Welcome to the review of changes to IGM Financial's reporting segments and operating metrics. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there'll be an opportunity to ask questions. To join the question queue, you may press Star, then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing Star and zero. I would now like to turn the conference over to Mr. Keith Potter, Senior Vice President, Treasurer, Head of Investor Relations. Please go ahead.
Thank you, and good afternoon, and welcome to IGM Financial's special call to discuss reporting segment changes, which are targeted to reflect the evolution of our business lines and provide enhanced emphasis on the components and value of the company. With me today is Luke Gould, Executive Vice President, CFO of IGM Financial, who will walk through the presentation, which outlines the rationale for the changes and will highlight some key items for you. At the end, we'll open up to some questions. If you're still digesting the information and the changes after the call, and have any questions, please reach out to Luke, myself, or Kyle Martens, who many of you know, and we can help you there.
As usual, before we get started, I'd just like to draw your attention to the cautions concerning forward-looking statements on slide 2 of the presentation. Slide 3 summarizes non-IFRS financial measures using material, and on slide 4, we provide a list of documents that are available to the public on our website, incorporated by reference. I would just like to highlight that we have retroactively restated 10 quarters of the supplemental information package and includes enhanced operating metrics. And with that, I'll now turn it over to Luke Gould.
Okay, thanks a lot, Keith. Morning, everybody. I'm on page five of the presentation. I'll start by saying we're very pleased to announce these disclosure enhancements. We've been signaling them for a few quarters now with the GLC acquisition announced. We did finalize our sub-advisory transfer pricing framework, and that did allow us to actually launch these disclosure changes. We do believe these changes will be a big help in demonstrating what the businesses are, how they work, and who their peers are globally. Starting on page 5, you'll see on the left, one key change has been to introduce a wealth management segment. IG and IPC are financial planning businesses. A majority of their revenues are derived from advisory fees earned upon assets and advisement.
You'll see here that these firms represent 68% of IGM's pretax earnings, and with CAD 120 billion in assets under advisement, it ranks as one of the largest wealth managers in Canada. I highlight the fourth point in this column, and here you'll see that we've characterized all of the revenues earned by these firms as wealth management revenues. These revenues include product and program fees relating to these firms' mutual fund offerings and discretionary programs. Our view is whether this type of portfolio construction is done within a mutual fund trust or within a client account, the dealer. We believe these are activities are best characterized as wealth management revenue. I'd also highlight that neither IG nor IPC have their own portfolio management capabilities.
They retain leading sub-advisors, including Mackenzie, and their results include all the sub-advisory fees that they pay to third-party sub-advisors and Mackenzie in bringing these solutions to life. The asset management segment in the middle reflects Mackenzie and its CAD 140 billion in assets under management, which will now be CAD 180 billion pro forma for the acquisition of GLC Asset Management. You'll see here Mackenzie's results now include its CAD 70 billion sub-advisory relationship to IG Wealth, and its earnings now include the associated sub-advisory fee revenue at market rates, commensurate with this relationship of this size. And in the right column, you'll see strategic investments and other segment, and this includes our investments in China MC, Great West Life Co, Wealthsimple, Portage, as well as the upcoming acquisition of Northleaf Capital. You'll see at the...
In point six, we've also included unallocated capital in this segment. This is new disclosure. We've provided 10 quarters of retroactive restatement of this amount, and this reflects our ongoing determination of the excess capital not required within any of our business operations. I'd also remind that this capital is invested in high-quality, liquid financial instruments. You can see that the last bullet in the right column has our criteria for inclusion within the segment, and it's situations when a business is sufficiently differentiated from our core wealth and asset management businesses due to different market segments or different growth profile. As we go through the presentation, you'll see we're looking to assist and encourage a sum of the parts approach to assessing IGM's valuation, to ensure that the business is clearly understood and to ensure that elements of value are properly considered.
So I'll turn now to page six. So here we provide a bit more color on the segments, and the bottom row outlines the key changes we made with these disclosures. I'd first start by saying that we love this ecosystem, and we're very pleased that there's a lot of momentum in all these segments. On wealth management, in the bottom row, all I'd highlight is that the orientation is now clearly focused on assets under advisement, as opposed to assets under management. And you'll see in the coming slides, the largest component of our revenues is advisory fees, and they are driven and charged upon assets under advisement.
When you look in the asset management segment, you'll see in the coming slides that with the change to Mackenzie to include the CAD 70 billion sub-advisory relationship with IG at market rates, has actually resulted in a reallocation of about CAD 50 million in pre-tax profit from IG to Mackenzie. We think that this more properly represents the contribution Mackenzie makes to put these services at market. Then importantly, the fair value of the strategic investments in other segment that was recorded within our June 30, 2020 financial statements was around CAD 2.5 billion, which is very meaningful in relation to our market cap at close yesterday of CAD 7.5 billion or CAD 9.6 billion, including our long-term debentures. I'm going to go through a few of these elements of this segment.
I'll first start by making some remarks on China Asset Management, which you can see that we're carrying at CAD 700 million. This is essentially at the cost of what we paid in 2017 when we acquired this stake. And you'll remember from our Q2 2020 results call, the business has been experiencing very strong growth in AUM and earnings of about 30% year-over-year as a result of very strong net sales rates in the Chinese market of just under 30% of assets per year. If you go beside this, you'll see our investments in Wealthsimple and Portage, which we're carrying at CAD 300 million. Wealthsimple is CAD 250 million of this, so it's the largest single part of this piece of this line item.
The valuation of Wealthsimple essentially reflects the last funding round, where Allianz took a small stake in the business a couple of years ago. You'll see in the appendix, we provided some supplemental information on Wealthsimple's results, and you'll see it's experiencing significant growth in AUA of approximately 100% per year, and now has AUA of about CAD 8 billion and continues to hold over 60% market share of robo-advisors in Canada. Going to Great-West Lifeco, you can see it's obviously publicly traded, and everyone can see where it's traded every day. We have footnoted the tax that would be payable if it were to be disposed, which is trivial. But we did want to make sure people understood this, this component of value, and it is significant in relation to the market cap of IGM.
And then lastly, at the left, you can see our excess capital. It's CAD 600 million at June thirtieth. I would highlight this includes the after-tax proceeds of CAD 227 million from the sale of Personal Capital, which we have now received and is safely in the bank. I'd also highlight we'll be funding the CAD 145 million acquisition of GLC and also funding the CAD 195 million acquisition of Northleaf out of this, which will leave about CAD 260 million of excess capital after these two investments are made. I'll turn now to page 7, and this is a reminder from our Q2 2020 results call that I believe gives a pretty good depiction of the changes we made today.
The chart on the left shows the addition to Mackenzie of CAD 70 billion in sub-advisory mandates to IG, as well as in the two stacks in the middle, the additional net CAD 30 billion in mandates that will be coming to it as per the distribution arrangements it will have with Canada Life going forward. As indicated in point one at the top left, one of the requirements to launch these new disclosures was the development of a sub-advisory fee transfer pricing framework that Mackenzie will use in serving both IG as well as Canada Life. This framework was developed using market-based principles, and if anybody has CAD 70 billion of business to place with Mackenzie and similar mandates to what IG has, they should expect similar pricing, and we'd love to talk to them.
On the right, you can see the pro forma income statement, and the key point I make is that the wealth management segment's key driver is now assets under advisement, and the asset management segment continues to have a key driver being AUM. We have highlighted in the second row that AUM continues to be a very relevant metric for the wealth management segment, but it's not the primary metric. Moving to page 8. You can see here we've outlined our new monthly press release, disclosure and key metrics, and you'll see these on a monthly and a quarterly basis. We've boxed the key measures for each of the segments, and we've identified in blue italics the measures that are new. In the asset management column, if you go midway through the page, you'll see Mackenzie's CAD 70.1 billion in sub-advisory mandates to IG and IPC's AUM.
This CAD 70 billion is obviously part of the wealth management AUM as well, so it eliminates on consolidation. You'll see this in so far as the consolidated AUM&A of 188 billion is the same, you know, regardless of the treatment here, because it is in both segments. I'd also note we provide that metric that this is 74% of the wealth managers' AUM. This is the way we'd expect people to model and consider this amount as a percent of wealth manager AUM, and so you can see that CAD 70.136 billion is 74% of the CAD 94.574 billion in wealth manager AUM. We will not be including net sales from the sub-advisory mandates that Mackenzie gets from IG and IPC within Mackenzie's net sales results.
We do think, as again, modeling it and considering it as a % of the wealth managers' AUM is the right way to model the business. Similarly, we view it as appropriate to model the AUM of the wealth managers as a % of AUA over time, and we'll be providing on a monthly basis the details to allow people to do that. Moving on to page 9. I think this is a really good set of waterfall charts to outline the key reclassifications made across segments with the new disclosures. Point 1, if you follow it to the second column, and we've got a statement on the right, it addresses the second stack in the waterfall, and so you can see we've reallocated CAD 4 million in EBIT from the corporate and other segment into IG.
What this reflects is a return on capital that's required in the IG business to operate it and had previously been recorded in the corporate and other segment. Going forward, the only returns generated on excess capital strategic investments will be included within this segment's results. The second set of changes is recharacterizing Mackenzie's sub-advisory services to IG as a client relationship as opposed to a cost-sharing of the investment team. You'll see this is resulting in a reallocation of a net CAD 50 million in EBIT from IG to Mackenzie, as the previous cost recovery by Mackenzie of CAD 48 million is replaced by CAD 101 million of sub-advisory fees, paid to Mackenzie at market rates, which you'll see on coming slides are about 13-14 basis points.
Lastly, in point three, the second column to the right, you'll see we've reclassified the IPC results from the corporate and other segment into the wealth management segment to reflect the fact that IPC is a wealth manager. So I want to go to page 10 now. This is a very busy slide and a very detailed slide, but it does show our pro forma income statement by segment using the 2019 results to illustrate. It's intended to demonstrate the key drivers of revenue and expense lines for each segment using color code. And I'm just going to make a few comments to show how it works. Starting at the top, you'll see in the top row, we have AUM, which we've shaded in light brown.
If you follow down the income statement, you can see that AUM drives first, the product and program fees within the wealth management fee line. Then it drives the net management fees within the asset management segment, and at the very bottom, it drives the sub-advisory expenses. Next, at the top, you'll see total assets under advisement and management is shaded in a light green. And if you follow this down the income statement, you'll see this is a key driver of wealth management earnings and drives the advisory fee line within the wealth management segment, and also drives asset-based compensation within the expenses. Next, at the top, you can see the sub-advised business that Mackenzie has from IG and IPC, and you'll see that this obviously drives the sub-advisory fees of just over CAD 100 million that Mackenzie earns from these segments.
that line is obviously in the wealth manager sub-advisory expenses, and both of those eliminate on consolidation as they're a net nothing to IGM Financial. They just reflect transfer pricing between the wealth management and asset management segment. And I'd also highlight that within wealth management revenue, if you look at the wealth management fee line, you'll see a line, other financial planning revenues in light blue. This represents revenues we earn from distribution of insurance products, mortgages, and banking services. And we just remind that if you go to the advisory and business development expenses, there's an other product commissions line, and this is driven very clearly by that revenue line above. And so it should be very easy and clean to model.
I'll turn to page 11, and this is our, our secret decoder matrix of, of how things changed between the prior presentation and the, and the new disclosures. I'm only going to highlight a few items to help people understand the approach we've taken. First, in the second row down, you can see a circled item 1, and, this is CAD 1.243 billion of advisory fees. And you'll see as you go along the, the row, that many of these amounts were previously recorded in management fees, administration fees, and distribution fees. So I'll first highlight, as you know, we've been migrating all of IG's clientele to our fee-based account and unbundled fee arrangements. That is substantively complete, and going forward, a substantive majority of the, fees are, actually advisory fees we charge to clients.
What I guide you is that we've retroactively restated by allocating all of the dealer compensation that had previously been bundled within the product MERs to be classified in advisory fees. And so you'll see the trended fee rates are very, very stable and very understandable over time. Second, halfway down the page, in the second column from the right, you'll see a circle number three. Here you'll see that we've classified dealer compensation paid by Mackenzie on bundled products to be recorded as net revenue, as opposed to being recorded as an expense. As business migrates from bundled products in the industry to unbundled products, Mackenzie's gross revenue is declining, but net revenue is unchanged, as Mackenzie was essentially an agent just passing through dealer compensation, and now the dealers are charging for their services directly to the client.
Last, in the right column, you'll see 0.6 towards the bottom, illustrating that our CAD 1 billion in previous non-commission expenses has been allocated into three new expense items that are designed to help you better understand the character of these expenses and how they behave. First, you'll see we've reclassified CAD 241 million to advisory and business development expenses. This primarily relates to IG and reflects the direct cost of providing financial planning and promotional activities. This includes elements of advisor compensation that were previously in the non-commission expenses. It also includes our network of specialists, advanced financial planning specialists, mortgage specialists, security specialists, insurance specialists. It includes the training we provide our financial planners. It includes the facilities that house our financial planners in more normal times.
And it also includes the direct advisor technology and advertising expenditures. These are items that financial planners typically have to pay for out of pocket, out of their dealers, and would be recorded within dealer compensation. And many of these expenses vary with the number of financial advisors we have or the number of clients they serve. And some of these expenses, like advertising, are discretionary. So we think having all those expenses classified in this line will really help people understand what we're spending our money on and how the expense set actually moves over time. We've also identified sub-advisory expenses to third-party sub-advisors as a separate line. As you all know, these expenses are variable with AUM.
On a consolidated basis, the greater the proportion of AUM not advised upon by Mackenzie, the greater the expense will be, and we're pleased to be giving this disclosure going forward to help you understand how this expense will be moving. Moving to page 12, we've now got a few slides that highlight how the fee rates look with the new disclosures and the way you can expect us to be reporting on the consolidated results and the segments going forward. Page 12, I think, does a really good job of highlighting that this is a very simple and transparent business. On the left, you can see the quarterly trending in EBIT by line item. You'll see we've netted advisory and business development expenses and sub-advisory fees out of revenue, given that they're largely driven by average assets.
On the right, you can see the revenue and expenses as a % of average assets under management and advisement. First, I'd say net revenue of around 90 basis points is relatively stable and does have some seasonality to it. It varies obviously, the rate, based upon the underlying composition of clientele and product. But I'd highlight for those who want to model IGM in its entirety at the consolidated level, you'll see here it's quite an easy thing to do. Operations and support expenses at the bottom are relatively fixed and have some seasonality. You all know we're embarked on the transformation program and are working hard on bringing more initiatives to life, and we'll be providing updated guidance on how you can expect this line to travel.
Also, highlight EBIT's running at about 48 basis points. It was a bit impacted by depressed asset levels during Q2 2020, and, and obviously, asset levels have recovered quite well into Q3. I'll turn now to page 13, which gives a summary of the last 6 quarters results of the wealth management segment. These results include both IG and IPC. I'm just going to make some comments on the two charts on the right. In the chart on the top right, you can see our average assets under advisement segmented between AUM and other AUA. We've also highlighted the weighted average advisory and product and program fees as basis points of AUA. Again, you'll see they're very predictable.
Going to the chart below, you can see we've got the key revenue expense lines that are driven by AUA or AUM, respectively, and we've color-coded these lines in relation to the driver that that relates to them. I'd first highlight that the advisory fee rate is relatively stable, and I remind that it doesn't vary across asset classes. We charge the same thing, irrespective of the underlying assets, and we compensate our financial planners irrespective of the recommendations they make for very different products. The way this line varies is based upon the composition of clientele that we have, where obviously high net worth clients pay lower fee rates than more developing clients. Product and program fees is the opposite. It's driven by AUM. It doesn't vary by type of client.
It varies by the type of underlying product, and you can see it's been very stable over time. And I'd also remind, when you look at asset-based compensation, that we did increase the asset-based compensation rate at IG, effective January 1, 2020, and this was offset by lower sales commission rates. Page 14 shows the exact same information for the IG Wealth segment. I'm not going to make any comments on it, just to remind, it's very in line with the disclosures you'd be used to in the past, and it does a really good job of linking advisory fees to AUA and linking product and program fees to AUM, as well as sub-advisory fees.
Page fifteen is a slide that you all would have seen before, that highlights our value proposition at IG Wealth of better gamma, better beta, and better alpha. I'd remind that gamma reflects the value that comes from our financial planning services, and we clearly demonstrate that contributes to about 60%-65% of client outcome. You can see here with our new disclosures, about 60% of our revenues are in relation to gamma through advisory fees and other product and planning revenues. And we think this is very good alignment between client outcomes, between who does what with our financial planners clearly delivering gamma, and there's really good alignment there.
When you look to the right, you can see beta represents portfolio construction and asset allocation, and alpha represents achieving returns on a sleeve in excess of our pre-established benchmark. This represents 35%-40% of client outcomes, and you can see we're charging fees for these services within our product and program fees that represent about 40% of our fees overall. I'd also remind that we've differentiated our fees across client segments and product categories and product types, and believe our fees are very competitive across the board. Going to page 16, you can see the asset management segment's results for the last six quarters. I'd only have two really quick comments here. This is a really transparent business and a very easy business to model.
You can see in the top right, we've provided, assets under management segmented between sub-advisory managed to the wealth management segment and third-party assets. You can see the weighted average net management fee has been trending, about 43 basis points and very stable. And then when you go to the chart at the bottom right, you can see the net management fee rate on third-party AUM and on the, the AUM, in sub-advisory mandates to wealth management. And, and again, very stable and understandable results. And I'd also remind that Mackenzie was awarded a lot of institutional business in the second quarter. They were awarded about CAD 2.5 billion, and because these institutional mandates were at lower fee rates than the retail business, it, it did result in a, a reduction in the net management fee rate.
I'll go now to page 17, and this is my last slide. I've already made most of my comments on the strategic investments in other segment on an earlier slide. The key message I have here is you can continue to count on us to enhance our disclosures over time on these investments as warranted and as they become a more meaningful part of IGM Financial's activities. Given the growth profile of a number of these investments and the fact that our excess capital is invested in high quality liquid securities, you'll see here if someone was to apply a multiple of 10 times earnings to these investments, they'd be missing about CAD 1 billion of value.
And we've included some slides in the appendix on China and Wealthsimple to remind of the significant growth through organic flows that's occurring within these two businesses. And we do think these disclosures will be helpful over time to help people understand all these different business lines, because we do have this element of growth, growth-oriented business, high growth-oriented businesses within IGM's results, and we do think it does warrant separate consideration. So that concludes my comments. I'll turn it over to questions, and I'd remind that in the appendix, you'll find not only some more details on China and Wealthsimple, but also a glossary to understand the line items that have been introduced and some other support to help folks understand the changes that have been made in trying to reconcile our past disclosures to our new disclosures. So thanks, everybody.
Thank you. We will now begin the question and answer session. To join the question queue, you may press star, then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then 2. To join the question queue, please press star then 1 now. Our first question comes from Tom MacKinnon of BMO Capital. Please go ahead.
Yeah, thanks very much. Just a question really with respect to what you categorize as business development and expenses and operations and support expenses. I think this is especially if we look on slide 14 and 16, the color coding there is great as in terms of the drivers, but how should we be looking at modeling in business development expenses and operations and support expenses? And then I have a follow-up as well. Thanks.
Yeah, great question, Tom. So yeah, if we go to page 14, I think you're referring us to. So asset-based comp, clearly driven by AUA, and you can see in the chart on the right, it's stable and predictable. Sales-based compensation reflects primarily sales commissions paid to IG Wealth financial planners. And that's best modeled as a percentage of the gross inflows, and you'll see there in our supplemental. And I'd remind that those amounts are amortized over time, so it's very mechanical. You'll be able to take our sales commissions paid in the past, and you'll be able to model them being amortized over 72 months.
The next line, other product commissions, is commissions paid to our field on the distribution of insurance, primarily, and also mortgage products. And it varies, you'll see with the yellow color coding, with the volumes that we're experiencing in insurance revenues and mortgage revenues. And you'll see if you look at the trending, that that's been very stable and predictable as well. And then the other line, business development, that one we'll be giving guidance on over time. And you'll see here, it's relatively stable. The key things that drive it would be, again, the number of financial planners we have, the number of client relationships we have, as well as our own discretion. And so that one, you'll be able to model, you know, having regards to the guidance we give and where it's trending.
Again, this is things like all the specialists who support our rich financial planning experience, as well as facilities and technology. We'll be giving guidance to help you understand where that line travels. The operations and support line is all of our traditional activities. Management operations is now over half of this line. And you know, we've had a campaign going on to try to outsource, automate, and otherwise make more efficient all these activities. And traditionally, we've been giving guidance on our overall non-commissioned expense line. Going forward, you'll have us, you'll hear us spending a lot of time on this line and giving very clear guidance on where we expect it to be traveling. These...
This line is fixed. I'd also say, absent all the activities we have to rein in costs and manage them. And so I'd note there's a lot of operating leverage in this business because of those fixed expenses. I'd also highlight sub-advisory fees, which again vary based on the level of AUM, so this will be very predictable. And you can see on the bottom right, this has been running at about 16 basis points for IG Wealth and has been very stable. So we're hopeful that these disclosures will be very helpful, and most of the forecasting will be really mechanical and clear.
Are we to expect that the combination of, say, business development expenses and operating and support expenses are going to track in the kind of the 3% increase range I think that you had sort of targeted for your non-commission expenses? Would that be something to that I know you're going to give increased guidance on this or but how should we be thinking about how the rate at which those things increase?
Yeah, great question, Tom. If you go back to page 11, the secret decoder matrix, you can see in the bottom right that we've identified what used to be non-commissioned expenses. It's substantially intact when you add those bottom three rows, with the exception of CAD 74 million that used to be in commission expense. We're remaining committed to our guidance for full year 2020, where these costs in aggregate are coming down by 1% relative to 2019 as a result of expense management measures we announced in the first quarter. And going forward, that is a good rule of thumb, that they won't be increasing by any more than 3% year-over-year.
But again, I would remind you, we have a number of flags that we're actively looking to plant on our transformation program. And so we are looking to first, you know, rein in costs where we can through outsourcing and automation. And B, I would remind that we have the acquisition of GLC coming on, and we'll help navigate you through the expenses that come on with that acquisition. And that acquisition is obviously accretive to us.
Yeah. And then finally, just with respect to GLC, I assume that's put into the asset management segment that's shown on page 16. And, how are the, how are the fees gonna be? Are the fees gonna be any different associated with GLC business versus the, the other business within asset management?
Yeah, great question, Tom. So on page 16, you're right on, that we'll be adding about CAD 32-CAD 33 billion of AUM as per the acquisition. And pro forma for that acquisition, we'll be facing Canada Life as their premier investment manager. So that will be a CAD 50 billion relationship. We have established a sub-advisory fee framework, a pricing framework that we're using to price the IG business as well. And we'll be providing disclosure on what revenues we're earning in relation to that CAD 50 billion relationship with Canada Life, and how it's growing over time.
So you can expect the fee rates coming on to be very much in line with those sub-advisory fee rates to the wealth management segment of around 14 basis points.
Okay. Thanks for that.
Our next question comes from Gary Ho of Desjardins. Please go ahead.
Thanks. Good morning. My first question, if I can refer to slide 8 here. Just, you know, just wanted to get some understanding on the other asset under advisement and then the other net flows. I know it's a small component of the total, in terms of assets under management and advisement, but it could swing quite a bit on the net flows from month to month. Can you talk about the fees that you guys generate on these other assets? Is it similar? Is it lower? I assume it's a little bit lower than the others. Can you give me some context?
No, great, great question. Thanks, Gary. So yeah, page eight's a good one to refer to, and I'll start with IG Wealth. So you can see that, you know, just over 90% of IG Wealth's assets under advisement are in assets under management. And I'd remind, we're focused on managed solutions, and we don't have in-house investment capabilities. We hire leading sub-advisors, including Mackenzie, and we hold everybody to a high standard. So most of the client's savings with us will be in our managed solutions, which you can see in AUM. The CAD 4.3 billion that you can see that's in other assets, I'll talk about some component pieces of that.
It includes, obviously, third-party mutual funds, direct securities like equities and fixed income instruments, as well as high interest savings accounts, and just cash that's held on deposit within our clients' investment accounts. The advisory fee that you'll see as the majority of our revenue going forward is charged on AUA in its entirety, not on AUM. So you can use the fee rates that have been provided in the slide set behind these ones to understand the advisory fees we'll be earning on these assets. What isn't earned on those other assets under advisement is the product and program fees. Those fees are earned on assets under management, and so that's the delta between what we earn on AUM and AUA.
When you talk about the volatility from month to month, I characterize it as transactional. We did see a bit more money go into high interest savings accounts and deposits during the recent volatility. But a lot of this over time will reflect just transactional volatility. A lot of money gets transferred into our organization in kind, in the form of third-party mutual funds and other securities. And so that will be recorded in the other net flows line as we are consolidating our clients' savings within our firm. And as people sell different financial instruments and buy different financial instruments, it's going to affect the cash balance within their account, and that noise will also be in that other net flow line.
Got it. Okay, that's, that's helpful. And then just going back to, maybe Tom's question and, and your comment on that 14 basis points. I don't know, at, at first glance, it does seem a little bit low. Just wondering how the mechanics went in. And then second part of that question, will, will that change from time to time, that 14 basis points? Is that -- or is that pretty stable when I'm kind of modeling that out?
Okay, great. So on the sub-advisory transfer pricing framework, we spent a lot of time making sure we have something, a framework, that would endure. So I'd first start by reminding, this is for investment only services. IG has its own mutual fund management organization. It doesn't need anybody to provide administrative services, wholesale marketing support, things like product shelf management, et cetera. The only thing that it's hiring other people for here is sub-advisory and just investment-only services. We've set these rates having regard to published rates on a mandate by mandate basis within the investment database. It's a database where investment managers post institutional rates where they'd be prepared to do business.
We then anchor these rates to—we've anchored the fee rates to investment—and then we've taken into account the size of the assets in each mandate, as well as the size of the aggregate relationship. And so we really have sought to get market rates. And if it looks low, I'd guide that it's in relation to a CAD 70 billion relationship in the case of IG, where the only service being provided is truly direct investment only services for investment management.
And to your other point, Gary, you're right on the money to the extent that there's more fixed income, or a core Canadian equity and these type of mandates, it would obviously be a lower rate than if there were specialty or capacity constrained mandates like alternative small cap, global, et cetera.
Got it. Okay. And then last question for me, I think you alluded to a little bit at the beginning of your presentation. Now, now that you've provided this enhanced disclosure, it's much easier to kind of compare IG Wealth to other peers. And then in terms of the other peers, can you point me to kind of how you guys think about your comparables, either in Canada or or abroad in terms of the wealth management side of the business?
Yeah, great question. We obviously start with something like a St. James's Place in the UK. It's a business when we look at theirs, it feels so similar to IG Wealth in terms of the character of what it is. So that's the first one we go to when publicly traded. There's obviously lots of private businesses like Edward Jones and others, but for us, we're really anchored to St. James's Place, Raymond James, and Ameriprise, as many of you know, you know, actually had its tradition of being the same organization of what's now IG, and to this day, it remains similar in a lot of respects to IG. But those are the businesses we tend to anchor to, even firms like LPL Financial in the United States.
They've got the same character. But yeah, Raymond James, St. James's Place, those are some that we'd look to as global peers that are publicly traded.
Yeah. Got it. Okay, that's it for me. Thank you.
Once again, if you have a question, please press star then 1. Our next question comes from Graham Ryding of TD Securities. Please go ahead.
Hi, good morning. Just starting on the asset management section, the dealer compensation line, just want to be clear, that is associated with essentially, you know, what I guess used to be kind of a trailing fee commission under your old disclosure. Is that correct? And it's not to IG, it's to third party?
Yeah, right, right on, Graham. That's exactly what it is. And again, you know, in the industry that's been going away, but it's really on bundled price units, A-class units, where we're just passing a trailer on to the dealers at Mackenzie.
Okay. Understood. And then, in terms of expense, have you given any expense guidance for 2021 yet?
No, we haven't. We've... The only guidance we've given is that the highest it would be is 3%. That is guidance we gave in the past, but absent that, we haven't set it, and we are looking to set it, and we'll be setting it pro forma for GLC. And so you can expect us to give more guidance. There are some moving things because we've done a few acquisitions recently. But the one thing I'd highlight is our commitment to our transformation program and our commitment to again continue planting flags. We're about 3 years through a five-year transformation journey that we signaled and brought to all of you.
Yeah, we are continuing to plant flags to make sure we're automating what can be automated and outsourcing what should be outsourced, and otherwise, you know, engaging in whatever opportunities there are to drive operational efficiency.
Okay, understood. And then, Northleaf, how are you going to be including the economics there? Is it a, you know, you've got 56% economic interest. Is it, are you consolidating the results and then, is there going to be a non-controlling offset or just equity accounting this?
Our current expectation, Graham, is we'll be equity accounting. It's there are two parts to it. We'll be consolidating the vehicle through which ourselves and Great-West Lifeco participating. And obviously, Mackenzie owns 80% of that vehicle. However, the vehicle itself will be equity accounting. We do not have control of the company, but we certainly have significant influence. So you can expect it to be very clean, that we'll have a proportionate share of the earnings of Northleaf that goes through the corporate and other segment. The other item I'd highlight is a lot of the benefits we get through our partnership with Northleaf comes through the wealth management and asset management segment.
We view it as a huge advantage we have at IG Wealth and IPC to be able to bring privates to Canadians within their portfolios, and we think we're uniquely positioned to do that. And so client acquisition and just the returns we generate for our clients will be much richer having Northleaf. And similar at Mackenzie, we think we've got a lot of advantage in bringing Northleaf to Mackenzie's channels. And so we expect to see some strengthening of results at Mackenzie as well because of these types of synergies.
Okay. That's it for me. Thank you.
Our next question comes from Scott Chan of Canaccord. Please go ahead.
Hey, good morning. So just on CAD 517, with the strategic investments, the, I guess, the new disclosure on excess capital or unallocated capital, the CAD 262 pro forma. So how do we think about that going forward in terms of, how IGM looks, at strategic investments? Is there a certain dry powder amount that you want to keep there, like the amount here? Or, or how, how do we kind of think about that in terms of, kind of deployment into existing investments or, or potentially new investments?
Yeah, great, great question. So we've traditionally, you know, kept, we've sought to have financial flexibility, so, so we've got the wherewithal to capitalize on opportunities in good times or in bad times as they come to fruition. So, so we've always had some excess capital. I've been here over 20 years, and we've had some over that time. What's new for us now is giving clear disclosure on this is, this is the amount that's not required in the businesses. This is the amount for share buybacks, for dividends, for investments, for M&A, for any number of activities.
And you'll see in these slides and our posture to these balances, given what they are, has been to keep them safe. It's been in highly liquid, high quality, financial instruments, and so we thought it was really important to highlight to, you know, to the investment community that that's indeed where this is invested, and to make sure people don't lose sight of this value. Because after you apply a multiple on, you know, return on money market instruments of 10x, you're really gonna understate the value. Of course, we'll obviously keep you well apprised of what our priorities are and where we think we may be investing or otherwise deploying that capital.
But we thought it was important to let everybody know, you know, what quantum it is and the fact that it exists here, and it is an element to our value.
Just lastly, on the strategic investments, you touched about, like, you know, potential enhanced disclosures going forward. Is there something that you could kind of talk about now in terms of, you know, what you're thinking of, in terms of any of the current investments in that portfolio?
Yeah, absolutely. So if we go to, Scott, page 20 and 21. So, so again, China, it's, it was a CAD 700 million investment for us. So, so think of it as, you know, call it 7% of our market cap. We've been equity accounting for it. We've been providing disclosures, but as it grows, we expect to have our disclosures get richer and richer, commensurate with what it reflects for IGM Financial's results. So page 20 was some new disclosure we provided on the industry to help people understand how it's developing, and we're gonna keep this alive, so people can understand what's happening in the domestic market in China. I'd remind you, this is rare, like, this is unique.
We're the largest foreign investor in the domestic Chinese asset management industry. Our investee company is a leader in that space, that's consistently ranked as one of the top three. So to have an exposure in a publicly traded vehicle, like IGM, is very unique, and we understand for people to properly assess the value, we're gonna have to give disclosure of what's going on with that investment and what's going on in that marketplace. So you can expect us to be giving them more and more information on China, like we're providing on page 20 and 21. And then on page 22, we provided some disclosure on Wealthsimple, and obviously it started for us as a small investment. It, you know, it was less than CAD 200 million invested.
We've been so proud of its success over time, but it's been, you know, less than 2% of IGM's market cap. But as you look on page 22 at the success the business has had, and you can see it's CAD 7 billion at June, it's over CAD 8 billion now. It's really capturing space in the Canadian marketplace, and it's gonna continue to... And you can expect us to provide disclosures to help you understand what it's worth to us and to make sure that it's properly considered and valued.
Okay, thank you very much.
This concludes the question and answer session. I would like to turn the conference back over for any closing remarks.
Thank you. Thank you all for participating on today's call. As I mentioned up front, if you as you're digesting the information and looking through the supplemental, please feel free to reach out with any questions you have to Luke, myself, or Kyle. With that, I will end the call and turn it back to the operator.
This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.