Thriving under pressure

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This article was published 10/05/2022 (1359 days ago), so information in it may no longer be current.

Despite volatile markets, deepening inflation and ongoing supply chain rebalancing, IGM Financial posted record growth in earning and assets under management.

In fact, all of that instability may even be one of the reasons for the current hot streak of the company that owns IG Wealth Management, Mackenzie Investment and Investment Planning Counsel.

In an interview with the Free Press, IGM Financial’s CEO James O’Sullivan, said these are not normal times.

But O’Sullivan remembers the days of disinflation, secular stagnation and quantitative easing that featured flat earnings and flat share prices.

“I think this (current) environment will cause many Canadians to seek financial advice as opposed to do-it-yourself financial planning,” he said. “It is an environment that active asset management will come back into favour relative to passive asset management.”

So while we are in the throes of significant volatility that is going to persist for some time, it is not all bad for IGM Financial.

When O’Sullivan took over in September 2020 after Jeff Carney was forced to step down for health reasons, the company had already rebranded Investors Group to IG Wealth Management and started to attract higher net worth clients. As well, the company had made significant investments in technology — including implementing and investing in the Winnipeg software company Conquest Planning — and was starting to recruit investment advisers with their own book of business.

Whereas the old Investors Group took pride in an ever-growing army of financial planners who fanned out across the country, O’Sullivan said the company is not recruiting at the pace in which it had in the past.

“This is not the Investors Group of 10 years ago,” he said. “Historically we had a huge rookie intake program. But as the business has evolved we still do some of that, but we are also recruiting experienced advisors now from banks and other platforms.”

But O’Sullivan is quick to add, “We are in growth mode.”

With $268.3 billion of assets under management and net earnings in the first quarter of $219.3 million — both record highs — despite the entrance of new players and innovative fintech offerings, the company continues to dominate the industry.

Assets under administration dipped a bit from the previous quarter and declined a further four per cent in April and its share price has lost about 25 per cent of its value since its highs of around $50 in the fall — closing at $37.42 on Friday — but O’Sullivan said management is confident in its strategy.

Jaeme Gloyn, an analyst with National Bank of Canada Financial Markets maintains a target price of $53.

On Thursday he wrote to clients, “We believe IGM’s growth strategies will win out longer-term. In addition, the shares continue to represent good value; trading below the long-term average and in line with global wealth and global asset management peers.”

But he did acknowledge a higher risk backdrop from geopolitical/market uncertainty and “tempering household savings rates and investor confidence.”

O’Sullivan does not dispute that we are in the throws of significant volatility that will persist “from some little while longer.”

But with strong earnings and investment in its own digital platform creating reliable performance the company is also engaged in making strategic investments.

In addition to acquiring wealth management firms — in competition with the likes of Winnipeg’s Wellington Altus and Richardson Wealth — it participated in Wealth Simple’s latest funding round at the beginning of the year and continues to be its largest shareholder at about 23 per cent worth more than $1 billion.

Also at the beginning of the year IGM’s subsidiary Mackenzie doubled its investment in China Asset Management Co., the second-largest player in China.

Even though some say there are geopolitical concerns connected to that kind of investment in China today, O’Sullivan has no misgivings.

“Our core purpose at IGM Financial is to help improve the lives of Canadians by helping them better plan and manage their money,” he said. “I can tell you we have learned over the years that the best portfolios are ones that are fully and truly diversified by industry and geography. When you consider the fact that China is the second largest economy in the world, the second largest equity market… I do believe that Canadians are going to want an allocation to China as they build truly diversified, truly global portfolios.”

martin.cash@freepress.mb.ca