Five years ago, during a period of rocky sales and net redemptions, detractors complained that the captive sales force at Winnipeg-based Investors Group Inc. was simply not doing the job. But today, those critics have “all clammed up,” says IG CEO Murray Taylor.
“I believe we hold the respect of the industry as we never have before — and the respect of our own people in a stronger way than five years ago,” he says. Company surveys have shown high confidence among its advisors and managers, and strong convictions that the business model is optimal.
In fact, IG has been strengthening its business model by boosting the number of “consultants,” as it calls advisors, for 11 consecutive quarters. As of March 31, it had 3,985, up 68 from the end of last year. That’s also 24% higher from when the upward trend began in the summer of 2004.
And IG will open six new offices this year — four in Ontario (in North Bay, St. Catharines, Pickering and Brantford/Cambridge), as well as one in Quebec City and one on Vancouver Island — bringing its national total to 85. That’s on top of the five that were launched in 2006 and the seven the year before.
IG’s mutual fund assets under management are growing as well. As of March 31, AUM increased 12% to $60.2 billion from $53.8 billion a year earlier. Its net sales for the first quarter were $1 billion, compared with $718 million the year before.
“We have consistency now with the growth [of advisor numbers] and, to the extent that growth continues, the infrastructure will, too,” says Taylor.
Fund industry analyst Dan Hallett, president of Windsor, Ont.-based Dan Hallett & Associates Inc. , says IG’s captive sales force is the main driver of its growth.
“It has distribution; that’s key in this industry. The banks had it all along, but it took them a while to figure out how to use it to their advantage on the wealth-management side,” Hallett says. “IG funds aren’t selling because they’re great performers — and they tend to be more expensive than others; it’s because of the dedicated sales force.”
Taylor, however, disputes Hallett’s assessment of performance. He is quick to note that 43% of IG’s more than 140 funds have been given four- or five-star ratings by Morningstar Canada, significantly higher than the industry average of 31%.
Taylor is also buoyed by last year’s first annual mutual fund investor survey from the Investment Funds Institute of Canada. It reported 85% of mutual fund investors preferred to invest through an advisor and the same number indicated they were “satisfied” or “completely satisfied” with their advisors.
Taylor is very aware of the threat posed by the Big Five banks to IG’s market share, but he’s confident his company will be able to fend them off and continue to grow its share of the pie.
“I’m not predicting [banks are] on the decline; they’re very formidable competitors,” he says. “They’re doing lots of things to expand, and that’s fair ball. But it’s not as if they’re on an upward trajectory that is going out of sight and taking over the industry.”
Indeed, the banks have done very well over the past several years with monthly income fund-type products, which in many ways resemble high-yielding GICs.
The banks’ continued focus on mutual funds brings more credibility to the investment as a means of saving for retirement, Taylor says, and that’s good news for parent company, IGM Financial Inc. and sister company Mackenzie Financial Corp.
In fact, Taylor notes, several of the banks saw their gross sales decline in the first quarter of 2007 and they all had higher redemption rates than IG. It had just 7.9% of long-term funds cashed in during 2006 — a record low for the company — down from 8.7% in 2005 and well below the 14.7% redemption rate for the entire industry.
Taylor feels much the same way about insurance companies’ efforts to build up their mutual fund assets.
“I really don’t see any evidence of insurance distribution taking significant leaps lately,” he says. “The leaps were taken in the 1990s. That doesn’t mean there aren’t efforts to innovate and bring new products to the table, but there’s nothing that I would call dramatic in terms of gross sales or asset management.”
@page_break@Taylor says IG has been increasingly taking a holistic view of asset management, including risk, banking and mortgages. The company employs a large staff of lawyers, accountants and tax experts that support its consultants on a case-by-case basis. One of his favourite recent innovations is IG’s charitable-giving plan.
“We have been able to facilitate clients having access to many of the same features of a personal foundation without the costs of a personal foundation,” he says. “They can use our funds in that context and have immediate tax deductibility. They can direct where the proceeds go annually, in terms of charities of their choice. This is one of the things we believe differentiates us in the market.”
Taylor says 2006 was a milestone year for Mackenzie because of its third-quarter acquisition of Cundill Investment Research Ltd. Not only did Toronto-based Mackenzie purchase the subadvi-sor to more than $12.5 billion of Mackenzie Cundill mutual funds and other Mackenzie mandates, but Cundill also manages more than $3 billion of institutional and high net-worth mandates for clients around the world.
“Mackenzie already had a small degree of institutional business, but the acquisition of Cundill added capacity to expand some of those roles,” Taylor says. “The piece that grew the most [at Mackenzie] was the institutional component. That diversification is a very important message.”
Mackenzie contributed $63.7 billion in the first quarter to IGM’s total AUM of $123.4 billion, which is up from $107.2 billion a year ago. Mackenzie’s AUM has grown by more than 18% over the past year, boosted by the Cundill aquisition.
Taylor is noncommittal on the subject of further acquisitions for IGM, at which he shares president and CEO duties with Charlie Sims, head of Mackenzie: “If you look at the history of our company and the history of companies in our group, it’s one of taking long-term positions in companies. We’re not into buying and selling and flipping. We have a long-standing relationship with our shareholders.
“At the same time, our experience has been that, if and when opportunities have come along that have made sense for us, in terms of expanding our resources and distribution,” he adds, “we have seized upon them.” IE
The sky’s the limit for IG’s dedicated sales force
Total number of people selling IG products reaches 3,985 as of March 31; the company plans to open six new offices this year
- By: Geoff Kirbyson
- May 29, 2007 May 29, 2007
- 09:19