After shelling out $2.4-billion for acquisitions since the start of the COVID-19 pandemic, IGM Financial Inc. IGM-T chief executive James O’Sullivan is shifting his focus to the growth of the company’s two core subsidiaries, IG Wealth Management and Mackenzie Investments.
The investment giant, a subsidiary of Power Corp. of Canada POW-T, has seen its assets under administration – including its strategic investments – increase to more than $400-billion as of Sept. 30 – a significant boost from $240-billion on the same date in 2020.
“Given the amount of mergers and acquisitions that we’ve done over the past three years, we feel very strongly that we’ve repositioned and rebuilt the business for growth in the years ahead,” Mr. O’Sullivan said in an interview with The Globe and Mail.
Much of that growth has stemmed from a flurry of acquisitions that include buying a 20.5-per-cent stake in U.S wealth giant Rockefeller Capital Management and a 56-per-cent stake in private equity firm Northleaf Capital Partners. In 2022, IGM Financial doubled its stake in China Asset Management Co. to 27.8 per cent from 13.9 per cent, and it continues to hold nearly 25 per cent in digital wealth manager Wealthsimple. At the same time, Mr. O’Sullivan freed up capital with the sale of independent wealth manager Investment Planning Counsel Inc. (which closed in November, 2023).
However, Mr. O’Sullivan said his two core business, IG Wealth and Mackenzie, still account for about 75 per cent of company earnings. Even with the “higher growth expectations” of the strategic investments he has made, he says those two divisions will likely account for almost 70 per cent of earnings in 2028.
“Our priority over the next two years is crystal clear: Invest in the core,” he told analysts during an investors day in December.
Most of IGM Financial’s revenue comes from IG Wealth (formerly known as Investors Group), which has more than 3,200 financial advisers and associates. Over the past five years, IG Wealth has completely overhauled its business model – slashing its work force by almost 2,000 advisers and pivoting to a more high-net-worth investor base.
At the same time, clients with less than $100,000 in investable assets were no longer allocated a dedicated financial adviser. Instead, they were redirected to a centralized call centre. They have about $2.5-billion in assets, and the centre services about 25 per cent of IG Wealth’s total client base.
Now, five years later, the heavy-handed plan that was put into motion by then IGM Financial head Jeff Carney appears to be paying off. IG Wealth has grown to $114-billion in assets, as of Sept. 30, up from $86-billion at the end of 2017.
In 2017, only 12 per cent of sales came from clients who had more than $1-million in assets. Today, that has jumped to 25 per cent, and IG Wealth’s current chief executive, Damon Murchison, says he expects that to increase to 33 per cent in five years.
“We have 40 per cent less advisers, but the productivity – the amount of business each adviser does – is up by 166 per cent,” Mr. Murchison said in an interview. “Because of our investment in technology, in products and in the support services we provide to advisers, we have been able to remove some of the noise in the organization.”
And now, IG Wealth is homing in on two new markets. In September, it launched a division for small business owners called Private Company Advisory – an opportunity Mr. Murchison says is aimed at capturing the “three-quarters of the small and medium-sized businesses in Canada that are going to be sold within the next 10 years.”
The other opportunity lies in the middle market – a segment with advisers who oversee clients who have between $100,000 and $250,000 in assets. It’s a population of investors who typically fall through the cracks for dedicated financial advice, as they do not meet the minimum threshold for many investment firms. It’s also a segment that may have been shuffled around during IG Wealth’s reconfiguration in past years.
Now, Mr. Murchison is hiring advisers – predominately financial planners – who will be separate from the company’s current advisory business (where advisers build their own book of business with clients who pay fees and commissions). In the new “employee dedicated advice” business, advisers will be hired as employees, paid a salary and provided an existing book of clients. Already, he says, a number of advisers have joined the dedicated advice channel from the company’s existing adviser network.
“These are important clients, and we want them to be here at IG Wealth,” Mr. Murchison said. “We have never ever said we don’t want all these clients. We just had to make sure that we were servicing them the right way.”
While Mr. Murchison focuses on the growth of the retail market in Canada, sister company Mackenzie is looking to diversify its investment portfolio outside Canada, as well as expand its institutional client base.
While some competitors have merged investment brands, and combined teams of portfolio managers, Mackenzie chief executive Luke Gould continues to run more than two dozen independent teams, including popular investment brand names such as Mackenzie Cundill, Mackenzie Ivy and Mackenzie Bluewater.
“We are portfolio managers, and we believe in diversification,” Mr. Gould said. “When we say we’re boutiques, we have 16 investment teams, each with their own articulated edge. They’re autonomous. They don’t share best ideas and our job is to nurture them in their own discipline.”
Mackenzie manages about $186-billion in assets. About 90 per cent of those assets are in Canada. But with the company’s recent investment in Northleaf, and IGM’s increased stake in China AMC, Mr. Gould wants the asset mix to get more global. Currently, Mackenzie has seven investment offices – including locations in Hong Kong, Dublin and Boston.
“We’re a Canadian company. However, our investment reach is global,” Mr. Gould added. “We have a very rich opportunity to expand institutionally and expand outside these borders – and we feel the opportunity is an exciting one.”
Editor’s note: This story has been updated to reflect new information provided by Mackenzie Investments about its total assets. The company previously reported it managed $112-billion in assets, but did not include money managed on behalf of IG Wealth and Investment Planning Counsel, which brings its total assets under management to $186-billion. The article also stated it had spent $4.1-billion on acquisitions. It has been updated to state the company spent $2.4-billion on acquisitions.