CI Financial Corp (CIXX) 2015 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen. At this time I would like to welcome everyone to the CI Financial 2015 fourth quarter results webcast.

All lines are in a listen-only mode. After the speaker's remarks there will be a question-and-answer. (Operator Instructions). Please take note of the cautionary language regarding forward-looking statements and non-IFRS measures 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, please go ahead.

Thank you very much, and welcome to CI's earning call for the year ended December 31, 2015.

I'm going to start by a bit of a reflection on what was accomplished during the year and then my colleagues, Derek, Steve Donald, and Neal Kerr and Doug Jamieson will take you through some of the other elements of the business, giving you a bit of a go forward look.

Just looking back at the year, we finished December 31, 2015, with CAD145.7 billion of fee earning assets, representing an all new record high for CI up from CAD134.8 billion the year before. Equally important is, at the end of the year, we've now finished 21 years where we've had positive net sales in 89% of all quarters, a terrific accomplishment for any company.

Looking specifically at 2015, we reported earnings per share of CAD1.99, up 8% from CAD1.85 in 2014. Adjusting for fund remediation, our earnings per share for 2015 was CAD0.03 higher at CAD2.02, up 10% from CAD1.83 in 2014 on an adjusted basis.

Our AUM, as I mentioned, was CAD111.1 billion, up 8% from 2014. Assante Wealth Management and Stonegate Private Client assets were CAD34.6 billion, up 8% from 2014. CI recorded net sales of CAD3.43 billion in 2015 representing our third consecutive year of net sales well in excess of the CAD3 billion mark.

We also increased the dividend by 5% in 2015, and it's now CAD1.32 per annum and Doug will take later about how long we've been increasing the dividend. But a lot of other great things happened in 2015.

We acquired the First Asset ETF business under CEO Barry Gordon. This is a premiere business in the ETF space that we are very fortunate to be able to acquire and it accomplished 60% growth in 2015, and we have a great outlook for that business over the next five years.

Equally important at Stonegate and Assante, the growth in high net worth was the fastest growing part of their business, and Steve Donald will address that in a minute. We also saw increased institutional business under a number of mandates and Neal Kerr will talk about that, when he talks about it but it was a very positive year in our institutional side.

Our core retail distribution remains exceptionally strong. And our key channels of Assante, where we now have 60% penetration rate, Sun Credit Union and others, and Derek will address that in his talk. I think it was very important to point out that our managed solutions now account for over one-third of all retail assets under management at CI, so that's well in excess of CAD30 billion of important sticky assets and our whole strategy with respect to affluent and high net worth clients, again, will be discussed between Steve Donald and Derek Green.

What I'm particularly proud of is that we created positive results for our clients in 2015 versus an 8.3% total return decline for the TSX and that's very important given the market turmoil we've had of late to have positive experiences for your clients going 2016. And I want to turn to what's been in the news the last day and, unfortunately, what the media has completely mischaracterized and misconstrued, and this is this Forward Fund issue you've heard about.

First of all, I don't know where people came up with this CAD156 million number that CI was paying out, but our one time cost is CAD9.8 million after tax in this issue, and that covers all our net costs. To be frank, it's insignificant. That's about CAD0.03 a share to CI at the end of the day on a one-time basis.

The second thing I want to point out is that this was an isolated incident due to the unique characteristics of the forward agreements and they were only used in seven of the hundreds of CI funds that we have. Thirdly, the CAD156 million of interest accrued in the bank accounts of the funds, it's always been in the accounts of the funds, this has never been in the accounts of CI, and to characterize it as CI as having to repatriate the money to the unit holders is completely wrong. It's always been the unit holders money, and not CI, and that's very important to know.

Thirdly, this was merely an accounting and administrative error. It is not a compliance error. It built up over time on a wide variety or a wide base of funds. The minute we found it, we corrected it. It was reported and escalated to Senior Management. We put in place a plan to get the monies allocated correctly to the funds as soon as we could, and reported it to the OSC.

And just to finish off, to let you know, CI actually has an exceptional record of NAV accuracy and for years and years and years, there have never been NAV errors on our accounts through our hundreds of millions of dollars, hundreds, to say, and billions of dollars of NAV calculations that go on. This was a very isolated incident, and does not reflect, in any way, on the fact that CI has any issues with its policies and procedures.

With that out of you the way, I would hope that this puts this issue to bed, as it's not consequential to CI, our unit holders will be getting repatriated with the funds ASAP, that should start, we've community that, within a month, and I'm very happy too. CI has dealt with it the way CI has always dealt with its unit holders, fairly, quickly and efficiently.

And with that behind us, I'd like to turn it over to Derek Green to talk about more positive things.

Thanks, Steve.

I'll now touch on our sales for 2015. 2015 gross sales were CAD15.4 billion, a new record, up 7% from 2014. Net sales were down from 2014, but still strong at CAD3.43 billion, and well diversified by channel. Q4 net sales were almost CAD300 million at CAD299 million, and we continue to see a transition of our business, managed solutions and PIM, our mass affluent product, account for the majority of our net sales. We continue to focus on mass affluent and high net worth in 2015 and we've made a significant investment in service and our value-added support to advisors.

We also continue to invest in our brand awareness. We continue through advertising on TV during golf and curling events and on news radio. I'll now touch on our performance. We continue to see strong performance, 73% of CI's long-term AUM is first or second quartile over ten years, 90% of CI's Managed Solutions, AUM, is first or second quartile over ten years, 100% of Black Creek AUM is first or second quartile over ten years. 87% of Signature's AUM is first or second quartile over ten years. And 77% of Cambridge AUM is first or second quartile after five years.

So with that, I'd like to now pass the presentation over to Neal Kerr. Neal?

Thank you, Derek.

Turning to our institutional business, it was a strong year for CI Institutional, in terms of new clients. We are benefiting from offering a more diversified institutional product line-up from multiple CI investment teams, and, importantly, we have a sufficiently tenured and a dedicated Canadian equity institutional product in our line-up now, for the first time, managed by our Cambridge Global Asset Management team.

And that Cambridge product complements our other institutional mandates, and Cambridge joins the manager line-up in this business unit along with Signature, Global Asset Management, and also along with our multi-asset class Solutions Group who run our asset allocation and target date institutional products.

With respect to First Asset, a reminder we closed the acquisition at the end of November so still very early days for CI, with the ETF business and our First Asset partners. We are working to realize synergies in area such as IT, legal, operations, and finance while maintaining separate business management team and separate sales and marketing teams.

As Steve mentioned, 2015 was a strong year for First Asset, with ETF assets up 60% for the year, you know, this growth is coming off a smaller starting base than CI's Investment Fund business but it certainly highlights the growth opportunity for ETS in the Canadian marketplace.

In terms of 2016 plans, we are working together to enhance existing First Asset products as well as existing CI products. We expect to launch new products in the actively managed ETF space throughout 2016, and, you know, for instance, First Asset is planning to introduce a corporate class ETF structure later this month, which is an interesting innovation in the space that very few other ETF providers offer today.

Turning to the Investment Management part of our business, obviously 2015 was a tougher year for returns, really, the toughest since 2011. On average, however, CI's clients made positive returns last year. Again, different absolute numbers than the previous three years, but we are continuing to benefit from our multi-asset, multi-manager strategy here at CI and funds with global or non-Canadian mandates and funds with foreign currency outperformed Canadian mandates and Canadian currency.

Also investment teams, with more of a growth style to their investment approach, generally had better relative years than our more value style teams, as equity returns, in many markets, were quite narrowly concentrated in terms of contributing stocks, and our more growth oriented and momentum oriented strategies benefited while value sensitive strategies don't typically own any or as much of these types of stocks.

So overall we're pleased with the results of our investment funds, and our investment teams that have been our focus for the past several years, I'm thinking of our Signature team, our Cambridge team, Black Creek, as well as our asset allocation portfolio managed solutions. All of these have seen strong investment results and also strong investor demand.

Over the past several years, CI has reinvested significantly in Investment Management analysts, portfolio management personnel, have increased materially across all our internal portfolio management teams. In addition, we've been investing in various forms of technology for asset management, a portfolio management systems, asset allocation and fixed income tools, as well as attribution and reporting tools. These investments have largely been made and going forward, we expect to see the benefits and our anticipated rate of reinvestment in this area will slow.

With that, I'd like to pass things to Steve Donald.

Thanks, Neal.

Touching on our advisor businesses, as Steve mentioned, our assets across Assante Wealth Management and Stonegate Private Counsel have reached CAD34.6 billion at the end of the year, which is up 8% on a year-over-year basis. Across the platforms we've also had strong in-flows, up 8% on a year-over-year basis compared to 2014.

When we look at data from investor economics, we see that the industry overall has seen net sales contract, in fact, by a rate of about 4.3%, so we're very pleased with that year-over-year growth in in-flows across Assante and Stonegate. As you've heard, across our entire organization, that success has allowed us to have continuing investment back into the business to promote continued growth.

Firstly, touching on technology, we've made some significant investments, primarily focused on security initiatives and efficiencies of the platform so that we can wrench those going forward. Secondly, advisor recruiting, activity in this area at Assante has been almost 2.5 times the activity of 2014, and I think that clearly reflects the trend that we've been talking about for some time now, toward consolidation in the industry.

At Assante and Stonegate, we've continued our branding efforts. At Assante the complete campaign being leveraged into regions, creating awareness of who we are, what we stand for, and really supporting those recruiting and sales growth initiatives that we've talked about.

Related to sales growth, certainly that's also supported by our staff and their expertise, and we've invested in increasing our wealth planning team by 25% in the past year, to support our advisors in dealing with our continuing focus on mass affluent and high network investors. As we look at assets across Assante and Stonegate, 62% of our assets or CAD21.3 billion is in this space of affluent and high net worth families.

For high net worth families, those families with more than CAD1 million invested with us, we stand at almost CAD14 billion or 40% of our assets, and that certainly represents the fastest growing component of our asset base.

So with that brief touch on our advisor businesses, I'll turn the call over to Doug Jamieson.

Thank you, Steve.

On slide ten we have the full year highlights for 2014 and 2015. And as largely pointed out by Steve, average assets were up 10% to CAD108.4 billion, and this average includes one month of First Asset's AUM that was acquired on November 30.

Reported net income was CAD553.5 million up 5% from last year's CAD525 million. On a per share basis was up 8% to CAD1.99, and the higher rate of increase from 5% to 8% is reflecting accretion from share buybacks. Adjusting for the various provisions detailed at the bottom of the slide, net income was up 8%, to CAD563.7 million or CAD2.02 per share.

EBITDA was up 7% to CAD3.37 per share and dividends paid totaled CAD1.295 per share, up from CAD1.18 per share last year. Net debt end of the year, at CAD433.1 million. Up from CAD185.2 million last year, but CAD172 million of this increase was due to the funds put on deposit with CRA during the year. CI's net debt to EBITDA ratio sits at just under 0.5 to one, as reported, but net of the deposit at CRA, the ratio is closer to 0.3 to 1.

And here we compare the fourth quarter of this year with the fourth quarter of last year. Average assets under management were up 7% from CAD101.1 billion a year ago to CAD108.7 billion. Net income was CAD127.2 million, down from CAD140.4 last year, and on a per share basis, CAD0.46, down from CAD0.50 last year. Adjusted for the provisions mentioned at the bottom of the slide, earnings were up 1% to CAD137 million. And up 4% on a per share basis to CAD0.50.

EBITDA per share up CAD0.01 to CAD0.83, and dividends paid were up 8%, as CI paid out CAD0.305 cents per share in the fourth quarter last year and CAD0.33 in the fourth quarter this year. CI's EBITDA margin has declined slightly from 47.9% a year ago to 46.3% in the most recent quarter. And this is primarily attributable to increased spend on SG&A relative to the growth in revenue.

This next slide provides a little more Insight into our management fees, the changing mix of product from class A into class F and high net worth, as well as the inclusion of First Asset for one month of the fourth quarter, has pushed our gross management fee line down from 184 basis points in 2009 to 162 basis points in the most recent quarter.

Over a full quarter the impact of First Asset would be approximately two basis points. For the net fee, we take the trailer fees paid and the amortization of DSC from gross fees, in order to standardize our management fees to look as if all business was in fee based or institutional accounts. So we're left with the net management fee that you see here, and that has held much more stable over the years, and here the impact of First Asset over a full quarter would be about a half a basis point.

The asset management margin measures how much we retain out of management fees after paying trailers, SG&A, and DSC. And we calculate it on a trailing 12-month basis within the asset management segment. We see we're left with CAD42.50 out of every CAD100.00 in management fees earned, up from about CAD42.00 a year ago.

This measure eliminates the financing impact of front end versus back end funds, since we have 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's measured as a percentage of management fees and not AUM.

CI's SG&A calculated as a percentage of average assets under management, and we're showing it here in annualized basis points, was 35.4 basis points. We saw on the highlights slide that CI's average AUM grew by 7% from last year and at the same time SG&A spend grew by 11%. We expect that our investments and our portfolio management teams and technology over the past several quarters is largely complete and we're going to look for ways to leverage efficiencies across the organization, given the current trend in AUM levels.

For the SG&A efficiency margin, also measured on a trailing 12-month basis within the asset management segment, we look at the available pool of management fees, less trailer fees and DSC and how much of that pool remains after deducting SG&A spend. In the past 12 months, CI has retained 71.3% of that available pool.

Looking at our uses of free cash flow over the past few years, the darkest bar, representing dividends paid, is growing in line with free cash flow and we see that a large component of free cash was used to reduce net debt over the past few years. Our plan for 2015 was to stop paying down net debt and increase the level of buybacks so that, at a minimum, all free cash is returned to shareholders.

And here are the details on that plan, in 2015 CI reported operating cash flow of CAD688 million and paid out sales commissions of CAD91 million for free cash of CAD597 million. We repurchased CAD244 million in stock and paid out CAD362 million in dividends for a total return to shareholders of CAD606 million. So we executed our plan quite well in returning free cash to shareholders.

And as we look at the fourth quarter cash flow, the reported CAD158 million is impacted by the CAD10 million provision for fund remediation and so otherwise would have been CAD10 million higher for both the quarter and the year. Sales commissions paid were CAD16 million, giving CAD142 million in free cash flow. We repurchased CAD56 million in stock in the fourth quarter and paid dividends of CAD91 million for a total return of free cash flow of CAD147 million.

We are very comfortable with this level of dividend payout that has averaged 60% of free cash flow and as we move into the next slide, CI remains below its target leverage, in particular, when considering the CAD172 million on deposit with CRA. But given the uncertainty as to the timing of getting those funds back, we are not adjusting for it when calculating our net debt. The shaded area highlights our target leverage ratio of 50% to 75% of EBITDA, to be achieved over time with increased buybacks and, particularly now, in light of declining valuations.

I'll now turn it back to Steve.

Thank you, Doug.

On our next chart we plot the last 12 months of our assets under management versus the TSX total return. I think what's important to see at this point in time, that just in 12 months the incredible gap between what's happened at CI, the growth at CI, versus decline in the TSX. And why that's important is because you have to recognize that the mood of the market is set by the TSX even though CI has significantly outperformed it.

The other point I'd like to make is that though, certainly, in the last month we've felt a downturn in the market, this is not the first time this has ever occurred, and if you look at the history of CI, certainly over the last 22 years that I've been here, that CI shines best when times are a little tougher like they are right now. And I am 100% confident that this will actually create opportunities for us because, A, our clients had a good experience last year, we have a lot of stability in our products, and, as a company, we're able to react to market changes, I think, better than any of our competitors.

So turning to summarizing the outlook, as you heard, I believe we're very well positioned today in our key distribution channels. We've invested a lot in service and support for these areas, whether it be in the CMI Investment side or the Assante/Stonegate side. And these are critical investments that we made last year and the year before in order to drive the growth in 2016 and beyond.

Notwithstanding, the executive team, we've gotten together and met a number of times, and our focus in 2016, not only will be on growing the business but on efficiency measures across the company. And we're looking at every way to deliver our services in a more efficient manner than we can, and there's been a lot of good ideas that have come forth and I think over the course of the year you'll see them come to fruition.

In addition to the work that's been done on the portfolio management groups in the last year to, again, position us for future growth, I foresee that we'll be having further advancements to our portfolio management throughout 2016 as Neal Kerr remains focused on ensuring that CI really has world-class money management in many areas for us.

I can't understate how much our emphasis on the high net worth and mass affluent market will continue and there's a tremendous number of projects underway on both the technology, training and service side and product side that we believe will lead to continued growth in that area and when you look at the success that we've talked about in our managed solutions, which are really an affluent and high net worth product, to being one-third of our retail assets now, I think that confirms what we've done.

Assante and Stonegate have become very attractive to new advisors. In 2015 we had, certainly one of our best years ever of, advisors wanting to join the business. I believe 2016 will be as good, if not better, for that business.

And lastly, from a capital allocation perspective, we'll continue to focus on share repurchases and dividend growth as priorities for the business itself.

And with that, I'd like to open it up to any questions you might have for myself or my colleagues.

Thank you. (Operator Instructions). The first question is from Gary Ho from Desjardins Capital. Please go ahead.

Good afternoon. Maybe a bigger Question one for Steve or Derek. Just wondering if you can share with us your outlook over the next 12 to 18 months, just given the market volatility to start the year, how are advisors or clients are positioning themselves, thinking they're a little bit more cautious, just curious what you're seeing out there and any comments on the outlook for the RSB season, that would be helpful.

Well, thanks for the question, Gary. It's Derek Green. Historically when we've seen a softer start to the year, you know, the sales aren't as good. You know, if I were to have told you a year ago that government of Canada ten year bonds were below 100 basis points and the ten year in the States were 155 and rates were negative in many other parts of the world, I'm not sure, you know, what your thoughts on what was going on with global economies, but I think there's a lot of nervous people.

Now, in saying that, you know, we have some excellent solutions in, from an income perspective, from a diversified income perspective, but, you know, the one thing that I'll say is, volatility, historically, has not been good for sales. So the longer and more volatile it is, the softer the sales will be, but in saying that, we do have good solutions for our clients in income and diversified income, and I just think people will sit on their hands with regard to equities. But in our managed solutions will also (inaudible).

And Gary, Steve Donald, I think I can add a little bit further color from a distribution perspective. We've seen through the start of this year our net in-flows are actually fairly consistent with last year but we are seeing a significant element of those in-flows being put into cash for the short-term.

The investments that are being made are being made to the managed solutions, trying to deal with some of the volatility by asset class, but I think if you think about the fact that investors are still putting money into the market with their advisors, that amount sitting in cash bodes well for a longer term investment back into the markets.

That's great. And if I can dig a little bit further, just wondering if you're seeing a lot of, maybe, some weakness in Alberta given what's going on there, some of the feedback from advisors there would be helpful.

If you look at, you know, across we look at Western Canada, we look at Ontario and then Quebec and Atlantic, Western Canada on a relative basis, overall, had a pretty good year. Clearly the closer you get to Calgary, the tougher things are. So it's certainly softer than it was in 2014, but certainly not apocalyptic or anything.

Okay. Great. And then the second question, perhaps for Doug, when I look at the SG&A expenses, picked up a little bit in Q4 and you mentioned there's some rationalization, but I'm assuming that's not a good run rate to use for 2016 and if markets continue to be weak, what could management do to adjust the expense base and how quickly could you act on that?I know historically you've been pretty good at expense management. Or maybe asked another way, how much of your, kind of, SG&A expenses are fixed versus variable?

Well, first, on the Q4 numbers, there is an element of First Asset in that, we had one month of SG&A there. As Neal pointed out, we are looking for ways to achieve synergies by integrating back office functions and we expect to see that over 2016. I would say, you know, we kind of view our SG&A as half fixed, half variable and we're certainly able to act during that market downturns to make necessary cuts.

Our first priority is to look for ways to just be more efficient. That's our plan, as Steve said, for 2016, to look for those efficiencies, and hold the line on SG&A.

And how quickly can you guys act on that, on the variable part?

On some things, very quickly.

Okay. All right. That's it for me. Thank you.

Thank you. The next question is from Paul Holden from CIBC. Please go ahead.

Hi thank you. Good afternoon. So, Steve, you made some comments about the media reports and maybe some other reports related to the OSC no contest settlement and I get how that might be somewhat disruptive for you but maybe more importantly, sort of the way the advisors perceive this, I'm wondering if you could provide some commentary on what you're doing to go out to the advisor community in terms of communications with them over this issue.

Sure, Paul. It's Steve. And I'm just going to start and then turn it over to Derek because he's been doing a lot of work on the communications side. Listen, we're not happy that it happened. CI takes huge pride in the accuracy of our business.

We're actually, you know, known to process very accurately and good, and, you know, I think that's holding us in good stead on this, on it and we're just trying to make sure that what we communicate with the advisors is the correct story on this. And I think the most important thing that, you know, Derek will talk about is CI has always done what's right for investors.

There are always going to be small errors made in this business, it's not unique to CI. The question is, you know, how do you react to it when you do it and we always do what's right and I think the press has kind of characterized this like the OSC is kind of taking claim, oh, yes we came in, we found this money for the investors. That couldn't be further from the truth.

We already had a plan in place, it was just proceeding, you know, they just came in after, kind of, the fact. But with that, I really would like to turn this over to Derek because I think, what results he's seen so far are pretty amazing.

Thanks, Steve. Hi, Paul. So we've had a communication plan that's been a work in progress really for the last two weeks. We had calls with our wholesalers Monday after, you know, the news broke on Friday, and then we, after the hearing yesterday, we sent out 15,000 e-mails to advisors.

We sent out 5,000 letters to advisors today. And we will contact 9,000 advisors by phone over the next ten business days. So from this morning till when we came in the room now, we've contacted 1200 advisors with CAD18 billion in retail assets. In real time, and this is a plug for the Salesforce, I guess, and, no, I don't own the stock, 97% of our clients had no issues, 5% of them had small concerns.

So we continue, this is a huge undertaking, and we take it, as Steve said, we take it incredibly serious. It may be a big to-do, but to date it hasn't been a big issue. There just doesn't seem to be that many concerns.

And the one common theme that we are getting from advisors, and it is consistent across all channels, the line is, we appreciate you getting out in front of this, keeping us informed, and calling to summarize, you know, what we've seen in the press or at least correct what was, you know, which was actually incorrect, it was picked up incorrectly by some of the people in the press.

Okay. Good. And then a question related to CRM2, given the way the markets are heading right now, there's a very good chance that when clients get their first CRM2 related statement, they see negative one year returns. So that will have challenges of its own, I guess, for the industry and just wondering generally how, at CI and generally, you feel about that and then particularly maybe Steve Donald can talk with the Assante perspective on that as well.

Well, we've known each other for a while, I'm surprised you're throwing in the towel on the year already. We're only five weeks into the year. If you remember, 2012 started out, you know, as a pretty tough year, and then it turned out pretty well. But you and Steve and I have had long conversations about CRM2.

My concern has always been, after, you know, tremendous bull markets, that, you know, the year before people see, you know, their first statement after CRM2 is fully implemented, you know, that the market could be a bear market and then it would be harder to explain to clients. You know, hope is a terrible strategy but, you know, we still have ten and a half months for, you know, the markets to, you know, firm up into positive returns.

We continue to see more and more of our clients transition their business into either a fee disclosed or a transparent model, to the point where either managed solutions or high net worth solution, you know, are effectively 100% of our sales now. So the more of our business we can get into hat format, the more comfortable I am with our business and investors seeing their returns. Steve?

Yes, and I think, just from an Assante or from a Stonegate perspective, I think if the markets continue to misbehave and that performance is reflected, given the fact that, through our channels, we've been having these discussions, as Derek has said, and repositioning that the relationship with clients, I think we'll be well positioned for this and there might actually be an opportunity within Assante and Stonegate where our competitors haven't positioned their clients for disclosure over both cost and performance, so, you know, while I hope that this is going to look more like 2012 than otherwise, as Derek has often said, hope is not a terribly good strategy, but I think we're well positioned to deal with any fallout that may occur.

Okay. Good to hear. And then final question, as we're talking about the institutional business opportunities there, both of those realized in 2015 and those potentially in the future, like what kind of institutional business are we talking about? Is this pension fund type business or is this subadvisory business? Maybe you can just clarify in terms of the type of clients we're talking about.

Sure, Paul. It's Neal here. We are talking about both. You know, to this point, two-thirds or approximately two-thirds of our business is subadvisory, and approximately one-third is in pension, foundation, and endowment business. So we're in both lines.

Our history in subadvisory goes back, you know, 15 years or so. Our history in more traditional institutional goes back now about five or six years, so it's newer for us. But we have product for both of those, you know, broad channels inside the business unit and we have, you know, business development resources focused on both lines inside that institutional business.

And then just to follow onto that answer, follow-on question, would you expect that proportionate change then over the next three or five years to reflect more of the true institutional business?

Great question. It's hard to forecast future business, in my experience, since the accounts are, you know, they can be lumpy coming in or lumpy going out when that happens. So I'm really never, you know, 100%t certain about, you know, where the new client mandates or the sales that correspond to those, you know, are going to come, and, you know, actually until we see the money hit our system, I really don't feel it's prudent, sort of, to forecast.

What I can tell you from a forecast perspective is that we've got, you know, a robust business plan focused on both lines, and, you know, like in years past, we will do over a thousand business developments and service meetings in the institutional market this year, and, you know, from these meetings, we always have an interesting pipeline of opportunities. Whether these opportunities come to fruition or not, is never certain.

Okay. Great. That's all the questions I had. Thank you.

So, Paul, it's Derek, just an update on that question you asked me earlier about the advisors. So we've now contacted 20% of effected advisors today by phone. Over CAD30 billion in retail assets that they hold with CI, 97% of them say, it's not a big concern. So those are real time numbers as of, you know, 12 minutes ago. So that's pretty definitive data.

Okay. I appreciate that. Thank you.

Thank you. The next question is from Tom MacKinnon from BMO Capital. Please go ahead.

Yes, thank you very much. Good afternoon. A question maybe Derek or Steve can take. I was just wondering, with respect to the NAV error that you settled here, and the fact that it seems to have stemmed from your outsourced service provider and, I would assume, just some of the controls you had over that, how are you tightening up the controls here and is there any change in your outsource service provider as a result of this? Just wondering kind of what actions you're taking at that end.

Yes, sure, Tom, it's Steve MacPhail. I would start out by saying that our controls with our outsourced service provider, does all the custodian, work, they're excellent. This is a very isolated situation that started out very tiny and built it up over a number of years.

Our outsource producer calculates thousands and thousands of NAVs every day and has never made an error. We've had a relationship with them for, I don't know, 14, 15 years. And they've done a fabulous job for us the whole time.

Notwithstanding, we have made a few changes. But these changes took, you know, 20 minutes worth of work, let's just be clear here, that we had a process in place and it wasn't followed precisely right and it was kind of a perfect storm situation that led to this administrative error. All it was an administrative error. And it built up over time.

So really, to answer your question, the change was made right away. We changed the program. The rest of our business works well. That's why there are no errors in and our work is highly accurate, and third, our outsource service provider wouldn't have liked this to happen, either. They're not happy with the situation.

And, you know, they've worked with us closely to ensure, when we have unique situations like this, this can never happen again, either. So I think, you know, we've got a good outcome on this situation, but no one's losing sleep thinking this is going to happen again.

Sounds like you just flipped a switch and you fixed it, but you should have been monitoring that a little bit beforehand. Is that, and it doesn't look like you have to delve into something in order to fix it.

It's not a simple as this. The money was always in the funds. At the end of the day, if, you know, we have billion dollars, a hundred billion dollars worth of many funds and at the end of the day, you have this understanding that this tiny amount is going, remember, this is a fraction of a basis point each day, a fraction of a basis point and it just builds up over time. That if your understanding is that it's being properly allocated to the NAV of the fund, then things would just progress and it was just discovered that it wasn't, and we've definitely corrected that and moved on.

Okay. Thanks for that.

This is not a substantial issue. And I'm not trying to downplay it or not take accountability for any of this, to say we don't take it seriously, but, you know, this is really just been blown out of proportion as to what it was. This could have just been as easily caught at some earlier time and you never would have noticed because there are things like this go on all the time, they're just not reported so you don't hear about them. This is being sensationalized unnecessarily.

Okay. Thanks for this.

Thank you. The next question is from Graham Ryding from TD Securities. Please go ahead.

Hi. You talked about having some success recruiting advisors at the Assante/Stonegate platform. Can you maybe give some context around the number of advisors today versus a year ago?

We're running around 750. It's fairly stable. Where we're having a lot of success is, as we see advisor departures, Graham, they tend to be retirements, so to give you context, the average age of the advisors that we brought in over 2015 is 38 years old versus the departing advisors at 62. So we've maintained or slightly increased the total number of advisors but the average age is dropping, which is critical for us as we think about future succession planning arrangements.

Got it. And then you've talked a little bit before about looking at automated advice platform, building that out of Assante. Is there any update there?

We continue to look at how we can develop enhanced capabilities around some of our managed platforms that advisors can use for potentially lower fee services to the bottom end of their book, so in progress is the short answer.

Okay. And then maybe just with the dividend, I was sort of expecting dividend increase this quarter. I'm just wondering, was that maybe related to the combination of, you know, the First Asset acquisition and also, you know, your higher investments towards SG&A, was that maybe a factor in your looking at your dividend payout?

It's Steve MacPhail. I think you've known me long enough, when markets are volatile like this, then you really don't feel like taking an aggressive position on the dividend, and certainly, I mean, our cash flow, everything can support it, the SG&A is, that's a non-factor in the whole thing, or the First Asset.

We just like to see a bit of an idea on market stability and, you know, we collectively agreed that this wasn't a time to increase the dividend. Focus a little bit more on share buybacks. Certainly the market's created an awesome opportunity for us to buy back our shares right now. I can see Doug smiling over there.

But the reality is, we'll review this again in May, but, you know, we've always focused on trying to increase the dividend each year for our shareholders and, you know, we would hope that would come to fruition again this year and we'll look at that again in May.

Perfect. And then just lastly, with the First Asset acquisition, you know, that platform had 60% growth last year. Do you have any targets or what are your expectations for what you think this platform can deliver this year?

Great question. It's Neal here. You know, the platform is, I think, a little more sensitive to market performance than the mutual fund business, so, you know, and it's not something that we've had, you know, CI's had direct experience in. Obviously, if we can see the same type of growth this year, we would be absolutely thrilled. But I don't think we would, you know, we want to manage expectations here. And we're going to be doing some innovative things together.

I think it will somewhat depend on the overall growth of the ETF, you know, market in Canada because really First Asset has been getting, you know, their fair share of market growth, as ETFs are becoming more popular. You know, CI will be bringing some additional resources to the business and so the profile of the First Asset products should be increasing accordingly.

And with some new products that are being introduced, we should have some interesting things there, too. But similar to my comments around the institutional business, we, you know, we're really not providing a specific forecast at this point in time.

Okay. That's fine. How about the, just the percentage of inflows for First Asset that come through brokers versus do-it-yourself investors, do you have a feel for that?

Absolutely. The First Asset business plan, which is very consistent with CI's investment fund business plan, has been to, you know, do business development with advisors and, in this case, almost exclusively, to this point, iROCK Advisors so there'd be very little do-it-yourself today in the First Asset business and, you know, they are really focused on working with advisors and that fits very well into our overall philosophy of an advised client is better off.

Great. Thank you.

Thank you. (Operator Instructions). The next question is from Scott Chan from Canaccord Genuity. Please go ahead.

Good afternoon, guys. I just wanted to go back to the institutional, Neal, and just on the Cambridge side, why the Canadian Equity Mandate, not the US and global or is that something that might be considered in the future?

Thanks for the question. We launched the Canadian Equity Mandate four and a half years ago. It takes at least three to four years to build the track record and get the ratings that we need to win business so it's the most tenured product. We do have international, global, US pools that are, you know, they're already in the water and they are about two and a half years into their life right now with some very nice, initial, preformance results. So we will be introducing those as they mature.

Okay. And, just lastly, Steve, can you remind me who your custodian is?

You know what, I don't think I'm going to talk. It's one of the major custodian's, you dig hard enough but I'm not going to say who the custodian is, but we have a good relationship with them.

Yes. Okay. It's public though so I guess I can work it out.

Listen, Scotty, you can dig that up yourself.

Okay. Pretty busy though but okay.

But we've had a good relationship there a long time.

Okay. Okay. Thanks, guys.

The next question is from Stephen Boland from GMP Securities. Please go ahead.

Evening. Just one question. There was some additional, I guess, responses on the OIC on mutual fund fees, you know, responses to some questions, I guess, that had been sent in. It seemed to be very, more definitive in terms of saying that trailer fees are bad, affiliated dealer flows are bad, value advice is, maybe, it's not really worth what people are paying. Do you have any responses to those, I guess, those questions and, you know, obviously, just an update on the regulatory, your thoughts?

Stephen, it's Steve Donald, really no different position than what we've talked about over the last couple of quarters. I think the Brondesbury Report, in terms of their global review of the market place, is pretty clear. They say that there is some issues that need to be considered but don't really quantify those and I think the report from Dr. Cumming, and I haven't gone in detail through some of the updates to that report, but I think it had some interesting findings where flows to funds, all things being equal flows to funds that pay an above market trailer tend to get greater flows.

So that's something I think that needs to be taken into consideration. But I also think he was very ill infomed when he said that funds that have a trailer, those that have an advisor, have lower pathed performance than other funds. I think that's misguided because that is, in fact, the values of an advisor, you shouldn't chase performance. We've known in this industry, for decades, that chasing performance results in bad returns. So, I think it needs to be looked at very closely.

There hasn't really been a lot of update coming out of the CSA, I would anticipate that over the next quarter we'll start to see their conclusions on some of these reports. But, really, from our perspective no real change in our view right now. Advisors are well, they would have stronger practices if they started to embrace a discussion or disclosed fee arrangements and we, across our entire organization, believe of the value of active management, we believe in the value of active advice.

Okay. Thanks. And, obviously, a press release just came out, so I guess I'm the lucky one who gets to ask, Mr. MacPhail retiring. Steve, can you, obviously, comment on that?

Steve, you know I was, they messed up the timing because I was trying to hold that till you asked all your questions so it wouldn't be a distraction. So, I guess, you'll get my answer now. I'd just say that with the equity markets over the last month, well, especially the last three days, and now you know what I would best describe as a silly, over reaction to our forward fund issue, which I would say no thanks to the OIC on that. I could've had a little bit better timing that today.

But, I just want to announce to you, the analysts, I was hoping that you were going get it first, that on June 30 of this year I'm going to be retiring from CI after, I'll call it, 22 awesome years here. And it's no secret that I, I always told you guys that when we had good succession at CI and when I was going to be closing in on 60 years old that I would pass the baton. Well, mission accomplished on both fronts. We've got great succession at CI and, damn it, I'm closing in on 60.

So I've been working with the Board and with Bill Holland for the last several months and everything's really come together here. As I said, I could've picked a better date to announce it but, notwithstanding, I'm actually really excited about the outcome of my succession. And let us start by saying my friend, former CI Partner and highly respected, Peter Anderson, is going to replace me as CEO this summer.

Just as a reminder, Peter was a skilled operator and a builder of our Company when he was at CI for so many years and I missed him when he went off to do some other things. But I'll say what's great is he's augmented his management skills from here as the current CEO of Aston Hill and with its challenges.

I think, on addition, you have to remind that Peter's going to be supported by a work class management team here at CI and I've spoken at length to all of them. You know, it's funny, I think they're sincere when they say they're going to miss me, I'm taking them at face value, but the reality is everyone's pretty excited that Peter's the guy who's going to continue the great CI story. And his Executive Team will include the four colleagues of mine in this room as well as Sheila Murray, who's exceptional performance has elevated her to the (inaudible) President, CI Financial looking after some of the operational sides of our business and I think that's a fantastic team for Peter.

Just so you know, Peter's going to get his old office back, right beside me. At the end of the month he's going to come in and he and I are going to be working side by side and I'm pretty excited about that.

All of you have known me for many years and watched what we've accomplished at CI. If you recall, way back in time, when I started at CI we had a market cap of CAD125 million and about CAD2.5 billion in assets under management. We've just come off another year of record profits and our business is in great shape. But I won't lie, I will miss CI and all it's great employees.

Now, looking at 2016, like many other years, it's going to have it's challenges, we've talked about those on this call, but you've got to remember CI's always shone best when things were tougher and I have many months to work with Peter and the Executive Team to advance CI forward, so I'm just not throwing him in the deep end and saying that a boy, to get them.

We're going to work very closely to make sure this works perfectly. I know you have lots of questions over the next few months but I want to take this opportunity to say I've worked with so many of you analysts, I mean, I can think of all your names here, Jeff, Paul, Scotty, Steveie, Phil, John, Gary, Tom, Graham, Suzanne, you all know who you are, we've had a lot of time together. So I just want to say thank you for all you work at CI, I've seen so many of you evolve in this business and that Peter will be working with a great group.

So, I guess, that's kind of it for what I have to say. It's back to work time for us unless you have any other questions here.

No, just, and I'm not speaking for everyone, Steve, but thanks very much and, obviously, you guys are very open with that information so I appreciate getting more information on the transition over the next several months.

Thanks, Steve.

Thank you. The next question is from Graham Ryding from TD Securities. Please go ahead.

Well, Stephen Boland beat me to it but, Stephen, do you have any plans to remain on the Board or will that be it with your direct involvement?

No, that will be with my direct involvement, I mean, that's pretty standard issue, that Peter Anderson will take my place on the Board and I'll move off onto other things. But, you know, I'm a good sized shareholder of CI so I'll be keeping a close watch on things so I don't need on the Board to do that.

All right. Well, congratulations on a great job and all the best.

Thank you.

Thank you. There are no further questions at this time. I would like to turn the meeting back over to Mr. MacPhail.

Great. Thank you for tuning into our conference call, we really appreciate it, and we look forward to talking to you over the next few months and also at the next earnings call, which is slated for early May, and I believe Peter Anderson will join us on that call for his inaugural CI call with us. Thank you very much.

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