CI’s new program competes on fees

CI’s new offering, the CI Private Investment Management program, is what CI president Derek Green calls “more of a ‘mass affluent’ product.”

Although this private investment-management program is being billed as brand new, Green also calls it the “next evolutionary step” for CI’s long-running private managed-assets program for affluent investors.

CI is ending new enrolment in the old program, although existing investors can stay in the old program if they choose.

The biggest differences between the old and the new programs are the minimum thresholds for assets and the fees. Under the old program, clients needed a minimum of $500,000 at the account level to invest; the new product will grant limited services to clients for a minimum investment of $100,000.

Full services under the new program are available at the $250,000 threshold. Couples can pool their individual resources to gain full access to the new program, says Green: “If a husband and wife have a total of $250,000, they can access this program and we will discount our fees.”

In addition, the new program allows the linking of multiple accounts by clients and their family members.

“When you are able to aggregate the assets of the family household,” Green says, “you are able to be more effective at adjusting your asset mix [and] measuring performance, but also [at] managing the complete income generation from your entire portfolio.”

The launch of the new investment program is designed to increase competitiveness by offering lower fees to “mass affluent” clients.

“We are the low-cost producer,” says Green. “For larger accounts, we are willing to cut our fee and make less margin [while making] more money.”

Green estimates CI’s margin will drop by about 8% with the introduction of the new program.

Fees will decline as more money is invested with CI. Green gives the example of a client with a $2-million account invested in balanced funds and paying 0.75% in total fees.

That would compare with 1.25% in fees for similar services under CI’s former program.

In addition, the CI’s new program offers some tax advantages, including access to a corporate-class structure that allows for tax-deferred, compounded growth and the ability to switch investments between non-registered accounts without triggering tax consequences.

“I think you would be hard pressed,” Green says, “to find investment counsellors that would run $2 million in a balanced mandate and then have the tax-effectiveness of our corporate class that this platform sits on top of.”

CI currently has $800 million invested in assets under management in its old program, with an average account size of $1 million. Green expects that the new investment program should attract $1 billion in AUM “over the next couple of years.”

Dan Hallett, vice president and director of asset management with Oakville, Ont.-based high net-worth investment firm HighView Financial Group, notes that firms in general are lowering the threshold of what constitutes an “affluent” investor.

“The bar,” Hallett says, “has been made up of rubber for a long time.”

Although investment firms generally are offering better service with their high-net worth programs, says Hallett, it comes down to fees.

“All CI is doing — and all the others are doing — is just taking their investing offerings and then packaging them up differently for different segments,” Hallett says. “The only real difference, for the most part, is fees. And that is really the difference that people should care about — if you have 10 or 100 times more money than [most] other people.”

The new CI program, Green says, is well positioned for the shift to increased fee transparency: “If advisors are looking to transition, if you are looking for a program that allows you to deal with the unbundling of fees and fee transparency, this program will do it for you.” IE