CI Financial Corp (CIXX) 2014 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen. At this time, I would like to welcome everyone to the CI Financial 2014 Third-Quarter Result Webcast. (Operator Instructions)

Please take note of the cautionary language regarding forward-looking statement and non-IFRS measure on the second page of the presentation.

I would now like to turn the call over to Mr. Stephen MacPhail, President and CEO of CI Financial. Mr. MacPhail, you may begin.

Thank you very much, and welcome to CI's conference call for our fiscal Q3 2014 results.

With me today are three members of CI's Executive Management Team. Doug Jamieson, well to known to you all, our EVP and Chief Financial Officer. Also with me today is Derek Green, President of CI Investments. And also Steve Donald, President of Assante Wealth Management. So we have all key areas of our business represented here today.

I start off with just looking at the performance of CI, given the number of changes that have gone through this year. I'm still proud to say that we're the, by a long shot, the top-serving financial services stock, returning over 4,274% since June 1994, which puts us as the fourth best-forming stock on the TSX since 1994. And in fact, we've been in the top 10 over the last 16 years, showing the consistency of our outperformance.

Just looking at some of the highlights of the year, we reported earnings per share of CAD0.48 a share, up 26% from CAD0.38 in Q3 2013. In addition, our earnings were up 7% from CAD0.45 in the prior quarter.

Our Q3 average assets under management were up 20% year over year and up 3% from the second quarter of 2014.

Our retail net sales in Q3 2014 were 17% higher than the same quarter in 2013. Net debt was down 45% from Q3 2013 and down 13% from the prior quarter.

And lastly, we increased the dividend today to CAD0.105 per month, which is our third increase in 12 months, reflecting the continued, strong free cash flows, asset growth, and sales at CI.

I'm particularly proud of the report that came out in the Wealth Professional magazine and its 2014 Advisor Report. In that report, CI was ranked number one overall in Canada versus all the banks, fundcos, and insurance companies.

They measured 10 categories such as service, product range, processing accuracy, technology, advisor support, performance, et cetera, and CI ranked either one or two in 80% of the categories, and ranked top three in 100% of the categories. I would say this top ranking reflects CI long-term culture of over 20 years of service and advisor focus.

And with that, I'd like to turn it over to Derek Green to talk about sales. Derek.

Thanks, Steve. We're enjoying another excellent year at CI. During the first nine months, we had CAD11.0 billion in gross sales, which is 6% higher than 2013. Year-to-date net sales are CAD3.4 billion to the end of the third quarter, which is 15% higher than 2013.

Q3 retail sales are the highest in over a decade. And our sales are well diversified by channel. Since 1994, CI has achieved positive net sales in 88% of all quarters, which is ranked the highest of all mutual fund companies in Canada.

In terms of sales outlook, we've just returned from Las Vegas where we had over 1,200 advisors pay their own way to our leadership forum.

We're currently enjoying another solid year of performance. Over half of CI's long-term AUM is first or second quartile year to date, over one year, over three years, and over five years. And I'm happy to report that 79% of CI's long-term AUM is first or second quartile over 10 years.

With regulatory reform, we're seeing a change in advisor behavior. We've seen a sharp increase into our award-winning managed solution and into our mass affluent product, PIM. We are also seeing strong flows into our traditional funds. And after five and a half years of a bull market, we're seeing a decrease and interest in segregated funds.

In terms of where we're seeing sales flow, our managed solutions, our income products, our global balanced and global equity in emerging markets are seeing an increased share of sales. American equities are maintaining share, and Canadian equity and Canadian balanced have seen a decreased share.

And with that, I'd like to pass it over to Steve Donald. Steve.

Thanks, Derek. I thought I would take a few moments to talk about our advisory platforms, Assante Wealth Management and Stonegate Private Council. Across these platforms, we provide advice on over CAD31 billion in assets. That's CAD4 billion of discretionary portfolios and CAD27 billion of advised portfolios.

Over half of our assets are held in high net worth accounts. And we're seeing continued flows come to us over the summer months. We're capturing larger and larger opportunities as demographics are demanding increasingly complex planning services.

I think it's those planning services, and our focused approach to providing planning, that has helped us be very well-positioned for regulatory change that's in our environment. The regulatory change is really focused on transparency and accountability in the relationship between advisors and their clients.

And over half of our assets are already in fee-disclosed accounts. We've had the discussion with our clients about their fees, and about the value that's received for the fees that our clients are paying. And I think that value is augmented by our wealth planning support.

Last year's investment executive survey ranked us as the top ranked firm among our peers in wealth planning support. Across our organization, we have upwards of 70 people, 70 professionals assisting advisors and their clients. I think it's that scale that has allowed us to continue to invest in our business, and that will set us apart as we move forward.

We are helping our advisors help their clients through expertise, investing in people, wealth planning resources, practice management resources, investing in technology, helping advisors have more efficient practices, and of course investing in brand.

It's a lot easier to attract clients when they know who you are and what they stand for. So as I think about Assante Wealth Management and Stonegate Private Counsel, it really is about standing for that complete financial wellbeing of our clients.

So with that, I will turn the call over to Doug Jamieson who will touch on our financial highlights.

Thank you, Steve. This next slide of financial highlights has a few of the numbers that Steve MacPhail went through already, but they're summarized here comparing the third quarter of this year with the third quarter of last year.

As Steve said, average assets under management were up 20% from CAD84.1 billion a year ago to CAD101 billion.

Next, net income was CAD135.1 million, and that was up 25% from CAD107.8 million last year. And on a per-share basis was up to CAD0.48 from CAD0.38 last year, and that's an increase of 26%.

EBITDA per share up CAD0.13 to CAD0.81, a 19% increase.

And dividends paid were up 11% as CI paid out CAD76.6 million last year. And that was at a rate of CAD0.27 for that quarter. And CAD85.3 million in the third quarter this year at a rate of CAD0.30 per share or CAD0.10 per month.

And net debt has declined CAD184 million from CAD404 million at the end of the third quarter of 2013. And at the end of September 2014, it was approximately CAD220 million, calculated as gross public debt outstanding of CAD500 million less CAD280 million of excess cash and marketable securities. This gives CI a net debt to EBITDA ratio of under 0.25 to 1. And as we've said before, it continues to provide CI with significant financial flexibility.

Now we can take a look at quarter-over-quarter highlights. Average AUM up 3% from CAD97.9 billion to CAD101 billion. Net income up 6% from CAD127.8 million to CAD135.1 million. And a CAD0.48 of earnings per share, up 7%. EBITDA up 4% from CAD225 -- CAD221.5 million to CAD230.8 million. And the CAD0.81 per share is also up 4%.

Dividends paid of CAD85.3 million was an increase of 3% from CAD82.6 million. And net debt declined CAD32 million during the third quarter alone.

CI's EBITDA margin increased to 48% this quarter, which reflects the fact that even as CI's average management fee rate has declined due to the mix of business, we generate CAD0.48 of EBITDA profitability on each revenue dollar.

CI introduced a couple of new performance measures in the first quarter, the first of which was the asset management margin that you see here. This margin measures how much we retain out of management fees after paying trailers, SG&A, and DSC on a trailing 12-month basis. And we see that we are left with over CAD41 of every CAD100 in management fees earned, up from about CAD39 one year ago.

And this measure eliminates the financing impact of frontend versus backend funds, since we're already deducted trailers and DSC. And it also eliminates the distortion of equity and fixed income mix changes, and retail and institutional mix changes, because it is measured as a percentage of management fees and not AUM.

CI's SG&A, which we're calculating as a percentage of assets under management and showing it in basis points, has declined significantly from the third quarter of last year. We saw on the quarterly highlights slide that CI's average AUM grew by 20% from last year, while at the same time, SG&A spend grew by less than 10%. So we see the drop from 37.0 to 33.8 basis points year over year, and a drop of 1.0 basis point in this quarter.

And here is the other new performance measure that we introduced this year, the SG&A efficiency margin. Here we look at an available pool of management fees, less trailer fees and DSC, and how much of that pool remains after deducting SG&A spend. So in the past 12 months, CI has retained 71% of that available pool, up from 68.5% a year earlier.

Put another way, CI spends less than 30% of the amount available, after paying trailer fees and DSC, out of management fees.

Next, looking at cash flow. We have five quarters here of free cash flow, and we have a nice jump to a record quarterly free cash of CAD148 million. And that's CAD29 million higher than the third quarter last year.

Note that the first quarter's typically a low point in the middle there because of the increased spend on DSC during RSP season. And the year-over-year increase is a result of operating cash flow growing by more than CAD25 million. And we spent about CAD4 million less on deferred sales commissions this year, as the trend away from deferred-load sales is continuing.

And here in the first part of the return to shareholders table, you can see the detail on the change in free cash flow from last quarter to this quarter. Last quarter's operating cash flow of CAD168 million, less commissions of CAD30 million, gave us CAD138 million in free cash. This quarter we had CAD173 million of operating cash flow and paid out just under CAD25 million of commissions, giving us a CAD10 million increase in free cash flow.

The next section details the amounts returned to shareholders. We repurchased CAD56 million in stock in the third quarter, and increased the dividends paid to CAD85 million, up from CAD5 million in repurchases last quarter and CAD83 million in dividends. And as we pointed out in our news release, we purchased -- repurchased an additional CAD22 million in stock in October. As well, CI's run rate dividend payout is now CAD89 million with the increase announced today.

The net surplus of CAD7 million, plus a decrease in working capital, is what reduced net debt by CAD32 million in the quarter.

We continue to highlight CI's return on equity, which hit 27% this quarter, and is another indicator of the strong performance of CI. And this return has grown over the past year from 24% as CI leverages the growth in its AUM to earnings growth, and CI's limited need for additional capital to support that growth.

And looking at the dividends over the last five years, the dividends paid since 2010 and through to our forecast total payout for 2014 shows a compounded annual growth rate of 11%.

I will now turn it back to Steve MacPhail.

Thank you, Doug. Those were terrific numbers. Every time I'm surprised because I never think they can get better and somehow you manage to make them better.

This chart depicts our current assets under management, really where they've been over the last year and a bit. And you can see that why the third quarter was a record quarter for CI.

And though we saw in October the markets decline and then come back up, we're pretty well back up to our all-time high again. We're closing in on that very closely, which put us in a strong position to increase the dividend.

Turning to outlook for CI. As Derek mentioned, our year-to-date gross and net retail sales levels are ahead of 2013. We continue to see an increase in the demand for equity-oriented and balanced investments.

CI has established a clear leadership role in helping advisors adapt to regulatory change. And as you heard from Steve Donald, we're very comfortable that we've actually put this into a positive position for the advisors where they'll be able to take advantage of it. And then in fact, that's already reflected in the strong business we're seeing at Assante year to date.

As a company, we continue to focus on comprehensive service. And we're making big investments in additional inside sales staff, wholesalers, customer service people, technology, and admin people to keep us ahead of the curve on that side of the business.

Under Neal Kerr, who heads up our institutional and money management side, he makes money management talent enhancement a key priority for our companies who are -- whether it's a Signature group, Cambridge, Harbour. We're always looking to see where we can add to that money management talent, especially on the international and global side, to enhance our product lineups.

And lastly, in the last few months I've talked about a goal for CI, that when we look forward for our business, we're targeting this Company to be a CAD150 billion company. And we're trying to take all the actions necessary to position us to be that type of company, whether it be on service, money management, products, et cetera.

On the Assante side of the business, Steve Donald has established a target of CAD50 billion in assets for that, from where the 32. Essentially based on the same thing CI's talking about with the added benefit of the comprehensive wealth management that the Assante advisors add.

With that, I'd like to say thank you, and I was happy to report another record quarter for CI. With that, I'm open to taking any questions you might have.

(Operator Instructions) Gary Ho.

Thanks. First question is on the use of cash. The Company has pretty conservative balance sheet, and I think you're planning on redeeming CAD200 million debt at year end. Is it the intent to redeem mostly cash on hand, or will you consider refinancing some of this, given where rates are?

At this point in time, we'll probably just repay that debt with cash on hand, and then evaluate our options as to whether or not we want to lock in longer-term debt as we go along. But one activity is not contingent upon the other.

Okay. I guess along the same lines, what I'm trying to get at is why wouldn't you guys consider taking on more debt and be more aggressive with your buybacks?

You know, you might recall I have made the statement at the annual meeting, and since that, when we look out over a five-year period of time, between surplus cash, free cash flow, and if we look at taking ourselves up to approximately, something just less than 1 times debt to EBITDA, we see that over five years that that would free up about CAD2 billion to do many things, including buyback -- buyback more shares.

You certainly would have seen that our activity in the last three months in the buyback area has been much more extensive. Even in the month of October, we had a great opportunity to buy back shares at what we considered a very, very reasonable price. We bought back 500,000 at CAD31.30. So it was a terrific opportunity. We're going to continue to pursue those.

So if you annualize out what we've done in the last three months, you saw we almost took our net free cash down to zero in the last quarter. So you should expect to see more of that as we go forward.

We also just increased the dividend, but that's always been in our planning process that when our free cash flow and earnings increased, that we'd look to increase the dividend consistent with that.

So, I think you could expect kind of more of the same as we go forward -- opportunistic buying back of our shares, increasing dividends. And if we see good acquisition opportunities, then certainly with kind of that CAD2 billion number to work with over five years, we've got lots of flexibility.

Perfect. Thanks for the color. And then my next question is on fees. And this is quite topical over the last while, given some of your actions by your competitors. Can you update us on where or how fees in your products match up with peers? Any particular product you think might be an outlier in terms of fees?

So I would say -- it's Derek Green speaking -- I would say we're very competitive from a fee perspective. Specifically in the mass affluent space, we're very competitive. But I think we're also realistic that there's ongoing pressure for fees to come down.

So it's certainly not affecting our sales. Our sales, we're having the best year in the history of the Company from a sales perspective, from a gross sales, and we're having a really good year from a net sales perspective. So, I think we're very competitive.

Okay. Perfect. That's it for me. Thanks.

Geoff Kwan.

Hi. Just had a question with the advisor conference that you just had. I know it's relatively recent, but any sort of color around, in terms of some of the leads on potential for more business from those advisors?

Well, you know, at any time, all we have to look at is -- this was the (inaudible) leadership forum. We always do analysis of the attendees. And when people have paid their money to come listen to our money managers' views and our featured speakers, we seem to get more sales out of them. So we're -- we've seen some significant business already out of the attendees.

So the exact number was we had 1,275 advisors in Las Vegas, which represented about CAD13 billion of retail AUM. So they're -- I think we'll see some pretty decent sales.

Geoff, it's just Steve MacPhail. Let me side into that. You have to remember the point of this conference. This is not a sales conference. What this conference is all about is providing content to advisors, whether it be to Assante advisors, Sun Life advisor, all the people that we're involved with.

It's not about talking about our individual funds. So, many of the topics, we have topics ranging from cybercrime to regulatory changes to practice management to succession planning. So advisors go there because it's educational, is what they want to do.

And we bring the money managers down so they have the opportunity to talk to the money managers one on one, to understand what's going on in the world. And so they understand what they're paying for with the professional money management. So I think you have to have a pretty good idea of that.

The objective isn't to bring someone down and say, hey, did you give us a dollar the next day? If you take that attitude, it'll never be successful. The idea is that you go down, say let's do what's right from a service perspective, because these are all very big supporters of CI.

You have to remember, we have over CAD100 billion in assets under management, and the service that we provide to people on the existing business is paramount to us. So let me just make that perfectly clear.

Thank you. Just the other question I had is with some of the regulatory stuff going on in places, if they ever did decide to go down the road of banning trailer commissions, can you kind of talk about hypothetically how you would try to compete? Or what you might do differently from what you do now in that scenario? And particularly I was just thinking about the types of business that you do outside of the Assante channel.

Sure. It's Derek again, Geoff. We've been talking quite vocally for the last I would say three years on regulatory reform and where we ultimately think it's going. And I think it's a big leap to say that commissions are going to be banned.

What we've been promoting, though, is for advisors to be more transparent with using fee-disclosed products. So, our PIM product last year at this time was 2.5% of our AUM. Last year it was about 25% of our net flow. This year it's 4.2% of our AUM, but it's over 30% of our net flow. So, it's a product that is transparent. It's fee-based. It really enables us to compete quite effectively if that does happen.

So, we've been out -- I think we've been out in front of this. We try to be thought leaders on it. We know that regulatory reform is not just CRM 2. But CRM 2 is the start to helping advisors transition, should there be a ban.

Okay, thank you.

Stephen Boland.

Derek, just following up on that. You said that it may be a big leap to assume that trailer fees get banned. Why do you -- can you explain a little bit more why you believe that?

Well, you know, I think there's -- mixed things have come out of Australia and Britain whether that's the right thing to do. What we've said to regulators, and the feedback that we've provided, is let's see what effect CRM 2 actually has on the behavior. So, to make change just for the sense of making change, I don't think makes sense. But then again, I'm not the regulator.

I just don't think it's as clear cut as that, just assuming that commissions are going to be banned or embedded, compensation is going to be banned, but I think we should wait and see. But we -- it's the old saying, prepare for the -- hope for the best and prepare for the worst.

So I think we've got a good game plan in place. We've got a very competitive product. And we continue to see increased flows into our mass affluent product quarter over quarter.

And Stephen, it's Steve Donald. If I can just add a little bit more color to that. I think the objective of the regulators with their client relationship model and a lot of the discussion is to enhance transparency and accountability, as I said earlier. And the client relationship model will significantly increase that transparency.

With every passing day, we're getting more and more information out of jurisdictions like the UK, like Australia, about the impact that their rules, which have gone further than the rules that are now going to be in place for Canada. We're getting more and more information about the implications that it's having, particularly on smaller investors. And I believe based on some of the discussions that I've been involved with that is of concern.

So, to Derek's point, taking a little time to understand what happens in these other jurisdictions, -- particularly the UK; to a lesser extent Australia -- and also what happens in Canada with the full implementation of CRM 2, is very important. We want to make sure that if there are policy gaps that are identified, we can address those gaps. But let's not make drastic change that may have, excuse the cliche, but have unintended consequences.

Do you find that the regulator is being receptive to your views of the industry views in general?

I think there's a lot more discussion right now. Now of course, there are a number of research initiatives underway right now to try to get a better understanding of the impact of compensation models on behavior on long-term outcomes. But there's certainly -- there seems to be a desire to have a better factual understanding of the outcomes that may come about as a result of this.

Just one other thing. There is a scenario where it could be something in between what's happened in the UK and Australia. You could have a situation where it's like the United States where the 12b-1 fee is capped at 25 basis points. So we really don't know exactly where this is going. But to Steve's point, I think when CRM 2 is fully implemented in 2016, we'll have a much better idea of where things are going.

Okay, that's great. Thanks, guys.

Paul Holden.

That was a good over overview you provided at the beginning of the call with respect to all the action you're taking on regulatory change. I get the impression that these can't simply be defensive actions, or else we would just be looking at a lot of margin pressure. They must be offensive in some nature as well. So maybe you can talk a little bit about that angle and potentially where additional assets would be coming from.

Well, I'll take a shot at that. I think the one, as I said before, we've been out in front of this, and we've been talking about it for quite a long time. As -- three years ago we were talking about regulatory reform, and we tried to become, as I said, thought leaders on this. We've invested significant dollars. We have a professional development team that is doing workshops across the country.

A decade ago, the most important thing about a mutual fund company is that they had good product with good performance. That is really table stakes today. It's all of the other things that we do for our partners. It's our value proposition that we are trying to enhance every day that we come to work.

So, if we make it easier for an advisor to do business with them, if we give them the tools and resources to do a better job for their client, it will translate into, and it is translating into additional business. And I think not every fund company has the tools or resources. At CAD100 billion, we do have scale and we do have the resources to invest back into the business.

And that's something that Steve's been very good at doing is investing into the business and giving us the tools that we need to help advisors.

Did you have anything you wanted to add, Steve?

Well I think, Paul, from a distribution perspective, certainly these changes, not only on the regulatory side but also the legislative side -- if you think about the investment that's required in technology to deal with the client relationship model with point of sale distribution, and what will likely become presale distribution of the Fund Facts document with requirements around anti-spam infrastructure, to ensure that you've accumulated permission, this requires a significant investment.

And we see that this will exacerbate the continuing consolidation on the distribution side. But having said that, I think that we are well-positioned to provide a platform for strong professional advisors. And we will, I think we'll benefit out of a certain level of consolidation.

And Steve, can you just remind me on your end there how you can capitalize on that consolidation? Is that primarily going to be through hiring an IA or two at a time? Or are there opportunities, say for, to bring over entire firms? Like if there's small firms out there that maybe have 20 or 30 IAs, you buy them all in one shot.

Yes, I think that it's a multi-faceted approach. Steve mentioned that we have fairly aggressive growth targets. Certainly where we are spending most of our time and effort is helping our existing advisors grow their practices. And I mentioned the demand that's coming from demographic shifts. We are seeing higher and higher inflows.

But certainly, we are looking at recruiting opportunities; bringing in like-minded professional advisors, and acquisition opportunities. Particularly amongst the smaller firms where the capital investment is going to be substantial, we can be a platform for professional advisors to continue to provide advice to their clients. So, multi-faceted -- organic growth, recruiting, and acquisition where we see opportunity.

Okay. As we think about all these changes taking place, are there any kind of thoughts on new product innovation and/or additions that you can make to capitalize on regulatory change?

I can't think of anything too specific right now. I think we're going to continue to see demand for income products. As Canadians get older, they're looking for secure sources of income. We came out with our G520 product a couple years ago. But when you have five and a half year of bull markets, last year with returns being in the 20% to 25%, people generally don't -- aren't looking for insurance on their investments.

So, we'll continue to look at products selectively, but I think you'll continue to see income, diversified income products, multi-asset class income products. We have a huge commitment to managed solutions. It's just a better, more efficient way for advisors to run their practices.

We can help them a tremendous amount with the heavy lifting in terms of the asset allocation decisions, the investment decisions, the rebalancing. And leave them more time to actually do what they get paid for, which is to meet with their clients, to meet with centers of influence, and really to grow -- be more professional.

And I would add to that, Paul, I think CI has a tremendous lead right now in terms of developing managed solutions where there is already a direct negotiation of fees between an advisor and their client. So those fees are disclosed.

It positions the advisors that use CI solutions well for the pending regulatory change. So, I would imagine continued focus on developing and enhancing those managed solutions will continue to differentiate CI in marketplace.

Okay. So my interpretation is you think the -- your position is the value proposition of the products and services you're providing are enough to stave off the competitive threat of lower-cost options in the new regulatory world. Is that fair? Do you spend a lot of time thinking about sort of the lower-cost alternatives such as ETFs?

Every day. Every day.

Yes, and I would suggest to you, Paul, that that whole discussion applies to both the manufacturing and the distribution parts of our business, to be able to clearly articulate the value proposition that people get for their fees. Whether it be on the manufacturing side of managed solutions, corporate class, automatic rebalancing, or whether it be on the advice side in terms of a focus on wealth management, tax, and estate planning, all of those value elements, rather than simply a discussion of cost. You get what you pay for.

Got it. Okay. Thank you very much for your answers.

(Operator Instructions) Graham Ryding.

Maybe I could keep at the theme of regulatory and just the CRM 2. Is there any concern that as CRM 2 sort of gets brought in over the next couple years, that the potential fallout for some will be, there'll be pushback on clients to advisors on what they're paying for advice. And then in turn, there could be pushback to the manufacturers from the advisors saying, look, we're being pressured on our fees. You've got to take some of the hit here, and we'd like to see you lower your fund fees. Is that a reasonable concern?

Graham, it's Steve Donald. Maybe I'll take it from a distribution perspective. As I said to the last question that Paul had, I think a continuing focus on the value proposition. You can get into this environment of just continuing to cut fees, but I think as an organization, we are absolutely focused on the value that's delivered for those.

So, we're not looking to compete against a low-cost index. There is value added to active portfolio management, to integrated financial advice. And being able to clearly articulate, demonstrate, and document that value will help us I think not only stave off low-priced discount-type competition, but actually attract assets by clearly articulating that value.

Right. I guess what I was going at there is you can certainly control Assante because you can control the advice and the whole integrated approach. But some of the other channels where really, I guess you're more focused on providing the right product for the advisor and educating the whatnot. But the end of the day, you can't necessarily control their whole approach to the advice they're offering.

Right. And in terms of that, we do have -- we are competitive on our mass affluent product. So, when we first came out with our PIM product, it had a million threshold where we sharpened our pencil and reduced our fees. And then it was CAD500,000, and now it's down to CAD250,000, and we're making enhancements to that. But what people get with that is multi-asset class, multi-manager. They can have managed solutions or al a carte funds, and rebalancing tools.

But again, there's going to be ongoing pressure for fees. It's a reality. And we'll remain competitive, and we evaluate that really on a day-to-day-basis. We're not in the passive investment business. We're in the active management business.

That's good color. And then maybe I just could ask, on the targets that you provided, so CAD50 billion at Assante and CAD150 billion at CI. What's the -- is there a timeline behind those targets at all? And do we assume that it's a combination of organic and acquisition to fuel that growth?

Graham, it's Steve MacPhail. I set those targets. And what you basically need is you have to set a target that's way bigger than where you are. Because you have to look at your business and say, what are the gaps in our business to get there?

Where are service gaps, that if we were at CAD150 billion, are we able to accommodate it? Where do we need to enhance money management expertise? So you strip all of it, you come up with a number. It's part of running a company. It's what you do.

I used five years because if I used seven years, someone could say, ah, market just goes up by 7% for seven years, MacPhail, and you hit that target 150, no problem. Well, it's not a no-problem because a lot of our competitors over the last five years have actually shrunk in size, even though we've had a tremendous increase in the market.

So I look at it's a factor of that if we continue to do the things that are necessary to grow our business, then we'll get, continue to get inflows into our business, and we're able to take advantage of markets when they rise. And that's how you get to CAD150 billion.

And the same theory goes at Assante. How do they go from 32 to 50? And they get to that number by saying, what are all the things that they want to do? Whether it's dealing with regulatory changes, fee changes, et cetera, what is it we can do to drive the business to that level? So, it's kind of a guide over five years, how we think we can get there.

I can't control the markets. So if the markets were flat for five years, it'd be a little bit more difficult, obviously. But otherwise, that we think -- we certainly believe that over time, markets go up. It's our business that we can get to that number.

Great, thanks. And then just a quick question. On one of the slides you talked about the areas of your business where you're gaining share and where you're losing share. Are you referring to the market there, or are you referring to your asset (inaudible)?

We were referring just to within our assets. What we're trying to do is give color when people always ask the question, what's selling, what's not selling at CI? And so, instead of waiting for the question, we just said here's the areas where people at CI are increasing their exposures, and here's where they're decreasing their exposures in our asset mix. So, we just look at year to date and see what's been increasing importance and what's not.

So, I think most people recognize that global, international, areas like that have been increasing in performance, or in importance in people's portfolios. And they've diversified away from as much kind of Canadian balanced funds. So, we were just trying to summarize that for you.

Appreciate it. Thank you.

(Operator Instruction) Scott Chan.

Thanks a lot. Hey, Steve, just on the targets on the AUM side, kind of just kind of backing the CAD150 billion, does that limit large acquisitions for you guys, or is this just a kind of a five-year target?

Scott, that'd be kind of cheating if we just went out and bought a CAD50 billion company and called it a day.

Right.

So, no, the 150 is with what we have, what we're doing in Canada the way we're doing it. How do we -- what we want to do is grow our business from 100 to 150. That's what we believe we can do, even with all the regulatory changes going on, because the position we believe we're in. And as our industry on the non-bank side continues to consolidate -- by the numbers anyway, if not by companies -- that is where we think we will get there.

It doesn't prohibit us from doing an acquisition, but an acquisition would just be an add-on to that if we were to do something in Canada.

Okay. Okay, thanks a lot.

Thank you. There are no further question registered at this time. I would now like to turn the meeting over to Mr. Steven MacPhail.

I just say thank you very much for joining our call, and appreciate all the questions you have. If there's anything you haven't asked us, you know how to get a hold of us and ask us there.

So thank you very much, and I look forward to reporting to you next with our year-end results in February. Bye now.

Thank you. The conference has now ended. Please disconnect your line at this time. And we thank you for your participation.