Change afoot in IGM’s executive offices

Taylor says he and Sims will continue to work closely with Orr on the broader issues affecting IGM and that the new appointments are a “natural evolution” for the company.

“I think it’s going to work very well,” Murray says. “The nature of IGM Financial is its two large operating companies, Investors Group and Mackenzie, were heavily involved in virtually every respect anyway. To have us partner together in these roles makes perfect sense,” he says.

Dan Richards, president of Strategic Imperatives, a Toronto-based financial services consulting firm, agrees, although he warns that two-headed CEOs can either “work or be a disaster.

“The fact that both Charlie and Murray are well known for keeping their egos in check and for being team players [bodes well],” he says. “It’s a great decision. You have two very strong leaders. In promoting Murray and Charlie, [IGM has] selected two guys with terrific track records in terms of their leadership in the past. They have a very strong blend of operating discipline, track record, business maturity and understanding of advisors and investors,” he says.

Taylor, who has been with Investors Group for four years after spending a quarter-century with Great-West Life Assurance Co. and London Life Insurance Co., will be based in Winnipeg, while Sims will stay in Toronto.

Since assuming the top job at Investors Group 14 months ago, Taylor says, he’s had regular contact with Orr — and that is not about to change.

“We have the same vision today as when IGM was formed [in April 2004]. I think we are a very strong company in the marketplace; we have strong market share, we are represented in different ways in terms of Investors Group [with its captive sales force] and how we go about our business. Mackenzie is in a different part of the channel, and it serves the market in a slightly different way. [Investment Planning Counsel] has its spot in the market, as well,” he says.

Orr, who will chair the executive committee of IGM’s board, says that if the company’s returns on the Toronto Stock Exchange in the past two years — particularly the 14.5% return in 2004 — are any indication, IGM appears well positioned for the future.

“Rising stock markets and continued low interest rates [in 2004] produced an environment in which Canadians returned to mutual funds in a bigger way, with industry net sales reaching their highest level in four years,” he says.

Orr says Investors Group is reaping the benefits of the seeds planted in 2003. Chief among them were lowering MERs on its mutual funds, revamping compensation for its consultants and increasing individualized sales support for them.

That has helped boost the number of consultants on staff to 3,503 at the end of March, up 10% from 3,186 in June 2003.

“The consultant network is the pipe through which all Investors Group business flows,” Orr says. “As optimistic as I was a year ago that those changes would result in really positive traction for the Investors Group consultant network, it has been even more positive. My optimism was understated.”

Taylor says that, despite a turnaround in the markets in the past few years, its consultants still face many challenges, including overcoming the stigma resulting from the $19.2-million fine levied by the Ontario Securities Commission on the company late last year for market-timing activity in the late 1990s and early 2000s.
There are also lingering fears from the most recent bear market, he adds.

“That has soured some people on mutual funds,” he says. “So it’s important for us to communicate the value and merits of mutual funds and how they can be used effectively over time [to meet retirement needs].

@page_break@“In the past few years, investors have been regaining confidence in equities. But, from time to time, memories of the bear market create some hesitancy.”

Orr says he spent the bulk of his time in the past year working with the management teams of the three operating companies to review their strengths, weaknesses, opportunities and threats, and to set the course for strong organic growth. “You can’t count on making another acquisition for your growth,” he says.

However, he notes, the company’s brass is keeping its eyes open for opportunities on both the fund manufacturing and distribution sides of the business. He says it is natural to expect more potential acquisition targets in the financial planning market, where IGM picked up IPC last year for about $100 million, because there has been far less consolidation in that sector than in mutual funds.

“There are so many manufacturers and suppliers that may, at some point, become available. The thing about acquisitions is they are not just dependent on what you want to do; they are dependent on what other people think and what their plans are,” he says.

Orr says the bulk of his time at Mackenzie was spent managing through the leadership transition from long-time CEO Jim Hunter to Sims, who joined the company this spring from Franklin Templeton Investments Corp.’s head office in California.

“I’m delighted with the outcome of that process. We received interest from very strong candidates across the industry. Our search was an international one,” he says.

Sims says his focus for the foreseeable future will be getting up to speed on Mackenzie’s internal operations.

“I’m looking, listening and learning. I don’t
yet understand Mackenzie the way I need to,” he says.

As for IPC, Orr says, he has spent much of his time searching for ways in which the IGM/Power group can leverage its size and strength to provide IPC with the support to build its business platform.

“We’ve already benefited it in a big way. It has some internal products for which it outsourced the financing of commissions to third parties. We brought all that in-house at substantial savings to the company,” he says.

Orr notes IPC doesn’t yet have the same level of profitability as its two big sister companies, but that is expected to change in the future.

“IPC is still very much in growth mode. It will be investing quite heavily in its support and programs for its advisors over the next year,” he says.

Orr adds that IGM will continue in its current capacity as a holding company because it is not intended to be a firm that ends up building its own overhead and infrastructure.
Some executives, including Terry Wright, legal counsel and secretary, and Greg Tretiak, chief financial officer, are employees of the public company, he says.

Orr says IGM has “absolutely” surpassed its goal of $100 million in synergies from the four-year-old $4.15-billion acquisition of Mackenzie — $75 million of which was supposed to be for shareholders, with the remainder for unitholders.

“We had a stretch goal of 30% above that. We surpassed those goals and we’ve stopped reporting them. It’s just ongoing business now, how we can run these companies as effectively as possible. We look for opportunities wherever we can across the three companies to purchase things together or look at systems,” he says.

Orr says the ongoing attention to costs, which was ramped up during the bear market, has become part of IGM’s ongoing culture, an element that is crucial in the financial services industry today.

“It’s a growth business, but a growth business in which one needs to provide high-quality products and services on a cost-effective basis,” he explains. “If you can’t do that, you’re not going to be in the business long. It means a continual process of trying to figure out how to do things better, more efficiently and more effectively without cutting the quality of the service or product.

“We are better able to do that as an organization operating on a base of $85 billion in mutual fund assets under management. It is back to block and tackle, and executing the basics. I feel good; things could be a lot worse.” IE