Thank you for standing by. This is the conference operator. Welcome to the IGM Financial Fourth Quarter 2025 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 two. I would now like to turn the conference over to Kyle Martens, Senior Vice President, Corporate Development and Investor Relations. Please go ahead.
Thank you, Rocco. Good morning, everyone, and thank you for joining us. On the call today, we have James O'Sullivan, President and CEO, 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, IGM Financial. Before we get started, I would like to draw your attention to our cautions concerning forward-looking statements on slide three of the presentation. Slides four and five summarize non-IFRS financial measures and other financial measures used in this presentation. On slide six, we provide a list of documents that are available on our website related to IGM Financial's fourth quarter and fiscal 2025 results. And with that, we'll take us to slide nine, where I'll turn it over to James.
All right. Thank you, Kyle, and good morning, everyone. 2025 was clearly a strong year for IGM Financial. Growth in client assets across our compelling lineup of wealth and Asset Management businesses, including in our core businesses of IG Wealth and Mackenzie, demonstrated strength and momentum during the year. This broad-based success drove IGM's adjusted earnings per share up 17% year-over-year, to a record high of CAD 4.61. 2025 was also a year where we had the opportunity to showcase the embedded growth within our strategic investments, with the announcement of two important transactions later in the year.
The Rockefeller transaction, which Keith will speak to in greater detail, was an important business milestone, and with the value of our equity interest nearly doubling in two and a half years, our investment decision of 2023 has clearly been validated. Our participation in the transaction was guided by the key principles of supporting the positive evolution of Rockefeller's ownership structure, while maintaining IGM's significant influence and privileged position as the second-largest and only wealth manager in the company's cap table. Our support of the transaction demonstrates our long-term strategic perspective on Rockefeller. The Wealthsimple transaction, another long-term strategic investment, reflected its explosive growth and significant shareholder value creation. Our strategic investments continue to elevate IGM's diversified growth profile, complementing the strength and momentum in our core businesses.
Turning to slide 10, with clear momentum across our businesses, 2026 will be a year of capitalizing on accelerating growth and our financial strength. At IG Wealth, the focus remains on extending our success in the high net worth and mass affluent client segments, leveraging our segmented advice model and increasingly embracing AI-powered tools to further elevate the advisor and client experience. At Mackenzie, we will maintain our focus on product innovation, expanding distribution reach, and investing in our client and advisor experience as we continue to build on our strengths in advanced data analytics and artificial intelligence to further elevate investment excellence. And across the six wealth and Asset Management businesses, we continue to pursue opportunities to work collaboratively across businesses to elevate our capabilities and create collective value. We refer to this as the benefit of horizontal connectivity. Shifting now to capital allocation.
With strong business momentum and fundamentals, combined with clear financial strength, we enter 2026 positioned to meaningfully increase capital return to shareholders. During December, we launched a normal course issuer bid for up to 5% of our shares outstanding, and over the past two months, we've been quite active. Our intention is to repurchase the full 5% over the remainder of the year. Yesterday, our board approved a 10% increase in our quarterly common dividend. The increase demonstrates the management team and the board's confidence in our financial position and growth trajectory. Before passing the call over to Damon and Luke to discuss more details on their businesses, I'll shift briefly to the fourth quarter, starting on slide 11. Q4 adjusted earnings per share of CAD 1.27 was another record high.
During the quarter, IGM was once again recognized for our efforts as one of Canada's top 100 employers and among Corporate Knights Global 100 Most Sustainable Companies. Turning to slide 12 on the operating environment, after a 15% year in 2024, IG and Mackenzie's average client return was nearly 12% during 2025. Notwithstanding the evolving global economic environment, the strong market returns, along with easing inflation during the year, are supporting a constructive backdrop for our businesses as we start 2026. Slide 13 demonstrates the earnings growth across our wealth and Asset Management segments, with consolidated 2025 adjusted net earnings up 16% year-over-year, including a 21% increase in the fourth quarter. Slide 14 highlights our asset growth on a look-through basis, which in aggregate grew by 17% at the IGM level, with contributions from each of the six businesses.
I'll turn it now over to Damon to speak to the Wealth Management segment next.
Thank you, James, and good morning, everyone. Turn to slide 16 in Wealth Management's fourth quarter highlights, including IG Wealth, Rockefeller, and Wealthsimple. I've been speaking about the momentum at IG Wealth for more than a year now, and in the fourth quarter, that momentum accelerated. Our quarter end AUMA of CAD 159 billion was a record, up 13% from Q4 of last year. Our gross flows of CAD 4.8 billion and sales of CAD 4.5 billion were both Q4 records and demonstrated strong year-over-year growth. New client growth inflows of CAD 1.6 billion grew almost 19% versus Q4 2024, with 81% of those flows coming from mass affluent and high net worth clients.
The quarter also delivered strong total net inflows of CAD 694 million, and net sales into IGM product-- or IGM product, yes, of CAD 347 million, representing the six consecutive quarters of positive net flows and sales. Our momentum continued in January, with adjusted net inflows of CAD 102 million and strong net sales into IGM product of CAD 704 million. Of note, our total net inflows during January of CAD 3.4 billion included CAD 3.3 billion in flows from our institutional clients related to our strategic investment in Rockefeller. We view these flows as further evidence that our investment is truly strategic, and as James just spoke about, an example of horizontal connectivity.
One of the drivers of our success has been our ability to share our views with both current and prospective clients across leading financial planning and investment topics. For the third consecutive year, we ranked number one in earned media share of voice among both national banks and independent firms, continuing to confirm that our voice is being heard. Lastly, both Rockefeller and Wealthsimple continue to deliver growth. I'll speak to more of this on upcoming slides. Moving to slide 17. On the left-hand side, you can see solid growth in our adjusted flows, with record growth inflows across all periods, which are supporting our strong net inflows. The graph on the right demonstrates the strength of our business and ability for our advisors to work with their clients as they dollar-cost average into the markets.
This slide also represents a visualization of the returns that our business is reaping from investments that we've made in the past. These investments have elevated our competitiveness in the marketplace in both client and advisor experience. This business was built to gain market share, and we fully expect that our advisors will continue to gain both share of wallet and market share in their respective communities. Turn to slide 18. This provides our view into our operating results, which continue to provide great insight into the strength of this business. Move to slide 19. Our growth inflows from new acquired clients demonstrates the new client acquisition force that IG Wealth has become.
During 2025, gross inflows from newly acquired clients of CAD 5.3 billion represented 17% growth over the prior year, with almost 79% of these inflows coming from mass affluent and high net worth clients. Turn to Slide 20. This showcases the growth that we've delivered in both our mortgage and insurance businesses, with mortgage funding up 23% year-over-year and new annualized insurance premiums up 16% versus 2024. We continue to see strong growth prospects in both of these businesses. Now, let's turn to slide 21 and talk about Rockefeller's progress. Client assets grew by 31% year-over-year, driven by organic growth, inorganic growth, as well as the markets.
Over the last 12 months, organic growth was driven—has driven $10.2 billion in client assets, while the addition of 76 advisors during 2025 has supported inorganic growth of $15 billion in client assets over the same period. We are as confident as ever in Rockefeller's ability to continue to execute on their growth-oriented business model. Now, let's move to slide 22 and talk about Wealthsimple as they continue to deliver. Over the last year, Wealthsimple has grown their AUA by 74%, with fourth quarter delivering sequential growth of 10%. At the same time, Wealthsimple has increased their clients served by 24% year-over-year, ending the year with 3.2 million clients. Wealthsimple continues to demonstrate an ability to attract new clients and grow client share of wallet at the same time.
With this, I'll turn the call over to Luke Gould.
Great. Thanks, Damon. Good morning, everyone. Turn to page 24, you'll see highlights for Mackenzie and the Asset Management segment for the quarter. During the fourth quarter, we continued our momentum across a number of dimensions. We ended the quarter with record-high assets of CAD 244 billion, up 2% in the quarter, driven by investment returns for our clients and net sales of CAD 1.5 billion. Our net sales were once again up meaningfully from last year, with momentum across channels and overall sales for CAD 1.5 billion.
Importantly, in the top right, we have highlighted the continued momentum in retail, where we continue to have positive flows and meaningful year-over-year improvement. I'll give a bit more color on the coming slides. We've also highlighted another CAD 2 billion in institutional awards during the quarter that are expected to fund during early 2026. Also, earlier this month, we reported our January sales results. This was our second-best January investment fund net sales in the last 25 years, with significant momentum in retail, where gross purchases were up close to 100% and net sales of CAD 134 million were up meaningfully from 2025. We've been very busy bringing innovative and compelling products to market, with 23 new products launched in 2025.
In the bottom right, we're pleased with a lot of our sales momentum coming from products launched during the last 36 months. You can see we've highlighted four new products launched in Q4, which extend our privates, our quant, and our value offerings. At the very bottom, you can see both China AMC and Northleaf continue to generate good growth. China AMC's investment funds are up 28% from last year, while Northleaf continued to have strong fundraising of CAD 5.8 billion during 2025 and CAD 1.5 billion during the quarter. Turning to page 25, you can see the trend in the history of Mackenzie's investment fund net sales. At the bottom left, we've introduced Mackenzie's overall annual net sales results to this slide to provide an opportunity to showcase the breadth across client segments.
This CAD 6.7 billion in full year 2025 is an all-time high for us, with several awards from institutional investors and financial service partners across several geographies. In the top left, you can see January 2026 was our second-best net sales in the last decade, and Q4, in the middle, was our third best in the last decade. These improvements in 2025 were driven by retail. On the right-hand side, you can see the last 12-month trailing trend with good momentum in retail and overall, and we believe that we have winning conditions entering 2026. As our sales organization leans in on opportunities, we're confident in the continuation of this strong upward momentum. Turning to page 26, at the top left, you can see our net sales segmented between retail and institutional and by delivery vehicle.
We've once again circled the improvement within our retail investment funds, which accounted for a large majority of our improvement from Q4 relative to Q4 2024. Now, on the right-hand side, we provide a snapshot of our top five net selling actively managed investment funds, including both mutual funds and ETFs. We want to highlight that increasingly active equity ETFs are among our top net sellers, with the launch of a full suite of active equity ETFs over the last two years. And here you can see that MIQE, our Mackenzie GQE International Equity ETF, was our second best-selling fund. We want to highlight that we have a pricing philosophy of being clear, consistent, and competitive everywhere, and our management fees are the same on our active ETFs as on the traditional mutual funds.
In the bottom left, you can see that we've been gaining ground, and we are poised to break through the overall industry last 12-month trailing net sales rate. Now turning to page 27, you can see our performance and our net sales for our retail investment funds by boutique. Across the slide, looking near the top, you can see compelling performance relative to peers across multiple boutiques. If you look towards the middle, you'll see continued exceptional relative performance at our global quant equity boutique. As well, looking through the boutiques, you'll see strong performance across time frames for our Greenchip, Cundill, and multi-asset boutiques. I do want to highlight at the bottom, looking at investment fund flows for the quarter. Our global quant equity boutique put up strong net sales in Q4, but we believe we're just getting started as we trailblaze with quant retail.
Their holistic quant all-weather approach that marries AI with HI has delivered performance track records that are leading and impressive, not just in terms of the returns, but also in terms of the consistency of alpha across different environments. Turning to page 28, a few comments on the Chinese investment fund industry. On the left, you can see the industry grew by 14% over the last year and 3% in the quarter, driven by the strong market rebound in Q3, as well as continued industry net flows. On the right, we're pleased with the continued strong performance of China AMC relative to peers, with a second-ranked market share on long-term funds of 6.7% of the industry, up from 6.2% last year. Turning to page 29, you can see the strong growth in China AMC's AUM.
Overall, AUM remained just over CNY 3 trillion and is up 22% over last year. Investment funds increased by 1% in the quarter, and net outflows on money market fund partially offset the net sales into long-term funds. Last, on page 30, you can see another very strong quarter of fundraising at Northleaf, with CAD 1.5 billion of fundraising in the quarter. Over 2025, fundraising was strong across private equity, private credit, and infrastructure, resulting in CAD 5.8 billion of fundraising. This was the best year Northleaf has had in fundraising since we commenced our partnership in 2020. I'll now turn the call over to Keith Potter.
Thank you, Luke, and good morning, everyone. On slide 32, you can see key highlights for Q4. Adjusted EPS is CAD 1.27, up 21% year-over-year, and excludes Life co's other items and gains on partial sales of investments in associates. We returned CAD 263 million to shareholders in the quarter, including CAD 130 million in share repurchases. As James commented, we expect to return more capital to shareholders in 2026 than 2025 through a higher level of share repurchases, including the use of proceeds from the Rockefeller transaction, which contributed to unallocated capital of approximately CAD 1 billion. In December, we filed an NCIB for 11.8 million shares, which is 5% of the outstanding, and our intent is to repurchase the maximum permitted under the bid....
We also increased the dividend in the quarter from CAD 0.5625 - CAD 0.62. Prior to the increase, the last twelve months trailing cash dividend payout rate was 57% and 50% on a run rate basis. As we go forward, we will review the dividend if the payout is below 60%, while giving consideration to our overall capital allocation priorities and general market environment. We also closed on our incremental CAD 100 million investment in Wealthsimple and finalized the Rockefeller transaction, I'll speak to in a few moments. Finally, in 2025, expense growth came in at 4.2%, in line with guidance, and we expect growth of 4% in 2026. Turning to slide 33, you can see our AUM and AUA inflows trend.
We achieved solid asset growth during the fourth quarter, with ending AUM and AUA up 2.5%, while average balances increased 5.4% relative to Q3 and 14% over year over year. On slide 34, you see how higher assets drove solid revenue growth and a 21% year-over-year increase in adjusted EPS at the IGM level. Drilling down to the operating company level, slide 35 presents key profitability drivers for IG Wealth Management. And on the left, you can see that average AUM and AUA was up 4.8% from last quarter. And related to this strong asset growth, our advisory fee rate declined 0.7 basis points during the quarter, primarily driven by clients moving off wealth bands.
On slide 36, IG's overall earnings of CAD 166.9 million in Q4 are up 23.4% year-over-year on revenue growth of 12.9%, demonstrating strong growth and positive operating leverage in the business. On point two, other financial planning revenue continues to demonstrate growth, supported by momentum in the mortgage and insurance business. And on point three, IG operations support and business development expenses were CAD 165 million in the quarter, up 0.7% year-over-year, and up 1.6% for the full year, which is lower than guidance. Moving to slide 37, we have Mackenzie's AUM by client and product type, as well as net revenue rates. And on the left, you can see average AUM was up 5.4% versus Q3.
On the right, the third-party rate, excluding Canada Life, decreased primarily due to the onboarding of CAD 2.6 billion in institutional SMA and ETFs during Q3 and Q4. As we look forward to Q1, we expect this rate to drop approximately 2 basis points from mix shift, driven by institutional onboarding, the strength of our Wealth Management partnerships, and having two less days in Q1. The change in the Canada Life rate was driven by a few items, including a rebalancing mix shift, a one-time fee, annual fee true up, and admin fees that remain stable as AUM increases. Turning to slide 38, Mackenzie earnings of CAD 60.4 million are down slightly year-over-year. One of the main drivers is net investment income and other.
That was CAD 8.5 million last year versus CAD 2 million this quarter, primarily from seed capital gains, and excluding this, earnings would have been up 6%. Operations support and business development expense growth of 9.5% was primarily driven by higher wholesale compensation from improving net sales that Luke commented on, as well as other variable items. And as a reminder, wholesale compensation is expenses paid and is not capitalized and amortized. Turning to slide 39, on operations and support and business development expense guidance. Overall, we expect expense growth of 4% in 2026. I will note that starting Q1 2026, certain investment management advisory expenses at Mackenzie that are primarily variable with AUM and revenue, will be reclassified to sub-advisory expenses from operations and support.
These expenses were CAD 7 million in 2025, and beginning in Q1, they will be retrospectively reclassified from operations and support to sub-advisory expenses. So pro forma these reclassifications, we expect our operations and support and business development expenses to grow by 4%, continuing to balance prudent expense management while growing our businesses. Slide 40 has China AMC results. On the right, you can see China AMC's earnings of CAD 22 million. It was impacted by seed capital losses in the quarter and one-time items. Adjusting for this, Q4 would have been in the range of Q4 2024 through Q2 2025, and in line with our expectations. Slide 41 has earnings contribution from companies in each segment. I'll make a few comments here.
First, Rockefeller had strong earnings of CAD 12.2 million, with growth coming from their core family office business, as well as significant contributions from their strategic advisory M&A practice and other transactional activities, which can vary from quarter to quarter. Excluding the contribution from the variable revenue, earnings would have been closer to CAD 6 million-CAD 7 million, which builds from last quarter earnings of CAD 2.9 million. For Northleaf, Q4 earnings of CAD 8.8 million benefited from a year-end tax true-up and a couple of one-time items. Looking forward, CAD 4.5 million-CAD 5 million net of NCI is a reasonable expectation for average quarterly earnings in 2026, with expected quarterly variability. I would remind Q1 could be somewhat higher due to annual incentive fees. Turning to slide 42 for further details on the Rockefeller transaction.
As we announced in October, we participated in Rockefeller's recapitalization transaction, which saw our investment nearly double in value as compared to the value at the time of the initial investment in April of 2023. The transaction had a few components, including the recapitalization, which included equity, debt, and adjustments to the management incentive programs, as well as a cash distribution to existing investors. A meaningful outcome of the transaction is IGM receiving pre-tax proceeds of $394 million from the sale of a small portion of our investment, and the receipt of a distribution to existing investors. Combining the sale of a portion of our interest and impact of the long-term equity incentive program, IGM now holds 17.2% interest in Rockefeller, valued at CAD 1.16 billion Canadian.
We supported the goals of the transaction by selling a small portion of the investment, while remaining the second-largest shareholder and only wealth manager in the capital stack, with this investment remaining long-term and strategic to IGM. As we look forward to 2026, we expect Rockefeller and the overall transaction to contribute to IGM's adjusted EPS growth. First, we expect proceeds from the transaction to support our NCIB share repurchases, and the amount would represent a notional annualized earnings contribution of approximately CAD 27 million or CAD 0.12 per share. Second, we expect Rockefeller's contribution to IGM's reported 2026 earnings to be approximately break even, and excluding the potential impact from certain equity incentive programs, to be positive and in line with 2025.
And for context, earnings will include incremental interest expense and certain expenses related to equity incentive programs that may create period-to-period variability, given the expected accounting treatment under IFRS, and we will provide updates in future quarters on this. I would note that in Q1, it could be slightly negative due to seasonally higher expenses, and then move to break even and positive for the remainder of the year. Overall, we expect the combined performance of Rockefeller and the impact of the transaction to contribute to EPS growth in 2026 and accelerate into 2027. On slide 43, we demonstrate significant progress on execution against our capital allocation priorities. We returned CAD 263 million in capital to shareholders in Q4, while increasing unallocated capital of CAD 1 billion, including the proceeds from the Rockefeller transaction.
Our leverage ended the year lower at 1.37 x. As mentioned, the board approved a 10% quarterly dividend increase of CAD 0.62 per share, reflecting IGM's strength on strong strategic positioning of our underlying businesses. We currently expect to maximize our share buybacks under the new NCIB. Slide 44 presents a framework for how management views the buildup of IGM's indicative value. The methodology behind this is consistent with the sum of the parts disclosure we've used in the past, that builds up an indicative NAV per share of over CAD 82. We've introduced this view to provide perspective on the value of our collective businesses, given the strong momentum at IGM.
I just note that we derive the indicative value of our core operating companies using an average PE multiple from a diversified group of wealth managers for IG and asset managers for Mackenzie as of market close on Wednesday. The indicative value of our strategic investments is based on our historical approach to disclosures. This valuation framework demonstrates the embedded value at IGM Financial. That will end our prepared remarks, and we'll open it 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 are using the speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. We will pause for just a moment as callers join the queue. Thank you for your patience. Today's first question comes from Scott Fletcher at CIBC World Markets. Please go ahead.
Hi, good morning, everyone. Well, the market narrative over the last few days has really been around AI disruption, and the wealth managers were not immune to that. Just love to get your thoughts on AI and Wealth Management, and how you see the rapid development impacting both on the wealth and the Asset Management sides of the house.
Sure. Good morning, Scott, it's James. I'll start, and then I'll have Damon and Luke make a comment. You know, maybe the most important thing for me to say at the outset is that the last couple of days serve as a reminder that every move in the market does not represent a change in value, but it does represent a change in price. We're gonna integrate AI tools. We are integrating AI tools, and we're doing it to build and deliver an even better advisor experience and an even better client experience. We have a substantial project underway as we speak on AI, and I expect, Scott, we're gonna have meaningfully more to say on this topic during the first half of this year.
With that, a few comments from Damon and Luke on each of Wealth Management and Asset Management.
Thanks, thanks, James. So Scott, for, for IG, we really truly see this as a, as, an opportunity for us, that we, we are a little bit unique in, in the industry. We believe we have a world-class tech stack, and we have you know, global partners that we partner with that are all investing heavily in AI, and our tech stack is integrated. So it's really the trifecta. We've got clean data, we've got integrated across all systems and tools, and they're AI-enabled. So what really that's gonna allow us to do is, is significantly improve our advisor and client experience, and we're looking at it leveraging our segmented model. So both the Corporate channel and the Entrepreneurial channel, we're focusing on many different things. You know, one example would be pre, during, and post-meetings with clients.
You know, how can we leverage AI to make sure that the meetings are sharper, our advisors are more prepared? You know, what we're talking about is more relevant, personalized for the client. You know, in the end of the day, it's gonna mean for us, we're gonna be able to do more meetings and better quality meetings, with driving better client outcomes. So that's what we're focused on from an IG perspective.
Yeah, it's Luke. I'll just follow up with a few comments related to Asset Management. First, I'd say people pay us for intellect, for process, and for investment edge. So, technology and any tools that can harness that are critical to us. I'd say when you look at Mackenzie, first, we've got our quant team, and we've also got quant capabilities embedded into our multi-asset team. And we view this as giving us a competitive advantage. We believe we are world-leading and do have something really special here. Beyond that, I'd say when it comes to AI, we've been integrating these tools into our investment processes everywhere, fundamental equity, fixed income, et cetera.
This is just a natural evolution in how investment management is delivered. But I'd say this is fundamental to what we do, to actually incorporate technology, and we're well stood up to capitalize on.
Great, thanks. Really appreciate the commentary there. And then I just had a second question on the Rockefeller transaction and taking some of the chips off the table there. Certainly realized a nice return. So wondering if there's any desire to sort of take a similar approach with any of the other investments, or if this is really just unique to the transaction here?
Yeah, it's James. I'll share a few thoughts on Rockefeller and then more, perhaps more broadly. You know, I think Rockefeller, Scott, emerges from this transaction with really a remarkable shareholder base that it now includes a number of families globally that I can tell you are committed to its long-term success. And I think very importantly, and I've said this before, you know, what I love about Rockefeller is they do not need to reinvent the wheel every year. You know, they need to continue to do what they've been doing now for eight years. They need to do it with focus, with determination, with excellence.
So, you know, for us, to almost double our investment in 2.5 years, repatriate kind of pre-tax, almost $400 million bucks to Canada for share buybacks, you know, it represented a great opportunity. And of course, you know, we sit here today still as the number two shareholder, the only strategic in the capital stack, and I can assure you our interest remains, strategic and long term. I will use the opportunity to, you know, to share with you that, you know, any further purchase, you know, would have to be both what I would call risk-smart, we coined that phrase in 2023, and it would have to be earnings aware, that is, mindful of how we trade.
But I think we've now completed two transactions with Rockefeller, very consistent with these principles, and subject to those principles, you know, we'd be pleased to own more in the future. To your broader question on whether we, you know, take chips off the table or sell more of anything else, I think the short answer is no. I think our ownership position in China AMC is long-term stable. Well, Wealthsimple, if anything, I would see us potentially deploying some capital, depending on how it evolves strategically.
Similarly with Northleaf, we've restructured the 2020 deal to ensure that the founders and the key employees are long-term owners of the exact same instruments as us, being common shares, and we will be purchasing a little bit more of Northleaf, both this year and in the coming years. So no, I'm not looking to... I think we've got, I really think, Scott, we're sitting here with the businesses we want. We don't need to look further afield. If we want to deploy further capital kind of strategically in businesses, we've got a lineup of six great businesses, and that's where we'll be looking.
Great color. Thank you. I'll pass along.
Thank you. Our next question today comes from Tom MacKinnon with BMO Capital Markets. Please go ahead.
Yeah, just further clarification as to how we should be looking at the Rockefeller going forward. Should we just assume that your, earnings that you've got out of Rockefeller, net of NCI in 2025, are gonna be the same as 2026? Or, are they gonna be zero, and you're just gonna make up for that, loss of earnings through share buybacks? Just a little bit, if you can clarify. Thanks.
Sure, Tom. It's, Keith here. Yeah, what I'd say is, there is an equity incentive program that can create variability. We'd say, you know, the earnings we'd expect, excluding the variability, would be, in line with 2025. So you can think about that being approximately $10 million.
It may, that variability may have a negative impact, and we'd say it'd be closer to breakeven for the entire year. And to your other point, I would comment that, yeah, we will be repurchasing shares of the proceeds, and you can think about that being worth about CAD 0.12 per share, you know, close to CAD 30 million in notional earnings coming from Rockefeller and the overall transaction.
Okay, so it seems $10 million outlook for Rockefeller for 2026?
Yeah, yeah, I think, Tom, that would be a good number to use.
Okay. And then, okay, now just further digging into the AI disruption that we're kind of seeing, especially with wealth managers. You know, you mentioned here, AI tools really helping your advisors serve their clients better. But AI tools are clearly increasing clients' capabilities as well. So, you know, when we look at that, what does that mean for the general model? I mean, does that mean we would potentially get more do-it-yourself? What does that mean for fees when someone can do some of this stuff on their own? And do they not necessarily need to be paying an advisor to do all the other stuff that they can sort of ChatGPT with? So, just comments with respect to that, because we've really seen the you know, the wealth managers hurt more on this.
I take your point that the market does overreact, but comments with respect to what I just said would be great. Thanks.
Yeah, Tom, it's Damon. So, you know, I guess you're asking, you know, will AI replace, you know, advisors? And you could look at it as AI could replace certain types of advisors, particularly those that just focus on investing people's money. If you're just focusing on investing people's money and market commentary, chances are AI is going to be able to do it cheaper, faster, and at scale. So you know, that's how we look at things. And just a reminder, at IG, this is not what we do at all. You know, what we focus on is multigenerational family dynamics and planning. We focus on complex tax optimization, estate structuring, legacy planning, business succession planning. You know, we work with our clients.
We were on our fifth generation of clients. We build trust, we build relationships. A lot of what we do is emotional coaching in life situations. That cannot be replaced by AI at all. We-
Well, I would argue that estate planning could be replaced by AI.
Certain types of estate planning, not complex estate.
So some of the services that you provide could be AI replaced.
Well, once again, we're talking about complex situations. So a simple situation, some of it, yes, for sure. But complex, we do not believe so. And in totality, what we believe this is going to just allow us to better demonstrate what good advice means to the marketplace. I mean, if you were to ask me, "Why are we growing so fast now? How are we getting so many clients?" This is how we're doing it. There's a significant need out there in this industry to make the complex simple and help us plan our lives, because our lives are far more complicated than they have been in the past, and that's what IG delivers.
You know, Tom, it's James. I'd just add that. I mean, the way I think about this is, I think you've got to look kind of Wealth Management model by Wealth Management model and ask the question: How do advisors add value in that model? And kind of how wide or not is the moat that they create as a result of how they add value. And so in models where, you know, advisors across the country are just picking stocks, I don't view that as... I really don't view that as adding sufficient value to create much of a moat. But what I've always loved about IG, and including before I was here, is that this is a model that's, you know, this is a model that's really been thoughtful about the division of labor.
You know, what should the house do? What should the advisor do? Where should we leverage third parties? And I think it's evolved to the point where, compared to some other models, the IG model, led by planning, I really do think creates a bigger moat than some other models, where the value add I just view as significantly narrower. I take your point on fees, Tom. I mean, but I'd also say that this industry has been dealing with the headwind of pressure on fees now. Well, certainly the entirety of my career. But I'd say that has been, you know, as headwinds go, a moderate headwind.
And I think the, you know, the trilogy of kind of rising markets, a net sales opportunity, and the opportunity for positive operating leverage over time, have allowed us to continue to grow the business. And I expect that to continue. But I think this is, you know, this is definitely going to sharpen the focus on the Wealth Management model and just how much it, how much value add is each advisor contributing to the client in that relationship. And I think relatively, we are well positioned. And as I said earlier, we're going to be coming back to you and your peers in a few months with a lot more to say on this topic, because it's an important topic.
Thanks for the color.
Thank you. Our next question today comes from Bart Dziarski with RBC Capital Markets. Please go ahead.
Great. Good morning. Thanks, everyone, and congrats on the strong quarter. I'm just following up on the Wealth Management topic and AI. So, you know, we hear your comments and color, but you did increase your expense growth guidance in that segment. So last year, you were calling for 2.5% growth. This year, it looks like 4% growth. Is that a defensive posture or is that an offensive posture in terms of the spend in that business?
That's an interesting point. I don't know, Bart, that I'd read too much into it. I mean, I was sharing with the board yesterday that, you know, what I love about Damon and his leadership team is they don't plan in quarters or years. They've actually got a multi-year plan for this business. And when, you know, expenses are running, you know, a bit hot, he can, he can, he can tap on the brakes. When we see a little bit of runway, he can kind of press on the gas. And so I, I really wouldn't read too much into the, in- into the 4% other than, you know, We really did want to establish our credentials, if, if you will, as a, as an organization that was serious about, you know, respecting the shareholders' money, and I think we've done that.
But, you know, in the current environment including the current level of inflation as it relates to services that we consume in this business, 4% kind of felt, you know, about right for now, subject to, as I say, some ongoing work, some very important ongoing work that we're doing to see how we can, you know, if anything, accelerate our deployment of AI tools. Damon?
Yeah. I would agree with James, and I would just say that there are major projects on the go that extend beyond AI, with total cost reporting and a number of regulatory things that we have to get accomplished this year, that everyone has to get accomplished in the industry this year, as well as it's our hundredth anniversary. So we've got a lot of things on the go at IG that we're very excited about.
Okay, great. Thank, thanks for that. That's very helpful. And then just on the, the market volatility. So, you know, also agree, price and value can be quite, disconnected sometimes. But we have seen Robinhood come down 50%. That's a pretty meaningful move. And so just as a read-through to Wealthsimple, how are you thinking about the kind of stability of the mark there in light of that, move?
Yeah, you know, it's James. I'll start, and then Keith, Keith will add. I mean, let me start, you know, by just, by just saying, Bart, that with each kind of passing board meeting, my confidence is growing, that Wealthsimple, you know, is really establishing themselves as a prominent, part of Canada's, financial sector. And so from an operational perspective, the beat goes on. I can't promise a straight line here, but I can tell you the direction of travel, for that asset is up. And, you know, I'll also share with you that the... It's a very highly, you know, integrated and expansive platform. And when I think of the Wealthsimple platform, you know, I start with the trade platform. I then think about the invest platform.
It also has kind of, you know, outstanding savings, crypto, and work platforms, but it's a remarkably kind of exceptionally integrated, expansive, and nimble platform. You know, the Wealthsimple transaction closed, I believe, Keith, in December. And you know, in some respects, Bart, this is the difference between public markets and private markets, right?
Yes.
I mean, in private equity or private markets, generally, you know, if there was a large trade in December, you would—no one would even think of trading the mark, changing the mark kind of six weeks later. I think it's back to the point that you just reaffirmed, that we do, from time to not time, need to remind ourselves that there is a difference between price and value. Keith?
Yeah, no, I agree with everything James said, and, and to James' point, we, we marked this in December. It is quite a diversified platform, where you think about where growth is coming from for Wealthsimple, it's coming from a broad, diversified growth. It's, as James said, it's, it's the trade platform, it's the invest platform, it's the banking and save platform. You know, and, and, you know, reading the media that, you know, Wealthsimple is not nearly reliant on crypto, like, you know, some other, you know, players in the industry. So, it's a Canadian company built for Canadian clients and, and, you know, they're growing quite well, and we're looking that forward to what they're gonna do in the future here.
Awesome. Thanks for that color, guys.
Thank you. And our next question today comes from Graham Ryding with TD Securities. Please go ahead.
Hi, good morning. Just to follow up on that, is there any color you can give us on... You know, it seems like crypto is the piece that's sort of weighing on some of those, U.S.-based comps that might be a read-through for Wealthsimple. Can you give us some context for, you know, how significant crypto is, in terms of that sort of AUA mix within Wealthsimple, or how diversified that, that AUA, is? Just trying to get some comfort that, you know, that the overhang on crypto is not overly material for Wealthsimple.
Yeah, it's Keith here. I can say that crypto is a very small component of their AUA, but we're not going to get into details of the mix. They're a private company, but I can give you that comfort.
Okay. And then, most of my questions have already been asked, but just on the Rockefeller piece, if I missed it, I apologize. But can you sort of give us some context on why you decided to sell down a piece of Rockefeller? Was it opportunistic, perhaps, just to generate some proceeds to fund buybacks going forward? And how should we think about your sort of longer-term positioning in Rockefeller? Would you
Yeah
... would you be open to selling down again, or are you committed at this level?
Yeah, you know, we were at 20% and change, and we're now at 17% and change. A chunk of that, frankly, is the settlement of a management incentive plan. The result of which is management, very, very happily are meaningful shareholders in this company. And the delta, small portion of that move from 20% to 17% or a portion of it, you know, does represent a sale. We could have sold more. We chose not to. We actually chose to reinvest what, some of what we could have taken, kind of back in the business, to be clear. But the bit that we did sell, I would really say it was an accommodation.
By that, I mean, there's some high-profile global families that wanted into this capital stack, and we wanted them in the capital stack. So this is kind of how it shook out. You know, to be clear, I. You know, over time, I would like to own some more of Rockefeller. But as I said earlier, there's two principles that any transaction is going to have to be faithful to. Any transaction will have to be both kind of risk-smart, you know, as we coined it in 2023, and it's going to have to be earnings aware. Which means that it's going to have to be mindful of how we trade.
We have a very limited ability to kind of do things that our shareholders don't see value in or cannot reflect within a reasonable period of time in our share price. But I actually think the opportunity to do something that's both risk-smart and earnings-aware with Rockefeller in the coming years will be real. And on that basis, we would desire to own more.
Understood. Thank you.
As a reminder, ladies and gentlemen, if you'd like to ask a question, please press star, then one. Our next question today comes from Jaeme Gloyn in National Bank Financial. Please go ahead.
Yeah, thanks. First question, just on the dividend. As you, I believe, commented that you will look to review it with payout ratios below 60%. Is that just want to sort of clarify or understand the timeline. Is that an annual review, or is it something you'll review more regularly, quarter to quarter?
Yeah, Jamie, it's Keith here. I think you can expect more of an annual view. You know, we expect to, and we've guided to growing earnings at, you know, 9% per year. And, you know, on an annual basis, we'll, we'll, you can expect that to, you know, be the, the moment in time that we, we do review. We all know that we're, we, you know, the industry we're in, our business can be cyclical, but, you know, that would be a reasonable expectation, annual basis.
Okay, great. Maybe a question for Luke in the Mackenzie business. Obviously, quant and multi-strategy doing very well, but a couple of other platforms not so much. Can you talk about perhaps some of the strategies or what you're doing in Mackenzie to get a, you know, a stronger turnaround of, you know, Bluewater or Ivy or something like, you know, a couple that are maybe less robust on the net flows perspective?
Yeah, great question, Jaeme. So yeah, on page 27, we've got a boutique approach. What it means is we seek to stuff that's relevant and compelling in every market environment and for every client need. Some of the boutiques invariably find themselves in environments that don't favor their approach and favor their style. They remain disciplined to it, and we obviously coach to make sure that they're leaning into their investment edge. Right now, for Bluewater, for growth, there's a few of them that have had soft performance, and we remain behind these teams, coaching them and making sure that they're doing what they've told clients they're going to do, and making sure we're raising the bar in investment excellence everywhere.
That we've got quality across all of our boutiques, and that when the market environment comes, that it suits their particular approach, that, you know, they're delivering on it, and have a clear, set clear client expectations everywhere and all the time. But yeah, we are very pleased with this boutique approach, that we've got a lot of stuff right now that where we've seen some net redemptions in Bluewater, based upon the performance over the last 24 months. We actually have a lot of stuff that's being leaned in on, and right now there's more people selecting Mackenzie than in the history of the company when you look at the gross purchase activity.
Okay, and then, last, just to, maybe come back to the AI theme one more time. You know, how much of a, you know, friction point do you think the regulatory environment would present? You know, in terms of either, you know, advisors or, you know, IPS construction, things of that nature. Like, how much would regulatory environment create a friction for that type of disruption?
Yeah. Hey, Jaeme, it's Damon. I think from a regulatory standpoint, the regulators would be open to working with wealth managers to integrate AI, as long as, you know, you'd have the technology and the infrastructure and the internal controls to back it up and make sure that you have quality control. I think they would be all for it, because it would improve client outcomes, and that's what the regulators are focused on. And quite frankly, you know, we've had discussions with them on a number of topics, including AI. So we're excited about the future here.
Yeah, I think I meant more around would there be any hurdles for, you know, potential AI disruptors from a regulatory standpoint, but it-
If they're supportive for you, I'm sure they're supportive of all that as well.
Thank you. And our next question is a follow-up from Bart Dziarski with RBC Capital Markets. Please go ahead.
Hey, thanks for getting me back on. Just a follow-up on the dividend. The growth rate of 10% is above your EPS 9% + target. So I just want to check, is that a signal in terms of confidence in your EPS growth outlook, or am I reading into that too much?
You know, well, I mean, we're very committed to our 9%, medium-term, target, to be sure. But, you know, I think what it really reflects is that this company's financial condition has never been stronger. And, you know, we took our board through it in some detail yesterday. If you look at the client assets, look at revenue, look at earnings, look at unallocated capital, and look at what's becoming objectively a very low, leverage ratio, the financial condition has never been stronger. And so, and so I think we, you know, the 10% became a number that was, that was well justified.
I'm also, or we're also mindful that it's been a while since we increased our dividend, and if you have this kind of financial strength and that level of confidence in your medium-term, EPS, the difference between nine and 10, particularly, in a year where you plan to buy back as much stock as we do, you know, the run rate kind of delta or carry is—it's pretty small, and it's very manageable.
Great. Thanks.
Thank you. That concludes our question- and -answer session. I'd like to turn the conference back over to the management team for any closing remarks.
Great. Thank you, Rocco. And we'd once again like to thank everyone for joining us on the call this morning. And Rocco, with that, we can end this morning's call.
Yeah, sure. Thank you. That brings a close to today's conference call. You may now disconnect your lines. Thank you for participating, and have a pleasant day.