Standing by. This is the conference operator. Welcome to the IGM Financial Third Quarter 2021 earnings results call. As a reminder, all participants are in listen only mode, and the conference is being recorded. After the presentation, there'll be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Keith Potter, Senior Vice President, Finance. Please go ahead.
Thank you very much, and good morning, everyone, and welcome to IGM Financial's 2021 third quarter earnings call. Joining me on the call today are James O'Sullivan, President and CEO of IGM Financial, Damon Murchison, President and CEO of IG Wealth Management, Barry McInerney, President and CEO of Mackenzie Investments, and Luke Gould, Executive Vice President and CFO of IGM Financial. Before we get started, I'd like to draw your attention to our cautions concerning forward-looking statements on slide three. Slide four summarizes non-IFRS financial measures. On slide five, we provide a list of documents that are available to the public on our website related to third quarter results for IGM Financial. With that, I'll turn it over to James.
Good morning, everyone. We'll start on slide 7, highlights for Q3. I would start by saying that strong operating momentum is translating into strong earnings growth with contributions from all business segments. We achieved record high AUM&A of CAD 265.2 billion in the quarter, driven by strong net flows and more modest client investment returns this quarter. We also experienced record high investment fund net flows of CAD 1.7 billion and total net flows of CAD 1.9 billion, which include record highs for both IG Wealth and Mackenzie. Following the second quarter's record high EPS, I'm pleased to report a new record high in the company's history of CAD 1.13 for this quarter, up 26% from adjusted EPS of CAD 0.90 last year.
Finally, the IGM board declared a common share dividend of CAD 0.5625 per share, which provides an attractive dividend yield of 4.5%. Luke will address our thinking around future dividend increases in more detail in his remarks. Overall, I am focused on ensuring IGM has an appropriate level of capital allocation flexibility and a clear path to sustained dividend increases as our earnings continue to grow. Turning to slide 8 on investment returns, markets were a bit mixed in Q3, where we saw most equity markets decline slightly during the month of September. Overall, IGM average client investment returns were positive 0.5% in the third quarter and 7.8% year to date September 30, 2021.
We have since seen markets and average client investment returns rise in October, up 2% in the month, which is a good start for the fourth quarter. Turning to slide nine, third quarter long-term mutual fund net sales were CAD 24.5 billion for the total industry and CAD 9.9 billion for industry asset management peers. Following a record Q1 and Q2, full year 2021 is shaping up to be the best fund industry net sales in Canadian history. Turning to slide ten on IGM's results for the third quarter. Average AUM&A of CAD 267.4 billion increased CAD 72.5 billion or 37% year-over-year, including approximately CAD 30 billion related to the acquisition of GLC and Greenchip, which closed in December of last year.
As I mentioned, Q3 2021 EPS of CAD 1.13 is an all-time record high and is up 41% from last year and 26% on an adjusted basis. As a reminder, adjustments to 2020 Q3 earnings included the gain on sale of Personal Capital, offset by restructuring costs related to our technology transformation and acquisition of GLC. Slide 11 then highlights net earnings contributions from each of our segments. I'm very pleased to see that IGM's year-over-year increase in net earnings has been driven by strong results across all of our business segments. We're seeing strong earnings growth at our operating companies, including IG Wealth, IPC and Mackenzie. The same holds true across our strategic investments. You'll hear more on the strong fundamentals of these businesses in remarks from Damon, Barry, and Luke.
Slide 12, similar to the earnings growth story, we're seeing strong momentum and record net flows across all of our wealth management and asset management segments. With that, I'll turn it over to Damon.
Thank you, James. Good morning, everyone. Turning to slide 14 in IG Wealth Management's third quarter highlights. We ended the quarter with AUM of CAD 114 billion. It's an increase of 1.6% during the quarter, driven by record high Q3 net inflows of CAD 1 billion and client investment returns of 0.7%.
We also experienced strong net sales into IGM products of CAD 641 million. Our strong momentum continued in October, where we had another record month with net inflows of CAD 312 million and net sales into IGM managed products of CAD 171 million. This represented the twelfth consecutive month of positive net sales into IGM products and the thirteenth consecutive month of positive net flows. As I commented last quarter, we continue to see a significant positive impact from our business transformation efforts to enhance our advisor and client experience, and we're certainly not done. This quarter, we partnered with CapIntel to implement leading technology to help our advisors execute on client investment plans, including client-facing proposals, built-in compliance support.
The partnership is designed to help drive advisor efficiency, improve our client experience, and allow us to meet the new Client Focused Reforms requirements coming in January. We're also proud to have announced the launch of our new IG Climate Action Portfolios, furthering our work on ESG and adding to our strong roster of managed solutions. Finally, efforts to enhance the IG Wealth Management solutions are paying off, with 47% of our AUM either four- or five-star and 80% of our AUM rated three stars or better. Turning to slide 15, you can see the very strong results through the first 10 months of the year, including October's record net inflows of CAD 312 million. The 12-month trailing line chart on the right continues to demonstrate the clear and evident momentum in our total net flows and net sales into IGM products.
Turning to slide 16, Q3 record high gross inflows were up nearly 50% year-over-year. On the line chart, you'll see our twelve-month trailing net flows rate has now reached 3%. Our client net inflows of CAD 1 billion are broken down in more detail in the net flows table, where you can see significant improvement in net sales into IGM products of CAD 641 million. Like I have in previous quarters, I'll use slide 17 to speak to the mechanics of our AUA growth and net flows by investment product category. Starting with the second column on the left, you can see that our Q3 net inflows of CAD 1 billion were primarily made up of CAD 668 million of cash and short-term savings and CAD 339 million of third-party in-kind transfers from other dealers.
Third column shows the significant outflow from these categories that resulted in net sales into IGM managed solutions and Mackenzie funds totaling CAD 641 million. We expect to see this clear momentum continue as we acquire new client relationships and we work with our existing clients on comprehensive financial planning in delivering high-quality managed solutions. Turning to slide 18. Similar to last quarter, you'll see significant improvements in our advisor network productivity, a key KPI for us for both our new advisors and more experienced advisor practices. We are seeing our investments over the past several years paying off, and we continue to highlight some of the initiatives which are seen on the right that have contributed to the increased productivity. On slide 19, we demonstrate another strong quarter in acquiring new clients over 500,000.
Similar to Q2, we had CAD 443 million in growth and net inflows from newly acquired clients over 500,000, which represents a 67% increase year-over-year and nearly a 500% increase over the past 5 years. On the right-hand chart, you can see our increased focus on the mass affluent high net worth segments, along with the reduced focus on the mass market, has resulted in a trailing 12-month flows of over CAD 1.6 billion. Turning to slide 20. This highlights our new suite of climate action portfolios that provide clients with the opportunity to both support and take advantage of the global transition to net zero emissions. Our new portfolios are aligned with the goal to reach net zero emissions by 2050.
The portfolios will invest in both equity and fixed income securities, offering our clients a suite of single solutions addressing different investment outcomes from protecting capital, to providing income, to a focus on long-term investment growth. Portfolios will allocate investments to one or more climate-related approaches, which include best-in-class companies with leading climate practices, thematic allocations to green solutions, lower emitters of GHG emissions, and the employment of stewardship practices to prioritize climate policies and outcomes. With these portfolios, our clients can feel confident that their investments will strive to positively impact the world around them while taking advantage of emerging investment opportunities in the sustainability space. Before I turn the call over to Barry, I'll quickly touch on the positive impact of our ongoing efforts to further enhance our investment products in managed solutions on slide 21.
I mentioned on a prior call our recent expansion of iProfile to include new private market investments, which is one of the many actions we've taken to evolve our investment product offering, which we believe is now industry-leading. Which is now being recognized as both a strength internally by our own measures and by third party through the third-party dealer Report Card survey conducted annually by the Investment Executive. I'd also like to highlight our strong investment performance as measured by Morningstar. As of 30th September , we had 47% of our assets rated four or five star and 80% rated three star or better.
Given where we started the year, with 17% of our assets rated four or five star, we're pleased with our trajectory as it ranks us among the top firms in the industry. Lastly, we created and filled a new role of Chief Investment Strategist for IG Wealth Management with the hiring of Philip Petursson. This important new role reports directly to myself and will lead our thought leadership both internally in the organization with our advisors and high-net-worth clients, and externally with the media and to all Canadians. This is an ideal complement to our comprehensive financial planning approach. The IG Edge stems from our ability to build long-term, stable relationships with our clients and our expertise in building, monitoring, and executing personal financial plans that leverage well-constructed managed solutions. Our managed solutions are built around leading global asset managers that focus on both public and private asset classes.
All of this is supported by valuable insights on the capital markets and global economy. We are excited about what we're able to bring to the table today and how it's allowing us to compete. We have even more planned for next year, so stay tuned. With that, I'll turn it over to Barry McInerney.
Thank you very much, Damon, and good morning, everyone. I'll take us to slide 23 to review Mackenzie's Q3 results. Total AUM reached a record quarterly high of CAD 203.3 billion at September 30, up 0.8% during the quarter, with slightly positive capital market returns and continued strong net sales. Q3 marked our 20th consecutive quarter of positive retail investment fund net sales, and total net sales were CAD 782 million, a record high third quarter. Mackenzie's momentum continues to be supported by both mutual funds and ETFs and is diversified across all major asset classes and categories.
We continue to gain market share from competitors in the Canadian retail channel, and we received the 2021 Environics Advisor Perception Study results, which also highlighted Mackenzie's leading market position across all dimensions important to Canadian financial advisors, including another year-over-year increase in advisor sales penetration. During the quarter, we also launched a number of new products targeting the retail segment along the five themes or growth catalysts we've identified previously. Finally, we were thrilled to announce earlier this week that Mackenzie has joined the Net Zero Asset Managers Initiative, building on our existing strong commitment to climate. I'll speak more to these last two points on the coming slide. Turning to slide 24.
The strong net sales we reported on our last call has continued into the third and fourth quarter, with our investment fund net sales remaining at nearly CAD 7 billion on a twelve-month trailing basis. Given the very strong Q4 results last year, the comparative period for October and the remainder of the fourth quarter of 2021 will be a very high bar. We were pleased, though, with October investment fund net sales of CAD 282 million reported earlier this week. I should also mention, as you review October sales, that total net sales were impacted by net flow of about CAD 350 million from a single institutional account. Slide 25 summarizes Mackenzie's Q3 2021 operating results. Retail mutual fund gross sales increased 24% year-over-year.
Mackenzie continues to gain market share, as demonstrated by our 10% long-term investment fund net sales rate as of September 30. 51% of Mackenzie's AUM rated by Morningstar were in 4- or 5 star funds, and 17 of our top 20 funds were rated 4 or 5 stars for Series F. Slide 26 shows our retail mutual fund AUM, investment performance, and net sales across our investment boutiques. We continue to see strong overall performance in our growth-oriented boutiques, while our global quantitative and multi-asset teams have delivered strong outperformance over the past six months. Our strong retail net sales are coming from a wide variety of boutiques, including equity, fixed income, and multi-asset teams. Our third-party managers category, which includes China AMC, has also attracted strong inflows.
Finally, slide 27 highlights the growth catalysts we've identified at Mackenzie that are reshaping the global asset management industry. This quarter, I'll provide a few highlights across three of these themes, sustainable investing, alternatives, and China. Our momentum continues in sustainable investing, with CAD 3.8 billion in AUM as of 30th September . On our last call, I mentioned that we had launched our new Better World investment boutique, and we followed that with four new product launches in this space. The first two launches bring the Better World's team's deep sustainable investing expertise to Mackenzie's distribution for the first time in both Canadian equities and global equities. We also launched the Mackenzie Global Sustainable Bond ETF and the Mackenzie Global Green Bond Mutual Fund, both managed by Mackenzie's fixed income team.
As I mentioned earlier, Mackenzie is now signatory to the Global Net Zero Asset Managers Initiative, which builds on our existing commitments, including being a founding signatory to Climate Engagement Canada and signatory to the Responsible Investment Association's, or RIA, Statement on Climate Change. Moving to alternatives and private investments. Before getting into this quarter's achievements, I'd like to take a moment to comment on the breadth of Mackenzie's capabilities and products in this rapidly growing area. Mackenzie's investment organization has a long, rich history of bringing private market investments to IG Wealth Management's clientele in the form of private real estate and private mortgages. Mackenzie manages CAD 6.4 billion in these categories as of September thirtieth.
As a reminder, back in 2018, Mackenzie made history bringing Canada's first-ever liquid alternative strategies to the retail market based on the regulator's alternative framework proposal for conventional mutual funds. Today, Mackenzie manages over CAD 4 billion in liquid alternative strategies and asset classes. Last fall, Mackenzie entered into a strategic relationship with a leading global private markets manager, Northleaf Capital Partners. Within the first six months of the partnership, we collaborated to bring Northleaf's private credit investing capabilities to Canadian retail advisors and clients in a new way. Last month, we launched Mackenzie Northleaf Private Infrastructure Fund. We have plans to bring all three of Northleaf's private markets programs to retail, with private equity up next. Northleaf itself had another very strong quarter of fundraising, with CAD 1.1 billion completed during Q3, growing their total AUM to CAD 18.6 billion.
Finally, we launched two new mutual funds to further help Canadians seeking to gain investment exposure to the Chinese capital markets. These two products will be sub-advised by China AMC, and they join our highly successful Mackenzie China AMC All China Equity Fund to create a suite of products addressing the investment opportunities in the second-largest economy and second-largest capital markets in the world. Overall, we continue to innovate as advisors look for new ideas and solutions for their clients. Over the past three years, Mackenzie has generated CAD 5.5 billion of gross inflows from new products launched during that period and CAD 3.2 billion year-to-date, 2021. I'll now turn the call over to Luke.
Great. Thanks, Barry. Morning, everybody. I'll turn to page 29. I know there's not much to see on this slide. I just highlighted in the chart on the left, it was a very strong quarter, with average AUM and AUA up 4.7% in Q3 relative to Q2. I'd also note that we published October results on Wednesday, and assets, as you can see at the bottom left, were up 2.2% to CAD 271.1 billion from September. If you eyeball the chart and where assets are trending so far, you'll see we're on track to see continued growth in average assets in Q4 as net flows continue to be very strong and financial markets have been favorable in October and into November. Turning to page 30, I just highlight the business behaving the way you'd expect it to.
On the right, you can see with the dark blue box that the net revenue rate of 87 basis points was very stable relative to Q1 and Q2. On the bottom right, you can see unit costs have declined based upon greater scale and based on seasonality of expenses. In the middle, you can see the result is that EBIT margin as basis points of AUM and A has increased to 48 basis points. I'd also remind, as you look at this chart on the right, that the acquisition of GLC occurred January first this year, and that's the reason for the change in rates in Q1 2021. Going to page 31, you can see our consolidated income statement. As mentioned, our EPS of CAD 1.13 is a record high and is up 26% from last year and 14% from the second quarter.
The only point I'd call out on the P&L, and you can see we've highlighted as point 1 on the right, is business development expenses of CAD 71.2 million in the quarter. You'll see this is up slightly from last year and down CAD 8 million from Q2. I'd note that we do have an element of discretionary expense in this line. As you can see in the pull-up box on the right, we produced our full-year guidance on this line by CAD 13.5 million. You'll see the full details on slide 43 in the appendix. This is worth about CAD 0.04 per share after tax. I'd also remind you, in thinking about the future, there's some seasonality in this line, so we would expect it to be a bit higher in Q4 relative to Q3.
On page 32, you can see on the right IG Wealth's revenue and expenses as basis points of their relevant driver. The one item I highlight on the slide is the advisory fee rate and the top rate of 102.6 basis points, down 1.6 basis points in the quarter. You'll remember that our advisory fee rates are schedules that vary based upon the level of AUA in client accounts, and we actually accrue at the client level every single day versus based upon the asset level in their account. With the ongoing change in composition of our clientele toward high net worth, we guided to a decline of close to 0.7 basis points in the quarter. I would remind during Q3, there was a meaningful increase in client account values, with average AUA up almost 5% from Q2.
These higher account values are what led to this 1.6 basis point reduction in the quarter, and we view this type of of price reduction as obviously very healthy, given that it's based upon the significant growth in client account balances. Turning to page 33, you can see IG Wealth statement of earnings. Our CAD 140.9 million in earnings in the third quarter of 2021 is a record high, and we're up 20% from last year and 8% from Q2.
The only line I'd highlight again is business development, and you can see in this other business development line, we have a call-out box on the right that most of the decline in full-year expense guidance for IGM is coming from IG Wealth, and we've reduced our guidance here by CAD 12 million in this other business development line item. I'd remind you we have discretion in this line on sales and promotional activities, and the business and new client acquisition, as you've seen, are performing very well. When you're thinking about our spend here, we'd guide you to consider all of these four advisory and business development lines together and would highlight our people are very motivated and very resourced to serve their clients well and to acquire new ones. On page 34, I'll turn to Mackenzie's results.
In the chart on the right, you can see our net management fee rates. If you look at that yellow line, you'll see the weighted average fee rates of third parties has continued to increase up to 54.7 basis points. This is a result of strength in retail and strength in equity and balanced offerings, which tend to have higher fees. If you look at page 35, you've seen this chart before. There's a lot of detail on it, and we do seek to use this slide to let you know how business development expenses will travel based upon the volumes that are being put on at Mackenzie. If you look at the chart on the left, you'll see that Mackenzie continues to put on very strong sales results.
For our expense guidance, we've anchored to CAD 4.1 billion in retail mutual fund net sales for the full year. On that chart on the left, you'll see that the light blue line, and you'll see it is trending towards CAD 4.1 billion, which would be about CAD 800 million in mutual fund sales during the fourth quarter. As you could extrapolate from the four bars way over on the right-hand side of the chart, and you look at that third row from the bottom, business development expense, where we've guided to about CAD 4.1 billion would result in a full year expense of about CAD 92 million. That is a reduction in expense guidance of about CAD 4 million from what we published in the second quarter. Go to page 36.
You can see Mackenzie's statement of earnings. At the bottom, you can see the Q3 results of CAD 71 million is a record high, and it was up 47% from last year and 26% from Q2. I would remind there is a lot of operating leverage in Mackenzie's business, and it's net selling very well, so we would expect strong earnings growth to continue. Turn to page 37. Just a few quick remarks on China and Northleaf. On the left, you can see our Q3 2021 earnings of CAD 17 million from China AMC are up 62% from last year and 15% from Q2. As you know, China AMC is a consistent leader in the Chinese domestic asset management industry, and it's been maintaining share and maintaining market position within a very high growth market.
You'll remember that half of the global net flows into the asset management industry in the next decade are expected to come from China. While there certainly will be volatility for us along the way, we're very excited about the future of China AMC and very excited about our business relationship with them. On the right, you can see the year-to-date growth in Northleaf AUM. Q3 was another quarter of fundraising in excess of CAD 1 billion, bringing year-to-date fundraising to CAD 4.3 billion and driving AUM growth to 27%. I'd highlight for you that revenue growth from these fundraisings comes not at the time the business is committed but comes at the time that the money is invested and put to work.
We do have a good line of sight into revenue and earnings growth over the coming quarters as a result of this fundraising activity. Turn to page 38. This slide is intended to highlight our strategic investment and to demonstrate that these investments are conservatively worth CAD 4.6 billion at September 30. I'm going to highlight some of the metrics on the next page. Turn to page 39. You can see the sum of the parts view to our underlying businesses. I'd first highlight that everything on this slide is anchored to 2021 expected earnings, and we have it repositioned to 2022. I'd make two quick comments. The first on China, which you can see is the fifth column from the right.
We've approached valuation from the standpoint of our entry multiple when we did the acquisition four years ago of 17.5 times next twelve month earnings. We've applied this multiple to analyst consensus for 2021. This consensus obviously was before you having the information on the Q3 results we posted today. I'd also note that we did our acquisition on the basis of 17.5 times next twelve month earnings. This we view as a very conservative view of the value of ChinaAMC to actually apply that multiple to 2021 expected. In the bottom left, as we typically do, we've taken our CAD 49 share price when we went to press.
We deducted off a conservative value of each of our strategic investments from the market cap, and we've done this to arrive at an implied PE multiple for IG and Mackenzie relative to their peers. You'll see this approach would suggest that there's room for multiple expansion. These businesses have significant momentum and are posted solid earnings growth that we're very excited about. Turn to page 40. With the significant growth we've seen in our earnings, we did want to give some context on the dividend, which you'll see we've maintained at CAD 0.5625 per share this quarter. On the top left, we remind that traditionally we've considered increases at a payout rate of around 60%-65% of earnings. You can see here in the bottom left table that we've introduced a new measure, cash earnings, to profile the earnings that's distributable.
There's currently about CAD 150 million difference between reported earnings and cash earnings, and this reflects two things. First, the difference between the sales commissions we pay and our commission amortization. With rising sales activity, this delta between the commission amortization and commissions paid has risen. Second, the difference between our proportionate share in the earnings of Great-West Lifeco, China AMC, and Northleaf, and the dividends that we receive from them. You'll see in the third point in the top left, we highlight that we would consider recommending a dividend increase at a payout rate closer to 60% of cash earnings. You can see in the table at the bottom, we're currently running at 71%. On the right in the top, we've given a bit of context on our choice.
I'd point out a few things. First, as you all know and you can see in the chart on the right, our payout rate is unconventionally high relative to other Canadian financial service firms and global asset and wealth managers. Most important is point three. We see many alternative productive use for capital deployment. This includes reinvestment in business, it includes M&A, and includes share repurchases. There's a lot of room for us to deploy this capital and to create shareholder value. That is a big consideration for us in addressing the dividend. On closing, I would highlight and reinforce, we're very committed to growing earnings and we're very committed to growing our dividends over time, and we're feeling confident about the future. That concludes my comments. Ariel will turn it over for questions.
Thank you. We will now begin the question-and-answer session. To join the question queue, please press Star, then One on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press Star then Two. We will pause for a moment as callers join the queue. Our first question comes from Nik Priebe of CIBC Capital Markets. Please go ahead.
Okay, thanks. Wanted to start with a question on the accelerating growth of the earnings contribution from China AMC in the quarter. Is there any additional color granularity that you could provide on the performance of that business, maybe with respect to the net flows rate as a percentage of AUM, you know, how that compares to the industry, anything notable on investment performance? There's clearly a lot of momentum there. I'm just trying to get a better read on what some of the key drivers have been.
Thanks, Nick. It's Luke, and I'll probably turn over to Barry as well. I'd highlight by saying the last five or six quarters have been very strong in terms of net flows into the Chinese asset management industry. Long-term funds, we've seen a net sales rate of 30% per year, and China AMC, as mentioned, has been maintaining market share and maintaining market rank during a rapidly growing environment. In the third quarter, in spite of the volatility, we did continue to see very strong contribution from net flows, and that's led to consistent asset growth in long-term funds during the period. As you also know, there is operating leverage in this business, and that is leading to these strong earnings and growth results that we're seeing put on. I'll turn it to Barry.
Thanks, Luke. I'd just add a couple points. It's a great question, Nick. It's important to recognize with China AMC as well. They have a very strong business strategy and model, we think well-positioned for today and the future growth, just as we'll see, as we saw the industry in North America evolve. What I'm talking about is that they're multi-channel. Luke's point of the very strong retail flows continue for China AMC, but they're also strong institutional, and they're also strong in online. So they have really three main channels that all are doing very well. They also actually look a little bit like Mackenzie, too. They're multi-vehicle. So clearly, the mutual fund's doing very well as we report and measure on an ongoing basis.
The institutional separate managed accounts, SMAs, obviously continue to grow very well. They are actually we tend to forget about this, the number one ETF provider in China AMC. We have a very strong growing ETF industry, as we know how strong that's growing globally. They're number one in China, onshore and offshore. Finally, they're just a terrific culture, well-resourced, over 200 investment professionals, investment-led organization. They're really research-oriented, on the ground, fundamental focus. Actually, we share that research with them on a regular basis, which is very helpful for us. Just a 20 year firm that has a business model and a framework and a structure and a culture that you see now.
Well, we've seen this for ever, you know, years and years now, but it's just probably becoming more of a focus for you all because of their increasingly meaningful impact to earnings. Really remain very excited by China AMC and our investment in the future of that firm in the industry in China.
Understood. Okay, that's helpful. Maybe on the domestic front, you know, net flows have remained consistently positive, not only on a quarterly basis but month to month as well. You know, we've seen industry sales remain elevated. That's. I think that's benefited to some extent from higher consumer savings and an improvement in household balance sheets as a result of the pandemic. Just wanted to get your read on the sustainability of that trend at a macro level. Like, do you see that momentum extending beyond the RSP season next year, or is it a bit too early to say?
Again, great question. I'll start and might have others chime in. This is a very important topic for us, obviously, at IGM. You're spot on. We've seen this in Canada and other developed countries where savings rates are much higher, obviously because of the pandemic. Spending is down, obviously, to your point, which has strengthened personal balance sheets, but that spending also has resulted in quite a reduction in industry redemption rates. Higher flows and then lower redemption rates obviously results in much higher net flows. Across IGM operating companies are seeing obviously very nice gross flow increases year over year, but you may have noticed our net flows are even proportionally higher than the gross because of the higher gross and lower redemptions. You know, we're thinking this could be sustainable.
We're not sure at the levels that they are right now. Obviously, as the economy continues to recover, global synchronization of opening up the economies and getting back to some normalcy in terms of expenditures and consumer consumption. We think, though, that there's gonna be an increased focus on retirement and savings in Canada and maybe other countries as well. Therefore, that savings rate, we think can continue to be higher than it was pre-pandemic. Not sure where it's gonna land, but we think it's gonna be higher. The redemption rates, we'll see if they come up a little bit.
Again, because of the potential increased focus on savings, and by the way, just the enormous amount of cash on the sideline, so liquidity that can come into the investment funds industry, which we think it will. We think should bode well into 2022 and beyond. We can't predict on the levels, record levels that we're seeing in the industry today continuing at that level, but we think they will continue at a higher level for many years to come.
Okay. Very good.
Barry, it's Luke. I'd add to that, Nick. As Barry said, the money, like you mentioned in your question on savings rate, the money that went into demand deposits in 2020 was profound. It was about CAD 250 billion. That movement into demand deposits or that contribution to demand deposits by Canadians has just continued consistently through every single month of 2021. There's a lot of fuel to keep this fire going. All those demand deposits are earning nothing, and they're earning less than nothing when inflation's included. Across organizations, we're working hard with Canadians to put that money to work. There's a lot more fuel there to keep these strong investment fund flows going.
Okay. Thanks for taking my questions. I'll pass the line.
Our next question comes from Geoffrey Kwan of RBC Capital Markets. Please go ahead.
Hi, good morning. My first question was just on slide 19. I was kind of taking a look at the part where it's talking about gross flows from less than CAD 100,000 accounts, had been declining for a number of years, but been still a decent amount and has been actually increasing lately. Just with the focus on the high net worth part of the market, just curious around what is dynamics driving growth from some of the less affluent customers.
Yeah. It's Damon here. In terms of that segment, generally what takes place. You're going after the mass affluent high net worth market. You're identifying a certain segment in terms of what someone does for a living. You kind of naturally organize to those segments. We're talking about doctors, lawyers, other professionals. Part of our strategy is certainly to connect with those individuals early on in their careers. It does mean that early on they will have lower portfolios in terms of dollar amounts, but the opportunity long-term is huge.
A lot of that growth would be because we are doing a good job really finding people that we want to focus on, but early on, and then working with them on their plans as they start their careers and start a family and buy a house and do all the things that you would normally do.
Okay. Perfect. Just more broadly, in terms of the progress that you've made on the gross sales side, for each of high net worth, and then also just the overall business. When you take a look at where you are today, if we kind of use the baseball analogy, like what inning do you think you're in versus what you would view as being kind of full productivity, of the consultant base?
Yeah, I'd say that we are in the second or third inning. Here's the rationale. First of all, we are still in the fourth year of a five-year transformation, with the fifth year being next year. There's still a lot of things that we need to do to continue to improve our advisor and client experience, continue to connect our systems, continue to make sure that we make sure that our advisors are the most efficient in the industry, so we free up capacity. With that, we are just going to get better at doing what we do. When you take a look at our results, what is the most encouraging is that they're broad-based.
We're doing a good job in terms of acquiring new clients, particularly in the mass affluent, high net worth space, as you just mentioned. We're doing a very good job of working with our existing clients and share of wallet. A lot of Canadians diversify their advisors. Right now we're finding that, quite frankly, a lot of the competition is not stepping up. If our clients have one or two other advisors, you know, they're consolidating with us, which is great. We're also doing a great job in recruiting experienced advisors.
You know, for a lot of advisors, they see the benefits now, particularly with the Client Focused Reforms and everything that's taking place with regulation and partnering with a firm that can add value to their business and help them compete in their market, particularly against the competition, which tends to be fierce in this country. Because we're doing such a good job with our clients, our retention rates are dropping. We're doing a good job and certainly we're losing less clients than we have in the past. We feel quite comfortable about our ability to compete and how we're positioned right now.
Maybe just to ask it another way, is from a net sales as a percentage of AUM where do you think that you can get to again if you're having full productivity out of the network?
Right. If the forecast net savings rate for the country is around 3%, and it's forecasted to continue to be around 3%, and there'll be ebbs and flows in that. Right now you can see that we're at that number. We feel quite confident in our ability to punch above that weight and 3% plus, that's what this business is built to do. Ultimately, we're building a business that we want to be stable and resilient, that performs over various different market cycles and is going to gain share, and particularly gain share in the mass affluent and high net worth market. Punching above a 3% net sales as a percentage of AUM is something that is our focus.
Okay. Just if I can sneak in one last question, high net worth tends to be stickier assets. Do you expect then the redemption rate to decline over time versus historically what we've seen at IG Wealth? Also on another dynamic with boomers retiring and kind of maybe spending a little bit more, and therefore the savings are going to be less and then therefore have higher redemptions. Like, how do you think net-net these factors or any others that you see kind of impact the redemption rate versus what we've seen historically?
Well, I think if you're building your business properly, you know, I think mass affluent and high net worth, our focus is on making sure that our retention rate is obviously as solid as possible. IG has always had a history of having a retention rate that has been lower than the industry, and I think everyone knows that. These levels, obviously right now, we're in a different circumstance, but we believe that and feel confident that we can continue to do a great job. Now, as it relates to the aging population and deaccumulation, this is the key here. As long as you have a sales force that is diversified and you have a sales force where you're bringing on new talent.
You can continue to do that. We feel quite comfortable that we'll have a nice mix of clients. You know, the first question you asked, I talked about bringing on young professionals. That's a prime example of what the future looks like. We're going to have, obviously, a significant amount of money in the industry pass on from generation to generation, and our organization has proven over decades that we're leaders in really working with multi-generational families, not only having the grandparents, but having the parents, having the kids, having the grandparents. That puts us in a great position to capitalize on the movement of these assets through generation to generation.
Okay. Thank you.
Jeff, it's Luke. Just on the quantitative so that you can see our gross outflow rate, our redemption rate overall is trending at 9% and trending down. You'll remember that about 5% of that redemption rate is really structural. It's fulfillment of the product. It's people who you know, they're saving with us for a long-term need, which may include retirement. We view that obviously as a floor, you know, at 5%-5.5%. Everything above that you can think of as being competitive on some front. I'd guide that even with baby boomers retiring, you know, a rate of 8% is clearly achievable for us overall.
that is where we trended in the best of our times, and we think that potential is available for us now.
Okay, great. Thank you.
Our next question comes from Gary Ho of Desjardins Capital Markets. Please go ahead.
Great. Thanks. Good morning. First question, just on the expense guidance update. Looks like the biggest decline is within IG's biz dev expense line. Maybe can you comment on kind of what drove that in particular? I think, Luke, you mentioned some discretionary spend. You know, were these costs pushed out? Just wanted to see, you know, what changes were made relative to the budget at the beginning of the year. As a related question, can we also expect this 2%-3% overall expense growth as we look out to fiscal 2022?
Great question, Gary. I'll start with the last part. On 2022 and beyond, right now we'd guide to that territory. Like 3% is probably a good starting point to think of 2022. In our February call, we'll have finished our planning for the year, and we'll give much more robust guidance into 2022 and beyond. On IG's other business development expenses. Yeah. As mentioned, as you know, the things that are in that particular line includes sales, marketing, promotion, our facilities for our financial planners, training, technology, all the things that support on-the-ground business development and serving our clientele. I'd note that that is one of four lines that concerns what we've called advisory and business development.
The other lines are things like sales commission, asset-based comp, and other product commissions. The CAD 12 million reduction in guidance you see, you can view that as reflecting mostly discretionary sales and promotional activities, but it's quite a small amount in the context of the broader spend that we have on advisory business development. I'd also note Q4, the guidance we've given does have healthy spend in Q4, so I would guide you that you can take the expense guidance reduction we've given you to the bank. I would note there's seasonality coming in Q4, and you'll see when you do the math, the guidance for Q4 is quite a healthy level of spend in this particular line.
I would also highlight, as we've considered our activities and what we're spending on, the business is doing really, really well, and we think we're spending at a high enough level and doing the right things, and we didn't have to go any further in this period.
Great. Thanks. Maybe moving on to slide 40, where you laid out the roadmap for common dividend increase. Luke, when you do the math on maybe a 3Q annualized number as opposed to LTM, you know, you would get to a number that's closer to 60% payout. Just want to be clear that you are looking at it when you decide on it is on an LTM basis. Maybe on the same slide, maybe for James, you know, how do you decide between dividend increases versus buyback or some of the other initiatives that you listed on that page?
Yeah. I'll start and I'll turn to James there, Gary. Yeah, you're quite right. On our guidance and the spelling out where we consider recommending a dividend increase, we would be anchored to last 12 months, not to a quarter annualized. That removes the impact of seasonality, and that's what you should consider is last 12 months. I'll turn it to James.
Yeah, Gary, as we've said before, we believe we're in for, you know, an active M&A environment, given confidence levels, given the macro environment generally. You know, we are thinking actively about deploying capital in M&A. As we've discussed before from a wealth management perspective, we view that industry organized around the world. It's organized kind of nationally or regionally. Our aspirations in wealth management would be very much focused in Canada, particularly in high net worth and ultra-high net worth segments. On the asset management side, for Mackenzie, of course, it's a statement of the obvious, but Mackenzie very clearly participates in a global industry and is competing in Canada against global giants.
You know, for Mackenzie, we're prepared to look more broadly, geographically. If we can enhance its capabilities, that could be in Canada or outside Canada. M&A is something we're certainly thinking about, but buybacks too are going to be a part of the toolkit. I would say at this point, more focused on an M&A opportunities than buybacks.
Great. Maybe just follow on to that, James, just on the M&A side for Mackenzie, that's mostly in Canada, or you're looking at global as well? A related part to that, obviously very strong on the retail side. How about on the institutional side, any interest in buying institutional managers?
I'll start, and I'll let Barry add. You know, Mackenzie very clearly participates in, competes in what is truly a global industry, and we need to be mindful of that. It's not a Canadian industry, it's truly a global industry. When we think about kind of positioning Mackenzie three to five years out, we think about how do we make it a stronger competitor in what is today a global industry. For Mackenzie-
Sure.
We will be looking more broadly than just to Canada geographically for opportunities to both enhance its investment management capabilities and perhaps some distribution will come with it. I'll let Barry add to that answer.
Great. James, you got it spot on, and thanks for the question, Jeff. It is really a combination of the fact that we like to continue where we think we have gaps. We don't think we have gaps right now, but we're always looking for strong global investment capabilities to bring to Canada. Northleaf obviously is based in Canada, but they're preeminently global. Greenchip, the same. You know, as you know, we've lifted out a team in Boston, a wonderful institutional quality quant team. They're doing very well, up to CAD 5 billion AUM last three years. We've got a team in Dublin, a team in Hong Kong from legacy I.G. Investment Management, and they're just terrific, mostly compete in the institutional world. We're always looking for investment talent capabilities, as James mentioned, anywhere around the world.
That's irrespective of borders. Then we can bring that into our obviously robust Canadian retail business. Also, as James mentioned, you know, our institutional business, we love our business, and it really provides diversified sources of revenue. We do it in a very targeted and limited fashion in terms of a handful of capabilities that we think are of interest to global institutional investors in Canada, United States, Europe and Asia. We continue along that journey. Yes, if there's anything that could help us speed it up a little bit, we'd certainly be open for consideration.
Okay, great. Just my last question, I know there's some talk around on these retail flows. Just wondering the impact of higher rates or rates trending higher. You know, if the rate environment persists, you know, we know the story on the household debt. You know, would clients favor paying down debt versus increasing the savings rate? You know, is that a risk to elevated flows? I don't know if that's a question for Damon or Barry.
I'll start. Everyone likes to jump in on those ones, Jeff. You know, I'll just speak from Mackenzie's perspective and probably might be different on the wealth side. On the asset management side, again, first of all, we have, as you know, a multi-boutique model with really a variety of building blocks. What I've been saying personally and Mackenzie's been saying personally is to help advisors start that journey of a more future-oriented portfolio for their clients. That's why we've been bringing alternatives to the marketplace, not just liquid, but now, you know, private alternatives.
Obviously, you know, even if inflation is not transitory, you know, we've got a lot of building blocks to put a strategic allocation to portfolio to help to minimize some of the potential long-term effects of inflation, such as infrastructure, of course, we've got TIPS, we've got commodities, we've got REITs, we've got a whole plethora. That's just one thing on, and I want to mention on the Mackenzie side. We actually perform fairly well irrespective of the economic environment. In fact, as we know, last March of 2020, we probably perform our best when markets are choppy or downwards because we have a lot of protective downside. In terms of impact on flows, I'm not sure.
I'm not sure if that would, Jeff, have an impact on our thesis that savings rates will be sustainably higher than pre-COVID, albeit maybe not as high as today. Again, with that focus on savings and retirement for all Canadians, more so going forward, should be irrespective of the economic environment. I'll put in a little bit of plug, as you know I always do. You know, these transitory inflation trends are, you know, we're getting through them. They're going to take a little while, right, well into 2022. They hurt some segments of the population, so we got to be mindful of that. Long-term secular trends in developed countries like Canada is actually for low rates and low inflation going forward for demographics and technology productivity improvement reasons.
Probably something just to continue to think through long, long term. Obviously, short and midterm might be different. I'll turn it over to anybody else who wants to comment, but.
Yeah, it's.
Oh, sorry.
Yeah, it's Damon. I'll jump in, and I'll say that, you know, this is why we're in business. You know, questions like this is all about financial planning and how we work with our clients, and we're involved in helping our clients make the right decision as it relates to paying down debt or investing or doing both. The good news is, you know, as you direct your efforts towards high net worth, you know, high net worth individuals generally understand debt and understand how to use debt, positively. For us, we have not seen any issues with flows, nor do we anticipate any issues with flows.
Obviously, when you're talking about higher rates, it has more to do with markets and the environment and how do people feel about investing. We feel quite confident that it's not going to get in the way in terms of future flows.
Okay, great. That's it for me. Thank you.
Our next question comes from Tom MacKinnon of BMO Capital Markets. Please go ahead.
Yeah. Thanks very much. Morning. Just a quick one here. Luke, I think you said, in terms of looking for business development expenses for 2022, that a 3% increase over 2021 would be appropriate. How should we be looking at operations and support for IG Wealth at Mackenzie?
I'd say good question, Tom. My guidance would be on 3% would be overall. The overall ops and support in particular, business development will obviously be variable. There is some variability with Mackenzie wholesaling commissions in particular, but that 3% is meant to be an overall and in particular an ops and support. That's a very good question. Yeah, I clarify for everybody on 3%, it's we're first and foremost focused on ops and support expenses. Tom, as mentioned earlier, too, in February, you can expect us to give much clearer guidance once we finalize our plans by line item.
That business development expense would be a function too, though, of you know, just some variable element in it as well. If the growth sales continue to be strong, would we expect that business development expense portion of that overall could be actually higher than the three?
Yeah. Yep, for sure, Tom. The key elements of variability, so there's one key variable item in that line, which is Mackenzie wholesaling commission. We'd expect to continue like we've done on page 35 to give you guidance on how it's working. You heard very early in the year, when we launched this guidance and enhanced this disclosure remind that we reset the bar every year, and the bar rises. We'll help you understand how 2022 will behave based upon different sales levels. There's that element that is variable. There is some discretionary advertising, other promotional stuff in there, and we'll be finalizing that and giving guidance. Then a bunch of the stuff in that line is more fixed.
We would give the same type of guidance as we have on ops and support. That's the one item that we will help you understand is the variability to Mackenzie wholesaling commission. We would remind we do reset the bar every year on that one.
Okay, thanks.
Our next question comes from Graham Ryding of TD Securities. Please go ahead.
All right. Good morning. Perhaps James, I'll target this one for you. Just thinking about IPC, can you talk about the business model there and how it compares to IG Wealth? Is there any thought towards potentially bringing IPC, you know, into IG Wealth? Is there a value creation opportunity there, perhaps?
Yeah, it's a good question. I think the answer is no. It is a very different business model. These are with very different, you know, you have advisors who have a different contractual relationship, of course, with IPC than IG Wealth Advisors would have with IG Wealth. You have a very different grid. You have a very different allocation of expenses. I do view the businesses as being quite a bit different. In many respects, IG Wealth is a unique and I think a uniquely successful model within the industry.
I think what you should anticipate with IPC and look, it's executing well here as you can see from the results. There's a big push on as we speak to purchase practices, convert books where it makes sense to more of a salary plus bonus model as opposed to the current quite high grid payouts. You know, they're also exploring, indeed more than exploring, starting to execute on an ICPM model, where money is being managed on a discretionary basis.
As I've said earlier, I like IPC because I think this industry is in for a lot of change over the next several years as a generation of advisors who helped build this industry in the eighties and nineties approach retirement and think about succession and what they're going to do with their books. I think new industry architecture, new economic models are going to emerge, and we very much view IPC as our opportunity to experiment and participate in those new models. You know, to go back to the core of your question, as we sit here today, I do view the two models as quite a bit different.
Each has their own strategy, and each we think can achieve, you know, very significant growth in years to come.
Okay, thanks for that. Damon, I'll jump to you. IG, you're showing good sales growth momentum, and you gave us some advisor productivity numbers there, which show some increases. We're still seeing some attrition in the number of your advisors, sort of particularly at the greater than four years experience level. Can you just provide a little bit of color on what we're seeing there? Is that just a reflection of natural attrition not being replaced with the advisors that you were recruiting into IG Wealth?
Yeah. First off, I would say that it's important that everyone understands we're focused on quality, not quantity, and our KPIs are all around productivity and not the size of our sales force. The numbers you are seeing. It's just natural attrition. We continue to work with our existing advisors and make sure that we're focused, and make sure that they have everything they need to really attack the massive growth in the high net worth segments of the marketplace. We like the fact that we're leaner, quite frankly, than we have been in the past, let's say over the last three or four years, because it's really allowed us to focus our efforts. At the same time, we've done a very good job recruiting.
We're really attracting experienced advisors that really want to focus on planning and really want to enable their business and their teams and their clients to have an elevated experience. We feel quite confident and excited about what the future of our sales force looks like.
Graham, one thing I'd add, if you look at the supplemental disclosure, we've got the line with the consultant practices, and you can think of that as being the practice owner. We've got another line called associates, and those are employees of the practice and they're all licensed professionals. They're financial planners. They're serving clients. We'd guide you as well to look at those two lines together as far as the force of people who are serving the clientele there. So you'll see that a consultant practice, so the consultant owners has declined by 7, I believe, this quarter, while at the same time the associates has risen by 12. When you look at the actual force serving clients, it has been growing slightly.
Okay. Yeah, fair point. My last question would just be Northleaf fundraising this quarter. Could you give us some color about how much that I think it was CAD 1.1 billion. How much is third party versus commitments from Great-West or IG?
Yeah, we're very pleased to say that we're actually seeing good, and you've seen the products being brought to market, really good support of Northleaf across the group of companies. We're on plan there. In spite of that, substantively all of this fundraising is from outside the group. It is well diversified across private equity, private credit, and infrastructure. I'd say one of the bright lights that we're seeing as well that the Northleaf team's excited about is we're starting to see more foreign clientele within the numbers. Traditionally, Northleaf has been. Their investments have been global, but their clientele has been primarily Canadian.
That's one change that we've seen in 2021 that's very healthy, [they're executing well on their vision of having a lot more clientele outside of Canada.
Great. Thanks, Jimmy. Thank you.
Once again, if you have a question, please press star then one. Our next question comes from Scott Chan of Canaccord Genuity. Please go ahead.
Good morning. Maybe just going back to Northleaf. You know, the asset growth has been impressive, almost 25% since you acquired it. What proportion of those commitments, I guess, year to date would be within versus kind of external? I'm just trying to get a sense on looking forward, you know, in terms of Northleaf being a lot of your solutions and kind of the stability and growth within that.
Yeah. Of the CAD 4.3 billion, you can think of the group having furnished around CAD 500 million-CAD 600 million of that. Substantively all of that new business has come from third parties, and we see that growth continuing.
We're going to obviously support Northleaf with all we've got, and you can see us actively putting Northleaf into our managed solutions, launching products at Mackenzie, and Great-West Lifeco is also supporting them wherever they can. The bigger opportunity is obviously with third-party business. The team at Northleaf is very focused on growing their clientele, and as I mentioned, growing their clientele outside of Canada, which is a huge opportunity for them.
In the earnings of Northleaf, it seemed to come in above your original guidance. Is there like an updated guidance that we should think about for 2022? Because it seems like the assets probably are tracking a bit better than you expected, in my view.
Yeah. It's great. We've got very good line of sight on the revenues from this business. When you see the fundraising, as outlined in page 370, those are new commitments. The revenue comes on when the money's put to work and invested. We have these commitments in hand, and the revenues are going to grow and the earnings are going to grow as the money's invested.
Right now our original guidance for 2021 was CAD 10 million contribution from Northleaf. I'd guide you for 2022. You can probably expect about double that, about CAD 20 million. That is a function of all the business activity that's been put on this year.
That's super helpful. Just going back to the SG&A question for 2022. I just wanted to make sure, and I know you're going to refine it next quarter, but are you talking about total 3%, including business development and operations and support, acknowledging that business development has that variability?
Yeah. That's right. You can think of it as being 3% overall with the qualifier on business development and the fact that Mackenzie wholesale and commissions are in there.
Just lastly, James, just on the capital, you talked about NCIB or share repurchases being a bit lower on the priority. When do you expect to renew your NCIB or initiate one? Because I don't think there's one right now.
Yeah. No, you're correct. There is not one right now. Look, let's see how the next several months unfold in terms of capital deployment. That's certainly something we're thinking about for some time in 2022.
Great. Thank you very much.
This concludes the question and answer session. I would like to turn the conference back over to Mr. Potter for any closing remarks.
Thank you, Ariel, and thanks to all of you who joined the call today. We wish you a great upcoming weekend. Ariel, with that, we'll close out the call.
Thank you. This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.