Three big banks dominated mutual fund sales for RRSP season, November through February. The only other firm showing a significant increase was Manulife Investments, and that was because it gained $950 million in assets under management by merging Manulife and Maritime Life funds.

“The banks are a formidable force, providing meaningful competition,” says Dan Richards, president of Toronto-based Strategic Imperatives. “The banks have been investing heavily in branch-based sales forces that take a financial-planning approach.”

Banks’ sales forces are focused solely on investments, targeting the top 25% of customers in terms of assets — those with $100,000-$500,000 in investible assets.
Advisors are well trained and receive a combination of base salary with variable compensation representing 25%-40% of take-home pay. The banks are also making sure they have competitive products, says Richards, and no longer assume that customers will buy whatever they have on the shelf.

TD Asset Management Inc. was the top-selling mutual fund sponsoring bank in November through February, with $1.6 billion in new money (gross sales minus redemptions) from all fund categories, including money market funds, according to data from the Investment Funds Institute of Canada (see table, page 4). It was closely followed by RBC Asset Management Inc.,
with $1.59 billion. BMO Investments Inc. was fourth, at $978 millions.

Dynamic Mutual Funds Ltd., Phillips Hager & North Investment Management Ltd., CI Mutual Funds Inc. and Brandes Investment Partners & Co. also saw large inflows. At the other end, AGF Funds Inc. and AIC Ltd. led in net redemptions, with Fidelity Investments Canada Ltd. and Altamira Investment Services Inc. also experiencing big outflows.

When money market funds are excluded and only long-term assets tabulated, there are some changes in the rankings. CI, for example, moves up to fourth place. CIBC moves into solid net sales, vs net
redemptions. Altamira’s net redemptions are almost halved, while PH&N’s net sales fall, as do Manulife’s.

Even without the $950 million in new money coming from fund mergers, Manulife was among the best-selling mutual fund companies. Elliott & Page Monthly High Income Fund was the big winner, attracting $454 million in new money in November through February. The fund, with 35% in income trusts, is considered an income trust fund.

Richards says the beneficiaries of the income trust boom have not generally been the big mutual fund players, with the exception of CI. Instead, Dynamic, Acuity Funds Ltd. and Sentry Select Capital Corp.
have been the big winners. Sentry is too small to make the table, for which the cut-off was $1 billion in fund AUM, but it had $134 million in net sales during the RRSP season, amounting to 23.5% of its $568 million in AUM as of Feb. 28.

Brandes was a noteworthy winner this RRSP season, even though its funds are mainly equity and, in many cases, non-Canadian. The firm attracted $515 million in new money, equivalent to 13.8% of AUM as of Feb. 28. Richards calls the number “tremendous performance in a market in which international equities are not in favour.” Company president and CEO Oliver Murray says that there’s no secret to its sales and marketing success: “We don’t do any advertising whatsoever. We feel our time and money is better spent on educating advisors about what we do, why we do it and why it makes good long-term sense.”

Brandes has excellent investment performance. And, Richards adds, it benefits from being a new company without established assets. Hence, most of its assets are still subject to redemption fees.

Richards contrasts Brandes with Fidelity, which was a top seller in 1993-95 and has lots of assets that can be redeemed without penalty. Donna Miller, Fidelity’s vice president of corporate communications, echoes the view, although she points to strong sales in 1998-2000.

Fidelity has made recent moves to improve sales. One is a general lowering of fees and the introduction of a low-load option, with a two-year redemption schedule for all funds.
Miller says it helps being a large private company that can afford to lower fees. It has also expanded its sales force. “We had heard from advisors that they wanted more contact and to learn what we could do for them,” Miller says. Early results have been “very positive.”

Increased contact with advisors is a theme in other firms, notably AGF. The firm’s new sales and marketing strategy focuses on reconnecting with its advisor clients, and it is seeing results. “We’ve seen a progressive decline in daily net redemptions, trending to about $15 million a day, then $8 million-$9 million, then $5 million-$6 million and, finally, in early March, cracking through to a number of net positive days,” says Randy Ambrosie, executive vice president of sales and marketing.