having said all that, I think our outlook continues to be quite strong. Of course there is an impact on our asset levels in terms of valuation as we move through this period, but from a sales point of view, I'm quite optimistic.
Okay. And then I guess lastly just on the non-commission expenses, you mentioned plus 8% for 2016. If market continues to be soft, does historic still stand or are there other ways to trim this expense line item?
Yes, so our expense levels as we've outlined them in the past are made up of a number of components. One of that components is in relation to our consultant network, and the extent to which our consultant network continues to grow, or not through year will have some limited impact on that. Some of those costs of course relate to sub-advisory activity, and to the extent that we see a decline in asset values, that will have an immediate and associated decline in the expense levels.
And then across all the other things that are on our plate, we’re always managing our business as usual cost to quite a tight level. That will continue. And to the extent there is any discretionary issues, in a period of market contraction, we always bring good judgment to that. But that’s all within the context of the fact that we’re building our business for the long-term, and we’re very optimistic and we’ve got this new dealer platform being put in place on August 15th. It will have tremendous upside in terms of benefit and benefit to the people who use it, and benefit to us as a Company. So some of those investments will continue and will be delivered.
Perfect. And just circle back to Jeff, the plus 6% that you mentioned, that’s also for non-commission expense, is that right?
Thank you. The next question is from Geoff Kwan from RBC Capital Markets. Please go ahead.
Just the first question I had was for Jeff. On the institutional side of your business, can you give an update on where you’re seeing the interest broadly speaking within your product offering? And then also maybe a little bit in particular, the interest for stuff that’s coming out of Condell on the Deep Valley side?
I am pleased with the activity on the institutional side and hopefully we will able to share future wins this year, so that you can see the progress we’ve been making in building that strategy up further. So the same thing on that. But I am pleased with the funnel that we have and the opportunities that we’re looking at. So I look forward to announcing future wins. Your second question was…?
Just in particular, if you kind of talk about obviously the performance at Condell, the Morningstar ratings don’t make it look great, but just was wondering what the reception or the interest rates from the institutional side?
We've been finding the institutions -- thinking about the institutional market as the -- they are just a C rated [ph] buyer and they’re buying it for the reasons that I described. And so the volatility of that is evolved. That’s because they’re looking at the component of our overall portfolio. I think with the stars and the pressure of the Morningstar, sometimes the advisors under with their clients that they decided to redeem, which I personally think is a bit price selling for a long time [ph]. But that’s our job and the wholesalers are well armed with the cold story. They've got full access to our PMs and their capabilities. We make sure that whenever we can we expose them to the marketplace and do road shows and really reinforce the message of what Condell is and why it's been so successful over the years. And the outpours [ph] are obviously disappointing but they’re starting to slowdown. So that’s encouraging. And at base flow that will have an impact to our net flows overall.
And then just a second question I had is both for Murray and for Jeff, maybe a little bit more for Murray, but I just was kind of curious, with the decline in energy prices, how that’s impacted the asset gathering activities in affected areas such as Alberta? In other words, would it be fair to suggest the sales are understandably slower, given the economy, but also the redemptions may be higher as maybe clients are needing to tap into savings to meet day to day expenses, especially if the foster jobs?
We haven’t seen notable differences, and I would say that there are multiple dynamics that tend to occur. Given the unfortunate circumstances in the Calgary area, in particular Alberta, the oil patch and so forth, there often tends to be a fair bit of job dislocations. There tends to be severances. There tends to be a need for financial planning, and there tends to be people looking for changes in career. So on the plus side in that environment, we tend to have more people knocking on our door, and us knocking on theirs in terms of joining us as consultants for the future. And many clients have more complex situations that they need to deal with. So on one hand, there may be sensitivity to the savings versus consumption rate given the drops in income. On the other hand, life has become more complicated and the need for a good financial planner has increased. And I would say it's a flavor of all of those dynamics as opposed to any one being dominant.
And I’ll just add to that question, I was in Calgary last week and met with a number of IROC advisers and their spirits were good. They’re focused on just being a private client as much as possible and making sure that they understand what this particular market is about. But to Murray's points there is my emotion as a result of some of these things, and these advisors are really focused on helping clients through this time.
Thank you [Operator Instructions]. The following question is from Graham Ryding from TD Securities. Please go ahead, sir.
Murray, maybe I could just start with you on the financial planning side of the Investors Group. It looks like just under 30% of your consultants have a CFP license or the equivalent thereof. Do you have a target of where you’d like to see that move towards, or is there sort of bigger picture strategy in terms of getting certification amongst your advisors?
Sure. First of all, when you’re looking at the penetration, it takes two or three years to get your CFP, and the extent -- in rough numbers, I would look at the number of qualified CFPs compared to our core plus population, as opposed to our total population, roughly close in terms of similar numerators and denominators. And on that basis you have a very high level to begin with, and in fact in some survey studies we’ve done in the past, our understanding is that the number of qualified CFPs we have within our channel of people with four years or more of experience as compared to our competitors in the industry is about double. So that’s the place we’re starting from.
We are encouraging those who are interested to continue down the path to become certified. And so we’ve increased the rhetoric if you want around that in terms of why we think it’s valuable. We do observe that there’s a lift in productivity, which is beneficial to the individual and to us, when they do that. And I think that understanding is becoming more and more known. There is market forces at play here as the regulatory world talks about things like titling. The MSBA is having conversations around the role of financial planning. There is a blue ribbon committee in Ontario looking at the topic and issue. And so we clearly want to put our people in the best position possible to the extent there is any regulation around this area. Today there isn’t, but having that professional standard will put them in a very, very positive position.
So we’re encouraging everybody to think about it. It’s not a forced march. It’s not something we’re saying you have to have do business with us, but we’re helping them with the financials associated and the costs of studying and writing the exams and so forth. And we feel that that’s a very good investment. So when I look at the 722 plus the 1,500, call it 2,200 and some, now some of those people studying would be in their first four years, but we’re probably going to be approaching 80% or more of our four-year plus people as we move along.
Okay. That's deep color. Appreciate that. The restructuring charge, Murray around your dealer platform, the expenses related to building that out, I assume that’s about building out your own IROC platform. Can you just remind us what the benefits are for your advisors, and for the firm overall?
Sure. So it’s more than just that. What’s involved here is the history of time, any nominee administration has been outsourced by Investors Group. That involves all of our IROC business, but it also involves all of our nominee Mutual Fund business and all of our third-party fund administration and so forth. It’s been with various entities over the course of time and including MRS at one-time. And then MRS was sold and that relationship moved outside the Company.
So the amount you’re speaking of here is in relation to parting ways with a third-party and internalizing that activity. So it goes beyond as I said just the IROC licensed consultant part of our world, and effects many or most of our consultants who would have nominee accounts with their clients. And we’re bringing that in-house. It will be much more accessible, much more functional. Statements will look like Investors Group statements. The pride of using that system and the familiarity of it will be quite outstanding. It will have a lot of new feature in terms of electronic transactions with clients and so forth, and will probably increase the level of nominee account usage within our channel.
So as we see, that's potential for growth and we’re providing a number of new features of course for the IROC consultants, coincident with that that we talked about at Investor Day. We’re introducing SMAs and we’re introducing fee based accounts and a number of those functions as well. And we’ve had a number of people interested in becoming IROC licensed, but have consciously waited for this new platform, so that they didn’t have to duplicate their training as it were administratively. And so we anticipate a growing level of consultants considering and licensing in the IROC world. And again all of that, we see as very progressive in terms of individuals doing that to expand their business, to expand in the high net worth area, and again will be productive for them and for us.
Great, and for your IROC licensed consultants, can they offer third-party products or is it only Investors Group product that they offer?
No. They can offer third-party product.
Okay. The $21 million I think in CapEx this quarter, was that related to this dealer platform?
What was it related to? It just seemed to be a large amount.
There is a couple of components. CapEx would be related partly to our regional offices, and the development of our infrastructure and there is another portion related to our investing in technology as we're building out our data and data platforms. So there is a couple of components to make up our spend on what you call capital items.
Okay, but I assume that it seems larger than sort of the run rate. Is it a bit of a timing issue there?
It's part of what we talked about in Investor Day, where we're making investments in our business to facilitate our consultants, and both these dimensions, facilities being one, technology spend being another are directly related to growing out their capabilities. So it's an extension of what we talked about at Investor Day.
Thank you. There are no further questions registered at this time.
Okay then well thank you for joining us today.
I'm sorry to interrupt. Mr. Paul Holden has just queued up for a question. Please go ahead.
Hi, there sorry, I thought I was already queued up. There was something at the end here, if you don't mind. So first off, feedback on the new presentation format, based on my perspective is quite positive. So appreciate that change, Paul and to the rest of the team. So I guess, my first question is with respect to the commentary you had around RSP season which is a little bit surprising given what's happening in the market and I guess the general industry view on the direction of net sales. But I guess compression [ph] you sound quite confident that you're going to see year-over-year improvement of net sales in Q1. Is that right?
It's so hard to predict full Q1 at this point. But I would say as I look at -- I'll speak to Investors Group. As I look at our results in net sales 2015 compared to 2014, let me go there for a minute, and I compare that which I do quite often to say all the banks. We saw growth in our net sales, banks in total shrinkage. We've seen that shrinkage continue into January. We have seen growth. So, modest growth but growth. And so the underpinnings of activity within our Investors Group consultant network is positive. The attitude is very positive. We meet with all our management group from all of our offices across the country, every January for a couple of days for obvious reasons and signing and so forth, and the tone and attitude has been very positive. Our people are very experienced when it comes to market movement, and everyone would love up markets, but the presence of a down market is not going to diminish the activities of our consultants. So obviously we would expect somewhat more modest results, and if it was a buoyant continued full market environment. But as I said, some of the stuff our people are talking about, such as our Maestro product which is accelerating in its cash flow on day-to-day basis is a very powerful story in light of market uncertainty. So that is serving us very, very well.
Yes, I'd just say for us, our strength in global equity is which sometimes can help us, but certainly it feels like it is helping us out of the gate here. So -- but my guess would be that we're gaining a share of gross sales as a result of the increase we have year-over-year, which is significant on a lot of our key products. And so I feel like we're off to a strong start.
Okay, good and then just a follow up for you Jeff on that one in the Investor Day. You indicated your expectation that you would get to positive net sales in 2016. So despite fact of the markets being challenged over the last two months since the Investor Day, you still feel pretty confident in that expectation?
I do, it's a long year. And there's lot of [indiscernible] end of the year, but when I look at where we are, it kind of $1.5 billion out last year. And that accounted for all of our net outflows and more, and we would have been positive for 2.50 [ph] without challenges and we feel like we are -- we've got a better story this year, and got more productivity on my sales team as results some opportunities we've made. Our brand elevation has been fantastic, our share minds out there and the considerations of advisors is very high. And all the feedback we get as we travel around the country that they're very positive about the changes at Mackenzie. And so how that plays out with all the different variations and things that happen throughout the year, you never know, but in considering the market that we're in, and the numbers that I didn’t in January, I feel like something positive is happening here.
Good. And then Murray, you made a comment about a pick up in insurance sales, which tends to happen in this type of environment. Could you also then, seeing a pickup in Seg fund sales for the same reasons?
Yes, we've seen a good and healthy growth in Seg fund sales continuously through last year. And I wouldn't say it's a marked change during this more recent period here. But our Seg fund sales were growing faster than our mutual fund sales for sure, and have been doing so and we think that’s a very positive thing actually as we serve the retired market and intensify our efforts in the retired market in particular.
So those would have a fair share of the DMWB [ph] product in that then?
Our shelf of safe funds administered by Greg West with our funds have a variety of guarantees that you can chose for your circumstances. But some of them would be that for sure.
Okay. And then a question for you Murray, with respect to the mortgage book and Alberta. Obviously we have some concerns about credit risk in certain stocks that have mortgage books in Alberta. So just wondering if you’re able to size your book in Alberta, that’s not insured, that's not securitized, sort of sits in your balance sheet and not insured?
So the specific information you’re asking about wouldn’t be released. But let me put it in context for you. Our mortgage book in total insured and uninsured credit statistics on our mortgage books is substantially better than any of the five major banks in Canada. And we’re told by those who look at this independently such as the CMHCs of the world and portfolio insurers and others, that the quality of our book in terms of credit statistics is the best they have ever seen. So let’s start with that context. Our underwriting tends to be very tight. We only deal with our own clients. Their circumstances tend to be very strong. They tend to have assets and all of those considerations lead to that.
Then you layer on top the fact that over the last number of years we’ve been portfolio insuring significantly, not because we’re concerned about the credit risk as much as the opportunity to participate in various funding vehicles that require insurance. And so we have a very high level of our mortgage book that’s insured, either by the client because of their circumstance, but more importantly, because we’ve portfolio insured. And then we do track the very statistics you’re talking about and keep an eye on it. And I would just suggest that those statistics for us are extremely de minimis, and not in any way materially different than the experience we’re having in the rest of the country. Stay tuned what we always keep alert to it, but those would be the parameters I would give you on it.
And then just final question, as we think about share repurchases, you’ve obviously been extremely active there over the last two, three quarters plus. How are you thinking about your capacity to buy back stock here, particularly given the current price level? Is it a matter of after the dividend you will use effectively all free cash flow possible to buy back stock? Is that fair way to look at it?
I wouldn’t describe it in that sort of a screenshot. It is a decision that we make from time to time as we move along here, as opposed to a long term goal that we’re trying to achieve to in terms of the use of our cash. We’re very conscious of our balance sheet. we’re conscious of our liquidity desires and requirements, and we’re conscious of multiple purposes for the cash we have. So that’s all taken into account and in the consideration of how much and when.
We have another question from Mr. Gary Ho from Desjardins Capital Markets. Please go ahead.
Just going back Murray, just want to circle back on the dealer platform. The chart starts ticking this quarter. That’s related to breaking the contract and moving clients over and not the cost of developing it or what not. And just wondering if there any other restructuring charges that we can expect over the next few quarters?
First of all, you’re correct in your assumption. Let me start there. And secondly, restructuring charges basically are taken for things you stop doing, not things you start doing. And so in that light over the course of time into the future, there will be cost for this as we introduce it through 2016. That’s contained within than 8% guidance I gave you in total. In terms of its impact on 2016, there will be costs that are amortized into future years and there will be benefits that are accrued that offset -- more than offset the overall cost over the course of time, and then a good business case. So that will be the circumstances there.
Thank you. And there are no further questions registered at this time.
Okay. With that, again thank you for your participation. And that ends our call for today and we wish everybody a great weekend. Thank you.
Thank you. And your conference is now ended. Please disconnect your lines at this time, and we thank you for your participation.
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