Thank you for standing by. This is the conference operator. Welcome to the IGM Financial Third Quarter 2022 Analyst Call and Webcast. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will 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 then zero. I would now like to turn the conference over to Kyle Martens, Treasurer and Head of Investor Relations. Please go ahead.
Thank you, Sachi. Good morning, everyone, and welcome to IGM Financial's 2022 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; Luke Gould, President and CEO of Mackenzie Investments; and Keith Potter, 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 of the presentation. Slide four summarizes non-IFRS financial measures and other financial measures used in this material. On Slide five, we provide a list of documents that are available to the public on our website and on SEDAR related to the third quarter results for IGM Financial. With that, I'll turn it over to James.
Well, good morning, everyone. I will take us to Slide seven to start with the IGM highlights for the third quarter. Earnings per share of CAD 0.91 was the third best Q3 on record, a strong outcome. AUM and AUA ended the quarter relatively unchanged compared to June 30, down only 1.6%. That said, we continue to operate in a challenging macroeconomic environment with continued market volatility. Mackenzie's net redemptions of CAD 819 million are in line with the industry results for Q3, and I'll speak more to the industry operating environment on a coming slide. At IG Wealth, net inflows were a solid CAD 406 million during Q3, demonstrating the strength and resilience of this operating platform. Northleaf maintained its trend of AUM growth during the third quarter.
While we don't include our AUM and flows from strategic investments in our reported numbers, we do believe it's important to highlight to our shareholders the growth path these firms are on. Last quarter, we reduced 2022 full-year expense growth guidance to no more than 3%, which compares to our initial guidance of 5% in February. We believe this is the prudent path to be disciplined in our expense management during this period of heightened uncertainty in the markets. We have begun our planning for 2023. While we will not be providing expense guidance today for 2023, you should expect the planning to be guided by similar considerations to those that have driven the current fiscal year. Prudence and caution remain important watch words. Turning to slide 8, we show our client investment returns alongside major equity and fixed income indices.
Third quarter was another volatile quarter in the financial markets. Our client returns started the quarter in positive territory, but by September 30, we're effectively back to where they started. Equity markets were generally down across the board during the quarter, with China and Asia the most impacted, while fixed income markets held steady. Strengthening U.S. dollar helped our AUM as it has the average Canadian investor with an allocation to U.S. capital markets. October was a much better month for global equity markets, leading to a positive 3.1% average return for our clients last month. Turning to slide 9 on the overall industry net sales, the industry experienced broad-based long-term fund net redemptions across asset classes totaling CAD 17.6 billion during the quarter, the worst Q3 on record.
Industry asset manager peers overall experienced CAD 8.5 billion of net redemptions, down sizably from the record CAD 9.1 billion net inflows last year. Turning to Slide 10 on IGM's results for the third quarter, net earnings were CAD 216 million, and earnings per share were CAD 0.91. Slide 11 highlights net earnings by business segment, which Keith will review in detail during his remarks towards the end of the call. At a high level, earnings across our three main operating companies reflect the year-over-year declines in average AUM that put downward pressure on revenues, while a meaningful component of expenses are fixed in the short term. Turning to Slide 12, AUM & AUA declined 8%-12% across IG Wealth Management, IPC, and Mackenzie during the 12 months ended September 30, 2022.
However, both China AMC and Northleaf have grown their AUM over the last 12 months, up 8% and 24% respectively. Turning to Slide 13 on net flows, IG Wealth's net flows continued to be solid. These results are being achieved during challenging markets that are quite different from the record-setting industry environment in 2021. This demonstrates the leading client and advisor value proposition at IG Wealth. Mackenzie's sales results are in line with the industry outflows during Q3. Northleaf continues to attract new capital to the firm with CAD 291 million of new commitments during the third quarter. Overall, while market and macroeconomic factors are impacting our results, I am pleased with the underlying performance of our businesses and their positions within their industries. Equally, I'm struck by the commitment and determination of our leaders, employees, and advisors to navigate these times.
I'm confident that we will emerge from this environment even stronger and even more resilient. With that, I'll turn it over to Damon.
Thank you, James, and good morning, everyone. Turning to Slide 15 in IG Wealth Management's third quarter highlights. We ended the quarter with AUA of CAD 105 billion, a decrease of 0.4% during the quarter as a result of modest financial market declines. Gross inflows of CAD 2.8 billion were the second-best third quarter in our history, second only to the record high in Q3 2001. We achieved our eighth consecutive quarter of positive net flows at IG Wealth with CAD 406 million during Q3. In this environment, we're naturally seeing a slight uptick in client assets held in cash, HISAs, and GICs as some clients take time to put new money to work into long-term solutions.
This is to be expected, and it's a natural part of the journey as we work with our clients to put their money to work in today's volatile capital markets. IG's redemption rate over the last 12 months remains well below the industry and ended the quarter up slightly at 8.9%, while the industry redemption rate increased to 15.5%. Our positive net flows continue into October with positive net inflows of CAD 150 million. We continue to see strong high net worth and mass affluent new client acquisition with inflows from newly acquired clients over CAD 500,000 totaling CAD 401 million in Q3. Turn to Slide 16.
You can see the Q3 2022 gross and net flows remain solid relative to the past 10 years, especially in light of this year's volatile capital markets. On a year-to-date basis, IG Wealth has achieved the second highest gross and net flows in over 20 years at CAD 9.8 billion and CAD 2.3 billion, respectively. On the chart on the right, you can see visually what I spoke to on the prior slide. We are achieving solid net flows at IG Wealth while seeing short-term products like cash play a larger role due to the current market environment. We're also pleased that our positive net flows continued into the first month of the fourth quarter, which demonstrates both the resilience of our business model and the attractiveness of our value proposition centered around financial planning in the marketplace. Turn to Slide 17.
As a reminder, this slide demonstrates the mechanics behind our net flows and how they can materialize into IGM investment solutions after first arriving as cash, GICs, HISAs, third-party funds, and securities. We're pleased to see solid client inflows as we continue to gain share of wallet from our existing clients, acquire new clients, and recruit experienced financial planners to IG. Given the current market environment, it's natural and prudent for our advisors to build short-term positions and dollar cost average into the markets over time. With this in mind, we fully expect there to come a quarter where AUM growth exceeds AUA growth noticeably as short-term money is redeployed as a function of our clients' financial plans. Turn to Slide 18.
I'll reiterate that during the quarter Q3 2022, we achieved the second-best gross inflows in our history at CAD 2.8 billion, and our net inflows remain solid. We firmly believe we are winning market share through new client acquisition and greater share of wallet with our trailing 12-month net flows rate of 2.9% to end the quarter. On Slide 19, we highlight how IG Wealth's clients tend to remain committed to their financial plans throughout periods of market volatility. IG Wealth's last 12-month redemption rate of 8.9% remains low, while the overall industry redemption rate for long-term funds, on the other hand, has experienced a sharp increase during the third quarter, reaching 15.5% at the end of September. Turn to Slide 20.
This highlights our momentum in high net worth client acquisition, which continues to be a significant contributor to our overall gross and net flows at IG Wealth. Gross flows from newly acquired clients over CAD 500,000 remains significantly higher than what we've experienced from 2017 to 2020. Our advisors continue to engage regularly with their existing clients while still acquiring new clients throughout this market environment. We believe this demonstrates the attractiveness of our value proposition and the planning expertise that our financial advisors offer to high net worth Canadians. Lastly, on Slide 21, this shows our productivity by advisor experience. Both our new advisors and most experienced advisor practices are continuing to deliver strong productivity numbers as measured here by gross inflows per advisor.
We've undertaken a number of initiatives over the past five years to drive productivity gains and expect continued momentum in future quarters. Now I'll turn the call over to Luke Gould.
Great. Thanks, Damon. Morning, everybody. I'll take us to Slide 23 and review Mackenzie's Q3 results. First, total AUM of CAD 180.5 billion was down 2.3% in the quarter due to negative investment returns of 1.2% and negative net outflows of CAD 819 million. Second, investment fund net redemptions were CAD 680 million, reflecting a net redemption rate in line with industry peers, as described earlier by James.
Third, we're very pleased to report that Mackenzie's overall Advisor Perception Study rank improved to second in the 2022 Advisor Perception Study by Environics. We continue to be ranked number two in advisor sales penetration overall and across all channels, IIROC, MFDA, and insurance. We also maintained our rank of second in brand equity. On point four, I'd highlight we had two fund launches in the quarter. We launched the Mackenzie Inflation-Focused Fund in September. This fund is a balanced fund co-managed by the resource and fixed income teams, and it's designed to provide inflation resilience through tactical allocations in different inflationary environments. We also launched the Mackenzie Bluewater Next Gen Growth Fund. This is a global equity fund that seeks to invest in dominant businesses underpinned by next-generation products, services, and business models.
In coming slides, I'm also going to profile continued strong business development at Northleaf, with AUM up 5% in the quarter and year-to-date fundraising of CAD 2.5 billion, leading to AUM growth of 18.5% to CAD 23 billion year-to-date. On Page 24, you can see October Q3 and year-to-date investment fund sales results. As mentioned earlier and profiled in the next slide, our net sales results are in line with industry peers, and gross sales declines are also consistent. During the third quarter, as profiled earlier by James, we continue to see in the industry significant migration to safety, with meaningful flows to GICs, other deposit products, and high interest savings account offerings.
My overall observation on this would be that in the context of Canadians' portfolios, this net flow is relatively small, and Canadians generally and universally are remaining committed to their financial plans. You'll see on the coming slides that we see improved investment performance during the quarter. With our boutique approach, we're fortunate to have diversity of products with compelling performance and features in categories that are very relevant in this environment, and we are leaning in on these offerings. On Page 25, I've already summarized net flows and spoken to the industry environment. At the bottom, in the left, you can see that following record high net sales results and meaningful market share gains, we're currently maintaining market share. One of the product areas that's been depressed for us in this environment has been fixed income, where we've seen earlier success in several categories.
We have solid relative performance in many of these products, but flows have been affected by industry sentiment. I'd also highlight in the bottom right that we had a noticeable improvement in the proportion of our assets in four and five-star funds. I'd remind everybody that with our diversified boutique approach, we target to have 60% of assets in four and five-star funds and to consistently be above 40%. During the quarter, we did see rating increases in three of our five largest funds to four or five-star. On Slide 26, you can see our retail mutual fund AUM investment performance and net sales by boutique. This boutique investment structure continues to offer diversification benefits to the company and excellent choice for advisors through market cycles. You can see with the asset weight percentiles and Morningstar ratings that we have strength across many of our boutiques.
Some of the things we're currently emphasizing include inflation-resilient mandates, which we offer across multiple boutiques and product offerings. This includes our newly launched inflation fund and other products managed by our resource team. Infrastructure and TIPS offering within our ETFs offer inflation resilience, and we also have our infrastructure and other private offerings with Northleaf, which are very, very compelling during inflationary environments. I'd also profile dividend and income mandates managed by our global equity and income team and our monthly income portfolios all have exceptional investment performance and are managed by our asset allocation team that keeps the monthly income portfolios. I do want to highlight our Greenchip environmental products, which are currently our best sellers and are so relevant in this environment and have exceptional performance.
The last one I'd highlight that we're leaning into is Canadian equity, where we have strength across multiple boutiques, and we do see see demand in the marketplace. Moving to Page 27, a few comments on China AMC, starting with this slide on industry assets and flows. You can see on the left, industry assets of RMB 26 trillion is relatively unchanged in the quarter. While equity markets experienced declines, and actually meaningful declines, this was fully offset by continued significant contributions to long-term funds by Chinese citizens. At RMB 666 billion in the quarter, this represented an annualized net sales rate of 17% on long-term funds. On the right, you can see China AMC continues to gain market share within a high-growth market.
You can see that we continue to be the second largest in the Chinese industry in long-term funds with 4.6% share of assets. On Page 28, it focuses on China AMC's growth in AUM, which continues to be strong. Long-term fund and overall total assets were essentially unchanged quarter-over-quarter in spite of financial market declines as a result of very significant net sales activity. For perspective, China AMC's annualized net sales rate as a percent of long-term funds has been trending at over 25% over the past few quarters. Turning to Page 29, you can see Northleaf Capital Partners' CAD 23.1 billion in AUM and their strong growth across private equity, private credit, and infrastructure asset classes. As mentioned earlier, year-to-date, Northleaf has expanded AUM by 18.5%, driven by strong fundraising of CAD 2.5 billion.
I'll now turn the call to our CFO, Keith Potter.
Great. Thank you, Luke, and good morning, everyone. On Page 31, you can see our AUM and AUA. The chart on the left shows ending assets were down 1.2% during the quarter due to negative market returns. It was a volatile quarter that started with strong results in July, but it did reverse course, and we ended slightly negative. While markets are off to a positive start in October with client returns of 3.1%, we expect market volatility to persist in the near term, and we will continue to manage our business accordingly. Slide 32 shows quarterly EBIT in millions of dollars on the left and as a percentage of AUM and AUA on the right. I have a few comments here.
First, on the left, you can see our overall revenue of CAD 827.3 million is up from last quarter of CAD 824.7 million, even though average AUM & AUA is down 3.2%. There are a few reasons for this. First, net wealth and asset management revenue of CAD 527.7 million is down only 1.3% relative to the AUM & AUA at 3.2% in the quarter, and is driven by higher net asset management fee rates at Mackenzie. There's also one additional day in Q3 relative to Q2. We also had a better quarter in the mortgage insurance business with other financial planning revenue up CAD 6 million. The second point on revenue is that the share of associate earnings and net investment income are up CAD 8.6 million combined.
With respect to expenses, the combination of business development and ops support is up 2.8% relative to 2021, and down 4% relative to last quarter as we stay focused on expense management. On the right, you can see our adjusted EBIT margin as a percentage of AUM is up slightly relative to Q2, but down relative to Q3 2021. Turning to slide 33, we can see our consolidated earnings for IGM. I just have three comments on this slide. First, I'd point out that net investment income and other was CAD 11.1 million in Q3 2022, and is driven mostly by interest income earned on cash as we experience a rising rate environment, and secondly, from favorable seed capital marks on certain mandates and some small FX gains.
Point two, operations and support business development expenses combined increased 2.8% year-over-year, as I mentioned, but I will point out that expense growth would have been under 2% if not for a one-time item at IPC. We maintain our full year 2022 expense guidance of no more than 3%. As James mentioned earlier, we're in the middle of the 2023 planning process, and we'll provide guidance on 2023 expenses in the new year. I will reiterate that we continue to take a prudent approach, like we have done in 2022. Lastly, on point three, our dividend payout rate on the last 12-month basis is 70% of cash earnings. Turning to Slide 34, you can see a summary of IG Wealth's AUA and the key revenue and expense margins.
On the top right, our advisory fee revenue rate was down 0.6 basis points this quarter. This was primarily driven by the mix shift of over CAD 600 million of AUA into cash GICs and HISAs in the quarter. We do not charge an advisory fee on this amount, but we do earn a spread on cash, just not to the same level as the advisory fee rate on long-term solutions. We expect to generate a higher spread on cash balances in Q4 and into Q1, which will put upward pressure on the advisory fee rate. Having said that, as we continue, we would continue to expect some slight downward pressure of point five basis points per quarter as investment returns improve and we make progress in the high net worth market.
Our product and program fee rates decreased slightly in Q3 from some targeted fee rate changes announced in June on certain IG funds as part of their prospectus renewal process. We would expect this line to stay relatively flat going forward, as it has for the past several quarters. With regard to asset-based compensation rates, I would highlight that we continue our efforts to drive productivity growth through our network. We did harmonize the support available to our regional leaders in Q3, which shifted the geography of about 1.3 million from sales-based compensation into the asset-based compensation line. This had approximately a 0.5 basis point impact on the asset-based compensation rate this quarter. The reduction in sales-based compensation for the period is not noticeable in the expenses as it would have been capitalized and amortized.
Just to be clear, this is a small change. It does not impact the total amount of compensation paid, but just the geography. As we look forward, a 0.5 basis point per quarter increase in this rate is reasonable expectation for the remainder of 2022 as DSC units continue to mature. Just as a reminder, all DSC units will mature by the end of 2023 and will alleviate some of the increase here. On slide 35, you can see IG overall earnings of CAD 109.5 million, down 22% relative to Q3 2021. It's primarily driven by lower AUM and AUA and the impact it's had on revenue.
Also, we continue to remain focused on managing expense growth, and the combined business development and ops support was up 2% from Q3 2021, trending below our full year guidance for IGM of no more than 3% growth. Moving to slide 36, you can see Mackenzie's AUM by client and product type, as well as net revenue rates. I have one comment on this slide, and really on the right, focusing on the blue line, you can see the net management fee rate for third-party clients, excluding Canada Life at 82 basis points. The increase of 1.5 basis points quarter-over-quarter is primarily driven by lower deferred selling commission expense, which are netted within this line, as well as the seasonal impact on how asset-based compensation is paid to dealers.
As I mentioned last quarter, Mackenzie stopped selling DSC and low load options, and therefore, our expense for Q3 was zero versus $2.3 million last quarter. Other than this, we'd expect this rate to stay fairly stable going forward, subject to any major shifts in retail versus institutional or client asset class shifts. Turning to Slide 37, where we show asset management segmented profitability. Just one brief highlight under point one. The ops and support and business development expense combined were down 0.1% year-over-year. Business development expenses were down primarily due to lower variable costs related to sales-linked compensation items. Slide 38 has China AMC's results on the left. Total AUM of RMB 1.73 trillion is up 10% from last year.
At the bottom, you can see long-term funds were up 17% from last year in the dark blue stack, driven by continued net sales in industry and for China AMC. With respect to earnings on the right, I'd point out that Q3 2022 earnings included an after-tax CAD 2 million negative impact from seed capital marks, and that's in the context of a 14% decline in the CSI 300 in the quarter. Normalizing for this, earnings would have been closer to CAD 16.7 million. Now moving to Slide 39. I have a few comments first on IPC. Other than markets, the year-over-year decline in earnings is primarily driven by a CAD 2.3 million pre-tax non-recurring expense and a mutual fund pricing change which accounted for about CAD 1.2 million.
Second, on Wealthsimple valuation, it's unchanged this quarter. We've seen public market peer valuation stabilize, and Wealthsimple's growth is also well in line with our expectations. Finally, in the table at the bottom, we've reflected the upcoming purchase of an additional 13.9% stake in China AMC for CAD 1.15 billion. Along with that transaction, the sale of part of our Great-West Life stake. We do expect this to close in 2022. Lastly, on slide 40, you can see our typical disclosure around some of the parts. At the October 31st closing price of CAD 36.47, the implied PE multiple for IG and Mackenzie, based upon expected 2023 earnings, is 6.5 times.
I'd also highlight in the second column from the right on allocated capital and other, where you can see we have excess capital of CAD 772 million or around CAD 197 million pro forma the China AMC transaction close. That'll conclude my remarks, and we'll open up for questions.
Thank you. We will now begin the question and answer session. To join the question queue, you may press star then one on your telephone keypad. If you're 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. The first question is from Nik Priebe from CIBC Capital Markets. Please go ahead.
Okay. Thanks. Good morning. I want to start with a question on IG Wealth. From a segmentation perspective, when you break down net flows between high net worth and non-high net worth, is there any discernible difference evident between those two client categories with respect to the resiliency of flows in a volatile market like the one we've seen this year? I suppose another way of asking is, are you seeing a lower redemption rate from high net worth clients in that channel?
Yeah. Nick, it's Damon. I would say that for the high net worth part of our business, you see resiliency in a sense that you know, the redemption rates are pretty consistent across the board for all segments. You see resiliency in a sense that they generally have more cash to deploy. A lot of the cash positions would come from that high net worth segment. You know, we take a long-term approach, particularly in this market, to dollar-cost average into their long-term positions. That generally leads to once again a pretty good redemption rate as to where we are today.
Okay, that's helpful. Just one other point of clarification. On the increase in the proportion of Mackenzie Fund assets that are rated four or five stars by Morningstar, as you noted in your prepared remarks, that took a bit of a step up in the quarter. If I look at the proportion of fund assets that are performing above median on a trailing 12-month basis, that was essentially unchanged sequentially. Was the increase in the four- and five-star fund assets just a product of a few larger funds being pushed from three to four stars in the quarter? Just any additional color you could provide maybe on that?
Yeah, for sure, Nik. Yeah, the largest one. You know, as you know, the Morningstar ratings is a combination of the 10, 5, and 3-year returns, and they're risk-adjusted. Where we saw the improvements was, first of all, our Canadian growth mandate, which did very good in the quarter and were pushed up, and that was to four and five-star in A and F, respectively. Our global dividend, which is our third-largest fund, was upgraded, and Ivy Foreign Equity has actually performed very well in this environment and had upgrades.
Okay, very good. That's helpful. I'll pass the line. Thank you.
The next question is from Geoffrey Kwan from RBC Capital Markets. Please go ahead.
Hi. Good morning. James, just wanted to ask you about the China AMC transaction. Just more broadly, though, is what sort of appetite would you have to acquire the remaining 10% stake by that other shareholder, if that were to occur, would that have any change in terms of how China AMC might operate and call it strategize, given it would only then just be you and CITIC as the shareholders?
Yeah. Well, good morning, Geoff. Look, I think pro forma our acquisition of Power's, you know, approximately 14% stake in the property. I think from a size perspective, I think we've got it about right. I mean, it gives us meaningful exposure to, you know, China AMC. It gives us meaningful exposure to, you know, the Chinese economy. But on the other hand, from a risk management perspective, you know, it'll be about 15% of consolidated earnings. You know, that's really what we're balancing here. We want exposure to a great property and a high, what we believe will continue to be a high growth market.
We do look at this overall from a risk management perspective, and 15% of, you know, contribution to consolidated earnings, you know, feels about right. That would be my take on that 10%.
Okay. No, that's helpful. Just my second question was, Luke, you know, there's been generally a greater trend of trying to sell, you know, alternative strategies, private equity funds, those sorts of things, in covering different asset classes to qualified retail investors. Is this something you would like to do with Mackenzie to further differentiate yourself, you know, kind of in the market? If so, do you see Northleaf as capable of achieving this, or might you need to partner or even acquire other players?
Right now. Great question, Geoff . We actually celebrate an anniversary on Friday. It was the two-year anniversary of our Northleaf acquisition. Since then, we've launched four products now covering all three of their asset classes, private equity, private credit, infrastructure. You remember we launched the interval fund on private credit earlier this year. Right now we're out there actively promoting those products. We're so pleased with Northleaf as a partner and what they offer. We don't have any plans to expand beyond Northleaf. We're out there right now educating advisors and working with dealers to promote these products. As mentioned, we think these products, all three of them, those categories are so relevant in this environment.
We view ourselves as a pioneer in bringing privates to retail. We do call it the missing middle. Institutions, for so long, have had access to private markets, and retail has not. We're so excited about the future for these products. We think it's going to be a big part of Mackenzie and a big part of Canadians' portfolios going forward. It's a great question, and we're leading in on this one.
Okay, perfect. Thank you.
The next question is from Scott Chan from Canaccord Genuity. Please go ahead.
Hi. Good morning. Just maybe a bit of clarity on the net investment income. If I kind of look back in past quarters, it kind of ranged between CAD 2.5 million to over CAD 3 million, and last two quarters were negative. You spoke that the majority of the income came from excess capital. Was that from the unallocated capital that will be reduced with China AMC? I'm just trying to figure in a rising rate environment how sustainable that line might be near term and what could be a normalized rate going forward.
Yeah. Thanks, Scott. It's Keith here, and good morning. The CAD 11 million this quarter, I would say the majority of it would just be coming from interest income on cash. You could look at our balance sheet. We have about CAD 1 billion in cash on the balance sheet. You can call that, you know, CAD 7 million of the 11, and the rest would have come from some favorable capital marks and some small FX gains, as I mentioned. As you think about finalizing the China AMC transaction, you know, about half that cash will be put to work to finalize that transaction. As you know, rates have risen, we'll continue to earn that interest income on the remaining cash balance.
That's very helpful. Then you talked in your opening remarks about Investors Group or IG, the quarter being better in mortgage and insurance. I remember last quarter, you kind of telegraphed that mortgages might be weak again in terms of prepayments with higher rates. Maybe you can talk, is it more insurance that was better in the quarter or maybe an update on both those kind of product lines within IG in the quarter?
Yeah, sure. I'll start with the mortgage business. We did have CAD 8.3 million in the quarter versus CAD 4.5 million. One of the biggest differences, we didn't have any institutional sales where you recognize gains and losses up front. If you recall last quarter, we had a loss of CAD 2.8 million as this commitment cost with the rising rates. That's one of the main differences this quarter. Prepayment penalties were quite in line with Q2. I mean, the clients just aren't breaking mortgages to renew into higher rates. We expect that to continue going forward.
If you think about the mortgage business, subject to our funding mix, you know, CAD 6-8 million per quarter is a reasonable way to think about it. Then on the insurance side, we did have a better quarter of insurance. It was up by, you know, approximately CAD 3 million. Just had some larger case insurance that we wrote this quarter. You can also see that flowing through the other product commission line that's up a little bit as well. So that's those are those two items.
Right. Just last question on China AMC, and maybe on the industry, very helpful in terms of what you provided in Q3. Obviously, the CSI was down over 14%. In your commentary on net flows were 17% annualized, which helped protect China AMC as well in terms of assets in the quarter. It seems like that trend is so opposite versus what we see in North America when markets are down, flows accelerate, especially in China going into long-term funds. Was there any special dynamic in the quarter that drove that net flows, or is it more just that low penetration and better industry dynamics that we're seeing there?
Yeah, good question. It's Luke speaking. We view this as secular. Right now, China's building a retirement system. This is an industry that's in its infancy still, in spite of being a bit larger than Canada's already. This type of contribution is we expect it to continue. It's a growing industry, and the Chinese are contributing to their savings. They're going to continue to do that. That's been our mantra. They're building retirement system. There's a number of initiatives that are going to promote further individual savings, like the individual digital retirement accounts that have been approved just last year. Yeah, China AMC is going to be a part of that growth, and we're excited for it.
Okay. Thank you very much.
As a reminder, if you have a question, please press star then one. The next question is from Graham Ryding from TD Securities. Please go ahead.
Yeah, I'll start with a question for Damon. It's more of an industry question, so if James or Luke, if you want to chime in as well, by all means. Slide 19, you show that IG Wealth continues to outperform the industry with respect to redemption rates. It does look like the industry overall has not seen the redemptions like we've seen back in the global financial crisis or even the recent peak in 2019. Is it just a matter of time before the industry gets back to those levels, or do you think there's something structurally that's changed here within, you know, the financial advice industry? Are investors more willing to stay the course now relative to past cycles?
Yeah, what we're seeing is that generally speaking, investors are more informed than ever before, and they're willing to stay the course more than we have seen in the past. This is different. Usually when this happens, there's some place to also hide, and there's been no place to hide but to stay invested, and that includes real estate. Real estate has always been the biggest substitute in our industry, and certainly it's not a place to hide right now. You know, advisors across the country, and particularly at IG Wealth, we're doing a great job of talking to our clients and making sure that they understand what is happening in context of their long-term plan, and that's why we stress test it so that they're informed.
When they're informed, they can make informed decisions. That's what we're seeing.
The thing I'd add to that, it's Luke speaking. That mantra that I said earlier, generally people are sticking to the plan. There's some reallocation to perceived safety, and I would reinforce that perceived safety is perceived in the context of inflation. People are not preserving their wealth by moving to cash and cash substitutes right now. So we think Canadians are being responsible. That's slide 19. It positions it well. Will it go up to 18%-19% as an industry rate? It is still rising, but I don't think it's going to get there this time.
Okay. That's helpful. Luke, I'll stay with you. Just your the fund performance side of things. We saw some improvement with your four, five-star funds. You're targeting 60%. Is that a new metric, or have you always targeted that? Have you been above that level in the past, or would that be a milestone?
Yeah, that's been our target for about seven years now, seven or eight years. With our boutique approach, I'll first back up by saying in Canada, CIFSC categories, the categories against which we're evaluated, they're very broad. You've got a global equity category. There's no global equity large cap growth category or global equity large cap value. As a consequence of that, when you look at our boutique approach, we if we ever had something above 60%, we'd actually be raising the alarm bell saying something's wrong. People are talking to each other. We got group think, or we got concentration. We purposely targeted 60%. We were there about four quarters ago. We're at about 61%, and that is our target.
We've actually said to ourselves, if we're doing all the controllables right, so when you look at the Advisor Perception Study and the 42 metrics, if we're doing all the controllables right, and we consistently got between 40%-60% of our assets in four- and five-star funds, which we should have with this boutique approach and trying to have investment excellence everywhere, then we can be a consistent top three net seller in this industry. That's been our target is a range of 40%-60%, and 60% is our target. If we ever found ourselves at the 70%-80% of our assets, four and five-star, given the way categories are constructed in this country, we would be ringing the alarm bell saying, you know, "How is everything doing so well?
Are our boutiques talking to each other and sharing best ideas?" Which is something they certainly don't do at their autonomous boutiques.
Okay. That's helpful. One more, if I could. Keith, just, you made a comment, I think, on just the asset-based comp level at IG going up, 0.5 basis points per quarter. Does that persist until the end of 2023, or is that just for this year?
Yeah, you know, we talked about in the past the, as markets move up and rise again and we continue to shift our mix to high net worth, you know, we had guided in past quarters that we'd expect it to tick up about 0.5 basis points per quarter. You know, when you combine that with the impact from the maturing DSC units. There's a number of variables though that can influence this line item. There's obviously the shift in client mix that I just talked about. There's also investment returns, and we saw that happen in Q2. When markets fell, we actually had clients shifting peers. That's another thing that can influence that line item.
The other thing I just spoke to is the mix shift between really right now between cash GICs and our long-term solutions, and that as well, you know, can put i mpact on that line. Really at the end of the day, I'd say, yeah, a 0.5 basis point impact on the asset-based comp is really going to come from the.
Why don't we take the next question, operator, and we'll come back to this.
Great. The next question is from James Shanahan from Edward Jones. Please go ahead.
Good morning, everyone. I'm going to apologize in advance because you may have mentioned this, and I missed it. Can you please catch me up on the timing related to the closing of the additional interest in China AMC and the sale of Great-West Lifeco shares?
Yeah. Thank you for the question. We've been working hard at it, have made great progress, and we fully expect the transaction to close in Q4.
My follow-up question is related to the you know financial advisors. I noticed that there was a decline in the number of financial advisors with the you know with the firm for less than four years. I was curious perhaps what was happening there. My understanding was that you had reinitiated efforts to recruit and train advisors, and this appears to be you know perhaps a modest setback. Just like a quick update on the strategy there for recruitment and development. Thank you.
Yeah, James, it's Damon. So yeah, no, we are recruiting advisors, but our strategy is changed in the sense that it's not quantity, it's quality. We're very selective in who we bring to the organization. We only bring advisors that really want to specialize in financial planning within their communities and make sure that they focus on providing advice beyond an investment advice to their clientele. We're quite pleased with where we are with our network. Our size of our network is quite steady. When you take a look at the numbers, you'll see that overall the mix has changed. We really added a significant number of associates to our teams.
We believe the future is, you know, a little smaller number of teams, but larger teams, where it gives them more capability to provide broader advice to their clientele. We're like I said, we're very pleased with the size of our network and the trend of where we're going.
James, it's Luke. One thing I'd add on the disclosures, we disclose advisor practices with less than four years and greater than four years. The way we've defined the less than four years is in terms of industry experience. When IG brings in an experienced recruit from a competitor, it goes right into the greater than four-year bucket.
That's interesting. I wasn't aware of that. Thank you. If I could ask one more quick question. Has the firm disclosed publicly the percentage of client accounts or client assets that are handled by the National Service Center?
Yeah. We've been public about the fact that we've got over 230,000 accounts at the National Service Center, and it's something that quite frankly, we're going to look to grow over time, because that allows us to ensure that we're serving these clients that generally speaking, are more advice light and want a little bit more of a digital experience and want quick advice when they need it.
It allows us to service them appropriately and the best way for them, and it allows us to free up our advisors and once again provide more capacity for them to focus on providing the advice that high net worth Canadians need, which is more complex, and it takes more time and more of a human touch.
Thank you.
The next question is from Jaeme Gloyn from National Bank Financial. Please go ahead.
Yeah. Thanks. Good morning. First question, just digging into the client types and not so much focused on high net worth clients, but more on your average household, let's say. Looking at the savings rates declining both in the US and here in Canada. Just want to get a sense as to the performance of that average Canadian household. What are you seeing from their perspective on net flows either in the IG or the Mackenzie business?
Jaeme, it's Damon. I'll start off and then Luke can chime in. What we're seeing across our segments are a few things. Obviously, as you move more to high net worth, you're dealing with individuals at higher disposable income, and their savings rate tends to be higher. You're bringing in more cash right now. I've already mentioned that for Nik's question. Above and beyond that, for all segments, what we're seeing is that you know, it's always been the Canadian way to diversify your portfolio, but always also to diversify your advisor.
What is taking place with COVID and now with the markets and inflation and interest rates, it's given a lot of our clients really the opportunity to juxtapose their advisors and who's providing them advice, particularly advice beyond investment advice. What we're seeing right now is there's a consolidation of advisors within all segments. For us, it's been an opportunity to capture greater share of wallet with our existing clients. While their savings rates might be, you know, in the 1% or 2% a little bit lower than over the previous years, there's still a great opportunity to bring in new assets with existing clients as well as obviously new client acquisition.
Actually, I build on what Damon said. A few things. One, there's certainly not only a difference in savings rate by household wealth, but also by age. One thing that we've been not surprised by but we observe is our people are aging and entering sixties and seventies. There's still contributions that are happening. We are actually, you know, building products, and a lot of what we do is about managing people through decumulation. I would put out we actually see contributions across ages. I want to start with your first comment about savings rates declining. We actually are big fans of Investor Economics as a firm and Strategic Insight in that group.
Right now, the contribution rate to Canadian savings that's being forecast by Investor Economics is about 3% of assets per year. We obviously declare that one of our North Stars, that's gonna maintain market share for us if we've got a net sales rate of 3%. But they're not seeing, you know, a decline in contribution rate to Canadian savings over time. Last year was obviously above average in terms of contributions to the industry and to savings given the pandemic and a lot of what we've experienced. The outlook that they have and that we share is that savings rates will continue to be very healthy in Canada for the next decade.
A net contribution rate of 3% per year is where we anchor our thoughts.
Okay. I appreciate that perspective. Second one, the M&A environment, has the pipeline of potential opportunities increased, given what we've seen as a reduction in valuations, or is it sort of a case where your currency has declined and that also sort of streamlines the potential opportunities or pipelines available to you in the M&A front and thinking about your growth through that strategy?
Yes, James. I do not think that the opportunity set has increased at all. I think we're still in that stage of the market where, you know, buyers see value at one price and sellers see value at another price. You see the volume of transactions, you know, kind of fall precipitously. This is true in multiple markets, including obviously the housing market in this country. I think it's still the case that there's a very large gap. You know, my observation would be there's still a very large gap. It may be as large as I've ever seen between, you know, public company valuations and private market valuations generally. Public valuations reset quickly as rates rose.
We know that it takes private markets a little bit longer for values to reset. Ultimately, I think that will happen. I think this environment actually could persist a bit longer, frankly, where you don't see a high volume of transactions and you don't see a lot of M&A.
Understood. Thanks very much.
This concludes the question and answer session. I'd like to turn the conference back over to Kyle Martens for any closing comments.
Thank you, Sachi. Thank you everyone for joining us on the call this morning, and certainly hope everyone has a great weekend. Sachi, with that, I'll ask you that you please close out today's call.
Certainly. This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.