Realigned IGM Financial looks to ‘meaningful growth’ through diversification

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This article was published 04/05/2024 (879 days ago), so information in it may no longer be current.

IGM Financial Inc. held its annual meeting Friday in Winnipeg, the first time it’s done so in public since before the COVID-19 pandemic.

Since that time, the Winnipeg-based company has made a couple of strategic acquisitions, invested heavily in operations technology and fully committed to a reorientation of its target market to go after a higher net-worth client base.

While all that was going on, COVID rolled in, followed by a generational spike in inflation and a lingering high interest rate environment.

In an interview with the Free Press, IGM chief executive officer James O’Sullivan said it’s times like these where financial advice really shows its worth.

Revenue and earnings were off a little in the company’s first quarter that ended March 31, even though assets under administration (AUA) were up five per cent from the prior quarter (to $252.2 billion) and up 7.7 per cent compared to Q1 of 2023.

O’Sullivan said the bump in AUA was thanks to the markets being strong, but acknowledged “it’s a tough time out there,” noting the macro market is such the company can’t expect “money to be flowing through the door.”

“We will get through this. These things don’t last forever. Meanwhile, whatever money (IGM clients) do have in the market has done very well. That helps,” he said.

During the last few years, IGM Financial has undergone a bit of a transformation.

It has trimmed its workforce to a little less than 4,000, whereas Investors Group used to use its increasing numbers of investment advisers as a key metric of its growth. It still has more than 1,000 staffers based in Winnipeg.

It now characterizes itself as being in two segments: wealth management, led by IG Wealth Management; and asset management, led by Mackenzie Investments, its two main operating companies.

Over the last few years, it has made about $4 billion worth of investments, taking sizable stakes in four strategic companies: Wealthsimple, China AMC, Rockefeller Capital Management and Northleaf Capital Partners.

O’Sullivan said it gives the company geographic and product diversification with great brands that have excellent futures.

For example, Wealthsimple, which IGM has a 24.7 per cent ownership stake in, increased its assets AUA by 69 per cent last year.

On a conference call with analysts Friday, O’Sullivan referred to Wealthsimple’s first-quarter growth trajectory as “ballistic.”

It owns 28 per cent of China AMC, the second-largest player in wealth management business in that country with a population of one billion-plus. Its AUA is about $341 billion and that number is growing much faster than IGM’s own assets.

Its proportionate stake in those companies would add another $173 billion to IGM Financial’s consolidated AUA.

At his speech at the annual meeting, O’Sullivan said: “Today, IGM’s realigned business gives us a blueprint for meaningful growth through diversification across varied geographies, demographic segments, platforms and technologies — within a structure that has reshaped the earnings potential of this company for many years to come.”

With 62 per cent of IGM Financial owned by Power Corp. and another four per cent by Great-West Lifeco (which is also controlled by Power Corp.), the company may not be as constrained by needing to produce short-term results as more widely held public companies might be.

“The fact that Power Corp. controls IGM makes it easier for us to do the right things over the medium term and the long term is the way I would put it,” said O’Sullivan. “But if we say we’ll do something, it’s important that we deliver.”

As far as that goes, O’Sullivan said that is the mode the company is in right now: fine-tuning operations and bearing down.

“Our message is that we view ourselves as done for now in terms of (mergers and acquisitions), with the caveat that, if the phone rings, I’m going to pick it up,” the CEO said.

He added the plan for the near future is to focus on sharpening operations at IG Wealth and Mackenzie.

“That would be a productive couple of years,” O’Sullivan said.

martin.cash@freepress.mb.ca