IGM Financial
2020 Annual Report
TSX: IGM
Building
Momentum
Together
IGM Financial’s family of
companies are committed
to improving the financial
well-being of Canadians
and helping them achieve
their goals at every stage
of life.
Contents
2020 Highlights
Letter to Shareholders
Board of Directors
and Executive Leadership
Corporate Structure
4
6
10
11
Wealth Management Highlights 12
Asset Management Highlights
16
Strategic Investments Highlights 18
Talent and Culture
Guiding Principles
20
22
Readers are referred to the caution regarding Forward-Looking Statements and Non-IFRS Financial Measures and
Additional IFRS Measures on page 24 of this Annual Report.
Unless otherwise noted, all figures mentioned in this report are in Canadian dollars and are as of, or for the year
ending, December 31, 2020.
2 |
From Our IGM Family to Yours2020 IGM Financial Inc. Annual Report IGM maintains the unique strategies
of our individual businesses while
also maximizing the value of shared
knowledge and resources.
IGM Financial Inc. (TSX: IGM) is a leading wealth and
asset management company supporting financial advisors
and the clients they serve in Canada, and institutional
investors throughout North America, Europe and Asia.
Through its operating companies, IGM provides a broad
range of financial planning and investment management
services to help Canadians meet their financial goals.
The company creates value for shareholders through
three key areas:
• Wealth Management
• Asset Management
• Strategic Investments
Reasons to Invest
• Bold steps taken to transform operating
companies resulting in market share gains
and operational efficiencies
• Experienced leadership team focused on
driving innovation, an agile culture and
exceptional client outcomes
• Exciting growth opportunities through
investments in fintech, private alternative
markets and China
• Financial strength and scale, strong
governance and benefits as a member of
the Power Corporation group of companies
• Long-term view to shareholder value
creation and demonstrated commitment
to corporate responsibility
More than 100
employees, including
IGM’s Bobby Greenberg,
recorded videos for
IGM Cares Stories for
Charities, part of
IGM’s Annual Caring
Company Campaign.
| 3
From Our IGM Family to Yours2020 IGM Financial Inc. Annual Report 2020 Highlights
O U R C LI EN T S
1Million+
IG Wealth Management clients
OUR PEOPLE
3,500+
employees across the IGM group of companies
30,000+
external advisors doing business with
Mackenzie Investments
199,000+
Investment Planning Counsel clients
60%
of Mackenzie Mutual Fund Assets reside
in funds rated 4 or 5 stars by Morningstar
$1.65Billion
assets under management in Sustainable
Solutions at the end of 2020
27%
of IG consultants and associates are women
IGM signed pledge to end anti-Black systemic
racism and to take action in both our companies
and our investments
33%
of IGM senior leadership roles (Vice-President
level and higher) held by women
3
extra paid days off in 2020 in appreciation
of employees’ efforts during the year
IG and Mackenzie achieved a PRI Score
of A in the category for Strategy and
Governance of Responsible Investing
IG consultants with more than four years
experience and a total network of 3,304
consultants and associates
1,820
OUR COMMUNITIES
IGM ranked 29th among Corporate
Knights’ 2021 Global 100 Most
Sustainable Corporations
$1.18 million raised through inaugural
IGM Caring Company Campaign, a 10%
increase from 2019
$5 million over five years dedicated to further
the financial confidence of Indigenous
communities in Canada
$89,000 raised to support both local and
international initiatives
Investors Statement on
Coronavirus Response
IGM signed statement encouraging companies
to prioritize the health, safety and well-being of
their workers and communities
three new strategic investments to broaden
IGM’s distribution and product shelf
7 Partner In Action Teams
employee-led PIA teams enhance awareness,
understanding and progress in diversity, equity
and inclusion
$12.8 million donated to charities across
Canada since 1999
We are proud of our commitments and achievements in working towards a sustainable future
4 |
From Our IGM Family to Yours2020 IGM Financial Inc. Annual Report
SH A RE HOLDE R HIGHLIGHTS
NET EARNINGS
$764.4 Million
$3.21 per share
available to common shareholders
Strong Asset Growth
2020 IGM Financial assets under management
and advisement ($B)
ADJUSTED NET EARNINGS
$762.9 Million
$3.20 per share
available to common shareholders
DIVIDENDS DECLARED
$536.2 Million
$2.25 per share
per common share
30.3
240
190
7.1
12.5
OPENING
NET FLOWS
INVESTMENT
RETURNS
ACQUISITIONS
ENDING
TO T AL ASSE TS UN DER MANAG EMENT AND ADVISEM ENT ($ B)
IG Wealth Management
Investment Planning Counsel
Mackenzie Investments
IGM Financial Consolidated*
Opening
Net Flows
Investment
Returns
Acquisitions
Ending
97.1
27.7
68.3
190.0
0.8
0.4
6.2
7.1
5.4
1.2
6.1
12.5
-
-
30.3
30.3
103.3
29.3
110.9
240.0
*consolidated results eliminate double counting where business is reflected within multiple segments
| 5
From Our IGM Family to Yours2020 IGM Financial Inc. Annual Report
Letter to Shareholders
We hope you, your family and loved ones are
staying safe. As it was for many of you, 2020
was a year unlike any other for IGM Financial.
However, despite the multiple challenges our
business and people faced, we built on our
momentum and achieved some record results.
We were able to do this because we focused on what was important:
the health and well-being of our people and being there for our clients
when they needed us most. Our success can also be attributed to the
foundational work we began four years ago – a strategic and operational
transformation that gave us relevance, speed and flexibility when the
pandemic occurred.
On behalf of the leadership team, we thank IGM employees, consultants,
and advisors for their flexibility, resilience and commitment to our clients
throughout 2020. Almost 90 per cent of our people were able to shift to
work-from-home within two weeks of the pandemic. That transition was
near-seamless, thanks to new tools and infrastructure we already had
in place. For Canadian investors, our ability to stay connected while
providing the financial services they needed helped them navigate an
often-challenging environment.
In September, IGM Financial and IG Wealth Management President
and CEO Jeff Carney retired for health reasons. It’s a testament to his
leadership and vision that the company was able to successfully work
through this change and not miss a beat. We owe a debt of gratitude
to Jeff for setting the entire organization up for success both today
and tomorrow, and we wish him and his family the very best. With
Jeff’s departure, we welcomed James O’Sullivan as President and CEO
of IGM Financial and Damon Murchison as President and CEO of
IG Wealth Management.
In October, IGM realigned its reportable segments to better characterize
the company’s business lines and improve transparency into our key
business drivers, including Wealth Management, Asset Management
and Strategic Investments. The second half of 2020 also saw significant
M&A activity, including several strategic acquisitions and investments to
bolster our asset management business in important areas such as
group retirement, private markets and sustainable investing.
6 |
From Our IGM Family to Yours2020 IGM Financial Inc. Annual Report As a result of our collective efforts, together we achieved some outstanding milestones in 2020. We ended the
year with record-high assets under management and advisement (AUM&A) of $240 billion, up 26 per cent from
last year. Net inflows for the year of $7.1 billion were also a record high, up from net outflows of $1.7 billion
in 2019. Annual net earnings of $764.4 million or $3.21 per share compared to $746.7 million or $3.12 per
share in 2019, and annual adjusted net earnings were $762.9 million or $3.20 per share compared to
$763.9 million or $3.19 per share in 2019.
Accelerating our Business Operations Transformation
In 2020, we hit the midpoint of our five-year transformational journey to modernize our employee, consultant,
advisor and client experience, while also continuing the digitization of our back office for greater efficiency
and agility. The foundations laid in 2019 were critically important in helping our organization successfully
respond to and navigate the challenges of the pandemic.
Our transformational work allowed us to quickly pivot when the pandemic hit and change the way we serve
our clients. For example, we moved from meeting face-to-face across kitchen tables or in advisor/consultant
offices to video conferencing and are now using new mobile apps and adopting online documents, including
e-signatures. The transition from predominantly in-person service to a virtual environment was supported
and driven through our consultants’ transition to Salesforce and digital forms, which occurred in early 2020.
In addition, our employee experience was further enhanced in 2020 as we implemented SAP’s leading HR
platform, SuccessFactors, to better manage everything from employee benefits to vacation time. We also
engaged Soroc Technology to manage and service all our staff and consultants’ end-user productivity tools,
including laptops and mobile devices. The result is enhanced service delivered more cost-effectively.
Major steps and new partnerships with global leaders furthered our operational efficiencies. This included
moving data operations to Google Cloud, which provided us with cost savings, advanced data analytics
and AI capabilities. In the back office, our relationship with Capco provided new technologies that have
streamlined and, in many cases, automated processes that were once labour-intensive.
While our journey is not yet complete, we are well on our way to becoming one of the most modern financial
institutions in the country. During the last two years we have implemented outsourcing, automation and
efficiency initiatives that will reduce ongoing expenses by $40 million per year. This has allowed us to moderate
expense growth while we bring to life new capabilities that enhance our client and advisor experience.
STRUCTURED FOR SUCCESS
Wealth Management
There have rarely been times when Canadians were more concerned with their future financial security.
During 2020 it was essential for IG Wealth Management and Investment Planning Counsel to reassure
our clients that we were there for them and that we had the people, expertise and tools to help them
successfully navigate the year.
James O’Sullivan
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
IGM FINANCIAL
Our transformational work allowed us to
quickly pivot when the pandemic hit and
change the way we serve our clients.
| 7
From Our IGM Family to Yours2020 IGM Financial Inc. Annual Report When the pandemic hit, IG Wealth Management consultants
connected with our clients to help them understand how we
would keep them on track to achieve their financial goals,
leveraging the technology put in place as part of our business
transformation. Our holistic approach to financial planning,
embodied in the IG Living Plan, continued to deliver even
during the most challenging periods of 2020.
The proof was in the results. During a challenging 2020,
IG Wealth Management client assets under advisement
grew to $103.3 billion, an increase of 6.4 per cent from 2019,
while our gross client inflows were at record-high levels of
$10.0 billion, and net flows of $795 million, which are the
second highest over the last decade. We also made
significant progress in our focus of meeting the distinct
needs of high-net-worth (HNW) clients, who represent a
growing segment of our client base. In 2020, sales of HNW
solutions totaled $4.8 billion, representing 54 per cent of
total sales, up from 52 per cent in 2019.
Investment Planning Counsel results were enhanced by
its support and commitment to its financial advisors. IPC
received stellar ratings from advisors in Investment Executive’s
2020 Dealer Report Card: 9.1 out of 10 for corporate culture;
9 out of 10 for delivering on promises; and 8.6 out of 10 for
client service. Despite the challenges of 2020, IPC continued
to steadily grow its Corporate Branch Office model by more
than 50 per cent year-over-year, and has positioned itself as
a strong, viable place for retiring independent advisors to
transition their business to a strategic partner.
Asset Management
Mackenzie Investments delivered on strategy with new
products and tools at a time when Canada’s advisors and
retail investors needed them most, even as many other
asset managers took a defensive wait-and-see posture.
As a result, the Mackenzie team built on our 2019 success
with a record-setting 2020, which also included significant
acquisitions of, and investments in, strategic firms in the
group retirement (GLC Asset Management Group Ltd.),
private markets (Northleaf Capital Partners) and sustainable
investing (Greenchip Financial Corp) sectors.
8 |
IGM’s Jennifer Ottywill was among
the employees who shared their
favourite bedtime stories virtually with
charities across Canada during IGM’s
Annual Caring Company Campaign.
Total assets under management (AUM) hit record-high levels
of $186.8 billion, up 31.7 per cent from $141.8 billion at the
end of 2019. Mackenzie AUM, excluding $30.3 billion from
the acquisitions of GLC and Greenchip and $75.8 billion
sub-advisory to the Wealth Management segment, rose to
$80.6 billion, an increase of 18.1 per cent over 2019. We also
saw record-high investment fund net sales of $4.2 billion and
total net sales (including institutional) of $6.2 billion in 2020.
Mackenzie worked throughout the year to provide its clients
with relevant, innovative and strong-performing products
across all asset classes. The firm launched 11 new Exchange
Traded Funds (ETFs) and several new mutual funds. In doing so,
we reaffirmed our commitment to meeting and anticipating
the needs of Canadian investors.
Finally, we are very proud that the team was once again
recognized in 2020, with Mackenzie mutual funds and ETFs
winning five Refinitiv Lipper Awards, including the prestigious
Canada ETF Award for Best Equity Group (Three Year) and
From Our IGM Family to Yours2020 IGM Financial Inc. Annual Report 11 awards for outstanding fund performance at this year’s
Fundata FundGrade A+ Awards. We would be remiss if we
didn’t congratulate Barry McInerney on being recognized
as Wealth Professional’s CEO of the Year.
Strategic Investments
In 2020, our strategic investments gave us access to new
sectors and expertise that we share across the entire
Power Corporation family. We also made some important
gains by capitalizing on a couple of high-performing
investments, which generated both excellent return
on investment and valuable strategic assets for IGM.
The valuation of our investment in Wealthsimple, the
online investment management provider geared towards
millennials, more than doubled from $252 to $550 million,
after a new equity fundraising. The new equity valuation gave
Wealthsimple’s common shares a valuation of $1.5 billion.
We also realized an excellent return from the sale
of our 24.8 per cent interest in Personal Capital Corp.
for $232.8 million, compared to an acquisition cost of
$189.1 million. Personal Capital, an industry-leading
digital wealth management company, remains in the
Power Corp. family.
Our Commitment to Community
and the World Around Us
While the pandemic was the dominant narrative for 2020,
there were other important social and political catalysts
that caused us to further strengthen and invest in our
commitment to community, including a stronger focus
on Diversity, Equity and Inclusion.
In 2020 there was an increased awareness of anti-Black
systemic racism and, more generally, racism against
Black, Indigenous, and People of Colour (BIPOC). This year
IGM and its CEOs became signatories to the BlackNorth
Initiative, which is dedicated to the removal of anti-Black
systemic barriers.
In addition, we launched the IG Empower Your Tomorrow
Indigenous Commitment, which will deliver $5 million over
five years to Indigenous Communities across Canada. The
centrepiece of the campaign is a new partnership with
Prosper Canada to build the financial confidence of
Indigenous Peoples in isolated, rural communities.
We continued our focus on climate change, acknowledging
the role financial services companies play in tackling one of
the most defining issues of our time. IGM was recognized
by CDP at the leadership level for its climate disclosures for
the third consecutive year. In addition, IGM ranked among
Corporate Knights’ 2021 Global 100 Most Sustainable
Corporations in the World, finishing 29th overall and was
the top rated investment services company globally and
top rated financial services organization in North America.
2021 and Beyond
COVID challenged us as a company – and as individuals.
However, despite these challenges, the firm was able to
achieve some record results in 2020 and make significant
improvements to our operations, client, consultant,
advisor and employee experience and to make meaningful
contributions to our communities. We are determined to
see these successes translate into value for our shareholders
in 2021 and beyond.
This was all possible because our remarkable team showed
resilience, commitment and focus on our mission to help
Canadians. They adjusted to a dramatically changed
landscape and supported each other in ways that enabled
us to keep moving forward.
The world may change, but our growth and commitment to
you remains as steadfast and constant as ever.
On behalf of the Board of Directors.
James O’Sullivan
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
IGM FINANCIAL INC.
R. Jeffrey Orr
CHAIR OF THE BOARD
IGM FINANCIAL INC.
| 9
From Our IGM Family to Yours2020 IGM Financial Inc. Annual Report Board of Directors
and Executive Leadership
BOARD OF DIRECTORS
Marc A. Bibeau (1,3)
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
BEAUWARD REAL ESTATE INC.
Marcel R. Coutu (3)
CORPORATE DIRECTOR
André Desmarais,
O.C., O.Q. (2,3)
DEPUTY CHAIRMAN
POWER CORPORATION OF CANADA
Paul Desmarais, Jr.,
O.C., O.Q. (2,3)
CHAIRMAN
POWER CORPORATION OF CANADA
Gary Doer (2)
SENIOR BUSINESS ADVISOR
DENTONS CANADA LLP
Susan Doniz (1,5)
CHIEF INFORMATION OFFICER
THE BOEING COMPANY
Claude Généreux (3,5)
EXECUTIVE VICE-PRESIDENT
POWER CORPORATION OF CANADA
Sharon L. Hodgson (1,4,5)
DEAN
IVEY BUSINESS SCHOOL
Sharon MacLeod (1,3,4)
CORPORATE DIRECTOR
Susan J. McArthur (2,3,5)
CORPORATE DIRECTOR
John S. McCallum (1,2,4)
PROFESSOR OF FINANCE
UNIVERSITY OF MANITOBA
IGM stayed on strategy
and on course during a
challenging year, advancing
our operational
transformation and
making some important
acquisitions, all while
promoting a culture that
places the well-being of
Canadians and their
success at our centre.
R. Jeffrey Orr
CHAIR OF THE BOARD
IGM FINANCIAL INC.
R. Jeffrey Orr (2,3,5)
CHAIR OF THE BOARD
IGM FINANCIAL INC.
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
POWER CORPORATION OF CANADA
James O’Sullivan
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
IGM FINANCIAL INC.
Gregory D. Tretiak,
FCPA, FCA (5)
EXECUTIVE VICE-PRESIDENT
AND CHIEF FINANCIAL OFFICER
POWER CORPORATION OF CANADA
Beth Wilson (4,5)
CHIEF EXECUTIVE OFFICER
DENTONS CANADA LLP
EXECUTIVE LEADERSHIP
James O’Sullivan
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
IGM FINANCIAL
Barry McInerney
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
MACKENZIE INVESTMENTS
Damon Murchison
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
IG WEALTH MANAGEMENT
Chris Reynolds
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
INVESTMENT PLANNING COUNSEL
Luke Gould
EXECUTIVE VICE-PRESIDENT,
CHIEF FINANCIAL OFFICER
IGM FINANCIAL
(1) AUDIT COMMITTEE Chair: John S. McCallum
(2) GOVERNANCE AND NOMINATING
COMMITTEE Chair: R. Jeffrey Orr
(3) HUMAN RESOURCES COMMITTEE
Chair: Claude Généreux
(4) RELATED PARTY AND CONDUCT REVIEW
COMMITTEE Chair: John S. McCallum
(5) RISK COMMITTEE Chair: Gregory D. Tretiak
Cynthia Currie
EXECUTIVE VICE-PRESIDENT,
CHIEF HUMAN RESOURCES OFFICER
IGM FINANCIAL
Michael Dibden
CHIEF OPERATING OFFICER
IGM FINANCIAL
Rhonda Goldberg
EXECUTIVE VICE-PRESIDENT,
GENERAL COUNSEL
IGM FINANCIAL
Douglas Milne
EXECUTIVE VICE-PRESIDENT,
CHIEF MARKETING AND
STRATEGY OFFICER
IGM FINANCIAL
Blaine Shewchuk
EXECUTIVE VICE-PRESIDENT,
CHIEF STRATEGY & CORPORATE
DEVELOPMENT OFFICER
IGM FINANCIAL
10 |
From Our IGM Family to Yours2020 IGM Financial Inc. Annual Report Corporate Structure
Strength and scale as part
of Power Corporation group
of companies
IGM benefits from procurement systems; access to
investment distribution channels, products and
expertise; governance excellence; and financial strength.
Power Corporation is an international management
and holding company that focuses on financial
services in North America, Europe and Asia.
Wealth Management
Asset Management
Strategic Investments
| 11
From Our IGM Family to Yours2020 IGM Financial Inc. Annual Report Wealth Management Highlights
IGM Financial is well-positioned
to meet the needs of Canadians
through its two operating companies
focused on wealth management.
IG Wealth Management and
Investment Planning Counsel put
the client at the centre of everything
we do.
Damon Murchison
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
IG WEALTH MANAGEMENT
HIGHLIGHTS
Expert Financial Planning Was
Never More Important to Canadians
$103.3
BILLION
$10.0
BILLION
$0.8
BILLION
TOTAL ASSETS UNDER
ADVISEMENT
RECORD HIGH GROSS
CLIENT INFLOWS
SECOND HIGHEST
NET CLIENT INFLOWS
IN A DECADE
Nothing was more important for IG Wealth Management
in 2020 than reassuring our clients that we were there for
them, wherever they were, and that we have the tools to
help them achieve their financial goals in any economy.
To facilitate stronger connections between our consultants
and clients, we developed the Advisor Portal giving IG’s
consultants a holistic 360-degree view of current and
potential clients. Powered by Salesforce’s financial services
cloud and delivered with the support of the technology
consulting firm Slalom, Advisor Portal makes advisor/client
interactions faster and easier, enabling our consultants to
work with clients on mobile devices, anytime and anywhere.
As a result of the commitment to be there for clients, IG’s
consultants exceeded their client engagement target goals,
as determined by an independent survey conducted by
Gallup, a leading global advice and analytics firm.
12 |
From Our IGM Family to Yours2020 IGM Financial Inc. Annual Report Inspiring Financial Confidence in Challenging Times
In addition to being there for our clients, IG took concrete
action to support the communities in which we live and
work, making meaningful investments of money and
resources to strengthen the social fabric of Canada in 2020.
IG launched Answering the Call, a program that delivered
support to Canada’s small and medium-sized businesses
(SMBs) and their communities as they navigate the financial
challenges of the COVID-19 crisis.
Answering the Call was an extension of the work our
consultants were already doing in their communities,
and included:
• free regional webinars with tax, financial planning and
investing specialists;
• insights on tax planning and how to better understand
and access government programs; and
• the opportunity for SMB owners across Canada to be
matched with a local IG consultant for a no-obligation
consultation.
Community involvement and support is an important
part of IG Wealth Management. Through our work with
community partners and organizations, we continue to
build confidence where it matters.
Staff from our IG Fairview
Markham region office deliver
lunch to front line workers at the
North York General Hospital.
| 13
From Our IGM Family to Yours2020 IGM Financial Inc. Annual Report Wealth Management Highlights
IG announced an initiative to donate up to $500,000 to
support local businesses and their communities, which
was in addition to the $1 million donation by IGM Financial
along with Canada Life and Power Corporation of Canada
to support crisis relief efforts.
To help meet the unique needs of First Nations communities
in Canada, IG launched its Empower Your Tomorrow
Indigenous Commitment, dedicating $5 million over
the next five years to support programs and initiatives
to enhance financial skills and confidence in Indigenous
communities in Canada.
In 2020, IG Wealth Management also continued its support
for The Alzheimer Society of Canada, turning our annual
IG Walk For Alzheimer’s into a virtual event, with $5.1 million
raised by more than 12,000 virtual walkers nationally.
We also had a record-setting year for our support of United
Way Canada. Participation was up 27 per cent from 2019, with
$912,000 raised across the country, an increase of 10 per cent.
Keegan Starlight, an
Indigenous artist from
the Tsuut’ina Nation in
Southern Alberta, was
featured as part of IG’s
Empower Your Tomorrow
program, which focuses
on building the financial
confidence of Canadians.
14 |
From Our IGM Family to Yours2020 IGM Financial Inc. Annual Report The COVID-19 pandemic brought unique challenges for IPC,
but the firm still maintained its client-centric growth
momentum, continuing to provide independent financial
planners with the tools, products and support they need
to build a better business in support of the Canadians they
are helping.
In September, IPC launched a renewed brand campaign –
Advice Your Way – to meet the increased demand of
accessing financial advice and guidance through virtual
channels. The campaign also provided advisors with an
enhanced platform to provide continued advice and
support to clients during these uncertain times.
To enhance our investment offering and meet the evolving
needs of investors, Counsel Portfolio Services and IPC
Private Wealth expanded its product offering to include
two new portfolio families: IPC Focus Portfolios and IPC
Private Wealth Visio Pools, a series of simplified single
portfolio solutions that provide investors with access to
a strong combination of leading money managers not
otherwise accessible to Canadian investors. These portfolios,
launched in the fourth quarter of 2020, attracted close to
$50 million in total assets over the final quarter of the year
with strong momentum for continued growth in 2021.
Chris Reynolds
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
INVESTMENT PLANNING COUNSEL
696
FINANCIAL ADVISORS
HIGHLIGHTS
$29.3
BILLION
TOTAL ASSETS
UNDER ADVISEMENT
IPC employees came together virtually to
welcome advisors to the opening of IPC’s
2020 Fall Summit.
Clockwise from top right: Andrew Schredl, Linda
Dietrich, Paul Wylie, Sam Febbraro, Lisa Buffett,
Meredith Malloch, Tanya Sydor, Shannon Stock,
Hayley Glenn, Joel Penfold and Maja Hurtic.
| 15
From Our IGM Family to Yours2020 IGM Financial Inc. Annual Report Asset Management Highlights
Barry McInerney
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
MACKENZIE INVESTMENTS
HIGHLIGHTS
$186.8
BILLION*
$6.2
BILLIO N
$13.6
BILLION
RECORD HIGH TOTAL ASSETS
UNDER MANAGEMENT
RECORD HIGH TOTAL
NET SALES
MUTUAL FUND
GROSS SALES
*includes $75.8 billion in advisory fee mandates to Wealth Management.
IGM Financial is committed to
providing innovative and high-quality
investment solutions. Mackenzie
Investments continues to deliver
strong investment performance by
drawing on more than 50 years of
experience, insights and expertise
in the Asset Management sector.
16 |
Mackenzie employees volunteer at Toronto’s
Furniture Bank, building furniture donated
by IKEA for families experiencing furniture
poverty due to COVID-19. Pictured are
IGM’s Samantha Cherry and Kristi Mehisto
putting their skills to the test.
Mackenzie Investments delivered on strategy in 2020, with new
products and tools at a time when advisors and their clients
needed them most. The firm also continued to provide the best
possible support – research, investment advice, asset options –
to ensure no advisor or client was left behind during the year. As
a direct result, it maintained its positive momentum and posted
excellent results.
From Our IGM Family to Yours2020 IGM Financial Inc. Annual Report Mackenzie also made three strategic investments in 2020, including:
Becoming One of Canada’s Largest Asset Managers
In August, Mackenzie announced a definitive agreement to
acquire GLC Asset Management Group Ltd., a subsidiary of
The Canada Life Assurance Company. This made Mackenzie
one of the top three providers of investment solutions to
defined contribution plans and other group retirement offerings
in Canada. Further, it increased Mackenzie’s total AUM to
$186.8 billion at December 31, 2020, solidifying its position
as one of Canada’s largest asset managers.
Opening Up Private Equity
Opportunities to More Canadians
In October, Mackenzie established a strategic relationship to
increase its presence in the growing private markets investment
industry. With sister company GreatWest Lifeco Inc., Mackenzie
acquired an interest in Northleaf Capital Partners. Northleaf is
a global private markets investment firm with $15 billion in
private equity, private credit and infrastructure assets under
management. The transaction expands Mackenzie’s abilities
to offer global private equity, private credit and infrastructure
investments through our retail advisory channels and financial
institution distribution partners.
Responding to Canada’s Strong Desire
for Socially Responsible Investments
In December Mackenzie entered into an agreement to acquire
Greenchip Financial Corp., a top-performing Canadian firm
focused on the environmental economy. Greenchip invests
exclusively in companies selling products that support the
transition towards sustainable energy.
Helping Our Community
Mackenzie employees and clients also continued their invaluable
support, both financially and through volunteer activities. The
Mackenzie Investments Charitable Foundation coordinates our
charitable giving and volunteer activities. Supporting charities
across Canada, with a special focus on children and youth at
risk, the Foundation has donated $12.8 million since it was
created in 1999.
Mackenzie’s Cake Day is a time-honoured
tradition thanking employees for their
tremendous efforts throughout the year!
Pictured are Mackenzie’s Armi McLeod
and Errol Bose.
| 17
From Our IGM Family to Yours2020 IGM Financial Inc. Annual Report Strategic Investments Highlights
IGM Financial has a portfolio of
strategic investments that support
our core businesses, while also
serving as good investments
in their own right. 2020 was an
exceptional year in terms of
the value received from these
investments and their contribution
to our ability to serve our clients.
Strategic Investments Enhanced
IGM’s Business and Financial Strength
Prominent is our investment in China Asset Management
Co., Ltd. (CAMC). Our investment in CAMC provides
enormous opportunities to Canadian investors, while
diversifying IGM’s business outside of Canada. China is
the second largest economy in the world with one of
the highest savings rates globally and as a result CAMC is
already seeing break-out performance. With 150 million
clients, it is China’s second largest provider of long-term
mutual funds, and growth there is up 42 per cent in
assets under management, as a result of market growth
and new client contributions.
The market potential is considerable and we are
well-positioned to be part of this exponential growth.
$285.1 BILLIO N
ASSETS UNDER MANAGEMENT
UP 48.1% IN THE YEAR
13.9%
OWNERSHIP INTEREST
$14.6 BILLION
ASSETS UNDER MANAGEMENT
56%
NET ECONOMIC INTEREST
Founded in 1998 as one of the first fund management
companies in China, CAMC has developed and
maintained a position among the market leaders
in China’s asset management industry.
Northleaf is a global private markets investment
firm focused on mid-market companies and assets,
with an established long-term track record as a
principal investor in private equity, private credit
and infrastructure globally.
18 |
From Our IGM Family to Yours2020 IGM Financial Inc. Annual Report $9.7 BILLIO N
ASSETS UNDER ADMINISTRATION
UP 93.6% IN THE YEAR
36.4%
ECONOMIC INTEREST
38 Different
Investments
Wealthsimple is Canada’s largest online investment
management service offering best-in-class digital
access, innovation, client service and delivery.
Portag3, a venture capital fund focused on the financial
technology sector, has holdings in over 30 early-stage
financial technology companies including Wealthsimple.
Realizing Value from Investments
In the financial technology sector, the valuation of our
investment in Wealthsimple more than doubled after a
new equity fundraising.
From the sale of our equity interest in Personal Capital
to the Empower Retirement subsidiary of our sister firm,
Great-West Lifeco, we benefitted from Personal Capital’s
valuation of US $825 million while retaining its capabilities
in the Power Corporation family. Proceeds from the
transaction were CAD $232.8 million and up to an
additional USD $24.6 million in consideration subject to
Personal Capital achieving certain target growth objectives.
$1.1 BILLION
MARKET VALUE
4%
OWNERSHIP INTEREST
Great-West Lifeco is a financial services holding
company with interests in the life insurance, health
insurance, retirement savings, investment management
and reinsurance businesses.
| 19
From Our IGM Family to Yours2020 IGM Financial Inc. Annual Report Talent and Culture
IGM Financial has created and nurtured a healthy corporate culture that
is essential to our success. That strong, inclusive culture has enabled us to
thrive in spite of disruptions in the marketplace, as we saw in 2020 and
will continue into 2021.
IGM’s success depends on top-notch relationships. We are
strengthened by the uniqueness of our people and their
different approaches, viewpoints and experiences – this
makes our employees, consultants, advisors and clients our
greatest ambassadors.
Standing together in our values and beliefs across IGM has
created a compelling culture that enables us to embed and
deliver sustainable value to our people and clients.
As part of IGM’s five-year strategic initiatives, we are well into our
journey of moving from a “one experience fits all” approach to
deepening our culture of respect, equity, inclusion and community
involvement. This is how we enable meaningful careers and
motivate people to be the best they can be.
In 2020, COVID-19 acted as a catalyst for leadership and
technological change, accelerating us toward our goals.
Across IGM, we acted in a cohesive, unified manner, enabling
our people to work safely and productively from home – knowing
they had all the tools to do their jobs, while the company acted
quickly to focus on all aspects of their wellness.
Attention to employee physical, mental and financial wellness
was front and centre. Maintaining a healthy sense of connection
between leaders and their team members was essential and
that continues into 2021. These connections promote innovative
thought and a sense of belonging.
IGM made significant progress identifying and strengthening our
corporate culture in 2020 and employee survey results prove
these efforts have succeeded. We have encouraged our people
to have a voice, and they are using theirs. We asked them to
demonstrate managerial and individual courage. In turn, they
are asking IGM to demonstrate corporate courage.
Young skiers celebrate following their participation in
Mackenzie’s U10 youth racing program. Mackenzie has
been a proud supporter of Canadian snow sports for
more than 20 years.
IPC’s Linda Dietrich welcomes advisors to the Fall Summit.
IG’s Amandip Singh Kainth and his family explore Churchill,
MB, nicknamed the “Polar Bear Capital of the World”.
20 |
From Our IGM Family to Yours2020 IGM Financial Inc. Annual Report In addition to a connection to colleagues, clients and resources,
our people also need a sense of connection to community. 2020
was a record-breaking year for our community giving. The IGM
Caring Company Campaign raised $1.18 million, a 10 per cent
increase from 2019. Our employees participate in a number
of national sponsorship programs, such as the IG Wealth
Management Walk for Alzheimer’s. In 2020, $5.1 million was
raised by more than 12,000 virtual walkers nationally, with over
40,000 devices tuned into the national walk broadcast. The
Mackenzie Investments Charitable Foundation, run entirely by
employee volunteers, continued its support of charities across
Canada. The Foundation has donated more than $12 million in
grants to charitable organizations that help people in need.
We will continue our journey in 2021. While our environment
continues to evolve, our commitment to providing a strong and
positive culture to help our people thrive remains unchanged.
IG’s Andre Cadieux and Amy Cadieux had the opportunity to
hold the Grey Cup when the 2019 champion Winnipeg Blue
Bombers brought it to our head office in Winnipeg.
To achieve our vision, we have set priorities with
measurable goals that focus on the following:
Strategic Workforce Planning
Anticipate and drive change that aligns talent
decisions with future business opportunities
Optimal Organization Design
Align the right structure and roles with the business
and workforce strategy, and ensure we continue to
meet changing client needs
Talent Culture
Fulfilling/Differentiated People Value Proposition
Enable employee and business success through clarity
and focus on what makes IGM special
Holistic Approach To Wellness And Rewards
Increase resilience and engagement through holistic
wellness, flexible and competitive total rewards packages
Talent Management Systems
Equip our leaders to make informed decisions through
data-based insights driven by integrated systems
and programs
Build greater capabilities and future-proof the business
through evolving leadership, development and
succession management
Communications
Provide a connected, accessible communication
experience that enables people to provide their feedback
| 21
From Our IGM Family to Yours2020 IGM Financial Inc. Annual Report Our Guiding Principles
2020 challenged us as a company -
and as individuals. Despite these
challenges, we achieved some
record results, making significant
improvements to our operations
and meaningful contributions to
our communities.
The world may change, but our growth and commitment to our shareholders
remains as steadfast and constant as ever.
Clients Come First in All We Do
We will leverage the IGM ecosystem to deliver the best
outcomes for our clients
Scalable Growth
We will pursue growth while maximizing the use of scalable
processes across all of our businesses
Innovation Acceleration
We will drive speed, creativity and adaptability by maintaining
an open, flexible and collaborative organization
Strong Businesses and a Strong IGM
We will maintain the unique externally-oriented strategies
of our individual businesses while at the same time
maximizing the value of shared knowledge and resources
Talent Strength for All of IGM
We will use our scale to attract, retain and develop diverse
top talent by offering vibrant career opportunities
22 |
From Our IGM Family to Yours2020 IGM Financial Inc. Annual Report financial section
MANAGEMENT’S DISCUSSION AND ANALYSIS
IGM Financial Inc.
Summary of Consolidated Operating Results
Wealth Management
Review of the Business
Review of Segment Operating Results
Asset Management
Review of the Business
Review of Segment Operating Results
Strategic Investments and Other
Review of Segment Operating Results
IGM Financial Inc.
Consolidated Financial Position
Consolidated Liquidity and Capital Resources
Risk Management
The Financial Services Environment
Critical Accounting Estimates and Policies
Disclosure Controls and Procedures
Internal Control Over Financial Reporting
Other Information
FINANCIAL REVIEW
Consolidated Financial Statements
Management’s Responsibility for Financial Reporting
Independent Auditor’s Report
Consolidated Financial Statements
Notes to Consolidated Financial Statements
Supplementary Information
Quarterly Review
Ten Year Review
25
41
50
55
63
66
68
72
77
90
92
94
94
95
97
98
102
107
144
146
| 23
2020 IGM Financial Inc. Annual Report management’s
discussion and analysis
The Management’s Discussion and Analysis (MD&A) presents management’s view of the results of operations and the financial condition
of IGM Financial Inc. (IGM Financial or the Company) as at and for the years ended December 31, 2020 and 2019 and should be read in
conjunction with the audited Consolidated Financial Statements. Commentary in the MD&A as at and for the year ended December 31,
2020 is as of February 11, 2021.
Basis of Presentation and Summary of Accounting Policies
The Consolidated Financial Statements of IGM Financial, which are the basis of the information presented in the Company’s MD&A,
have been prepared in accordance with International Financial Reporting Standards (IFRS) and are presented in Canadian dollars
(Note 2 of the Consolidated Financial Statements).
Principal Holders of Voting Shares
As at December 31, 2020, Power Corporation of Canada (PCC) and Great‑West Lifeco Inc. (Lifeco), a subsidiary of PCC, held directly or
indirectly 62.1% and 3.9%, respectively, of the outstanding common shares of IGM Financial.
Forward-looking Statements
Certain statements in this report, other than statements of historical fact, are forward‑
looking statements based on certain assumptions and reflect IGM Financial’s current
expectations. Forward‑looking statements are provided to assist the reader in
understanding the Company’s financial position and results of operations as at and for
the periods ended on certain dates and to present information about management’s
current expectations and plans relating to the future. Readers are cautioned that such
statements may not be appropriate for other purposes. These statements may include,
without limitation, statements regarding the operations, business, financial condition,
expected financial results, performance, prospects, opportunities, priorities, targets, goals,
ongoing objectives, strategies and outlook of the Company, as well as the outlook for
North American and international economies, for the current fiscal year and subsequent
periods. Forward‑looking statements include statements that are predictive in nature,
depend upon or refer to future events or conditions, or include words such as “expects”,
“anticipates”, “plans”, “believes”, “estimates”, “seeks”, “intends”, “targets”, “projects”,
“forecasts” or negative versions thereof and other similar expressions, or future or
conditional verbs such as “may”, “will”, “should”, “would” and “could”.
This information is based upon certain material factors or assumptions that were applied
in drawing a conclusion or making a forecast or projection as reflected in the forward‑
looking statements, including the perception of historical trends, current conditions and
expected future developments, as well as other factors that are believed to be appropriate
in the circumstances. While the Company considers these assumptions to be reasonable
based on information currently available to management, they may prove to be incorrect.
By its nature, this information is subject to inherent risks and uncertainties that may
be general or specific and which give rise to the possibility that expectations, forecasts,
predictions, projections or conclusions will not prove to be accurate, that assumptions
may not be correct and that objectives, strategic goals and priorities will not be achieved.
A variety of material factors, many of which are beyond the Company’s and its
subsidiaries’ control, affect the operations, performance and results of the Company, and
Non-IFRS Financial Measures and Additional IFRS Measures
Net earnings available to common shareholders, which is an additional measure in
accordance with IFRS, may be subdivided into two components consisting of:
•
•
Adjusted net earnings available to common shareholders; and
Other items, which include the after‑tax impact of any item that management
considers to be of a non‑recurring nature or that could make the period‑over‑period
comparison of results from operations less meaningful.
“Adjusted net earnings available to common shareholders”, “adjusted diluted earnings
per share” (EPS) and “adjusted return on average common equity” (ROE) are non‑IFRS
financial measures which are used to provide management and investors with additional
measures to assess earnings performance. These non‑IFRS financial measures do not
have standard meanings prescribed by IFRS and may not be directly comparable to
similar measures used by other companies.
“Earnings before interest and taxes” (EBIT), “adjusted earnings before interest and taxes”
(Adjusted EBIT), “earnings before interest, taxes, depreciation and amortization before
sales commissions” (EBITDA before sales commissions), and “earnings before interest,
taxes, depreciation and amortization after sales commissions” (EBITDA after sales
commissions) are also non‑IFRS financial measures. EBIT, Adjusted EBIT, EBITDA before
its subsidiaries, and their businesses, and could cause actual results to differ materially
from current expectations of estimated or anticipated events or results. These factors
include, but are not limited to: the impact or unanticipated impact of general economic,
political and market factors in North America and internationally, interest and foreign
exchange rates, global equity and capital markets, management of market liquidity
and funding risks, changes in accounting policies and methods used to report financial
condition (including uncertainties associated with critical accounting assumptions and
estimates), the effect of applying future accounting changes, operational and reputational
risks, business competition, technological change, changes in government regulations and
legislation, changes in tax laws, unexpected judicial or regulatory proceedings, catastrophic
events, outbreaks of disease or pandemics (such as COVID‑19), the Company’s ability
to complete strategic transactions, integrate acquisitions and implement other growth
strategies, and the Company’s and its subsidiaries’ success in anticipating and managing
the foregoing factors.
The reader is cautioned that the foregoing list is not exhaustive of the factors that may
affect any of the Company’s forward‑looking statements. The reader is also cautioned
to consider these and other factors, uncertainties and potential events carefully and not
place undue reliance on forward‑looking statements.
Other than as specifically required by applicable Canadian law, the Company undertakes
no obligation to update any forward‑looking statements to reflect events or circumstances
after the date on which such statements are made, or to reflect the occurrence of
unanticipated events, whether as a result of new information, future events or results,
or otherwise.
Additional information about the risks and uncertainties of the Company’s business and
material factors or assumptions on which information contained in forward‑looking
statements is based is provided in its disclosure materials, including this Management’s
Discussion and Analysis and its most recent Annual Information Form, filed with the
securities regulatory authorities in Canada, available at www.sedar.com.
sales commissions and EBITDA after sales commissions are alternative measures of
performance utilized by management, investors and investment analysts to evaluate
and analyze the Company’s results. EBITDA before sales commissions excludes all
mutual fund sales commissions and is comparable to prior periods. EBITDA after sales
commissions includes all sales commissions and highlights aggregate cash flows. Other
items of a non‑recurring nature, or that could make the period‑over‑period comparison
of results from operations less meaningful, are further excluded to arrive at EBITDA
before sales commissions and EBITDA after sales commissions. These non‑IFRS financial
measures do not have standard meanings prescribed by IFRS and may not be directly
comparable to similar measures used by other companies.
“Earnings before income taxes” and “net earnings available to common shareholders” are
additional IFRS measures which are used to provide management and investors with
additional measures to assess earnings performance. These measures are considered
additional IFRS measures as they are in addition to the minimum line items required by
IFRS and are relevant to an understanding of the entity’s financial performance.
Refer to the appropriate reconciliations of non‑IFRS financial measures to reported
results in accordance with IFRS in Tables 1, 4, 5 and 6.
24 |
2020 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis IGM Financial Inc.
Summary of Consolidated Operating Results
IGM Financial Inc. (TSX:IGM) is a leading wealth and asset
Adjusted net earnings available to common shareholders,
management company supporting financial advisors and
excluding other items outlined below, for the year ended
the clients they serve in Canada, and institutional investors
December 31, 2020 were $762.9 million or $3.20 per share
throughout North America, Europe and Asia. The Company
compared to adjusted net earnings available to common
operates through a number of operating subsidiaries and also
shareholders of $763.9 million or $3.19 per share in 2019.
holds a number of strategic investments that provide benefits
Adjusted net earnings available to common shareholders,
to these subsidiaries while furthering the Company’s growth
excluding other items outlined below, for the three months
prospects. The Company’s principle operating subsidiaries are
ended December 31, 2020 were $204.3 million or 86 cents per
wealth manager IG Wealth Management and asset manager
share compared to adjusted net earnings available to common
Mackenzie Investments. The Company also operates through
shareholders of $200.8 million or 84 cents per share in 2019.
wealth manager Investment Planning Counsel and has strategic
investments in Great‑West Lifeco Inc. (Lifeco), China Asset
Other items for the year ended December 31, 2020 consisted of:
Management Co., Ltd. (China AMC), Northleaf Capital Group Ltd.
• A gain on the sale of the Quadrus Group of Funds net of
(Northleaf) and Wealthsimple Financial Corp. (Wealthsimple) as
described more fully later in this MD&A.
acquisition costs, of $21.4 million after‑tax ($25.2 million
pre‑tax), recorded in the fourth quarter.
In the third quarter of 2020, the Company realigned its financial
reporting and related disclosures to reflect its current reportable
segments of Wealth Management, Asset Management and
Strategic Investments and Other. These segments are described
later in this MD&A.
Adjusted Net Earnings and Adjusted Net Earnings per Share
For the financial year ($ millions, except per share amounts)
IGM Financial’s assets under management and advisement
were $240.0 billion as at December 31, 2020, the highest level
736
728
in the history of the Company, compared with $190.0 billion at
December 31, 2019, as detailed in Table 8. This increase of 26.3%
consists of $12.5 billion of client investment returns, $7.1 billion
of client net flows and $30.3 billion of net business acquisitions.
Average total assets under management and advisement for the
year ended December 31, 2020 were $191.2 billion compared to
$183.5 billion in 2019. Average total assets under management
and advisement for the fourth quarter of 2020 were $202.2 billion
compared to $187.4 billion in the fourth quarter of 2019.
Total assets under management were $214.0 billion at
December 31, 2020, the highest level in the history of the
Company, compared with $166.8 billion at December 31,
2019. Average total assets under management for the year
ended December 31, 2020 were $168.5 billion compared to
$161.1 billion in 2019. Average total assets under management
for the fourth quarter of 2020 were $177.6 billion compared to
$164.5 billion in the fourth quarter of 2019.
764
763
792
3.29
3.05
3.02
3.19
3.20
2016
2017
2018
2019
2020
Adjusted Net Earnings
Adjusted Diluted EPS
Adjusted net earnings and adjusted net earnings per share excluded the
following after‑tax amounts:
2016 – a reduction in income tax estimates related to certain tax filings.
2017 – charges related to restructuring and other, a favourable
revaluation of the Company’s pension plan obligation, charges
representing the Company’s proportionate share in Great‑West
Lifeco Inc.’s one‑time charges and restructuring provision.
Net earnings available to common shareholders for the year
2018 – charges related to restructuring and other and the premium paid
ended December 31, 2020 were $764.4 million or $3.21
per share compared to net earnings available to common
shareholders of $746.7 million or $3.12 per share in 2019.
Net earnings available to common shareholders for the three
months ended December 31, 2020 were $229.1 million or
96 cents per share compared to net earnings available to
common shareholders of $191.6 million or 80 cents per share
for the comparative period in 2019.
on the early redemption of debentures.
2019 – the Company’s proportionate share in Great‑West Lifeco Inc.’s
one‑time charges.
2020 – the gain on sale of Personal Capital, gain on sale of Quadrus
Group of Funds net of acqusition costs, the Company’s
proportionate share of associate’s adjustments and restructuring
and other.
| 25
Management’s Discussion and Analysis | 2020 IGM Financial Inc. Annual Report • The Company’s proportionate share in Great‑West Lifeco Inc.’s
2020 DEVELOPMENTS
after‑tax adjustments related to the revaluation of a deferred
tax asset less certain restructuring and transaction costs, of
ACQUISITIONS
$3.4 million, recorded in the fourth quarter.
• A gain on the sale of the investment in Personal Capital
Corporation of $31.4 million after‑tax ($37.2 million pre‑tax),
recorded in the third quarter.
GLC Asset Management Group Ltd. (GLC)
On December 31, 2020, the Company’s subsidiary, Mackenzie,
acquired all of the common shares of GLC, a wholly‑owned
subsidiary of Great‑West Lifeco Inc. (Lifeco), for cash consideration
• Restructuring and other charges of $54.7 million after‑tax
of $185.0 million.
($74.5 million pre‑tax), recorded in the third quarter, resulting
from our ongoing multi‑year transformation initiatives and
efforts to enhance our operational effectiveness and also
from the acquisition of GLC Asset Management Group Ltd.
(GLC) and other changes to our investment management
GLC has $37 billion in assets under management and a 50‑year
history of providing investment advisory services to a range of
mutual funds, individual and group segregated funds offered by
and through Canada Life.
teams. This included activities to improve efficiency and
In a separate transaction, Lifeco’s subsidiary, Canada Life
capabilities by leveraging the scale and expertise of scaled
Assurance Company (Canada Life) acquired the fund
providers through outsourcing partnerships, as well as process
management contracts relating to private label Quadrus Group
automation initiatives relating to key internal processes.
of Funds (QGOF) from Mackenzie for total cash consideration of
During the third quarter, IGM Financial announced outsourcing
$30 million. Mackenzie was previously the manager and trustee
initiatives with Soroc for IT end‑user services, with IBM for
of the QGOF. Subsequent to the sale, Mackenzie continues to
hosting of mainframe solutions, with Google for cloud‑based
provide investment and administration services to the QGOF.
data storage and other services, and also announced an
agreement with CAPCO for process automation. As a result
Northleaf Capital Group Ltd. (Northleaf)
of these initiatives, the Company recorded costs relating to
On October 28, 2020, the Company’s subsidiary, Mackenzie,
restructuring and downsizing activities as well as impairment
together with Great‑West Lifeco Inc. (Lifeco), acquired a
of redundant internally generated software assets. During the
non‑controlling interest in Northleaf through an acquisition
third quarter, the Company also incurred severance and other
vehicle 80% owned by Mackenzie and 20% owned by Lifeco
charges relating to the acquisition of GLC as well as other
for cash consideration of $241 million and up to an additional
personnel changes.
Other items for the year ended December 31, 2019 consisted of:
$245 million in consideration at the end of five years subject
to the business achieving exceptional growth in certain
performance measures over the period. Any additional
• A one‑time charge of $9.2 million, recorded in the fourth
consideration will be recognized as expense over the five year
quarter, which represented the Company’s proportionate
period based on the fair value of the expected payment, which
share in Great‑West Lifeco Inc.’s after‑tax adjustments related
is revalued at each reporting period date.
to the revaluation of a deferred tax asset, restructuring costs
and the net gain on the Scottish Friendly transaction.
• A one‑time charge of $8.0 million, recorded in the second
quarter, which represented the Company’s proportionate
share in Great‑West Lifeco Inc.’s after‑tax loss on the sale of
its United States individual life insurance and annuity business.
Shareholders’ equity was $5.0 billion at December 31, 2020,
compared to $4.5 billion at December 31, 2019. Return on
average common equity based on adjusted net earnings for
the year ended December 31, 2020 was 16.1%, compared
with 17.2% for the comparative period in 2019. The quarterly
dividend per common share was 56.25 cents in 2020,
The acquisition vehicle acquired a 49.9% non‑controlling voting
interest and a 70% economic interest in Northleaf. Mackenzie and
Lifeco have an obligation and right to purchase the remaining
economic and voting interest in Northleaf commencing in
approximately five years and extending into future periods.
Northleaf is a global private equity, private credit and
infrastructure fund manager, headquartered in Toronto, with
more than 150 employees across seven offices in Canada, the
U.S., UK and Australia. Northleaf’s assets under management,
including invested capital and uninvested commitments, were
$14.6 billion at December 31, 2020.
unchanged from the end of 2019.
The financial results of Northleaf are recorded in the Company’s
Strategic Investments and Other segment.
26 |
2020 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis Greenchip Financial Corporation (Greenchip)
bans, closing of non‑essential businesses, self‑imposed
On December 22, 2020, Mackenzie acquired 100% of Greenchip,
quarantine periods and social distancing, have caused significant
a Canadian firm focused exclusively on the environmental
volatility and weakness in global equity markets and material
economy since 2007. The acquisition adds $618 million in assets
disruption to businesses globally resulting in an economic
under management, of which $435 million was sub‑advisory
slowdown. Governments and central banks have reacted
mandates to the Mackenzie Global Environmental Equity Fund.
with significant monetary and fiscal interventions designed to
INVESTMENT IN WEALTHSIMPLE
FINANCIAL CORP. (WEALTHSIMPLE)
On October 14, 2020, Wealthsimple announced a $114 million
equity fundraising led by TCV, one of the largest growth equity
investors focused on technology, along with Greylock, Meritech,
Two Sigma Ventures and existing investor Allianz X. The new
investors have an ownership stake of 7.4%. The purchase price
associated with this fundraising valued the common equity of
Wealthsimple at $1.5 billion ($1.4 billion pre‑money valuation).
IGM Financial is the largest shareholder in Wealthsimple and
holds, directly and indirectly, a 36% interest. As a result of this
valuation, the fair value of the Company’s investment increased
by $298 million and is recorded at $550 million at December 31,
2020. The change in fair value was recognized through Other
Comprehensive Income.
SALE OF PERSONAL CAPITAL CORPORATION
(PERSONAL CAPITAL)
In the third quarter, the Company sold its equity interest in
Personal Capital to a subsidiary of Lifeco, Empower Retirement,
for proceeds of $232.8 million (USD $176.2 million) and up to an
additional USD $24.6 million in consideration subject to Personal
Capital achieving certain target growth objectives.
stabilize economic conditions.
Volatility in global equity markets in 2020 has been significant.
In the first quarter of 2020, the S&P TSX Composite index
declined by 21.6%, increased by 16.0% in the second quarter,
increased by 3.9% in the third quarter, and in the fourth quarter
increased by 8.1%. Year to date returns were positive 2.2%. U.S.
equity markets, as measured by the S&P 500 index, for those
same periods declined by 20.0%, increased by 20.0%, increased
by 8.5%, and increased by 11.7% for a year to date return of
positive 16.3%. Our clients experienced an average investment
return of negative 11.7% in the first quarter, positive returns of
9.7% in the second quarter of 2020, positive returns of 4.2% in
the third quarter, positive returns of 5.5% in the fourth quarter,
and year to date positive returns of 6.5%. IGM Financial’s
assets under management and advisement increased from
$196.4 billion at September 30, 2020 to $240.0 billion at
December 31, 2020, which represents an increase of 6.7%,
excluding $30.3 billion in net business acquisitions in the fourth
quarter of GLC and Greenchip. Excluding these acquisitions,
assets under management and advisement have increased by
10.3% from $190.0 billion at December 31, 2019, despite the
volatility in global equity markets during the year. The volatility
of IGM Financial’s assets under management and advisement
in 2020 has not been as severe as overall market changes,
reflecting the diversified nature of IGM Financial’s overall
As a result of the sale, the Company has derecognized its
investment in Personal Capital and recorded an accounting gain
asset mix.
of $37.2 million ($31.4 million net of tax) in Net investment
income and other in the Consolidated Financial Statements.
The Company’s economic gain, based on the cost of its
investment in Personal Capital of $189.1 million, was
approximately $43.7 million ($37.9 million net of tax).
COVID‑19
Even though progress has been made on the deployment of
vaccines, the duration and full impact of the COVID‑19 pandemic
is unknown at this time, as is the efficacy of the government and
central bank interventions. As a result, it is not possible to reliably
estimate the length and severity of these developments and the
impact on the financial results and condition of the Company and
its operating subsidiaries in future periods.
In response to the impact of COVID‑19, the Company continues
Governments worldwide have enacted emergency measures to
to support our employees, advisors, clients and communities
combat the spread of a novel strain of coronavirus (COVID‑19).
with actions as described in the following table.
These measures, which include the implementation of travel
| 27
Management’s Discussion and Analysis | 2020 IGM Financial Inc. Annual Report COVID-19 COMPANY RESPONSE – SUPPORTING OUR EMPLOYEES, ADVISORS, CLIENTS AND COMMUNITIES
Employees & Advisors
Clients
Communities
a) Safety: Rapid move to work from
a) Enhanced communication: Increased
a) $1 million joint contribution: along
home model for virtually all employees
support on managing market volatility,
with Power Corporation of Canada and
and company advisors. Investments in
the value of advice and portfolio
Canada Life, support crisis relief efforts
hardware and supported people to take
manager commentary
in our communities
desktops home
b) Taking advantage of digitization and
– Local and national food banks
b) Financial peace of mind: Commitment
technology to work with clients:
– Vulnerable people
to no COVID‑19 job loss across
At IG, increased utilization of digital
– Small businesses
IGM in 2020
forms, e‑signatures
Special allowance for non‑executive
Increased use of virtual client interactions
employees to cover work from
at IG and IPC
home costs
At Mackenzie, increased utilization of
Allowance for the few essential workers
virtual wholesaling with advisors
still travelling to the office
c) Financial hardship support: Ongoing
c) Work-life balance: Accommodations
delivery of financial planning, helping
for childcare and flexible workdays
clients access government programs
d) Mental and Physical Health: Enhanced
employee benefits
e) Advisor support to work with clients
Foundations to Support our Stakeholders
where needed, mortgage deferral
program at IG
b) IG Wealth Management will strengthen
its support of United Way and their
work with isolated seniors
c) Mackenzie Investments Charitable
Foundation will increase its support
for women and children in
community shelters
d) Free financial planning advice to small
and medium business owners
a) Executive COVID-19 Committee: Leadership decision making and direction setting, as well as coordination of divisional support
b) Business continuity and emergency preparedness: We plan for and test our ability to securely operate in a variety of scenarios
including work‑at‑home capabilities
COVID‑19 has the current and ongoing potential to expose
REPORTABLE SEGMENTS
the Company to a number of risks inherent in our business
The new segments as described below reflect the Company’s
activities. These include: liquidity risk; credit risk; business risk
internal financial reporting and performance measurement
and risks related to assets under management; operational
(Tables 4, 5 and 6):
risk; governance, oversight and strategic risk; regulatory
developments; and people risk. These risks are discussed in
further detail in the Risk Management section of this MD&A.
REPORTING CHANGES
• Wealth Management – reflects the activities of operating
companies that are principally focused on providing financial
planning and related services to Canadian households. This
segment includes the activities of IG Wealth Management
and Investment Planning Counsel. These firms are retail
In the third quarter of 2020, the Company realigned its reportable
distribution organizations who serve Canadian households
segments and made disclosure enhancements to its Consolidated
through their securities dealers, mutual fund dealers and
Statements of Earnings to better characterize the Company’s
other subsidiaries licensed to distribute financial products
business lines, improve transparency into the key drivers of the
and services. A majority of the revenues of this segment
business, and facilitate appropriate valuation of each segment.
are derived from providing financial advice and distributing
Prior period comparative information has been restated to reflect
financial products and services to Canadian households. This
the disclosure enhancements and realigned segments.
These changes have no impact on the reported earnings of
the Company.
segment also includes the investment management activities
of these organizations, including mutual fund management
and discretionary portfolio management services.
28 |
2020 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis
TABLE 1: RECONCILIATION OF NON‑IFRS FINANCIAL MEASURES
($ millions)
Adjusted net earnings available to common
shareholders – Non-IFRS measure
Gain on sale of Personal Capital, net of tax
Gain on sale of Quadrus Group of Funds net of
acquisition costs, net of tax
Proportionate share of associate’s adjustments
Restructuring and other, net of tax
Proportionate share of associate’s one‑time charges
THREE MONTHS ENDED
TWELVE MONTHS ENDED
2020
DEC. 31
2020
SEP. 30
2019
DEC. 31
2020
DEC. 31
2019
DEC. 31
$ 204.3
–
$ 214.2
31.4
$ 200.8
–
$ 762.9
31.4
$ 763.9
–
21.4
3.4
–
–
–
–
(54.7)
–
–
–
–
(9.2)
21.4
3.4
(54.7)
–
–
–
–
(17.2)
Net earnings available to common shareholders – IFRS
$ 229.1
$ 190.9
$ 191.6
$ 764.4
$ 746.7
Adjusted net earnings per share(1) available to
common shareholders – Non-IFRS measure
Gain on sale of Personal Capital, net of tax
Gain on sale of Quadrus Group of Funds net of
acquisition costs, net of tax
Proportionate share of associate’s adjustments
Restructuring and other, net of tax
Proportionate share of associate’s one‑time charges
Net earnings per share(1) available
to common shareholders – IFRS
$
0.86
–
0.09
0.01
–
–
$
0.90
0.13
$
0.84
(0.04)
$
3.20
0.13
$
3.19
–
–
–
(0.23)
–
–
–
–
–
0.09
0.02
(0.23)
–
–
–
–
(0.07)
$
0.96
$
0.80
$
0.80
$
3.21
$
3.12
EBITDA before sales commissions – Non-IFRS measure
Sales‑based commissions paid
$ 326.4
(41.3)
$ 336.3
(30.0)
$ 336.5
(45.2)
EBITDA after sales commissions – Non-IFRS measure
Sales‑based commissions paid subject to amortization
Amortization of capitalized sales commissions
Amortization of capital, intangible and other assets
Adjusted earnings before interest and income taxes –
Non-IFRS measure
Interest expense(2)
Adjusted earnings before income taxes –
Non-IFRS measure
Gain on sale of Personal Capital
Gain on sale of QGOF net of acquisition costs
Proportionate share of associate’s adjustments
Restructuring and other
Proportionate share of associate’s one‑time charges
Earnings before income taxes
Income taxes
Non‑controlling interest
Perpetual preferred share dividends
285.1
36.1
(10.6)
(21.5)
289.1
(27.9)
261.2
–
25.2
3.4
–
–
289.8
(60.5)
(0.2)
–
306.3
25.1
(9.5)
(21.5)
300.4
(27.9)
272.5
37.2
–
–
(74.5)
–
235.2
(44.3)
–
–
291.3
23.5
(6.5)
(19.9)
288.4
(27.8)
260.6
–
–
–
–
(9.2)
251.4
(59.8)
–
–
$ 1,226.4
(139.5)
1,086.9
117.6
(36.4)
(83.5)
$ 1,294.0
(165.1)
1,128.9
67.2
(22.4)
(79.5)
1,084.6
(110.6)
1,094.2
(108.4)
974.0
37.2
25.2
3.4
(74.5)
–
965.3
(200.7)
(0.2)
–
985.8
–
–
–
–
(17.2)
968.6
(219.7)
–
(2.2)
Net earnings available to common shareholders – IFRS
$ 229.1
$ 190.9
$ 191.6
$ 764.4
$ 746.7
(1) Diluted earnings per share.
(2) Interest expense includes interest on long-term debt and interest on leases.
| 29
Management’s Discussion and Analysis | 2020 IGM Financial Inc. Annual Report
• Asset Management – reflects the activities of operating
Assets under Management and Advisement (AUM&A)
companies primarily focused on providing investment
represents the consolidated AUM and AUA of IGM Financial. In
management services, and represents the operations of
the Wealth Management segment, AUM is a component part
Mackenzie Investments. Investment management services are
of AUA. All instances where the asset management segment
provided to a suite of investment funds that are distributed
is providing investment management services or distributing
through third party dealers and financial advisors, and through
its products through the Wealth Management segment are
institutional advisory mandates to financial institutions,
eliminated in our reporting such that there is no double‑counting
pensions and other institutional investors.
of the same client savings held at IGM operating companies.
• Strategic Investments and Other – primarily represents the
key strategic investments made by the Company, including
China Asset Management Co., Ltd., Great‑West Lifeco Inc.,
Northleaf Capital Group Ltd., Wealthsimple Financial Corp.,
and Portag3 Ventures LPs, as well as unallocated capital.
Investments are classified in this segment (as opposed to the
Wealth Management or Asset Management segment) when
warranted due to different market segments, growth profiles
or other unique characteristics.
At the consolidated IGM Financial level, the change in reportable
segments has no effect on financial results. The key differences
include the financial presentation changes and segment changes
noted above. In addition, the Asset Management segment
includes assets under management that are managed for other
IGM businesses in the Wealth Management segment.
Assets under Advisement (AUA) are the key driver of the
Wealth Management segment. AUA are savings and investment
products held within client accounts of our Wealth Management
segment operating companies.
Assets under Management (AUM) are the key driver of the
Asset Management segment. AUM are a secondary driver
of revenues and expenses within the Wealth Management
segment in relation to its investment management activities.
AUM are client assets where we provide investment
management services, and include investment funds where
we are the fund manager, investment advisory mandates
to institutions, and other client accounts where we have
discretionary portfolio management responsibilities.
COMPARISON OF IGM FINANCIAL REPORTABLE SEGMENTS
Segments Effective Third Quarter 2020(1)
Previous Segments
Wealth Management includes:
• IG Wealth Management
• Investment Planning Counsel Inc.
IG Wealth Management
Asset Management includes:
Mackenzie Investments
• Mackenzie Investments
• Results include the $76 billion sub‑advisory relationship(2) with
IG Wealth Management and Investment Planning Counsel
Strategic Investments and Other includes:
• Great‑West Lifeco Inc.
• China AMC
• Northleaf
• Wealthsimple
• Portag3 Ventures
• Unallocated capital
(1) Prior period segment reporting and disclosure has been restated for comparison purposes.
(2) Previously recorded as a cost-sharing arrangement.
Corporate and Other included:
• Great‑West Lifeco Inc.
• China AMC
• Wealthsimple
• Portag3 Ventures
• Personal Capital Corporation
• Net investment income not allocated to the IG Wealth
Management or Mackenzie segments
• Investment Planning Counsel Inc.
30 |
2020 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis FINANCIAL PRESENTATION
Certain items reflected in Tables 4, 5 and 6 are not allocated
The financial presentation changes include the reclassification
to segments:
of certain revenues and expenses to provide greater alignment
with the key drivers of business activity and to reflect our
emphasis on business growth and operational efficiency. The
changes to the categories are as follows:
• Interest expense – represents interest expense on long‑term
debt and interest expense on leases. The change in interest
expense for the twelve month period resulted from the
impact of the issuance of $250 million 4.206% debentures on
• Wealth management revenue – revenues earned by
March 20, 2019.
the Wealth Management segment for providing financial
• 2020 Gain on sale of the Quadrus Group of Funds net of acquisition
planning, investment advisory and related financial services.
costs – $25.2 million ($21.4 million after‑tax), recorded in the
Revenues include financial advisory fees, investment
fourth quarter.
management and related administration fees, distribution
revenue associated with insurance and banking products
and services, and net investment income and other revenue
relating to mortgage lending activities.
• 2020 Proportionate share of associate’s adjustments – $3.4 million
which represented the Company’s proportionate share in
Great‑West Lifeco Inc.’s after‑tax adjustments, recorded in the
fourth quarter, related to the revaluation of a deferred tax asset
• Asset management revenue – revenues earned by the Asset
less certain restructuring and transaction costs.
Management segment related to investment management
advisory and administrative services.
• Dealer compensation – asset‑based and sales‑based
• 2020 Gain on sale of Personal Capital – $37.2 million
($31.4 million after‑tax), recorded in the third quarter,
resulting from the sale of the Company’s investment in
compensation paid to dealers by the Asset Management segment.
Personal Capital.
• Advisory and business development expenses – expenses
• 2020 Restructuring and other – $74.5 million ($54.7 million
incurred on activities directly associated with providing
financial planning services to clients of the Wealth
Management segment. Expenses include compensation,
recognition and other support provided to our financial
after‑tax), recorded in the third quarter, resulting from
our ongoing multi‑year transformation initiatives and
efforts to enhance our operational effectiveness and also
from the acquisition of GLC and other changes to our
advisors, field management, product & planning specialists;
investment management teams. This included activities to
expenses associated with facilities, technology and training
improve efficiency and capabilities by leveraging the scale
relating to our financial advisors and specialists; other
and expertise of scaled providers through outsourcing
business development activities including direct marketing
partnerships, as well as process automation initiatives relating
and advertising; and wholesale distribution activities
to key internal processes. During the quarter, IGM announced
performed by the Asset Management segment. A significant
outsourcing initiatives with Soroc for IT end‑user services,
component of these expenses vary directly with levels
of assets under management or advisement, business
with IBM for hosting of mainframe solutions, with Google
for cloud‑based data storage and other services, and
development measures including sales and client acquisition,
also announced an agreement with CAPCO for process
and the number of advisor and client relationships.
automation. As a result of these initiatives, the Company
• Operations and support expenses – expenses associated
is recording costs relating to restructuring and downsizing
with business operations, including technology and business
activities as well as impairment of redundant internally
processes; in‑house investment management and product
generated software assets. During the quarter, the Company
shelf management; corporate management and support
also incurred severance and other charges relating to the
functions. These expenses primarily reflect compensation and
acquisition of GLC as well as other personnel changes.
technology and other service provider expenses.
• 2019 Proportionate share of associate’s one-time charges –
• Sub-advisory expenses – reflects fees relating to investment
consisted of:
management services provided by third party or related party
– $9.2 million representing the Company’s proportionate
investment management organizations. These fees typically are
share in Great‑West Lifeco Inc.’s after‑tax adjustments,
variable with the level of assets under management. These fees
recorded in the fourth quarter, related to the revaluation
include investment advisory services performed for the Wealth
of a deferred tax asset, restructuring costs and the net gain
Management segment by the Asset Management segment.
on the Scottish Friendly transaction.
The reconciliations of IGM’s current presentation of its revenues
and expenses to prior period presentation are included in
Tables 2 and 3.
– $8.0 million representing the Company’s proportionate
share in Great‑West Lifeco Inc.’s after‑tax loss, recorded
in the second quarter, on the sale of its United States
individual life insurance and annuity business.
| 31
Management’s Discussion and Analysis | 2020 IGM Financial Inc. Annual Report TABLE 2: STATEMENT OF EARNINGS RECONCILIATION
THREE MONTHS ENDED DECEMBER 31, 2020
($ millions)
PRIOR
PRESENTATION
CURRENT
PRESENTATION
MANAGEMENT
ADVISORY FEES
AND ADMINISTRATION
FEES
DISTRIBUTION
FEES
NET PROPORTIONATE
SHARE OF
ASSOCIATES’
EARNINGS
INVESTMENT
INCOME AND
OTHER
COMMISSION
EXPENSE
NON-
COMMISSION
EXPENSE
INTEREST
EXPENSE
EARNINGS
BEFORE
INCOME TAXES
$ 599.8
$ 103.3
$
93.8
$
49.8
$
43.5
$ 288.8
$ 283.7
$
27.9
$ 289.8
Revenues
Wealth management
$ 594.2
Asset management
Dealer compensation
216.3
(74.3)
408.9
190.9
76.1
27.2
92.6
1.2
16.6
Net asset management
142.0
190.9
27.2
1.2
(74.3)
(74.3)
(3.0)
(3.0)
Net investment income
and other(1)
Proportionate share of
associates’ earnings(2)
Expenses
Advisory and
business development
Operations and
support(3)
Sub‑advisory
Interest
33.2
43.5
812.9
283.1
193.8
18.3
27.9
523.1
Earnings before
income taxes
$ 289.8
33.2
599.8
103.3
93.8
49.8
43.5
43.5
(74.3)
(3.0)
214.5
68.6
193.8
18.3
214.5
280.7
27.9
27.9
(1) Net investment income includes the gain on sale of Quadrus Group of funds of $30.0 million.
(2) Proportionate share of associates’ earnings includes one time adjustments of $3.4 million.
(3) Operations and support includes acquisition costs of $4.8 million.
• Income taxes – changes in the effective tax rates are shown in
reported in adjusted net earnings is reflected in Other items,
Table 7.
Tax planning may result in the Company recording lower
levels of income taxes. Management monitors the status of its
income tax filings and regularly assesses the overall adequacy
of its provision for income taxes and, as a result, income
taxes recorded in prior years may be adjusted in the current
year. The effect of changes in management’s best estimates
which also includes, but is not limited to, the effect of lower
effective income tax rates on foreign operations.
• Perpetual preferred share dividends – represents the dividends
declared on the Company’s 5.90% non‑cumulative first
preferred shares. The decrease in the preferred share dividends
reflects the redemption of the $150.0 million in preferred
shares on April 30, 2019.
32 |
2020 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis
TABLE 3: STATEMENT OF EARNINGS RECONCILIATION
TWELVE MONTHS ENDED DECEMBER 31, 2020
($ millions)
PRIOR
PRESENTATION
CURRENT
PRESENTATION
Revenues
Wealth management
MANAGEMENT
ADVISORY FEES
AND ADMINISTRATION
FEES
DISTRIBUTION
FEES
NET PROPORTIONATE
SHARE OF
ASSOCIATES’
EARNINGS
INVESTMENT
INCOME AND
OTHER
COMMISSION
EXPENSE
NON-
COMMISSION
EXPENSE
INTEREST
EXPENSE
EARNINGS
BEFORE
INCOME TAXES
$ 2,282.9
$ 403.4
$ 346.3
$ 129.4
$ 150.4
$ 1,088.3
$ 1,148.2
$ 110.6
$ 965.3
Asset management
Dealer compensation
812.9
(283.1)
718.2
$ 2,259.6
1,564.7
301.9
101.5
Net Asset management
529.8
718.2
101.5
Net investment income
and other(1)
Proportionate share of
associates’ earnings(2)
78.2
150.4
341.8
51.2
4.5
4.5
(11.3)
(283.1)
(283.1)
(11.3)
78.2
150.4
3,018.0
2,282.9
403.4
346.3
129.4
150.4
(283.1)
(11.3)
Expenses
Advisory and
business development
Operations and
support(3)
Sub‑advisory
Interest
Earnings before
income taxes
1,040.2
830.7
71.2
110.6
2,052.7
$ 965.3
805.2
235.0
830.7
71.2
805.2
1,136.9
110.6
110.6
(1) Net investment income includes the gain on sale of Personal Capital of $37.2 million and gain on sale of Quadrus Group of funds of $30.0 million.
(2) Proportionate share of associates’ earnings includes one time adjustments of $3.4 million.
(3) Operations and support includes restructuring and other charges of $74.5 million and acquisition costs of $4.8 million.
| 33
Management’s Discussion and Analysis | 2020 IGM Financial Inc. Annual Report
TABLE 4: CONSOLIDATED OPERATING RESULTS BY SEGMENT – Q4 2020 VS. Q4 2019
WEALTH MANAGEMENT
ASSET MANAGEMENT
STRATEGIC
INVESTMENTS
& OTHER
INTERSEGMENT
ELIMINATIONS
THREE MONTHS ENDED
($ millions)
2020
DEC. 31
2019
DEC. 31
2020
DEC. 31
2019
DEC. 31
2020
DEC. 31
2019
DEC. 31
2020
DEC. 31
2019
DEC. 31
2020
DEC. 31
TOTAL
2019
DEC. 31
Revenues
Wealth management
Asset management
Dealer compensation
expense
Net asset management
Net investment income
and other
Proportionate share of
associates’ earnings
Expenses
Advisory and business
development
Operations and support
Sub‑advisory
Adjusted earnings before
interest and taxes
$ 598.5
$ 591.1 $
–
$
– $
242.1
229.6
(78.6)
(73.9)
163.5
155.7
–
–
–
–
$
– $
(4.3) $
(4.0) $ 594.2
$ 587.1
–
–
–
(25.8)
(26.2)
216.3
203.4
4.3
4.1
(74.3)
(69.8)
(21.5)
(22.1)
142.0
133.6
1.0
(0.3)
1.1
2.6
0.1
(0.1)
3.2
6.7
599.5
595.6
164.5
155.4
–
–
40.1
41.2
32.6
35.2
–
–
40.1
32.6
(25.7)
(26.2)
779.5
760.0
–
–
–
1.0
–
–
–
–
4.5
–
254.8
113.3
42.7
410.8
248.6
104.2
41.5
394.3
28.3
74.6
1.5
22.5
77.7
2.7
104.4
102.9
–
0.9
–
0.9
–
0.6
–
0.6
–
0.2
(25.9)
(25.7)
(0.2)
0.1
(26.1)
283.1
189.0
18.3
(26.2)
490.4
270.9
182.6
18.1
471.6
$ 188.7
$ 201.3 $
60.1
$
52.5 $
40.3
$
34.6 $
–
$
–
289.1
288.4
Interest expense(1)
Gain on sale of Quadrus Group of Funds net of acquisition costs
Proportionate share of associate’s adjustments
Proportionate share of associate’s one‑time charges
Earnings before income taxes
Income taxes
Net earnings
Non‑controlling interest
Net earnings available to common shareholders
Adjusted net earnings available to common shareholders(2)
(27.9)
25.2
3.4
–
289.8
60.5
229.3
(0.2)
(27.8)
–
–
(9.2)
251.4
59.8
191.6
–
$ 229.1
$ 191.6
$ 204.3
$ 200.8
(1) Interest expense includes interest on long-term debt and interest on leases.
(2) Refer to Non-IFRS Financial Measures and Additional IFRS Measures in this MD&A for an explanation of the Company’s use of non-IFRS financial measures.
34 |
2020 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis
TABLE 5: CONSOLIDATED OPERATING RESULTS BY SEGMENT – TWELVE MONTHS ENDED
WEALTH MANAGEMENT
ASSET MANAGEMENT
STRATEGIC
INVESTMENTS
& OTHER
INTERSEGMENT
ELIMINATIONS
TWELVE MONTHS ENDED
($ millions)
2020
DEC. 31
2019
DEC. 31
2020
DEC. 31
2019
DEC. 31
2020
DEC. 31
2019
DEC. 31
2020
DEC. 31
2019
DEC. 31
2020
DEC. 31
TOTAL
2019
DEC. 31
Revenues
Wealth management
Asset management
Dealer compensation
expense
Net asset management
Net investment income
$ 2,276.0
$ 2,315.2 $
–
$
– $
–
–
–
–
–
–
913.5
896.5
(299.5)
(292.9)
614.0
603.6
–
–
–
–
$
– $
(16.4) $
(16.2) $ 2,259.6
$ 2,299.0
–
–
–
(100.6)
(104.2)
812.9
792.3
16.4
15.9
(283.1)
(277.0)
(84.2)
(88.3)
529.8
515.3
and other
2.3
13.6
Proportionate share of
associates’ earnings
–
–
2.9
–
4.2
–
2,278.3
2,328.8
616.9
607.8
Expenses
Advisory and business
development
Operations and support
Sub‑advisory
Adjusted earnings before
interest and taxes
960.0
453.7
163.2
986.5
436.0
161.5
1,576.9
1,584.0
80.2
293.7
8.7
382.6
79.9
295.2
10.8
385.9
6.0
7.3
(0.2)
(0.3)
11.0
24.8
147.0
153.0
–
4.1
–
4.1
122.4
–
–
147.0
122.4
129.7
(100.8)
(104.8)
2,947.4
2,961.5
–
2.2
–
2.2
–
(0.1)
(100.7)
(0.4)
(0.3)
(104.1)
1,040.2
751.4
71.2
1,066.0
733.1
68.2
(100.8)
(104.8)
1,862.8
1,867.3
$ 701.4
$ 744.8 $ 234.3
$ 221.9 $ 148.9
$ 127.5 $
–
$
–
1,084.6
1,094.2
Interest expense(1)
Gain on sale of Personal Capital
Gain on sale of Quadrus Group of Funds net of acquisition costs
Proportionate share of associate’s adjustments
Restructuring and other
Proportionate share of associate’s one‑time charges
Earnings before income taxes
Income taxes
Net earnings
Non‑controlling interest
Perpetual preferred share dividends
Net earnings available to common shareholders
Adjusted net earnings available to common shareholders(2)
(110.6)
37.2
25.2
3.4
(74.5)
–
965.3
200.7
764.6
(0.2)
–
(108.4)
–
–
–
–
(17.2)
968.6
219.7
748.9
–
(2.2)
$ 764.4
$ 746.7
$ 762.9
$ 763.9
(1) Interest expense includes interest on long-term debt and interest on leases.
(2) Refer to Non-IFRS Financial Measures and Additional IFRS Measures in this MD&A for an explanation of the Company’s use of non-IFRS financial measures.
| 35
Management’s Discussion and Analysis | 2020 IGM Financial Inc. Annual Report
TABLE 6: CONSOLIDATED OPERATING RESULTS BY SEGMENT – Q4 2020 VS. Q3 2020
WEALTH MANAGEMENT
ASSET MANAGEMENT
STRATEGIC
INVESTMENTS
& OTHER
INTERSEGMENT
ELIMINATIONS
THREE MONTHS ENDED
($ millions)
2020
DEC. 31
2020
SEP. 30
2020
DEC. 31
2020
SEP. 30
2020
DEC. 31
2020
SEP. 30
2020
DEC. 31
2020
SEP. 30
2020
DEC. 31
TOTAL
2020
SEP. 30
Revenues
Wealth management
Asset management
Dealer compensation
expense
Net asset management
Net investment income
and other
Proportionate share of
associates’ earnings
Expenses
Advisory and business
development
Operations and support
Sub‑advisory
Adjusted earnings before
interest and taxes
$ 598.5
$ 575.7 $
–
$
– $
–
–
–
1.0
–
–
–
–
0.7
–
242.1
233.1
(78.6)
(75.5)
163.5
157.6
1.0
–
1.1
–
599.5
576.4
164.5
158.7
–
–
–
–
$
– $
(4.3) $
(4.1) $ 594.2
$ 571.6
–
–
–
(25.8)
(25.7)
216.3
207.4
4.3
4.2
(74.3)
(71.3)
(21.5)
(21.5)
142.0
136.1
1.1
0.6
0.1
(0.2)
3.2
2.2
40.1
41.2
43.5
44.1
–
–
40.1
43.5
(25.7)
(25.8)
779.5
753.4
254.8
113.3
42.7
410.8
236.5
111.2
41.7
389.4
28.3
74.6
1.5
104.4
16.0
69.7
2.5
88.2
–
0.9
–
0.9
–
1.2
–
1.2
–
0.2
(25.9)
(25.7)
0.1
(0.2)
(25.7)
283.1
189.0
18.3
(25.8)
490.4
252.6
181.9
18.5
453.0
$ 188.7
$ 187.0 $
60.1
$
70.5 $
40.3
$
42.9 $
–
$
–
289.1
300.4
Interest expense(1)
Gain on sale of Quadrus Group of Funds net of acquisition costs
Proportionate share of associate’s adjustments
Gain on sale of Personal Capital
Restructuring and other
Earnings before income taxes
Income taxes
Net earnings
Non‑controlling interest
Net earnings available to common shareholders
Adjusted net earnings available to common shareholders(2)
(27.9)
25.2
3.4
–
–
289.8
60.5
229.3
(0.2)
(27.9)
–
–
37.2
(74.5)
235.2
44.3
190.9
–
$ 229.1
$ 190.9
$ 204.3
$ 214.2
(1) Interest expense includes interest on long-term debt and interest on leases.
(2) Refer to Non-IFRS Financial Measures and Additional IFRS Measures in this MD&A for an explanation of the Company’s use of non-IFRS financial measures.
36 |
2020 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis
TABLE 7: EFFECTIVE INCOME TAX RATE
Income taxes at Canadian federal
and provincial statutory rates
Effect of:
Proportionate share of associates’ earnings
Tax loss consolidation(1)
Other items
Effective income tax rate – adjusted net earnings
Disposition of assets net of acquisition costs
Proportionate share of associate’s adjustments
THREE MONTHS ENDED
TWELVE MONTHS ENDED
2020
DEC. 31
2020
SEP. 30
2019
DEC. 31
2020
DEC. 31
2019
DEC. 31
26.60 %
26.82 %
26.76 %
26.68 %
26.77 %
(3.29)
(0.96)
(0.19)
22.16
(0.98)
(0.31)
(4.50)
(1.20)
(0.12)
21.00
(2.14)
–
(3.43)
(1.36)
0.83
22.80
–
0.99
(3.71)
(1.15)
(0.11)
21.71
(0.82)
(0.09)
(3.31)
(1.41)
0.15
22.20
–
0.48
Effective income tax rate – net earnings
20.87 %
18.86 %
23.79 %
20.80 %
22.68 %
(1) See Note 26 – Related Party Transactions of the Consolidated Financial Statements included in the 2020 IGM Financial Inc. Annual Report (Annual Financial Statements).
SUMMARY OF CHANGES IN TOTAL ASSETS
UNDER MANAGEMENT AND ADVISEMENT
Assets under management and advisement were $240.0 billion
at December 31, 2020 compared to $190.0 billion at
December 31, 2019, an increase of 26.3%. Excluding
$30.3 billion in net business acquisitions in the fourth quarter
of GLC Asset Management Group Ltd. (GLC) and Greenchip
Financial Corp. (Greenchip), assets under management and
advisement at December 31, 2020 were up 10.3% from
December 31, 2019. Total assets under management were
$214.0 billion at December 31, 2020 compared to $166.8 billion
at December 31, 2019, an increase of 28.3%. Excluding the net
business acquisitions, total assets under management were up
10.1%. Changes in assets under management and advisement
are detailed in Table 8.
Changes in assets under management for the Wealth
Management and Asset Management segments are discussed
further in each of their respective Review of the Business
sections in the MD&A.
SELECTED ANNUAL INFORMATION
Financial information for the three most recently completed
years is included in Table 9.
Net Earnings and Earnings per Share – Except as noted in the
reconciliation in Table 9, variations in net earnings and total
revenues result primarily from changes in average assets under
management and advisement. Assets under management
and advisement were $170.2 billion in 2018, increased to
$190.0 billion in 2019 and increased to $240.0 billion in 2020.
Increases were driven largely by changes in financial markets
during the periods, and in 2020 were primarily due to net
business acquisitions of $30.3 billion. Average total assets under
management and advisement for the year ended December 31,
2020 were $191.2 billion compared to $183.5 billion in 2019.
The impact on earnings and revenues of changes in average
total assets under management and advisement and other
pertinent items are discussed in the Review of Segment
Operating Results sections of the MD&A for both IG Wealth
Management and Mackenzie.
Net earnings in future periods will largely be determined by the
level of assets under management and advisement which will
continue to be influenced by global market conditions.
Dividends per Common Share – Annual dividends per common
share were $2.25 in 2020, unchanged from 2019 and 2018.
SUMMARY OF QUARTERLY RESULTS
The Summary of Quarterly Results in Table 10 includes the
eight most recent quarters and the reconciliation of non‑IFRS
financial measures to net earnings in accordance with IFRS.
Changes in average daily investment fund assets under
management over the eight most recent quarters, as shown in
Table 10, largely reflect the impact of changes in domestic and
foreign markets and net sales of the Company.
| 37
Management’s Discussion and Analysis | 2020 IGM Financial Inc. Annual Report
TABLE 8: ASSETS UNDER MANAGEMENT AND ADVISEMENT
WEALTH MANAGEMENT
ASSET MANAGEMENT
IG WEALTH
MANAGEMENT
INVESTMENT
PLANNING COUNSEL
MACKENZIE
INVESTMENTS
INTERCOMPANY
ELIMINATIONS(1)
CONSOLIDATED
THREE MONTHS ENDED
($ millions)
2020
DEC. 31
2019
DEC. 31
2020
DEC. 31
2019
DEC. 31
2020
DEC. 31
2019
DEC. 31
2020
DEC. 31
2019
DEC. 31
2020
DEC. 31
2019
DEC. 31
Gross flows
Mutual fund gross sales(2)(3) $ 2,572
Dealer gross inflows
2,938
Net flows
Mutual fund net sales(2)(3)
ETF Net creations
(9)
–
Investment fund net sales
Institutional SMA net sales
Managed asset net sales
Other dealer net flows
Total net flows
(9)
–
(9)
494
485
TWELVE MONTHS ENDED
Gross flows
Mutual fund gross sales(2)(5) $ 8,987
9,977
Dealer gross inflows
Net flows
Mutual fund net sales(2)(5)
ETF Net creations(4)
(451)
–
Investment fund net sales
Institutional SMA net sales
Managed asset net sales
Other dealer net flows
(451)
–
(451)
1,246
$ 2,251 $
2,467
177
1,487
$
147 $ 4,501
–
1,150
(247)
–
(247)
–
(247)
138
(109)
(89)
–
(89)
–
(89)
338
249
(114)
–
(114)
–
(114)
91
(23)
1,376
372
1,748
(75)
1,673
–
1,673
$ 8,723 $
9,307
577
4,760
$
694 $ 13,565
–
4,345
(1,089)
–
(1,089)
–
(1,089)
309
(307)
–
(307)
–
(307)
680
373
(272)
–
(272)
–
(272)
(317)
(589)
2,956
1,232
4,188
2,062
6,250
–
6,250
$ 2,587 $
–
18
202
220
(73)
147
–
147
$ 9,886 $
–
512
707
1,219
(1,492)
(273)
–
(273)
–
–
–
–
–
–
–
(186)
(186)
–
–
–
–
–
–
–
(319)
(319)
$
– $ 7,250
4,425
–
$ 4,985
3,617
–
–
–
–
–
(22)
(22)
1,278
372
1,650
(75)
1,575
646
2,221
(343)
202
(141)
(73)
(214)
207
(7)
$
– $ 23,129
14,737
–
$ 19,303
13,652
–
–
–
–
–
(22)
(22)
2,198
1,232
3,430
2,062
5,492
1,607
7,099
(849)
707
(142)
(1,492)
(1,634)
(30)
(1,664)
Total net flows
795
(780)
Assets under Management and Advisement
Wealth Management
AUM
Other AUA
AUA
$ 97,713
5,560
$ 93,161 $ 5,320
23,998
3,939
$ 5,391
22,337
103,273
97,100
29,318
27,728
$
$
–
(8)
(8)
– $ 103,033
29,550
(8)
$ 98,552
26,268
(8)
132,583
124,820
Asset Management
Mutual funds
ETFs
Investment funds
Institutional SMA
Total ex sub‑advisory to Wealth Management
Sub‑advisory to Wealth Management
Total AUM
ETFs
Distributed to third parties
Held within IGM investment funds
Total ETFs
Consolidated
AUM
Other AUA
$ 55,462
3,788
$ 60,839
2,372
59,250
51,688
63,211
5,046
110,938
75,821
68,257
73,575
186,759
141,832
55,462
3,788
60,839
2,372
59,250
51,688
63,211
5,046
110,938
75,821
68,257
73,575
186,759
141,832
3,788
4,663
8,451
2,372
2,376
(4,663)
(2,376)
3,788
–
4,748
(4,663)
(2,376)
3,788
2,372
–
2,372
97,713
5,560
93,161
3,939
5,320
23,998
5,391
22,337
186,759
–
141,832
–
(75,821)
(3,579)
(73,575)
(3,050)
213,971
25,979
166,809
23,226
AUM&A
103,273
97,100
29,318
27,728
186,759
141,832
(79,400)
(76,625)
239,950
190,035
(1) Consolidated results eliminate double counting where business is reflected within multiple segments.
(2) IG Wealth Management and Investment Planning Counsel AUM and net sales include separately managed accounts.
(3) During the fourth quarter of 2020, institutional clients which include Mackenzie mutual funds within their investment offerings made fund allocation changes which resulted in
sales of $625 million and net sales of $32 million.
(4) ETFs – During the second and third quarters of 2020, Wealthsimple made allocation changes which resulted in $370 million of purchases in Mackenzie ETFs and $325 million of
redemptions from Mackenzie’s ETFs respectively.
(5) During 2020, institutional clients which include Mackenzie mutual funds within their investment offerings made fund allocation changes which resulted in sales of $1.4 billion and
net sales of $612 million (2019 – sales of $129 million, net redemptions of $36 million).
38 |
2020 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis
TABLE 9: SELECTED ANNUAL INFORMATION
Consolidated statements of earnings ($ millions)
Revenues
Wealth management
Net asset management
Net investment income and other
Proportionate share of associates’ earnings
Expenses
Gain on sale of Personal Capital
Gain on sale of Quadrus Group of Funds net of acquisition costs
Proportionate share of associate’s adjustments
Restructuring and other
Proportionate share of associate’s one‑time charges
Premium paid on early redemption of debentures
Earnings before income taxes
Income taxes
Net earnings
Non‑controlling interest
Perpetual preferred share dividends
2020
2019
2018
$ 2,259.6
529.8
11.0
147.0
2,947.4
1,973.4
$ 2,299.0
515.3
24.8
122.4
2,961.5
1,975.7
974.0
37.2
25.2
3.4
(74.5)
–
–
965.3
200.7
764.6
(0.2)
–
985.8
–
–
–
–
(17.2)
–
968.6
219.7
748.9
–
(2.2)
$ 2,276.6
515.5
20.0
150.0
2,962.1
1,942.6
1,019.5
–
–
–
(22.7)
–
(10.7)
986.1
210.0
776.1
–
(8.8)
Net earnings available to common shareholders
$ 764.4
$ 746.7
$ 767.3
Reconciliation of Non-IFRS financial measures(1) ($ millions)
Adjusted net earnings available to common shareholders – non‑IFRS measure
Other items:
Gain on sale of Personal Capital, net of tax
Gain on sale of Quadrus Group of Funds net of acquisition costs, net of tax
Proportionate share of associate’s adjustments
Restructuring and other, net of tax
Proportionate share of associate’s one‑time charges
Premium paid on early redemption of debentures, net of tax
$ 762.9
$ 763.9
$ 791.8
31.4
21.4
3.4
(54.7)
–
–
–
–
–
–
(17.2)
–
–
–
–
(16.7)
–
(7.8)
Net earnings available to common shareholders – IFRS
$ 764.4
$ 746.7
$ 767.3
Earnings per share ($)
Adjusted net earnings available to common shareholders(1)
– Basic
– Diluted
Net earnings available to common shareholders
– Basic
– Diluted
Dividends per share ($)
Common
Preferred, Series B
Average assets under management and advisement ($ billions)
Investment fund assets under management
Total assets under management
Total assets under management and advisement
Ending assets under management and advisement ($ billions)
Investment fund assets under management
Total assets under management
Total assets under management and advisement
Total corporate assets ($ millions)
Total long‑term debt ($ millions)
Outstanding common shares (thousands)
$
3.20
3.20
3.21
3.21
$
3.19
3.19
3.12
3.12
$
3.29
3.29
3.19
3.18
$
2.25
–
$
2.25
0.37
$
2.25
1.48
$ 161.7
168.5
191.2
$ 162.3
214.0
240.0
$ 155.5
161.1
183.5
$ 161.8
166.8
190.0
$ 150.5
156.9
179.3
$ 143.3
149.1
170.2
$ 16,062
$ 15,391
$ 15,609
$ 2,100
$ 2,100
$ 1,850
238,308
238,294
240,885
(1) Refer to Non-IFRS Financial Measures and Additional IFRS Measures in addition to the Summary of Consolidated Operating Results section included in this MD&A for an explanation
of Other items used to calculate the Company’s Non-IFRS financial measures.
| 39
Management’s Discussion and Analysis | 2020 IGM Financial Inc. Annual Report
TABLE 10: SUMMARY OF QUARTERLY RESULTS
Consolidated statements of earnings ($ millions)
Revenues
Wealth management
2020
Q4
2020
Q3
2020
Q2
2020
Q1
2019
Q4
2019
Q3
2019
Q2
2019
Q1
$ 594.2
$ 571.6
$ 531.1
$ 562.7
$ 587.1
$ 581.1
$ 577.5
$ 553.3
Asset management
Dealer compensation expense
216.3
(74.3)
207.4
(71.3)
190.7
(66.1)
198.5
(71.4)
203.4
(69.8)
201.2
(68.9)
198.5
(69.6)
189.2
(68.7)
Net asset management
142.0
136.1
124.6
127.1
133.6
132.3
128.9
120.5
Net investment income and other
Proportionate share of associates’ earnings
3.2
40.1
2.2
43.5
7.6
43.3
(2.0)
20.1
6.7
32.6
2.0
28.9
4.9
28.2
11.2
32.7
779.5
753.4
706.6
707.9
760.0
744.3
739.5
717.7
Expenses
Advisory and business development
Operations and support
Sub‑advisory
Interest(1)
Earnings before undernoted
Gain on sale of Personal Capital
Gain on sale of Quadrus Group of Funds
net of acquisition costs
Proportionate share of associate’s adjustments
Restructuring and other
Proportionate share of associate’s one‑time charges
Earnings before income taxes
Income taxes
Net earnings
Non‑controlling interest
Perpetual preferred share dividends
283.1
189.0
18.3
27.9
252.6
181.9
18.5
27.9
245.4
185.4
16.9
27.5
259.1
195.1
17.5
27.3
270.9
182.6
18.1
27.8
257.1
180.3
17.4
27.8
267.7
178.5
17.0
27.6
270.3
191.7
15.7
25.2
518.3
480.9
475.2
499.0
499.4
482.6
490.8
502.9
261.2
–
272.5
37.2
231.4
–
208.9
–
260.6
–
261.7
–
248.7
–
214.8
–
25.2
3.4
–
–
–
(74.5)
–
–
–
–
–
–
–
–
–
(9.2)
–
–
–
–
–
(8.0)
–
–
–
289.8
60.5
229.3
(0.2)
–
235.2
44.3
190.9
–
–
231.4
47.9
183.5
–
–
208.9
48.0
160.9
–
–
251.4
59.8
191.6
–
–
261.7
59.2
202.5
–
–
240.7
55.6
185.1
–
–
214.8
45.1
169.7
–
(2.2)
Net earnings available to common shareholders
$ 229.1
$ 190.9
$ 183.5
$ 160.9
$ 191.6
$ 202.5
$ 185.1
$ 167.5
Reconciliation of Non-IFRS financial measures(2) ($ millions)
Adjusted net earnings available to common
shareholders – non‑IFRS measure
Other items:
Gain on sale of Personal Capital, net of tax
Gain on sale of Quadrus Group of Funds
net of acquisition costs, net of tax
Proportionate share of associate’s adjustments
Restructuring and other, net of tax
Proportionate share of associate’s one‑time charges
$ 204.3
$ 214.2
$ 183.5
$ 160.9
$ 200.8
$ 202.5
$ 193.1
$ 167.5
–
31.4
21.4
3.4
–
–
–
–
(54.7)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(9.2)
–
–
–
–
–
–
–
–
–
(8.0)
–
–
–
–
–
Net earnings available to common shareholders – IFRS
$ 229.1
$ 190.9
$ 183.5
$ 160.9
$ 191.6
$ 202.5
$ 185.1
$ 167.5
Earnings per Share (¢)
Adjusted net earnings available to common shareholders(1)
– Basic
– Diluted
Net earnings available to common shareholders
– Basic
– Diluted
86
86
96
96
90
90
80
80
77
77
77
77
68
68
68
68
84
84
80
80
85
85
85
85
81
81
77
77
70
70
70
70
Average assets under management and advisement ($ billions)
Investment fund assets under management
Total assets under management
Assets under management and advisement
$ 169.8
177.6
202.2
Ending assets under management and advisement ($ billions)
Investment fund assets under management
Total assets under management
Assets under management and advisement
$ 162.3
214.0
240.0
(1) Interest expense includes interest on long-term debt and interest on leases.
$ 163.7
171.4
194.9
$ 152.6
159.2
181.5
$ 158.5
163.3
186.0
$ 159.5
164.5
187.4
$ 156.8
162.1
184.7
$ 155.7
161.8
184.2
$ 149.9
155.9
177.8
$ 164.9
172.6
196.4
$ 157.8
165.4
188.3
$ 143.2
147.5
168.4
$ 161.8
166.8
190.0
$ 157.6
162.5
185.1
$ 156.3
162.3
184.9
$ 154.3
160.5
182.8
(2) Refer to Non-IFRS Financial Measures and Additional IFRS Measures in this MD&A in addition to the Summary of Consolidated Operating Results section included in the MD&A of
the 2020 IGM Financial Inc. Annual Report for an explanation of Other items used to calculate the Company’s Non-IFRS financial measures.
40 |
2020 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis
Wealth Management
The Wealth Management segment consists of both IG Wealth
• Product and program fees are related to the management of
Management and Investment Planning Counsel, Inc. (IPC).
investment products and include management, administration
Prior to the third quarter of 2020, IG Wealth Management was
and other related fees.
disclosed as a separate segment and IPC was included as part of
• Other financial planning revenues are fees related to
the Corporate and other segment.
providing clients other financial products including mortgages,
Other key differences of the reporting changes are as follows:
insurance and banking products.
• Wealth management revenue include Advisory fees,
Product and program fees and Other financial planning
revenues. Revenues were previously recorded by function
(i.e. management, administration, distribution). Wealth
management revenues depend largely on the level and
composition of client assets under advisement. Advisory fees
are fees for providing financial advice to clients including fees
related to the distribution of products.
• Expenses include Advisory and business development,
Operations and support and Sub-advisory fees. Expenses
were previously categorized as either commission or
non‑commission.
• Sub-advisory fees are fees paid between segments and to
third parties for investment management services provided to
our investment products. Under the new segments, Wealth
Management is considered a client of the Asset Management
segment and transfer pricing is based on values for similar
sized asset management mandates.
Review of the Business
IG Wealth Management, founded in 1926, provides comprehensive
During the year, IG Wealth Management launched “Answering
personal financial planning and wealth management services
the Call,” a new program to support Canadian small and
to Canadians through our exclusive network of approximately
medium‑sized businesses (SMBs) and their communities
3,300 Consultants. IG Wealth Management clients are more than
as they navigate the financial challenges presented by the
one million individuals, families and business owners.
COVID‑19 crisis.
Investment Planning Counsel, founded in 1996, is an independent
As of March 2020, there were almost 1.1 million SMBs in
distributor of financial products, services and advice in Canada,
Canada, which employed 70 per cent of all private sector
with 696 financial advisors.
The Wealth Management segment provides a comprehensive
planning approach, through IG Wealth Management Consultants
and IPC Advisors, by offering a broad range of financial products
and services.
The review of the business in the Wealth Management section
primarily relates to IG Wealth Management as it represents 97%
workers. IG Wealth Management counts several thousand SMBs
among its clients and has been working closely with them
throughout this period. The firm has now extended its financial
planning expertise to SMB owners across the country.
The Answering the Call initiative was inspired by and is an
extension of the work IG Consultants have been doing in their
communities since the crisis began. It includes:
of earnings before interest and taxes of the total segment.
• free live regional webinars with tax, financial planning and
2020 DEVELOPMENTS
COVID-19 AND CLIENT OUTREACH
As a result of COVID‑19 and the resulting impact to global
financial markets, we have significantly increased communications
to clients and Consultants. We have provided comprehensive
information and ongoing market updates to our Consultants, so
they have the tools they need to support our clients and their
long‑term financial planning needs. Our Consultants continue to
actively reach out and communicate with our clients, continuing
to reinforce the importance of long term planning and a
diversified investment portfolio.
investing specialists;
• videos from experts on a variety of topics;
• insights on tax planning and how to better understand and
access government programs; and
• the opportunity for SMB owners across Canada to be
matched with a local IG Wealth Management advisor for a
no‑obligation consultation.
The firm has also set up an initiative that will see as much as
$500,000 donated by IG Wealth Management to support local
businesses and their communities. This is in addition to the
$1 million donation IGM Financial made along with Canada Life
and Power Corporation of Canada to support crisis relief efforts.
| 41
Management’s Discussion and Analysis | 2020 IGM Financial Inc. Annual Report FEE TRANSPARENCY FOR
ALL CLIENTS AND PRICING CHANGES
DELIVERING GAMMA
the value of all efforts that sit outside of investment
IG Wealth Management is delivering on its client‑focused
portfolio construction. this includes the value that
commitment by expanding fee transparency while introducing
a financial advisor adds to a client relationship, and
product and pricing changes to accelerate growth.
comes from the creation and follow through of a
We increased fee transparency by making unbundled solutions
available to all client segments in the fourth quarter of 2019.
This means clients pay an advisory fee to the dealer for its
services as opposed to dealer compensation being bundled
within mutual fund management fees. Previously, these
solutions were available only to high net worth clients.
IG Wealth Management introduced the IG Advisory Account
(IGAA) in the fourth quarter of 2019. IGAA is a fee‑based
account that offers clients the ability to simplify and consolidate
investments into a single account while providing unbundled
pricing solutions and improved fee transparency.
IG WEALTH MANAGEMENT STRATEGY
well‑constructed financial plan.
Entrepreneurial Advisors, Superior Advice
Our financial advisors provide value to clients by developing
insight into their specific needs, creating and implementing well‑
constructed financial plans and offering superior advice. IG Wealth
Management has a national distribution network of more than
3,000 highly qualified financial advisors (called Consultants) in
communities throughout Canada. Our advisory services are most
suited to individuals with complicated financial needs.
All IG Wealth Management Consultant practices hold a
credentialed financial planning designation or are enrolled
in a program. These designations are nationally recognized
financial planning qualifications that require an individual to
IG Wealth Management’s promise is to inspire financial confidence.
demonstrate financial planning competence through education,
Our strategic mandate is to be Canada’s financial partner of choice.
Canadians hold $5.0 trillion in discretionary financial assets with
financial institutions at December 31, 2019 based on the most
recent report from Investor Economics, and we view these
savings as IG Wealth’s addressable market. 75% of these savings
standardized examinations, continuing education requirements,
and accountability to ethical standards.
The following provides a breakdown of the IG Wealth
Management Consultant network into its significant
components at December 31, 2020:
are held by households with over $1 million, which are referred
• 1,820 Consultant practices (1,830 at December 31, 2019),
to as high net worth, and another 21% reside with households
which reflect Consultants with more than four years of
with between $100,000 and $1 million, which are referred to as
experience. These practices may include Associates as
mass affluent. These segments tend to have more complicated
described below. The level and productivity of Consultant
financial needs, and IG Wealth Management’s focus on providing
practices is a key measurement of our business as they serve
comprehensive financial planning solutions positions it well to
clientele representing approximately 97% of AUM.
compete and grow in these segments.
Our value proposition is to deliver better Gamma, better Beta
and better Alpha.
We seek to deliver our value proposition through:
• 440 New Consultants (520 at December 31, 2019), which are
those Consultants with less than four years of experience.
• 1,044 Associates and Regional Directors (1,031 at December 31,
2019). Associates are licensed team members of Consultant
practices who provide financial planning services and advice to
• Superior Advice – Acquiring a deep knowledge of Canadian
the clientele served by the team.
investors and using those insights to shape everything we do.
• Segmented Client Experiences – Creating segmented
experiences personalized throughout our clients’ lifetimes.
• Entrepreneurial Advisors – Inspiring our entrepreneurial
advisors to constantly deliver an engaging experience and a
holistic plan that seeks to deliver superior outcomes.
• Powerful Financial Solutions – Providing our clients with a
comprehensive suite of well‑constructed, high‑performing
and competitively priced solutions.
• Business processes that are simple, easy and digitized –
Re‑designing client and advisor interactions to simplify
processes, reduce errors, and digitize the experience with
an appropriate cost structure.
• A high‑performing and diverse culture.
• IG Wealth Management had a total Consultant network of
3,304 (3,381 at December 31, 2019).
IG Wealth Management’s recruiting standards increase the
likelihood of success while also enhancing our culture and brand.
Our training curriculum is reviewed and refreshed each year
to offer new Consultants important building blocks to develop
client relationships. As Consultants progress, they develop their
skills as financial planners and business managers through a
selection of focused educational programs.
We also support Consultants and clients through our network
of product and planning specialists, who assist in the areas of
advanced financial planning, mortgages and banking, insurance,
and securities. These specialists help to ensure that we are
42 |
2020 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis providing comprehensive financial planning across all elements
During 2020, we launched the IG Wealth Management Advisor
of a client’s financial life. Clients are served by our Mutual Fund
Portal which is a customer relationship management platform
Dealers Association of Canada (MFDA) and Investment Industry
based on Salesforce. It enables our Consultants to manage
Regulatory Organization of Canada (IIROC) licensed Consultants
client relationships, improve their efficiency through digitized
or specialists.
workflows, and access data‑driven reporting to help better run
Segmented Client Experiences
IG Wealth Management distinguishes itself from our competition
by offering comprehensive planning to our clients within the
context of long‑term relationships. A primary focus is on advising
and attracting high net worth and mass affluent clients.
For the distinct needs of the high net worth market, we offer
their practices.
IG Wealth Management’s dealer platform provides increased
automation and supports both MFDA and IIROC licensed
advisors as well as new products on our investment dealer
platform designed to support the high net worth segment of
our client base.
IG Private Wealth Management which includes investment
A High-Performing and Diverse Culture
management, retirement, tax and estate planning services.
It is essential that we offer competitive compensation and
IG Living Plan™ is our holistic, client‑centric approach to
financial planning that reflects the evolving needs, goals and
aspirations of Canadian families and individuals. The IG Living
Plan provides a single, integrated view of all aspects of a client’s
finances. It incorporates investments, tax and risk management
strategies, for a truly personalized plan.
benefits to attract and retain outstanding people. Our training
and development approach, along with our use of feedback
from periodic employee and advisor surveys, positions our
employees and advisors to better serve our clients.
DELIVERING BETA AND ALPHA
beta – the value created by well‑constructed investment
The IG Living Plan leverages the expertise of IG Wealth
portfolios – achieving expected investment returns for
Management’s Consultants who serve approximately one million
the lowest possible risk.
clients located in communities throughout Canada.
alpha – the value of active management – achieving
IG Wealth Management has a full range of products that allow
returns superior to passive benchmarks with a similar
us to provide a tailored IG Living Plan that evolves over time.
composition and risk profile.
These products include:
IG Wealth Management strives to achieve expected investment
• Powerful financial solutions that include investment vehicles
returns for the lowest possible risk through well‑constructed
that match risk and investment performance to each client’s
investment portfolios (Beta), and to create value for clients
needs and requirements.
through active management (Alpha). To do this, we select and
• Insurance products that include a variety of different policy
engage high‑quality global sub‑advisors so our clients have
types from the leading insurers in Canada.
• Mortgage and banking solutions that are offered as part of a
comprehensive financial plan.
• Charitable Giving Program, a donor‑advised giving program
which enables Canadians to make donations and build an
enduring charitable giving legacy with considerably less
access to a diverse range of investment products and solutions.
Each asset manager is selected through a proven and rigorous
process. We oversee all sub‑advisors to ensure that their
activities are consistent with their investment philosophies and
with the investment objectives and strategies of the products
they advise.
expense and complexity than setting up and administering
IG Wealth Management’s relationships include Mackenzie
their own private foundation.
We have established a National Service Centre focused on clients
with small account values, while our Consultant practices focus
on those clients who have more complicated needs.
Business Processes
IG Wealth Management continually seeks to enhance our
systems and business processes so our Consultants can
serve clients more effectively. We look to enhance client and
Investments and other world class investment firms such as
BlackRock, T. Rowe Price, PIMCO, China AMC, Putnam and
JP Morgan Asset Management.
Powerful Financial Solutions
We provide clients with an extensive suite of well‑constructed
and competitively priced financial solutions. We regularly enhance
the scope and diversity of our investment offering with new funds
and product changes that enable clients to achieve their goals.
advisor interactions on an ongoing basis to simplify processes,
Our solutions include:
reduce errors, and digitize the experience with an appropriate
cost structure.
| 43
Management’s Discussion and Analysis | 2020 IGM Financial Inc. Annual Report • A deep and broad selection of mutual funds, diversified by
to differentiate pricing by client segment, ensuring that it is
manager, asset category, investment style, geography, market
competitive and rewards client loyalty while encouraging
capitalization and sector.
consolidation of client wealth at IG and attracting new clients.
• Managed portfolios that rebalance investments to ensure that
a chosen mix of risk and return is maintained. These solutions
include IG Core Portfolios, IG Managed Payout Portfolios,
Investors Portfolios, and IG Managed Risk Portfolios.
• IG Advisory Account (IGAA) and unbundled fee structures – The
IGAA was introduced in the fourth quarter of 2019 and is a
fee‑based account that improves client experience by offering
the ability to simplify and consolidate selected investments
into a single account while providing all of our clients with
unbundled pricing solutions. IGAA accounts increase fee
transparency and can hold most securities and investment
products available in the marketplace to individual investors.
We have discontinued offering bundled purchase options for
substantially all investment products.
IG Wealth Management monitors its investment performance
by comparing to certain benchmarks. Morningstar† fund ranking
service is one of the rankings monitored when determining
fund performance.
At December 31, 2020, 90.8% of IG Wealth Management
mutual fund unbundled series had a rating of three stars or
better from Morningstar† fund ranking service and 37.4% had a
rating of four or five stars. This compared to the Morningstar†
universe of 71.2% for three stars or better and 36.3% for four
• iProfile™ Private Portfolios – iProfile Private portfolios are
and five star funds at December 31, 2020. These are available
unique portfolio management programs that are available for
households with investments held at IG Wealth Management
in excess of $250,000. iProfile investment portfolios have
within the IG Advisory Account to which we are in the process
of migrating IG client accounts. Morningstar Ratings† are an
objective, quantitative measure of a fund’s three, five and ten
been designed to maximize returns and manage risk by
year risk‑adjusted performance relative to comparable funds.
diversifying across asset classes, management styles and
geographic regions.
During the third quarter, the iProfile Fixed Income Private
Pool revised its investment strategies by adding a Private
Credit Mandate that provides diversified exposure to private
credit investments in privately held companies from around
WEALTH MANAGEMENT ASSETS UNDER
MANAGEMENT AND ADVISEMENT
Assets under management and advisement are key performance
indicators for the Wealth Management segment.
the world. The Pool subsequently made commitments to
Wealth Management’s assets under advisement were
three of Northleaf Capital Partners’ private credit investments
$132.6 billion at December 31, 2020, an increase of 6.2% from
that focus on loans to middle market companies in North
December 31, 2019. The level of assets under advisement are
America and Europe.
influenced by three factors: client inflows, client outflows and
• iProfile™ Portfolios – iProfile Portfolios are a suite of four
investment returns.
managed solutions that provide comprehensive diversification
and are designed to suit personal preferences for risk
tolerance and investment goals. These portfolios are
available to households with investments held at IG Wealth
Management in excess of $100,000.
• Segregated funds that provide for long‑term investment
growth potential combined with risk management, benefit
guarantee features and estate planning efficiencies.
• Separately managed accounts (discretionary dealer‑managed
accounts) and fee‑based brokerage accounts.
A growing portion of IG Wealth Management’s client assets are
in unbundled fee structures. We are in the process of migrating
our clients to unbundled fee products, a significant change for
IG Wealth Management and the Canadian mutual fund industry
overall. Unbundled fee products separate the advisory fee that
is charged directly to a client’s account from the fees charged to
the underlying investment funds. This separation provides clients
with greater transparency into the fees they pay, and allows
IG Wealth Management to offer competitive pricing, particularly
for high net worth clients. This allows IG Wealth Management
Wealth Management’s assets under management were
$103.0 billion, an increase of 4.5% from December 31, 2019.
The level of assets under management are influenced by sales,
redemptions and investment returns.
Changes in Wealth Management assets under advisement and
assets under management for the periods under review are
reflected in Tables 11 and 12.
IG WEALTH MANAGEMENT ASSETS
UNDER MANAGEMENT AND ADVISEMENT
The introduction of the IG Advisory Account means that fees
are charged on eligible external assets under advisement. Assets
under advisement are therefore a key performance indicator for
IG Wealth Management. Revenues from the IG Advisory Account
are earned on eligible external assets under advisement. Our
Consultants’ compensation is also based on assets contributed
into the IG Advisory Account and other fee‑based programs.
IG Wealth Management’s assets under advisement were
$103.3 billion at December 31, 2020, an increase of 6.4% from
44 |
2020 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis TABLE 11: CHANGE IN ASSETS UNDER ADVISEMENT – WEALTH MANAGEMENT
THREE MONTHS ENDED
($ millions)
Gross client inflows
Gross client outflows
Net flows
Investment returns
Net change in assets
Beginning assets
Ending assets under advisement
IG Wealth Management
Investment Planning Counsel
Average assets under advisement
IG Wealth Management
Investment Planning Counsel
TWELVE MONTHS ENDED
($ millions)
Gross client inflows
Gross client outflows
Net flows
Investment returns
Net change in assets
Beginning assets
Ending assets under advisement
IG Wealth Management
Investment Planning Counsel
Average assets under advisement
IG Wealth Management
Investment Planning Counsel
$
2020
DEC. 31
4,425
3,688
737
6,831
7,568
125,015
$ 132,583
103,273
29,318
$ 128,342
100,295
28,054
$
2020
SEP. 30
3,024
3,179
(155)
4,703
4,548
120,467
$ 125,015
97,538
27,484
$ 124,327
97,045
27,288
$
2019
DEC. 31
3,617
3,748
(131)
3,254
3,123
121,697
$ 124,820
97,100
27,728
$ 123,180
95,780
27,407
2020
SEP. 30
% CHANGE
2019
DEC. 31
46.3 %
16.0
N/M
45.2
66.4
3.8
6.1 %
5.9
6.7
3.2 %
3.3
2.8
22.3 %
(1.6)
N/M
109.9
142.3
2.7
6.2 %
6.4
5.7
4.2 %
4.7
2.4
2020
DEC. 31
2019
DEC. 31
% CHANGE
$ 14,737
13,564
$
13,652
15,016
1,173
6,590
7,763
124,820
$ 132,583
103,273
29,318
$ 122,919
95,870
27,056
(1,364)
14,064
12,700
112,120
$ 124,820
97,100
27,728
$ 120,622
93,546
27,084
7.9 %
(9.7)
N/M
(53.1)
(38.9)
11.3
6.2 %
6.4
5.7
1.9 %
2.5
(0.1)
December 31, 2019, and mutual fund assets under management
of $780 million in the comparable period in 2019. During the
were $97.7 billion, an increase of 4.9%.
Changes in IG Wealth Management assets under advisement
and management for the periods under review are reflected in
Tables 13 and 14.
For the quarter ended December 31, 2020, gross client
twelve month period, investment returns resulted in an increase
of $5.4 billion in assets under advisement compared to an
increase of $11.5 billion in 2019.
Changes in mutual fund assets under management for the
periods under review are reflected in Table 14.
inflows of IG Wealth Management assets under advisement
At December 31, 2020, $51.7 billion, or 53% of IG Wealth
were $2.9 billion, an increase of 19.1% from $2.5 billion in the
Management’s mutual fund assets under management, were
comparable period in 2019. Net client inflows were $485 million
in products with unbundled fee structures, up 43.3% from
in the fourth quarter, an improvement of $594 million from
$36.0 billion at December 31, 2019 which represented 39% of
net client outflows of $109 million in the comparable period in
assets under management.
2019. During the fourth quarter, investment returns resulted in
an increase of $5.3 billion in assets under advisement compared
HIGH NET WORTH OFFERINGS
to an increase of $2.7 billion in the fourth quarter of 2019.
For the year ended December 31, 2020, gross client inflows
of IG Wealth Management assets under advisement were
$10.0 billion, an increase of 7.2% from $9.3 billion in the
comparable period in 2019. Net client inflows were $795 million
in 2020, an increase of $1.6 billion from net client outflows
IG Wealth Management has several offerings to address the
needs of high net worth clients, who represent a growing
segment of our client base, and continues to look at improving
our offerings to this segment. Assets under management for
clients in this category totalled $58.9 billion at December 31,
2020, an increase of 18.5% from one year ago, and represented
| 45
Management’s Discussion and Analysis | 2020 IGM Financial Inc. Annual Report
TABLE 12: CHANGE IN ASSETS UNDER MANAGEMENT – WEALTH MANAGEMENT
THREE MONTHS ENDED
($ millions)
Sales
Redemptions
Net sales (redemptions)
Investment returns
Net change in assets
Beginning assets
Ending assets under management
IG Wealth Management
Investment Planning Counsel
Daily average mutual fund assets
IG Wealth Management
Investment Planning Counsel
TWELVE MONTHS ENDED
($ millions)
Sales
Redemptions
Net sales (redemptions)
Investment returns
Net change in assets
Beginning assets
Ending assets under management
IG Wealth Management
Investment Planning Counsel
Daily average mutual fund assets
IG Wealth Management
Investment Planning Counsel
$
2020
DEC. 31
2,749
2,847
(98)
5,118
5,020
98,013
$ 103,033
97,713
5,320
$ 100,419
95,194
5,225
$
$
$
2020
SEP. 30
2,046
2,382
(336)
3,775
3,439
94,574
98,013
92,874
5,139
97,687
92,543
5,144
$
$
$
2019
DEC. 31
2,398
2,759
(361)
2,769
2,408
96,144
98,552
93,161
5,391
97,316
91,931
5,385
2020
DEC. 31
2020
SEP. 30
% CHANGE
2019
DEC. 31
34.4 %
19.5
70.8
35.6
46.0
3.6
5.1 %
5.2
3.5
2.8 %
2.9
1.6
14.6 %
3.2
72.9
84.8
108.5
1.9
4.5 %
4.9
(1.3)
3.2 %
3.5
(3.0)
2019
DEC. 31
% CHANGE
$
9,564
10,322
$
9,417
10,778
(758)
5,239
4,481
98,552
$ 103,033
97,713
5,320
$ 97,062
91,929
5,133
(1,361)
11,651
10,290
88,262
98,552
93,161
5,391
95,252
89,875
5,377
$
$
1.6 %
(4.2)
44.3
(55.0)
(56.4)
11.7
4.5 %
4.9
(1.3)
1.9 %
2.3
(4.5)
60% of total assets under management. Sales of high net worth
• iProfile™ Private Portfolios – are unique portfolio management
solutions totalled $1.6 billion for the fourth quarter of 2020,
programs that are available for households with investments
an increase of 28.8% from a year ago, and represented 62% of
held at IG Wealth Management in excess of $250,000. The
total sales up from 55% in 2019. For the twelve month period,
iProfile program also has an unbundled pricing structure.
sales of high net worth solutions totalled $4.8 billion, an increase
At December 31, 2020, the iProfile program assets under
of 7.9% from a year ago, and represented 54% of total sales
management were $19.7 billion, an increase of 30.0% from
up from 52% in 2019. High net worth solutions include Series
$15.1 billion at December 31, 2019.
U and for family groups in excess of $500,000, Series J and
• Series J is available for households with investments in
iProfile™ Private Portfolios.
• Series U is available to all clients and provides an unbundled
pricing structure that separates the advisory fee, which is
charged directly to a client’s account, from the fees charged
to the underlying investment funds. At December 31, 2020,
Series U assets under management related to households
with investments held at IG Wealth Management in excess
of $500,000 had increased to $28.5 billion, compared to
$20.6 billion at December 31, 2019, an increase of 38.1%.
IG Wealth Management funds in excess of $500,000 and had
assets of $10.7 billion at December 31, 2020, a decrease of
23.1% from $14.0 billion at December 31, 2019, largely as
a result of transfer activity from Series J to Series U. Series J
pricing structure bundles the cost of asset management and
advice into one fee. We continue to migrate clients from
Series J to Series U.
NATIONAL SERVICE CENTRE
Our National Service Centre supports more than 200,000 clients
and $1.8 billion assets under management.
46 |
2020 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis
TABLE 13: CHANGE IN ASSETS UNDER ADVISEMENT – IG WEALTH MANAGEMENT
THREE MONTHS ENDED
($ millions)
Gross client inflows
Gross client outflows
Net flows
Investment returns
Net change in assets
Beginning assets
Ending assets
Average assets under advisement
TWELVE MONTHS ENDED
($ millions)
Gross client inflows
Gross client outflows
Net flows
Investment returns
Net change in assets
Beginning assets
Ending assets
Average assets under advisement
$
2020
DEC. 31
2,938
2,453
485
5,250
5,735
97,538
$ 103,273
$ 100,295
2020
SEP. 30
2,132
2,141
(9)
3,711
3,702
93,836
97,538
97,045
$
$
$
$
$
$
$
2019
DEC. 31
2,467
2,576
(109)
2,680
2,571
94,529
97,100
95,780
2020
DEC. 31
9,977
9,182
795
5,378
6,173
97,100
$ 103,273
$ 95,870
$
$
2020
SEP. 30
% CHANGE
2019
DEC. 31
37.8 %
14.6
N/M
41.5
54.9
3.9
5.9 %
3.3 %
2019
DEC. 31
$
9,307
10,087
(780)
11,458
10,678
86,422
97,100
93,546
19.1 %
(4.8)
N/M
95.9
123.1
3.2
6.4 %
4.7 %
% CHANGE
7.2 %
(9.0)
N/M
(53.1)
(42.2)
12.4
6.4 %
2.5 %
TABLE 14: CHANGE IN ASSETS UNDER MANAGEMENT – IG WEALTH MANAGEMENT
THREE MONTHS ENDED
($ millions)
Sales
Redemptions
Net sales (redemptions)
Investment returns
Net change in assets
Beginning assets
Ending assets
2020
DEC. 31
$ 2,572
2,581
(9)
4,848
4,839
92,874
2020
SEP. 30
$ 1,949
2,208
(259)
3,600
2019
DEC. 31
$ 2,251
2,498
(247)
2,629
3,341
89,533
2,382
90,779
$ 97,713
$ 92,874
$ 93,161
Daily average assets under management
$ 95,194
$ 92,543
$ 91,931
2020
SEP. 30
% CHANGE
2019
DEC. 31
32.0 %
16.9
96.5
34.7
44.8
3.7
5.2 %
2.9 %
TWELVE MONTHS ENDED
($ millions)
Sales
Redemptions
Net sales (redemptions)
Investment returns
Net change in assets
Beginning assets
Ending assets
Daily average assets under management
2020
DEC. 31
$ 8,987
9,438
(451)
5,003
4,552
93,161
2019
DEC. 31
$ 8,723
9,812
(1,089)
11,113
10,024
83,137
$ 97,713
$ 93,161
$ 91,929
$ 89,875
14.3 %
3.3
96.4
84.4
103.1
2.3
4.9 %
3.5 %
% CHANGE
3.0 %
(3.8)
58.6
(55.0)
(54.6)
12.1
4.9 %
2.3 %
| 47
Management’s Discussion and Analysis | 2020 IGM Financial Inc. Annual Report
CHANGE IN ASSETS UNDER MANAGEMENT
were $95.2 billion in the fourth quarter of 2020 compared to
AND ADVISEMENT – 2020 VS. 2019
$92.5 billion in the third quarter of 2020, an increase of 2.9%.
IG Wealth Management’s assets under advisement were
$103.3 billion at December 31, 2020, up 6.4% from $97.1 billion
at December 31, 2019. IG Wealth Management’s mutual fund
assets under management were $97.7 billion at December 31,
2020, representing an increase of 4.9% from $93.2 billion at
December 31, 2019. Average daily mutual fund assets were
$95.2 billion in the fourth quarter of 2020, up 3.5% from
$91.9 billion in the fourth quarter of 2019. Average daily mutual
fund assets were $91.9 billion for the twelve months ended
December 31, 2020, up 2.3% from $89.9 billion in 2019.
For the quarter ended December 31, 2020, sales of IG Wealth
Management mutual funds through its Consultant network
were $2.6 billion, an increase of 14.3% from the comparable
period in 2019. Mutual fund redemptions totalled $2.6 billion,
For the quarter ended December 31, 2020, sales of IG Wealth
Management mutual funds through its Consultant network
were $2.6 billion, an increase of 32.0% from the third quarter of
2020. Mutual fund redemptions, which totalled $2.6 billion for
the fourth quarter, increased 16.9% from the previous quarter
and the annualized quarterly redemption rate was 10.3% in the
fourth quarter compared to 9.0% in the third quarter of 2020.
IG Wealth Management mutual fund net redemptions were
$9 million for the current quarter compared to net redemptions
of $259 million in the previous quarter.
IG WEALTH MANAGEMENT
OTHER PRODUCTS AND SERVICES
an increase of 3.3% from 2019. IG Wealth Management mutual
SEGREGATED FUNDS
fund net redemptions for the fourth quarter of 2020 were
$9 million compared with net redemptions of $247 million in
2019. During the fourth quarter, investment returns resulted in
an increase of $4.8 billion in mutual fund assets compared to an
increase of $2.6 billion in the fourth quarter of 2019.
IG Wealth Management’s annualized quarterly redemption rate
for long‑term funds was 10.3% in the fourth quarter of 2020,
compared to 10.2% in the fourth quarter of 2019. IG Wealth
Management’s twelve month trailing redemption rate for
long‑term funds was 9.8% at December 31, 2020, compared
to 10.3% at December 31, 2019, and remains well below the
corresponding average redemption rate for all other members of
the Investment Funds Institute of Canada (IFIC) of approximately
15.8% at December 31, 2020. IG Wealth Management’s
redemption rate has been very stable compared to the overall
mutual fund industry, reflecting our focus on financial planning.
For the twelve months ended December 31, 2020, sales of
IG Wealth Management mutual funds through its Consultant
network were $9.0 billion, an increase of 3.0% from 2019.
Mutual fund redemptions totalled $9.4 billion, a decrease of 3.8%
from 2019. Net redemptions of IG Wealth Management mutual
funds were $451 million compared with net redemptions of
$1.1 billion in 2019. During 2020, investment returns resulted in
an increase of $5.0 billion in mutual fund assets compared to an
increase of $11.1 billion in 2019.
CHANGE IN ASSETS UNDER MANAGEMENT
AND ADVISEMENT – Q4 2020 VS. Q3 2020
IG Wealth Management’s assets under advisement were
$103.3 billion at December 31, 2020, an increase of 5.9% from
$97.5 billion at September 30, 2020. IG Wealth Management’s
mutual fund assets under management were $97.7 billion at
December 31, 2020, an increase of 5.2% from $92.9 billion
at September 30, 2020. Average daily mutual fund assets
IG Wealth Management offers segregated funds which include
the IG Series of Guaranteed Investment Funds (GIFs). Select
GIF policies allow for a Lifetime Income Benefit (LIB) option to
provide guaranteed retirement income for life. The investment
components of these segregated funds are managed by IG Wealth
Management. At December 31, 2020, total segregated fund
assets were $1.6 billion, unchanged from December 31, 2019.
INSURANCE
IG Wealth Management continues to be a leader in the
distribution of life insurance in Canada. Through its arrangements
with leading insurance companies, IG Wealth Management
offers a broad range of term, universal life, whole life, disability,
critical illness, long‑term care, personal health care coverage
and group insurance. The Canada Life Assurance Company is a
leading provider of the Company’s insurance products. Effective
as of January 1, 2020, The Great‑West Life Assurance Company
(Great‑West), London Life Insurance Company (London Life) and
Canada Life, amalgamated into a single company, The Canada
Life Assurance Company.
The average number of policies sold by each insurance‑licensed
Consultant was 2.6 for the quarter ended December 31,
2020, compared to 2.5 in 2019. For the twelve months ended
December 31, 2020, the average number of policies sold by
each insurance‑licensed Consultant was 9.0 compared to 10.0
in 2019. Distribution of insurance products is enhanced through
IG Wealth Management’s Insurance Planning Specialists, located
throughout Canada, who assist Consultants with advanced
estate planning solutions for high net worth clients.
SECURITIES OPERATIONS
Investors Group Securities Inc. is an investment dealer registered
in all Canadian provinces and territories providing clients with
securities services to complement their financial and investment
48 |
2020 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis planning. IG Wealth Management Consultants can refer clients
to one of our Wealth Planning Specialists available through
Investors Group Securities Inc.
Mortgage fundings offered through IG Wealth Management and
through Solutions Banking† for the three and twelve months ended
December 31, 2020 were $297 million and $1.1 billion compared
to $293 million and $1.2 billion in 2019, an increase of 1.4% and a
MORTGAGE AND BANKING OPERATIONS
decrease of 6.1%, respectively. At December 31, 2020, mortgages
IG Wealth Management Mortgage Planning Specialists are
offered through both sources totalled $9.5 billion, compared to
located throughout each province in Canada, and work with
$10.3 billion at December 31, 2019, a decrease of 8.4%.
our clients and their Consultants to develop mortgage and other
lending strategies that meet the individual needs and goals of
each client as part of their comprehensive financial plan.
Available credit associated with Solutions Banking† All‑in‑One
accounts originated for the three and twelve month periods
ended December 31, 2020 were $411 million and $1.2 billion,
Mortgages are offered to clients by IG Wealth Management, a
respectively, compared to $240 million and $770 million in 2019.
national mortgage lender, and through IG Wealth Management’s
Solutions Banking†, provided by National Bank of Canada under
a long‑term distribution agreement. An All‑in‑One product, a
At December 31, 2020, the balance outstanding of Solutions
Banking† All‑in‑One products was $3.4 billion, compared to
$2.9 billion one year ago, and represented approximately 51%
comprehensive cash management solution that integrates the
of total available credit associated with these accounts.
features of a mortgage, term loan, revolving line of credit and
deposit account, is also offered through Solutions Banking†.
In 2020, the Company supported and participated in the deferral
of mortgage payments enacted to support homeowners as a
result of the economic disruption caused by COVID‑19. The
assessment was made on a case by case basis, subject to client
needs and in the context of their overall financial plan. At
Other products and services offered through IG Wealth
Management’s Solutions Banking† include investment loans, lines
of credit, personal loans, creditor insurance, deposit accounts,
and credit cards. Through Solutions Banking†, clients have access
to a network of banking machines, as well as a private labeled
client website and client service centre. The Solutions Banking†
offering supports IG Wealth Management’s approach to delivering
December 31, 2020, there were no mortgages in the deferral
total financial solutions for our clients through a broad financial
program. This compared to $94.5 million at September 30, 2020
and $306.0 million at June 30, 2020 which represented 1.1%
and 3.3%, respectively, of the Company’s total mortgages.
planning platform. Total outstanding lending products of IG Wealth
Management clients in the Solutions Banking† offering, including
Solutions Banking† mortgages totalled $5.1 billion at December 31,
2020, compared to $4.5 billion at December 31, 2019.
| 49
Management’s Discussion and Analysis | 2020 IGM Financial Inc. Annual Report Review of Segment Operating Results
The Wealth Management segment’s earnings before interest
The increase in product and program fees in the twelve month
and taxes are presented in Table 15 and include the operations
period ended December 31, 2020 was primarily due to the
of IG Wealth Management and Investment Planning Counsel.
increase in average assets under management of 2.3%, as
IG WEALTH MANAGEMENT
shown in Table 14. The average product and program fee rate
for the year was 86.3 basis points of average assets under
management compared to 87.6 basis points in 2019, reflecting
IG Wealth Management earnings before interest and taxes are
changes in product mix.
presented in Table 16.
2020 VS. 2019
FEE INCOME
Advisory fees include fees for providing financial advice to clients
including fees related to the distribution of products, and depend
largely on the level and composition of assets under advisement.
Advisory fees were $265.5 million in the fourth quarter of 2020,
Other financial planning revenues are primarily earned from:
• Mortgage banking operations
• Distribution of insurance products through I.G. Insurance
Services Inc.
• Securities trading services provided through Investors Group
Securities Inc.
• Banking services provided through Solutions Banking†
an increase of $1.8 million or 0.7% from $263.7 million in 2019.
Other financial planning revenues of $45.3 million for the fourth
For the twelve months ended December 31, 2020, advisory fees
quarter of 2020 increased by $0.9 million from $44.4 million in
were $1,019.1 million, a decrease of $14.6 million or 1.4% from
2019. For the twelve month period, other financial planning
$1,033.7 million in 2019.
The increase in advisory fees in the three months ending
December 31, 2020 was primarily due to the increase in
average assets under advisement of 4.7%, as shown in Table 13,
offset by a decrease in the advisory fee rate. The decrease in
advisory fees for the twelve months ending December 31, 2020
was due to lower rates offset in part by an increase in assets
revenues of $149.5 million decreased by $14.6 million from
$164.1 million in 2019. The increase in the three month period
was primarily due to higher earnings from the mortgage
banking operations offset in part by lower distribution fee
income from insurance products. The decrease in the twelve
month period was primarily due to lower distribution income
from insurance products.
under advisement of 2.5%. The average advisory fee rate for the
A summary of mortgage banking operations for the three and
fourth quarter was 105.3 basis points of average assets under
twelve month periods under review is presented in Table 17.
advisement compared to 109.2 basis points in 2019, reflecting
changes in product and client mix. The average advisory fee rate
NET INVESTMENT INCOME AND OTHER
for the twelve months ended December 31, 2020, was 106.3
basis points of average assets under advisement compared
to 110.5 basis points in 2019, primarily reflecting changes in
product and client mix. We also have more high net worth
clients who are eligible for lower rates.
Net investment income and other is primarily related to
investment income earned on our cash and cash equivalents and
securities and other income not related to our core business. It
also includes a charge from the Strategic Investments and Other
segment for the use of unallocated capital.
Product and program fees depend largely on the level and
composition of mutual fund assets under management. Product
and program fees totalled $205.8 million in the current quarter,
up 2.3% from $201.2 million a year ago. Product and program
fees were $790.6 million for the twelve month period ended
December 31, 2020 compared to $784.8 million in 2019,
increase of 0.7%.
The increase in product and program fees in the fourth quarter
of 2020 was primarily due to the increase in average assets
under management of 3.5%, as shown in Table 14. The average
product and program fee rate for the fourth quarter was 85.9
basis points of average assets under management compared to
87.1 basis points in 2019, reflecting changes in product mix.
EXPENSES
IG Wealth Management incurs advisory and business
development expenses that include compensation paid to our
Consultants. The majority of these costs vary directly with asset
or sales levels. Also included are other distribution and business
development activities which do not vary directly with asset or
sales levels, such as direct marketing and advertising, financial
planning specialist support and other costs incurred to support
our adviser networks. These expenses tend to be discretionary
or vary based upon the number of consultants or clients.
Asset‑based compensation fluctuates with the value of assets
under advisement. Asset‑based compensation, increased by
50 |
2020 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis TABLE 15: OPERATING RESULTS – WEALTH MANAGEMENT
THREE MONTHS ENDED
($ millions)
Revenues
Wealth Management
Advisory fees
Product and program fees
Redemption fees
Other financial planning revenues
Total Wealth Management
Net investment income and other
Expenses
Advisory and business development
Asset‑based compensation
Sales‑based compensation
Other
Other product commissions
Business development
Total advisory and business development
Operations and support
Sub‑advisory
2020
DEC. 31
2020
SEP. 30
2019
DEC. 31
2020
SEP. 30
$ 325.5
219.8
$ 315.3
214.9
$ 319.4
216.3
545.3
3.2
50.0
598.5
1.0
599.5
164.3
10.6
20.1
59.8
79.9
254.8
113.3
42.7
410.8
530.2
3.7
41.8
575.7
0.7
576.4
158.9
9.5
15.7
52.4
68.1
236.5
111.2
41.7
389.4
535.7
5.8
49.6
591.1
4.5
595.6
147.0
22.5
20.4
58.7
79.1
248.6
104.2
41.5
394.3
3.2 %
2.3
2.8
(13.5)
19.6
4.0
42.9
4.0
3.4
11.6
28.0
14.1
17.3
7.7
1.9
2.4
5.5
% CHANGE
2019
DEC. 31
1.9 %
1.6
1.8
(44.8)
0.8
1.3
(77.8)
0.7
11.8
(52.9)
(1.5)
1.9
1.0
2.5
8.7
2.9
4.2
Earnings before interest and taxes
$ 188.7
$ 187.0
$ 201.3
0.9 %
(6.3) %
TWELVE MONTHS ENDED
($ millions)
Revenues
Wealth Management
Advisory fees
Product and program fees
Redemption fees
Other financial planning revenues
Total Wealth Management
Net investment income and other
Expenses
Advisory and business development
Asset‑based compensation
Sales‑based compensation
Other
Other product commissions
Business development
Total advisory and business development
Operations and support
Sub‑advisory
2020
DEC. 31
2019
DEC. 31
% CHANGE
$ 1,245.7
846.3
2,092.0
16.0
168.0
2,276.0
2.3
$ 1,259.0
844.7
2,103.7
26.5
185.0
2,315.2
13.6
2,278.3
2,328.8
625.9
36.4
69.8
227.9
297.7
960.0
453.7
163.2
576.2
95.5
80.2
234.6
314.8
986.5
436.0
161.5
1,576.9
1,584.0
(1.1) %
0.2
(0.6)
(39.6)
(9.2)
(1.7)
(83.1)
(2.2)
8.6
(61.9)
(13.0)
(2.9)
(5.4)
(2.7)
4.1
1.1
(0.4)
Earnings before interest and taxes
$ 701.4
$ 744.8
(5.8) %
| 51
Management’s Discussion and Analysis | 2020 IGM Financial Inc. Annual Report
TABLE 16: OPERATING RESULTS – IG WEALTH MANAGEMENT
THREE MONTHS ENDED
($ millions)
Revenues
Wealth Management
Advisory fees
Product and program fees
Redemption fees
Other financial planning revenues
Total Wealth Management
Net investment income and other
Expenses
Advisory and business development
Asset‑based compensation
Sales‑based compensation
Other
Other product commissions
Business development
Total advisory and business development
Operations and support
Sub‑advisory
2020
DEC. 31
2020
SEP. 30
2019
DEC. 31
2020
SEP. 30
$ 265.5
205.8
$ 259.1
201.0
$ 263.7
201.2
471.3
3.0
45.3
519.6
0.8
520.4
116.8
10.6
17.3
52.3
69.6
197.0
101.8
39.2
338.0
460.1
3.7
37.2
501.0
0.6
501.6
113.1
9.5
12.9
46.0
58.9
181.5
100.0
38.4
319.9
464.9
5.7
44.4
515.0
4.0
519.0
101.8
22.6
17.4
51.8
69.2
193.6
92.3
37.6
323.5
2.5 %
2.4
2.4
(18.9)
21.8
3.7
33.3
3.7
3.3
11.6
34.1
13.7
18.2
8.5
1.8
2.1
5.7
% CHANGE
2019
DEC. 31
0.7 %
2.3
1.4
(47.4)
2.0
0.9
(80.0)
0.3
14.7
(53.1)
(0.6)
1.0
0.6
1.8
10.3
4.3
4.5
Earnings before interest and taxes
$ 182.4
$ 181.7
$ 195.5
0.4 %
(6.7) %
TWELVE MONTHS ENDED
($ millions)
Revenues
Wealth Management
Advisory fees
Product and program fees
Redemption fees
Other financial planning revenues
Total Wealth Management
Net investment income and other
Expenses
Advisory and business development
Asset‑based compensation
Sales‑based compensation
Other
Other product commissions
Business development
Total advisory and business development
Operations and support
Sub‑advisory
2020
DEC. 31
2019
DEC. 31
% CHANGE
$ 1,019.1
790.6
1,809.7
15.7
149.5
1,974.9
1.3
$ 1,033.7
784.8
1,818.5
26.1
164.1
2,008.7
10.1
1,976.2
2,018.8
445.5
36.4
58.6
199.1
257.7
739.6
407.1
149.7
397.0
95.2
67.6
207.3
274.9
767.1
385.7
145.4
1,296.4
1,298.2
(1.4) %
0.7
(0.5)
(39.8)
(8.9)
(1.7)
(87.1)
(2.1)
12.2
(61.8)
(13.3)
(4.0)
(6.3)
(3.6)
5.5
3.0
(0.1)
Earnings before interest and taxes
$ 679.8
$ 720.6
(5.7) %
52 |
2020 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis
TABLE 17: MORTGAGE BANKING OPERATIONS – IG WEALTH MANAGEMENT
THREE MONTHS ENDED
($ millions)
Total mortgage banking income
Net interest income on securitized loans
Interest income
Interest expense
Net interest income
Gains on sales(1)
Fair value adjustments
Other
Average mortgages serviced
Securitizations
Other
Mortgage sales to:(2)
Securitizations
Other(1)
TWELVE MONTHS ENDED
($ millions)
Total mortgage banking income
Net interest income on securitized loans
Interest income
Interest expense
Net interest income
Gains on sales(1)
Fair value adjustments
Other
Average mortgages serviced
Securitizations
Other
Mortgage sales to:(2)
Securitizations
Other(1)
2020
DEC. 31
2020
SEP. 30
2019
DEC. 31
2020
SEP. 30
% CHANGE
2019
DEC. 31
$
44.1
33.5
10.6
3.7
(1.0)
1.8
$
44.7
35.5
9.2
3.2
–
1.8
$
50.5
41.3
9.2
0.6
0.2
2.8
(1.3) %
(5.6)
15.2
15.6
–
–
(12.7) %
(18.9)
15.2
N/M
N/M
(35.7)
$
15.1
$
14.2
$
12.8
6.3 %
18.0 %
$ 6,126
2,670
$ 6,444
2,736
$ 6,996
2,744
$ 8,796
$ 9,180
$ 9,740
$
$
434
246
680
$
$
606
167
773
$
$
284
256
540
(4.9) %
(2.4)
(4.2) %
(28.4) %
47.3
(12.0) %
(12.4) %
(2.7)
(9.7) %
52.8 %
(3.9)
25.9 %
2020
DEC. 31
2019
DEC. 31
% CHANGE
$ 181.1
148.5
$ 208.0
171.9
32.6
9.8
(5.1)
8.5
36.1
3.2
(4.3)
10.4
(12.9) %
(13.6)
(9.7)
206.3
(18.6)
(18.3)
$
45.8
$
45.4
0.9 %
$ 6,465
2,748
$ 7,232
2,782
$ 9,213
$ 10,014
$ 1,605
760
$ 1,517
558
$ 2,365
$ 2,075
(10.6) %
(1.2)
(8.0) %
5.8 %
36.2
14.0 %
(1) Represents sales to institutional investors through private placements, to Investors Mortgage and Short Term Income Fund, and to Investors Canadian Corporate Bond Fund as well
as gains realized on those sales.
(2) Represents principal amounts sold.
$15.0 million and $48.5 million for the three and twelve month
Effective January 1, 2020, IG Wealth Management Consultant
periods ended December 31, 2020 to $116.8 million and
sales‑based compensation is based upon the level of new
$445.5 million, compared to 2019. The increase was primarily
assets contributed to client accounts at IG Wealth Management
due to increased average assets under advisement and
(subject to eligibility requirements), where previously they were
compensation changes implemented in 2020.
based upon gross sales of IG Wealth Management mutual funds.
| 53
Management’s Discussion and Analysis | 2020 IGM Financial Inc. Annual Report
All sales‑based compensation payments are now capitalized and
Q4 2020 VS. Q3 2020
amortized as they reflect incremental costs to obtain a client
contract. Previously, sales‑based compensation associated with
FEE INCOME
sales of IG Wealth Management mutual funds with bundled
pricing were expensed as incurred as these commissions
were deemed to be fulfillment of an existing contract with a
mutual fund.
Sales‑based compensation paid fluctuates with the level of new
assets contributed to IG Wealth Management accounts. Sales‑
based compensation paid on the sale of investment products
are capitalized and amortized over their estimated useful lives
where the Company receives a fee directly from the client. All
other sales‑based compensation paid on investment product
sales are expensed as incurred.
Sales‑based compensation was $10.6 million for the fourth
quarter of 2020, a decrease of $12.0 million from $22.6 million
in 2019 and for the twelve month period, sales‑based
compensation expense was $36.4 million, a decrease of
$58.8 million from $95.2 million in 2019. There was lower
sales‑based compensation expense in 2020 primarily due to
sales‑based compensation paid on the sales of investment
products being capitalized in 2020.
Other advisory and business development expenses were
$52.3 million in the fourth quarter of 2020, compared to
$51.8 million in 2019. Other advisory and business development
expenses were $199.1 million in the twelve months ended
December 31, 2020 compared to $207.3 million in 2019
due to the reduction of certain costs due to COVID‑19 as
communicated in the first quarter of 2020.
Advisory fee income increased by $6.4 million or 2.5% to
$265.5 million in the fourth quarter of 2020 compared with the
third quarter of 2020. The increase in advisory fees in the fourth
quarter was primarily due to the increase in average assets
under advisement of 3.3% for the quarter, as shown in Table 13.
The average advisory fee rate for the fourth quarter was 105.3
basis points of average assets under management compared to
106.2 basis points in the third quarter of 2020.
Product and program fees were $205.8 million in the fourth
quarter of 2020, an increase of $4.8 million from $201.0 in the
third quarter of 2020. The increase in product and program
fees was due to higher assets under management. The average
product and program fee rate in the fourth quarter was 85.9 basis
points compared to 86.2 basis points in the third quarter of 2020.
Other financial planning revenues of $45.3 million in the fourth
quarter of 2020 increased by $8.1 million from $37.2 million in
the third quarter primarily due to increased distribution revenue
from insurance products.
NET INVESTMENT INCOME AND OTHER
Net investment income and other was $0.8 million in the
fourth quarter of 2020 compared to $0.6 million in the previous
quarter, an increase of $0.2 million.
EXPENSES
Advisory and business development expenses in the current
quarter were $197.0 million compared with $181.5 million in the
Operations and support includes costs that support our wealth
previous quarter due to higher asset based compensation and
management and other general and administrative functions
higher commissions on the distribution of insurance products.
such as product management, technology and operations, as
well as other functional business units and corporate expenses.
Operations and support expenses were $101.8 million for the
INVESTMENT PLANNING COUNSEL
fourth quarter of 2020 compared to $92.3 million in 2019, an
2020 VS. 2019
increase of $9.5 million or 10.3%. For the twelve month period,
operations and support expenses were $407.1 million in 2020
compared to $385.7 million in 2019, an increase of $21.4 million
or 5.5%. The changes are due to expenses related to information
Earnings before interest and taxes related to Investment
Planning Counsel were $0.4 million higher in the fourth quarter
of 2020 compared to the fourth quarter of 2019 and were
$2.7 million lower in the year ended December 31, 2020
technology, including Advisor Portal as well as expenses related
compared to 2019.
to our operations transformation program.
Sub‑advisory expenses were $39.2 million for the fourth
quarter of 2020 compared to $37.6 million in 2019, an increase
of $1.6 million or 4.3%. For the twelve month period, sub‑
advisory expenses were $149.7 million in 2020 compared to
$145.4 million in 2019, an increase of $4.3 million or 3.0%.
Q4 2020 VS. Q3 2020
Earnings before interest and taxes related to Investment
Planning Counsel were $1.0 million higher in the fourth quarter
of 2020 compared to the prior quarter.
54 |
2020 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis Asset Management
The Asset Management segment includes Mackenzie Investments.
parties for investment management services. Under the new
The key differences of the disclosure enhancements made to the
Asset Management segment during 2020 are as follows:
segments, Wealth Management is considered a client of the
Asset Management segment and transfer pricing is based on
values for similar sized asset management mandates.
• Assets managed for IG Wealth Management are included in
the Asset Management segment’s assets under management.
• Introduction of net asset management fees which offsets
management fees with dealer compensation expenses.
Revenue earned on these sub‑advised assets are included
in Asset Management’s revenue. Previously, the costs of the
investment management teams were allocated based on a
cost sharing agreement.
• Asset management fees include fees received from our
mutual funds, Wealth Management segment, and third
• Expenses include Advisory and business development,
Operations and support, and Sub-advisory fees as
previously discussed in this MD&A. Expenses were previously
categorized as either commission or non‑commission.
Review of the Business
Mackenzie Investments is a diversified asset management
ACQUISITIONS
solutions provider founded in 1967. We provide investment
management and related services with a wide range of
investment mandates through a boutique structure and using
multiple distribution channels. We are committed to delivering
strong investment performance for our clients by drawing on
more than 50 years of investment management experience.
Mackenzie earns asset management fees primarily from:
• Management fees earned from its investment funds,
sub‑advised accounts and institutional clients.
GLC Asset Management Group Ltd. (GLC)
On December 31, 2020, Mackenzie acquired GLC, a Canadian
investment management firm with $37 billion in assets under
management, from Great‑West Lifeco Inc. (Lifeco) for total
consideration of $185.0 million.
Separately, Lifeco’s subsidiary, The Canada Life Assurance
Company (Canada Life) acquired the fund management
contracts relating to private label Quadrus Group of Funds
(QGOF) from Mackenzie for cash consideration of $30 million.
• Fees earned from its mutual funds for administrative services.
Mackenzie was previously the manager and trustee of the
• Redemption fees on deferred sales charge and low load units.
QGOF. Subsequent to the sale, Mackenzie continues to provide
The largest component of Mackenzie’s revenues is management
fees. The amount of management fees depends on the level
and composition of assets under management. Management
fee rates vary depending on the investment objective and the
account type of the underlying assets under management.
Equity based mandates have higher management fee rates
than fixed income mandates and retail mutual fund accounts
have higher management fee rates than sub‑advised and
institutional accounts.
2020 DEVELOPMENTS
COVID-19 AND COMMUNICATION
investment and administration services to the QGOF.
Benefits of the deal to Mackenzie include the following:
• The net addition of $30.1 billion in assets under management
resulting in Mackenzie becoming one of Canada’s largest
asset managers.
• Expands Mackenzie’s distribution reach to the fast‑growing
group retirement business channel and establishes Mackenzie
as one of the top three providers in Canada of investment
solutions to defined contribution plans and other group
retirement offerings.
• Enhances Mackenzie’s investment capabilities with the
addition of a new Canadian Equity boutique.
As a result of COVID‑19 and the resulting impact to global financial
The acquisition also includes a distribution agreement with
markets, we significantly increased communications to support
Canada Life, positioning Mackenzie as the core investment
the independent financial advisors and our institutional clients. Our
advisor to its individual and group product offerings and
focus has been to provide capital market and economic updates,
enhancing Canada Life’s capabilities and competitiveness.
ongoing commentary, and access to investment management to
ensure they have the tools and resources they need to support
Greenchip Financial Corporation (Greenchip)
their clients. Our multi‑boutique approach ensures that investors
On December 22, 2020, Mackenzie acquired Greenchip, a
can find the right solution in any market condition.
leading Canadian firm focused exclusively on the environmental
| 55
Management’s Discussion and Analysis | 2020 IGM Financial Inc. Annual Report economy since 2007. The acquisition adds $618 million in assets
portfolio management teams are located in Toronto, Montreal,
under management, of which $435 million was sub‑advisory
Winnipeg, Boston, Dublin and Hong Kong. In addition to
mandates to the Mackenzie Global Environmental Equity Fund.
our own investment teams, we supplement our investment
Mackenzie has been a leader in bringing sustainable investing
capabilities with strategic partners (third party sub‑advisors) in
to Canadians, with an evolving suite of funds focused on
selected areas. The development of a broad range of investment
environmental leadership, gender diversity and sustainability.
capabilities and products is a key strength in supporting the
The acquisition of Greenchip is a natural evolution reflecting
evolving financial needs of investors.
the success of Greenchip’s sub‑advisory relationship to the
Mackenzie Global Environmental Equity Fund.
Our business focuses on three key distribution channels: retail,
strategic alliances and institutional.
Northleaf Capital Group Ltd. (Northleaf)
Mackenzie primarily distributes its retail investment products
The Northleaf investment, which closed on October 28, 2020,
through third‑party financial advisors. Our sales teams work
expands Mackenzie’s capabilities to offer global private equity, private
with many of the more than 30,000 independent financial
credit and infrastructure investment solutions through our retail
advisors and their firms across Canada. Our innovative,
advisory channels and financial institution distribution partners.
comprehensive lineup of investment solutions covers all asset
Northleaf is a global private equity, private credit and infrastructure
fund manager, headquartered in Toronto, with more than 150
employees across seven offices in Canada, the U.S., UK and
Australia. Northleaf’s assets under management at December 31,
2020 was $14.6 billion.
ASSET MANAGEMENT STRATEGY
Mackenzie seeks to be Canada’s preferred global asset
management solutions provider and business partner.
Mackenzie’s vision: We are committed to the financial success
of investors, through their eyes. This vision impacts our strategic
priorities and drives future business growth. Our strategic
mandate is two‑fold: win in the Canadian retail space and
build meaningful strategic relationships. We aim to achieve
this mandate by attracting and fostering the best minds in the
investment industry, responding to changing needs of financial
advisors and investors with distinctive and innovative solutions,
and continuing to deliver institutional quality in everything we do.
To support this vision and strategic mandate our employees
strive to:
• Deliver competitive and consistent risk‑adjusted performance
• Offer innovative and high quality investment solutions
• Accelerate distribution
• Advance brand leadership
• Drive operational excellence and discipline
• Enable a high‑performing and diverse culture
classes and parts of the globe. We offer a range of relevant
products and investment solutions designed to help advisors
meet the evolving needs of their clients. We regularly introduce
new funds and we may merge or streamline our fund offerings
to provide enhanced investment solutions.
In addition to our retail distribution team, Mackenzie also
has specialty teams focused on strategic alliances and the
institutional marketplace.
Within the strategic alliance channel, Mackenzie offers certain
series of our mutual funds and provides sub‑advisory services to
third‑party and related party investment programs offered by
banks, insurance companies and other investment companies.
Strategic alliances with related parties include providing advisory
services to IG Wealth Management, Investment Planning
Counsel and Great‑West Lifeco Inc. (Lifeco) subsidiaries.
During the second quarter of 2020, Mackenzie partnered with
Wealthsimple and launched two Socially Responsible ETFs.
Within the strategic alliance channel, Mackenzie’s primary
distribution relationship is with the head office of the respective
bank, insurance company or investment company.
In the institutional channel, Mackenzie provides investment
management services to pension plans, foundations and other
institutions. We attract new institutional business through our
relationships with pension and management consultants.
Gross sales and redemption activity in strategic alliance and
institutional accounts can be more pronounced than in the retail
channel, given the relative size and the nature of the distribution
relationships of these accounts. These accounts are also subject
Mackenzie seeks to maximize returns on business investment by
to ongoing reviews and rebalance activities which may result in
focusing our resources in areas that directly impact the success
a significant change in the level of assets under management.
of our strategic mandate: investment management, distribution
and client experience.
Mackenzie continues to be positioned to continue to build
and enhance our distribution relationships given our team of
Our investment management capabilities are delivered
experienced investment professionals, strength of our distribution
through a boutique structure, with separate in‑house teams
network, broad product shelf, competitively priced products and
having distinct focuses and diverse styles. Our research and
our focus on client experience and investment excellence.
56 |
2020 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis ASSETS UNDER MANAGEMENT
Beginning in the third quarter of 2020, assets managed for the
Wealth Management segment are included in total assets under
management. Assets managed by Mackenzie for IG Wealth
Management were previously excluded from the Mackenzie
reportable segment.
The changes in investment fund assets under management are
summarized in Table 18 and the changes in total assets under
management are summarized in Table 19.
At December 31, 2020, Mackenzie’s total assets under
management were $186.8 billion, an all‑time high, and an
increase of 31.7% from $141.8 billion last year. Mackenzie’s total
assets under management excluding the $30.3 billion related
to the net business acquisitions of GLC and Greenchip were
$156.5 billion, an increase of 10.3% from last year. Mackenzie’s
total assets under management (excluding sub‑advisory to
Wealth Management) were $110.9 billion, also an all‑time
high, and an increase of 62.5% from $68.3 billion last year.
Mackenzie’s total assets under management excluding sub‑
advisory to Wealth Management and net business acquisitions
were $80.6 billion, an increase of 18.1% from last year. The
change in Mackenzie’s assets under management is determined
by investment returns generated for our clients and net
contributions from our clients.
CHANGE IN ASSETS UNDER
MANAGEMENT – 2020 VS. 2019
Mackenzie’s total assets under management at December 31,
2020 were $186.8 billion, inclusive of $30.3 billion related to
the net business acquisitions noted previously. Mackenzie’s total
assets under management exclusive of these net acquisitions
were $156.5 billion, an increase of 10.3% from $141.8 billion at
December 31, 2019. Assets under management excluding sub‑
advisory to the Wealth Management segment and acquisitions
were $80.6 billion, an increase of 18.1% from $68.3 billion at
December 31, 2019.
Investment fund assets under management were $59.3 billion
at December 31, 2020, reflecting the decrease of $13.2 billion of
net assets under management related to the sale of mutual fund
contracts in the divestiture of QGOF and the Greenchip acquisition,
noted previously. Mackenzie’s total investment fund assets
excluding the impact of these transactions was $72.5 billion, an
increase of 14.6% from December 30, 2019. Mackenzie’s mutual
fund assets under management excluding the impact of the
transactions noted above were $68.7 billion at December 31, 2020,
an increase of 12.9% from $60.8 billion at December 31, 2019.
Mackenzie’s ETF assets excluding ETFs held within IGM investment
funds were $3.8 billion at December 31, 2020, an increase of 59.7%
from $2.4 billion at December 31, 2019. ETF assets inclusive of
IGM investment funds were $8.5 billion at December 31, 2020
compared to $4.7 billion at December 31, 2019.
In the three months ended December 31, 2020, Mackenzie’s
mutual fund gross sales were $4.5 billion, a record high, an
increase of 74.0% from $2.6 billion in 2019. Mutual fund
redemptions in the current quarter were $3.1 billion, an
increase of 21.6% from last year. Mutual fund net sales for the
three months ended December 31, 2020 were $1.4 billion,
as compared to net sales of $18 million last year. In the three
months ended December 31, 2020, ETF net creations were
$372 million compared to $202 million last year. Investment
fund net sales in the current quarter were $1.7 billion compared
to net sales of $220 million last year. During the current quarter,
investment returns resulted in investment fund assets increasing
by $3.8 billion compared to an increase of $1.6 billion last year.
During the fourth quarter of 2020, certain third party programs,
which include Mackenzie mutual funds, made fund allocation
changes resulting in gross sales of $625 million, redemptions
of $593 million and net sales of $32 million. During the fourth
quarter of 2019, certain third party programs, which include
Mackenzie mutual funds, made fund allocation changes resulting
in gross sales of $129 million, redemptions of $165 million and
net redemptions of $36 million. Excluding these transactions in
2020 and 2019, mutual fund gross sales increased by 57.7% in
the three months ended December 31, 2020 compared to last
year, mutual fund redemptions increased by 5.3% and mutual
fund net sales of $1.3 billion in 2020 compared to mutual fund
net sales of $54 million last year.
Total net sales excluding sub‑advisory to the Wealth Management
segment for the three months ended December 31, 2020 were
$1.7 billion compared to net sales of $147 million last year.
Excluding the transactions noted above, net sales were $1.6 billion
for the three months ended December 31, 2020 compared to
net sales of $183 million last year. During the current quarter,
investment returns resulted in assets increasing by $4.4 billion
compared to an increase of $1.7 billion last year.
In the twelve months ended December 31, 2020, Mackenzie’s
mutual fund gross sales were $13.6 billion, a record high, and
an increase of 37.2% from $9.9 billion in the comparative period
last year. Mutual fund redemptions in the current period were
$10.6 billion, an increase of 13.2% from last year. Mutual fund
net sales for the twelve months ended December 31, 2020 were
$3.0 billion, as compared to net sales of $512 million last year. In
the twelve months ended December 31, 2020, ETF net creations
were $1.2 billion compared to ETF net creations of $707 million
last year. Investment fund net sales in the current period were
$4.2 billion, compared to $1.2 billion last year. During the
current period, investment returns resulted in investment fund
assets increasing by $5.1 billion as compared to an increase of
$7.0 billion last year.
During the twelve months ended December 31, 2020, certain
third party programs, which include Mackenzie mutual
funds, made fund allocation changes resulting in gross sales
| 57
Management’s Discussion and Analysis | 2020 IGM Financial Inc. Annual Report TABLE 18: CHANGE IN INVESTMENT FUND ASSETS UNDER MANAGEMENT – ASSET MANAGEMENT(1)
THREE MONTHS ENDED
($ millions)
Sales
Redemptions
Mutual fund net sales (redemptions)(2)
ETF net creations(3)
Investment fund net sales (redemptions)(4)
Change due to divestiture of Quadrus Group of Funds
and Greenchip acquisition(5)
Investment returns
Net change in assets
Beginning assets
Ending assets
Consists of:
Mutual funds
ETFs
2020
DEC. 31
$ 4,501
3,125
1,376
372
1,748
(13,216)
3,789
(7,679)
66,929
2020
SEP. 30
$ 2,903
2,054
849
97
946
–
2,719
2019
DEC. 31
$ 2,587
2,569
18
202
220
–
1,557
3,665
63,264
1,777
61,434
2020
SEP. 30
55.0 %
52.1
62.1
N/M
84.8
N/M
39.4
N/M
5.8
% CHANGE
2019
DEC. 31
74.0 %
21.6
N/M
84.2
N/M
N/M
143.4
N/M
8.9
$ 59,250
$ 66,929
$ 63,211
(11.5) %
(6.3) %
Investment funds
$ 59,250
$ 66,929
$ 63,211
Daily average investment fund assets
$ 69,343
$ 66,026
$ 62,216
$ 55,462
3,788
$ 63,599
3,330
$ 60,839
2,372
(12.8) %
13.8
(11.5) %
5.0 %
(8.8) %
59.7
(6.3) %
11.5 %
TWELVE MONTHS ENDED
($ millions)
Sales
Redemptions
Mutual fund net sales (redemptions)(2)
ETF net creations(3)
Investment fund net sales (redemptions)(4)
Change due to divestiture of Quadrus Group of Funds
and Greenchip acquisition(5)
Investment returns
Net change in assets
Beginning assets
Ending assets
Daily average investment fund assets
2020
DEC. 31
$ 13,565
10,609
2,956
1,232
4,188
(13,216)
5,067
(3,961)
63,211
2019
DEC. 31
$ 9,886
9,374
512
707
1,219
–
6,972
8,191
55,020
$ 59,250
$ 63,211
$ 64,617
$ 60,280
% CHANGE
37.2 %
13.2
N/M
74.3
N/M
N/M
(27.3)
N/M
14.9
(6.3) %
7.2 %
(1) Investment Fund assets under management and net sales excludes investments into Mackenzie mutual funds and ETFs by IGM investment funds.
(2) Mutual funds – During 2020 and 2019, institutional clients, which include Mackenzie mutual funds within their investment offerings, made fund allocation changes:
– Third quarter 2020 – resulted in sales and net sales of $290 million.
– Fourth quarter 2020 – resulted in sales of $625 million, redemptions of $593 million and net sales of $32 million.
– Year to date 2020 – resulted in sales of $1.4 billion, redemptions of $785 million and net sales of $612 million.
– Fourth quarter and year to date 2019 – resulted in sales of $129 million, redemptions of $165 million and net redemptions of $36 million.
(3) ETFs – during the second and third quarters of 2020, Wealthsimple made allocation changes which resulted in $370 million of purchases in Mackenzie ETFs and $325 million of
redemptions from Mackenzie’s ETFs respectively.
(4) Total investment fund net sales and assets under management exclude Mackenzie mutual fund investments in ETFs.
(5) Sold $13.4 billion of fund management contracts relating to private label Quadrus Group of Funds (QGOF) to Great-West Lifeco. Inc. Acquired $183 million in mutual fund assets
under management related to acquisition of Greenchip Financial Corporation.
58 |
2020 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis
TABLE 19: CHANGE IN TOTAL ASSETS UNDER MANAGEMENT – ASSET MANAGEMENT(1)
THREE MONTHS ENDED
($ millions)
Assets under management excluding
sub-advisory to Wealth Management
Net sales (redemptions)
Mutual funds(1)
ETF net creations(2)
Investment funds(3)
Sub‑advisory, institutional and other accounts(4)
Total net sales (redemptions)
Change due to GLC(5)
Investment returns
Net change in assets
Beginning assets
Ending assets
Consolidated Assets under management
Mutual funds
ETFs
Investment funds(3)
Sub‑advisory, institutional and other accounts
Sub‑advisory to Wealth Management
2020
DEC. 31
2020
SEP. 30
2019
DEC. 31
2020
SEP. 30
$
1,376
372
1,748
(75)
1,673
30,300
4,365
36,338
74,600
$
849
97
946
(319)
627
–
3,152
3,779
70,821
$
18
202
220
(73)
147
–
1,718
1,865
66,392
62.1 %
N/M
84.8
76.5
166.8
N/M
38.5
N/M
5.3
% CHANGE
2019
DEC. 31
N/M %
84.2
N/M
(2.7)
N/M
N/M
154.1
N/M
12.4
$ 110,938
$
74,600
$
68,257
48.7 %
62.5 %
$ 55,462
3,788
59,250
51,688
110,938
75,821
$
63,599
3,330
66,929
7,671
74,600
72,660
$
60,839
2,372
63,211
5,046
68,257
73,575
(12.8) %
13.8
(11.5)
N/M
48.7
4.4
(8.8) %
59.7
(6.3)
N/M
62.5
3.1
Consolidated assets under management
$ 186,759
$ 147,260
$ 141,832
26.8 %
31.7 %
Average total assets(6)
Excluding sub‑advisory to Wealth Management
Consolidated
$ 77,186
150,868
$
73,698
145,750
$
67,217
140,236
4.7 %
3.5
14.8 %
7.6
TWELVE MONTHS ENDED
($ millions)
Net sales (redemptions)
Mutual funds(1)
ETF net creations(2)
Investment funds(3)
Sub‑advisory, institutional and other accounts(4)
Total net sales (redemptions)
Change due to GLC(5)
Investment returns
Net change in assets
Beginning assets
Ending assets
Average total assets(6)
Excluding sub‑advisory to Wealth Management
Consolidated
2020
DEC. 31
2019
DEC. 31
% CHANGE
$
2,956
1,232
4,188
2,062
6,250
30,300
6,131
42,681
68,257
$
512
707
1,219
(1,492)
(273)
–
7,726
7,453
60,804
N/M %
74.3
N/M
N/M
N/M
N/M
(20.6)
N/M
12.3
$ 110,938
$
68,257
62.5 %
$ 71,402
143,193
$
65,807
138,675
8.5 %
3.3
(1) Mutual funds – During 2020, institutional clients, which include Mackenzie mutual funds within their investment offerings, made fund allocation changes:
– Third quarter of 2020 – resulted in sales and net sales of $290 million.
– Fourth quarter of 2020 – Resulted in sales of $625 million, redemptions of $593 million and net sales of $32 million.
– Year to date 2020 – Resulted in sales of $1.4 billion, redemptions of $785 million and net sales of $612 million.
– Fourth quarter and year to date 2019 – Resulted in sales of $129 million, redemptions of $165 million and net redemptions of $36 million.
(2) ETFs – During the second and third quarters of 2020, Wealthsimple made allocation changes which resulted in $370 million of purchases in Mackenzie ETFs and $325 million of
redemptions from Mackenzie’s ETFs respectively.
(3) Investment Fund assets under management and net sales exclude investments into Mackenzie mutual funds and ETFs by IGM investment funds.
(4) Sub-advisory, institutional and other accounts – During the second quarter of 2020, Mackenzie onboarded $2.6 billion of sub-advisory and institutional wins from various clients.
During the third quarter of 2019, MD Management reassigned sub-advisory responsibilities totalling $1.2 billion on mandates advised by Mackenzie.
(5) Sold $13.4 billion of fund management contracts relating to private label Quadrus Group of Funds (QGOF) to Great-West Lifeco. Inc. Acquired $183 million in mutual fund assets
under management related to acquisition of Greenchip Financial Corporation. Acquired $43.5 billion in institutional accounts as part of transaction with Great-West Lifeco Inc.
(6) Based on daily average investment fund assets and month-end average sub-advisory, institutional and other assets.
| 59
Management’s Discussion and Analysis | 2020 IGM Financial Inc. Annual Report
of $1.4 billion, redemptions of $785 million and net sales of
clients. These wins were spread across a diverse range of
$612 million. During the twelve month ended December 31,
investment strategies, including Global Equity, U.S. Equity, Fixed
2019, certain third party programs, which include Mackenzie
Income and Currency Overlay strategies. During the second and
mutual funds, made fund allocation changes resulting in gross
third quarters of 2020, Wealthsimple made allocation changes
sales of $129 million, redemptions of $165 million and net
which resulted in net sales of $45 million into Mackenzie
redemptions of $36 million. Excluding these transactions in
ETFs. Excluding these transactions and the mutual fund
2020 and 2019, mutual fund gross sales increased by 24.7%
allocation changes made by third party programs noted above,
and mutual fund redemptions increased by 6.7% in the twelve
total net sales were $3.0 billion in the twelve months ended
months ended December 31, 2020 compared to last year and
December 31, 2020.
mutual fund net sales were $2.3 billion in the current year
compared to $548 million last year.
During the third quarter of 2019, MD Management reassigned
sub‑advisory responsibilities totalling $1.2 billion on mandates
Redemptions of long‑term mutual funds in the three and
advised by Mackenzie. Excluding this transaction and the
twelve months ended December 31, 2020, were $3.0 billion
allocation changes made by third party programs noted above,
and $10.1 billion, respectively, as compared to $2.5 billion
total net sales were $0.9 billion in the twelve months ended
and $9.0 billion last year. Redemptions of long‑term mutual
December 31, 2019.
funds excluding mutual fund allocation changes made by third
party programs were $2.4 billion in the three months ended
December 31, 2020 and $9.3 billion in the twelve months ended
December 31, 2020. Mackenzie’s annualized quarterly redemption
rate for long‑term mutual funds was 18.2% in the fourth quarter
of 2020, compared to 16.4% in the fourth quarter of 2019.
Mackenzie’s annualized quarterly redemption rate for long‑term
mutual funds excluding rebalance transactions was 14.5% in
the fourth quarter of 2020, compared to 15.0% in the fourth
quarter of 2019. Mackenzie’s twelve‑month trailing redemption
rate for long‑term mutual funds was 16.6% at December 31,
2020, as compared to 15.6% last year. Mackenzie’s twelve month
trailing redemption rate for long‑term funds, excluding rebalance
transactions, was 15.3% at December 31, 2020, compared to
15.1% at December 31, 2019. The corresponding average twelve‑
month trailing redemption rate for long‑term mutual funds for all
other members of IFIC was approximately 15.3% at December 31,
2020. Mackenzie and the mutual fund industry saw increased
As at December 31, 2020, Mackenzie’s sub‑advisory to the
Wealth Management segment were $75.8 billion or 73.6% of
total Wealth Management assets under management compared
to $73.6 billion or 74.7% of total Wealth Management assets
under management at December 31, 2019.
CHANGE IN ASSETS UNDER
MANAGEMENT – Q4 2020 VS. Q3 2020
Mackenzie’s total assets under management at December 31,
2020 were $186.8 billion, inclusive of $30.3 billion related to the
net business acquisitions that closed on December 31, 2020.
Mackenzie’s total assets under management exclusive of these
net acquisitions were $156.5 billion, an increase of 6.2% from
$147.3 billion at September 30, 2020. Assets under management
excluding sub‑advisory to the Wealth Management segment and
the recent net business acquisitions were $80.6 billion, an increase
of 8.1% from $74.6 billion at September 30, 2020.
redemptions in the month of March 2020 as a result of COVID‑19
Investment fund assets under management were $59.3 billion
and these redemption rates have stabilized and declined during
at December 31, 2020, reflecting the decrease of $13.2 billion
the second and third quarters. Mackenzie’s twelve‑month trailing
of net assets under management related to the sale of mutual
redemption rate is comprised of the weighted average redemption
fund contracts in the divestiture of QGOF and the Greenchip
rate for front‑end load assets, deferred sales charge and low load
acquisition noted previously. Mackenzie’s total investment fund
assets with redemption fees, and deferred sales charge assets
assets exclusive of these transactions was $72.5 billion, an increase
without redemption fees (matured assets). Generally, redemption
of 8.3% from $66.9 billion at September 30, 2020. Mackenzie’s
rates for front‑end load assets and matured assets are higher than
mutual fund assets under management excluding the transactions
the redemption rates for deferred sales charge and low load assets
noted above were $68.7 billion at December 31, 2020, an increase
with redemption fees.
Total net sales excluding sub‑advisory to the Wealth Management
segment for the twelve months ended December 31, 2020 were
$6.3 billion, as compared to net redemptions of $273 million
last year. During the twelve months ended December 31, 2020,
of 8.0% from $63.6 billion at September 30, 2020. Mackenzie’s
ETF assets were $3.8 billion at December 31, 2020 compared
to $3.3 billion at September 30, 2020. ETF assets inclusive of
IGM investment funds were $8.5 billion at December 31, 2020
compared to $7.5 billion at September 30, 2020.
investment returns resulted in assets increasing by $6.1 billion
For the quarter ended December 31, 2020, Mackenzie mutual
compared to an increase of $7.7 billion last year.
During the second quarter of 2020, Mackenzie onboarded
$2.6 billion of sub‑advisory and institutional wins from various
fund gross sales were $4.5 billion, an increase of 55.0% from
the third quarter of 2020. Mutual fund redemptions were
$3.1 billion, an increase of 52.1% from the third quarter of 2020.
Net sales of Mackenzie mutual funds for the current quarter
60 |
2020 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis were $1.4 billion compared with net sales of $849 million in the
which each have a distinct focus and investment approach.
previous quarter.
During the current quarter of 2020, certain third party
programs, which include Mackenzie mutual funds, made fund
allocation changes resulting in gross sales of $625 million,
redemptions of $593 million and net sales of $32 million. During
the third quarter of 2020, certain third party programs, which
include Mackenzie mutual funds, made fund allocation changes
resulting in gross and net sales of $290 million. Excluding these
mutual fund allocation changes made by third party programs
during the fourth and third quarters of 2020, mutual fund gross
sales increased 48.3%, redemptions increased 23.3% and mutual
fund net sales were $1.3 billion in the current quarter compared
to net sales of $559 million in the previous quarter.
This boutique approach promotes diversification of styles and
ideas and provides Mackenzie with a breadth of capabilities.
Oversight is conducted through a common process intended
to promote superior risk‑adjusted returns over time. This
oversight process focuses on i) identifying and encouraging
each team’s performance edge, ii) promoting best practices in
portfolio construction, and iii) emphasizing risk management.
Upon the retirement of the Chief Investment Officer (CIO) at
December 31, 2020, Mackenzie introduced a two CIO model
that supports its growing size and complexity. This new model
will include one CIO dedicated to Fixed Income, Quantitative
and Multi‑Asset Strategies and the other CIO dedicated to
Equities and ensure that our Investment Management teams
benefit from independent leadership of their boutiques. At the
Redemptions of long‑term mutual fund assets in the current
quarter were $3.0 billion, compared to $1.9 billion in the third
same time, the two CIO’s will partner on key areas, including
talent, innovation, technology and data, investment operations
quarter of 2020. Mackenzie’s annualized quarterly redemption
and a collaborative approach to solutions selling.
rate for long‑term mutual funds for the current quarter was
18.2% compared to 12.6% in the third quarter. Mackenzie’s
annualized quarterly redemption rate for long‑term mutual
Our investment team currently consists of sixteen boutiques.
Initiatives during 2020 include the following:
funds excluding rebalance transactions was 14.5% in the fourth
• Addition of a new Canadian Equity boutique with the
quarter of 2020. Net sales of long‑term funds for the current
acquisition of GLC at December 31, 2020.
quarter were $1.3 billion compared to net sales of $784 million
• Addition of a new Greenchip boutique with the acquisition of
in the previous quarter.
Greenchip Financial Corp. at December 22, 2020.
For the quarter ended December 31, 2020, Mackenzie ETF net
creations were $372 million compared to $97 million in the third
quarter. Excluding the Wealthsimple allocation changes during
the third quarter of 2020 previously discussed, ETF net creations
were $422 million in the quarter ended September 30, 2020.
Investment fund net sales in the current quarter were $1.7 billion
compared to net sales of $0.9 billion in the third quarter.
Excluding the mutual fund and ETF allocation changes made by
third party programs, investment fund net sales of $1.7 billion in
the current quarter compared to net sales of $1.0 billion in the
prior quarter.
As at December 31, 2020, Mackenzie’s sub‑advisory to the
Wealth Management segment were $75.8 billion or 73.6% of
total Wealth Management assets under management compared
to $72.7 billion or 74.1% of total Wealth Management assets
under management at September 30, 2020.
INVESTMENT MANAGEMENT
Mackenzie has $186.8 billion in assets under management at
December 31, 2020, including $75.8 billion of sub‑advisory
mandates to the Wealth Management segment. It has teams
located in Toronto, Montreal, Winnipeg, Boston, Dublin and
Hong Kong.
We continue to deliver our investment offerings through a
boutique structure, with separate in‑house investment teams
The investment in Northleaf will also enhance our investment
capabilities by offering global private equity, private credit and
infrastructure investment solutions to our clients.
In addition to our own investment teams, Mackenzie supplements
investment capabilities through the use of third party sub‑advisors
and strategic beta index providers in selected areas. These include
Putnam Investments Inc., TOBAM, China AMC, Impax Asset
Management LLC and Rockefeller Capital Management.
Long‑term investment performance is a key measure of
Mackenzie’s ongoing success. At December 31, 2020, 78.3%
of Mackenzie mutual fund assets were rated in the top two
performance quartiles for the one year time frame, 67.2% for
the three year time frame and 60.8% for the five year time
frame. Mackenzie also monitors its fund performance relative to
the ratings it receives on its mutual funds from the Morningstar†
fund ranking service. At December 31, 2020, 82.5% of Mackenzie
mutual fund assets measured by Morningstar† had a rating
of three stars or better and 59.6% had a rating of four or five
stars. This compared to the Morningstar† universe of 84.6% for
three stars or better and 50.1% for four and five star funds at
December 31, 2020. These ratings exclude the Quadrus Group
of Funds†.
Mackenzie was once again recognized for industry leading
performance, winning five 2020 Refinitiv Lipper Awards. The
award honours funds that lead in delivering strong, risk‑adjusted
performance relative to their peers:
| 61
Management’s Discussion and Analysis | 2020 IGM Financial Inc. Annual Report • Mackenzie Canadian Growth Balanced Fund Series A – Best
• Mackenzie Global Sustainable Dividend Index ETF (CAD units
three‑year and five‑year performance in the Canadian Equity
and USD units)
Balanced category. This fund is co‑managed by Mackenzie’s
Bluewater, Fixed Income and Asset Allocation Teams.
• Mackenzie Precious Metals Class Series A – Best ten‑year
performance in the Precious Metals Equity category. This fund
is managed by Mackenzie’s Resource Team.
• Mackenzie Maximum Diversification Canada Index ETF and
Mackenzie Maximum Diversification All World Developed
Index ETF – Best three‑year performance in the ETF
Equity category. This ETF is managed by Mackenzie’s Asset
Allocation Team.
• Mackenzie US Large Cap Equity ETF (USD units)
Mackenzie’s current line‑up consists of 41 ETFs: 22 active and
strategic beta ETFs and 19 traditional index ETFs. ETF assets
under management ended the quarter at $8.5 billion, inclusive
of $4.7 billion in investments from IGM mutual funds. This ranks
Mackenzie in sixth place in the Canadian ETF industry for assets
under management.
MUTUAL FUNDS
Mackenzie manages its product shelf through new fund
In addition, eleven of Mackenzie’s mutual funds and ETFs were
launches and fund mergers to streamline fund offerings for
recognized for industry leading performance at the Fundata
advisors and investors.
FundGrade A+ awards.
PRODUCTS
Mackenzie continues to evolve its product shelf by providing
enhanced investment solutions for financial advisors to offer
their clients. In 2020, Mackenzie launched a number of
During 2020, Mackenzie launched five mutual funds:
• Mackenzie Global Small‑Mid Cap Fund
• Mackenzie Alternative Enhanced Yield Fund
• Mackenzie US Mid Cap Opportunities Fund
• Mackenzie US Mid Cap Opportunities Currency Neutral Fund
new products and merged mutual funds to streamline and
• Mackenzie Private Equity Replication Fund
strengthen its product shelf.
EXCHANGE TRADED FUNDS
The addition of Exchange Traded Funds (ETF) has complemented
Mackenzie’s broad and innovative fund line‑up and reflects its
investor‑focused vision to provide advisors and investors with
new solutions to drive investor outcomes and achieve their
personal goals. These ETFs offer investors another investment
option when building long‑term diversified portfolios.
During 2020, Mackenzie launched eleven new ETFs and two
USD series. These ETFs fill meaningful gaps in the product line‑
up as well as provide unique exposures in the Canadian market.
With Mackenzie’s continued focus on multi ‑channel distribution,
many of these ETFs cater to multi‑channel opportunities.
• Wealthsimple North American Socially Responsible Index ETF
• Wealthsimple Developed Markets excluding North America
Socially Responsible Index
In December of 2020, Mackenzie launched a Private Equity
Replication Fund. This fund seeks to provide access to the
amplified return and managed volatility characteristics of U.S.
private equity buyouts. It does this by replicating key elements of
the private equity investment profile including active exposures
to specific industries, leverage, and volatility management. The
fund invests in U.S. publicly traded companies that possess
characteristics similar to what private equity firms select for
investments, such as high quality companies with elevated
profitability that trade at attractive valuations.
Product changes during 2020 include the following:
• On October 29, the Mackenzie US Small‑Mid Cap Growth
Class and the Mackenzie US Small‑Mid Cap Growth Currency
Neutral Class were soft capped due to capacity constraints.
These funds have delivered strong investment performance
versus their benchmark and peers, which has led to sustained
asset growth in recent years. Closing the funds to new
• Mackenzie U.S. Aggregate Bond Index ETF (CAD‑Hedged)
investors will help to ensure that the integrity of the portfolio
• Mackenzie Developed ex‑North America Aggregate Bond
Index ETF (CAD‑Hedged)
• Mackenzie Developed Markets Real Estate Index ETF
• Mackenzie Global Fixed Income Allocation ETF
• Mackenzie Balanced Allocation ETF
• Mackenzie Conservative Allocation ETF
• Mackenzie Growth Allocation ETF
• Mackenzie Global Infrastructure Index ETF
managers’ investment process is protected, and the fund
continues to meet its objectives. New investors will be able
to access US mid caps through the Mackenzie US Mid Cap
Opportunities Fund and the US Mid Cap Opportunities
Currency Neutral Fund, which were launched during 2020. The
funds are managed by the same Mackenzie Growth Team with
a focus on high‑quality innovative US mid cap companies.
• Early in the fourth quarter, the Mackenzie Growth Fund
merged into the Mackenzie Canadian Growth Fund to
streamline the product shelf for investors and advisors.
62 |
2020 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis Review of Segment Operating Results
The Asset Management segment includes revenue earned
• Asset management fees – Wealth Management consists of sub‑
on advisory mandates to the Wealth Management segment
advisory fees earned from the Wealth Management segment.
and investments into Mackenzie mutual fund and ETFs by the
Wealth Management segment.
Net asset management fees – third party were $137.7 million
for the three months ended December 31, 2020, an increase of
The Asset Management segment earnings before interest and
$8.2 million or 6.3% from $129.5 million last year. The increase
taxes are presented in Table 20.
2020 VS. 2019
REVENUES
Asset management fees are classified as either Asset
management fees – third party or Asset management fees –
Wealth Management.
• Net asset management fees – third party is comprised of
the following:
in net asset management fees – third party was primarily due to
a 14.8% increase in average assets under management partially
offset by a decline in the effective net asset management fee
rate. Mackenzie’s net asset management fee rate was 70.8 basis
points for the three months December 31, 2020 compared
to 76.7 basis points in the comparative period in 2019. The
decline in the net asset management fee rate in the current
quarter was due to a change in the composition of assets under
management, including the impact of having a greater share in
non‑retail priced products. Contributing to the increase in non‑
retail assets was the onboarding of $2.6 billion of sub‑advisory
– Asset management fees – third party consists of management
and institutional wins during the second quarter of 2020.
and administration fees earned from our investment funds
and management fees from our third party sub‑advisory,
institutional and other accounts. The largest component is
management fees from our investment funds. The amount
of management fees depends on the level and composition
of assets under management. Management fee rates vary
depending on the investment objective and the account type
of the underlying assets under management. For example,
equity‑based mandates have higher management fee rates
than fixed income mandates and retail mutual fund accounts
have higher management fee rates than sub‑advised
and institutional accounts. The majority of Mackenzie’s
mutual fund assets are retail and sold through third party
Net asset management fees – third party were $513.4 million for
the year ended December 31, 2020, an increase of $14.0 million
or 2.8% from $499.4 million last year. The increase in net asset
management fees – third party was primarily due to an 8.5%
increase in average assets under management partially offset
by a decline in the effective net asset management fee rate.
Mackenzie’s net asset management fee rate was 71.8 basis points
for the year ended December 31, 2020 compared to 76.0 basis
points in the comparative period in 2019. The decrease in the net
asset management fee rate in the current period was due to a
change in the composition of assets under management, including
the impact of having a greater share in non‑retail priced products.
financial advisors.
Management fees – Wealth Management were $25.8 million
– Redemption fees – consists of fees earned from the
for the three months ended December 31, 2020, a decline of
redemptions of mutual fund assets sold on a deferred sales
$0.4 million or 1.5% from $26.2 million last year. The decline
charge purchase option and on a low load purchase option.
in management fees was due to a decline in the effective
Redemption fees charged for deferred sales charge assets
management fee rate partially offset by a 0.9% increase in
range from 5.5% in the first year and decrease to zero after
average assets under management. Mackenzie’s management fee
seven years. Redemption fees for low load assets range
rate was 13.9 basis points for the three months December 31,
from 2.0% to 3.0% in the first year and decrease to zero
2020 compared to 14.2 basis points in the comparative period
after two or three years, depending on the purchase option.
in 2019. The decrease in the management fee rate was due to a
– Dealer compensation expenses – consists of asset‑based
and sales‑based compensation. Asset‑based compensation
represents trailing commissions paid to dealers on certain
classes of retail mutual funds and are calculated as a
percentage of mutual fund assets under management.
These fees vary depending on the fund type and the
purchase option upon which the fund was sold: front‑end,
deferred sales charge or low load. Sales based compensation
are paid to dealers on the sale of mutual funds under the
deferred sales charge purchase option and on a low load
purchase option.
change in the composition of assets under management.
Management fees – Wealth Management were $100.6 million
for the year ended December 31, 2020, a decline of $3.6 million
or 3.5% from $104.2 million last year. The decline in management
fees was due to a 1.5% decline in average assets under
management coupled with a decline in the effective management
fee rate. Mackenzie’s management fee rate was 14.0 basis points
for the year ended December 31, 2020 compared to 14.3 basis
points in the comparative period in 2019. The decrease in the
management fee rate was due to a change in the composition of
assets under management.
| 63
Management’s Discussion and Analysis | 2020 IGM Financial Inc. Annual Report TABLE 20: OPERATING RESULTS – ASSET MANAGEMENT
THREE MONTHS ENDED
($ millions)
Revenues
Asset management
Asset management fees – third party
Redemption fees
Dealer compensation expenses
Asset‑based compensation
Sales‑based compensation
Net asset management fees – third party
Asset management fees – Wealth Management
Net asset management
Net investment income and other
Expenses
Advisory and business development
Operations and support
Sub‑advisory
2020
DEC. 31
2020
SEP. 30
2019
DEC. 31
2020
SEP. 30
% CHANGE
2019
DEC. 31
$ 215.1
1.2
$ 206.4
0.9
$ 202.0
1.4
216.3
207.3
203.4
(73.5)
(5.1)
(78.6)
137.7
25.8
163.5
1.0
164.5
28.3
74.6
1.5
104.4
(70.6)
(4.9)
(75.5)
131.8
25.8
157.6
1.1
158.7
16.0
69.7
2.5
88.2
(68.3)
(5.6)
(73.9)
129.5
26.2
155.7
(0.3)
155.4
22.5
77.7
2.7
102.9
4.2 %
33.3
4.3
4.1
4.1
4.1
4.5
–
3.7
(9.1)
3.7
76.9
7.0
(40.0)
18.4
6.5 %
(14.3)
6.3
7.6
(8.9)
6.4
6.3
(1.5)
5.0
N/M
5.9
25.8
(4.0)
(44.4)
1.5
Earnings before interest and taxes
$
60.1
$
70.5
$
52.5
(14.8) %
14.5 %
TWELVE MONTHS ENDED
($ millions)
Revenues
Asset management
Asset management fees – third party
Redemption fees
Dealer compensation expenses
Asset‑based compensation
Sales‑based compensation
Net asset management fees – third party
Asset management fees – Wealth Management
Net asset management
Net investment income and other
Expenses
Advisory and business development
Operations and support
Sub‑advisory
2020
DEC. 31
2019
DEC. 31
% CHANGE
$ 808.4
4.5
$ 786.6
5.7
812.9
792.3
2.8 %
(21.1)
2.6
(277.7)
(21.8)
(299.5)
513.4
100.6
614.0
2.9
616.9
80.2
293.7
8.7
382.6
(268.1)
(24.8)
(292.9)
499.4
104.2
603.6
4.2
607.8
79.9
295.2
10.8
385.9
3.6
(12.1)
2.3
2.8
(3.5)
1.7
(31.0)
1.5
0.4
(0.5)
(19.4)
(0.9)
Earnings before interest and taxes
$ 234.3
$ 221.9
5.6 %
64 |
2020 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis
Net investment income and other primarily includes investment
Q4 2020 VS. Q3 2020
returns related to Mackenzie’s investments in proprietary
funds. These investments are generally made in the process of
launching a fund and are sold as third party investors subscribe.
Net investment income and other was $1.0 million for the three
months ended December 31, 2020 compared to ($0.3) million
last year and was $2.9 million for the year ended December 31,
2020, compared to $4.2 million last year.
EXPENSES
Mackenzie incurs advisory and business development expenses
that primarily includes wholesale distribution activities and
these costs vary directly with assets or sales levels. Advisory and
business development expenses were $28.3 million for the three
months ended December 31, 2020, an increase of $5.8 million or
25.8% from $22.5 million in 2019. The increase in expense during
the current quarter is due to higher wholesaler commissions
attributed to record high level of sales partially offset by lower
travel and entertainment expenses. Expenses for the year
ended December 31, 2020 were $80.2 million, an increase of
$0.3 million or 0.4% from $79.9 million last year.
REVENUES
Net asset management fees – third party were $137.7 million
for the current quarter, an increase of $5.9 million or 4.5% from
$131.8 million in the third quarter. The increase in net asset
management fees – third party was primarily due to a 4.7%
increase in average assets under management slightly offset
by a decline in the effective net asset management fee rate.
Mackenzie’s net asset management fee rate was 70.8 basis
points for the current quarter compared to 71.0 basis points in
the third quarter.
Management fees – Wealth Management were $25.8 million in
the current quarter, consistent with the third quarter. The 2.3%
increase in average assets under management was offset by a
decline in the effective management fee rate. The management
fee rate was 13.9 basis points in the current quarter compared
to 14.2 basis points in the third quarter.
Net investment income and other was $1.0 million for the
current quarter, a decrease of $0.1 million from the third quarter.
Operations and support includes costs associated with business
EXPENSES
operations, including technology and business processes, in‑house
investment management and product shelf management,
corporate management and support functions. These expenses
primarily reflect compensation, technology and other service
provider expenses. Operations and support expenses were
$74.6 million for the three months ended December 31,
2020, a decrease of $3.1 million or 4.0% from $77.7 million
in 2019. Expenses for the year ended December 31, 2020
were $293.7 million, a decline of $1.5 million or 0.5% from
$295.2 million last year.
Sub‑advisory expenses were $1.5 million for the three months
ended December 31, 2020, compared to $2.7 million in
2019. Expenses for the year ended December 31, 2020 were
$8.7 million, compared to $10.8 million last year.
Advisory and business development expenses were $28.3 million
for the current quarter, an increase of $12.3 million or 76.9%
from $16.0 million in the third quarter. The increase during
the current quarter is due to higher wholesaler commissions
attributable to record high level of sales during the quarter.
Operations and support expenses were $74.6 million for
the current quarter, an increase of $4.9 million or 7.0% from
$69.7 million compared to the third quarter.
Sub‑advisory expenses were $1.5 million for the current quarter,
compared to $2.5 million in the third quarter.
| 65
Management’s Discussion and Analysis | 2020 IGM Financial Inc. Annual Report Strategic Investments and Other
Review of Segment Operating Results
The Strategic Investments and Other segment includes
2020 VS. 2019
investments in Great‑West Lifeco Inc. (Lifeco), China Asset
Management Co., Ltd. (China AMC), Northleaf Capital Group Ltd.
(Northleaf), Wealthsimple Financial Corp., Portag3 Ventures LPs.,
and unallocated capital.
Earnings from the Strategic Investments and Other segment
include the Company’s proportionate share of earnings of its
associates, Lifeco, China AMC and Northleaf as well as net
investment income on unallocated capital.
In the third quarter of 2020, the Company sold its 24.8% equity
interest in Personal Capital as discussed in the Consolidated
Financial Position section of this MD&A. The gain on sale is
excluded from segment results.
Assets held by the Strategic Investments and Other segment are
included in Table 21.
Unallocated capital represents capital not allocated to any of
the operating companies and which would be available for
investment, debt repayment, distribution to shareholders or
other corporate purposes. This capital is invested in highly
liquid, high quality financial instruments in accordance with
the Company’s Investment Policy.
Strategic investments and other segment earnings before
interest and taxes are presented in Table 22.
The proportionate share of associates’ earnings increased by
$7.5 million in the fourth quarter of 2020 compared to the
fourth quarter of 2019 and increased by $24.6 million in the
year ended December 31, 2020, compared to 2019. These
earnings reflect equity earnings from Lifeco, China AMC and,
until the third quarter of 2020, Personal Capital, as discussed
in the Consolidated Financial Position section of this MD&A.
The increase in the fourth quarter resulted primarily from
increases in the proportionate share of China AMC’s earnings
of $4.6 million and an increase in Personal Capital reflecting
the sale of the Company’s investment in the second quarter of
2020. The increase in the twelve months ended December 31,
2020, resulted from the increases in the proportionate share of
China AMC’s earnings of $11.4 million and Personal Capital’s
earnings of $12.2 million. Net investment income and other
decreased to $1.1 million in the fourth quarter of 2020
compared to $2.6 million in 2019. For the twelve month period,
net investment income and other decreased to $6.0 million
compared to $7.3 million in 2019.
Q4 2020 VS. Q3 2020
The proportionate share of associates’ earnings was $40.1 million
in the fourth quarter of 2020, a decrease of $3.4 million from
the third quarter of 2020. Net investment income and other
was $1.1 million in the fourth quarter of 2020, compared to
$0.6 million in the third quarter.
TABLE 21: TOTAL ASSETS – STRATEGIC INVESTMENTS AND OTHER
($ millions)
Investments in associates
Lifeco
China AMC
Northleaf
Personal Capital
FVTOCI investments
Wealthsimple (direct investment only)
Portag3 and other investments
Unallocated capital and other
Total assets
Lifeco fair value
66 |
2020
2019
DECEMBER 31
DECEMBER 31
$ 962.4
720.3
248.5
–
$ 896.7
662.7
–
194.5
1,931.2
1,753.9
511.6
81.7
593.3
240.6
236.2
64.9
301.1
321.0
$ 2,765.1
$ 2,376.0
$ 1,133.2
$ 1,241.8
2020 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis
TABLE 22: OPERATING RESULTS – STRATEGIC INVESTMENTS AND OTHER
THREE MONTHS ENDED
($ millions)
Revenues
Net investment income and other
Proportionate share of associates’ earnings
Investment in Lifeco
Investment in China AMC
Investment in Northleaf
Investment in Personal Capital
Expenses
Operations and support
2020
DEC. 31
2020
SEP. 30
2019
DEC. 31
2020
SEP. 30
% CHANGE
2019
DEC. 31
$
1.1
$
0.6
$
2.6
83.3 %
(57.7) %
27.3
11.8
1.0
–
40.1
41.2
0.9
33.0
10.5
–
–
43.5
44.1
1.2
29.9
7.2
–
(4.5)
32.6
35.2
0.6
(17.3)
12.4
N/M
–
(7.8)
(6.6)
(8.7)
63.9
N/M
100.0
23.0
17.0
(25.0)
(6.1) %
50.0
16.5 %
Earnings before interest and taxes
$
40.3
$
42.9
$
34.6
TWELVE MONTHS ENDED
($ millions)
Revenues
Net investment income and other
Proportionate share of associates’ earnings
Investment in Lifeco
Investment in China AMC
Investment in Northleaf
Investment in Personal Capital
Expenses
Operations and support
Earnings before interest and taxes
2020
DEC. 31
2019
DEC. 31
% CHANGE
$
6.0
$
7.3
(17.8) %
109.1
41.5
1.0
(4.6)
147.0
153.0
109.1
30.1
–
(16.8)
122.4
129.7
–
37.9
N/M
72.6
20.1
18.0
4.1
2.2
$ 148.9
$ 127.5
86.4
16.8 %
| 67
Management’s Discussion and Analysis | 2020 IGM Financial Inc. Annual Report
IGM Financial Inc.
Consolidated Financial Position
IGM Financial’s total assets were $16.1 billion at December 31,
IGM Financial Inc. is the largest shareholder in Wealthsimple
2020, compared to $15.4 billion at December 31, 2019.
and holds, directly and indirectly, a 36% interest. As a result
OTHER INVESTMENTS
The composition of the Company’s securities holdings is detailed
in Table 23.
FAIR VALUE THROUGH OTHER
COMPREHENSIVE INCOME (FVTOCI)
Gains and losses on FVTOCI investments are recorded in Other
comprehensive income.
Corporate Investments
Corporate investments is primarily comprised of the Company’s
investments in Wealthsimple Financial Corp., and Portag3
Ventures LP and Portag3 Ventures II LP.
Portag3 Ventures LP and Portag3 Ventures II LP (Portag3) are
early‑stage investment funds dedicated to backing innovating
financial services companies and are controlled by Power
Financial Corporation, a subsidiary of Power Corporation of
Canada. As at December 31, 2020, the Company had invested
a total of $53.1 million in Portag3.
Wealthsimple Financial Corp. (Wealthsimple) is an online
investment manager that provides financial investment guidance.
As at December 31, 2020, the Company had invested a total of
of this valuation, the fair value of the Company’s investment
increased by $298 million and is recorded at $550 million at
December 31, 2020.
The total fair value of Corporate investments of $593 million
is presented net of certain costs incurred within the limited
partnership structures holding the underlying investments.
FAIR VALUE THROUGH PROFIT OR LOSS (FVTPL)
Securities classified as FVTPL include equity securities and
proprietary investment funds. Gains and losses are recorded
in Net investment income and other in the Consolidated
Statements of Earnings.
Certain proprietary investment funds are consolidated where
the Company has made the assessment that it controls the
investment fund. The underlying securities of these funds are
classified as FVTPL.
LOANS
The composition of the Company’s loans is detailed in Table 24.
Loans consisted of residential mortgages and represented 39.4%
of total assets at December 31, 2020, compared to 46.8% at
December 31, 2019.
$186.9 million in Wealthsimple through a limited partnership
Loans measured at amortized cost are primarily comprised of
controlled by Power Financial Corporation. The investment is
residential mortgages sold to securitization programs sponsored
classified at Fair value through other comprehensive income.
by third parties that in turn issue securities to investors. An
On October 14, 2020, Wealthsimple announced a $114 million
equity fundraising led by TCV, one of the largest growth equity
investors focused on technology, along with Greylock, Meritech,
offsetting liability, Obligations to securitization entities, has
been recorded and totalled $6.2 billion at December 31, 2020,
compared to $6.9 billion at December 31, 2019.
Two Sigma Ventures and existing investor Allianz X. The new
The Company holds loans pending sale or securitization. Loans
investors have an ownership stake of 7.4%. The purchase price
measured at fair value through profit or loss are residential
associated with this fundraising valued the common equity of
mortgages held temporarily by the Company pending sale.
Wealthsimple at $1.5 billion ($1.4 billion pre‑money valuation).
Loans held for securitization are carried at amortized cost. Total
TABLE 23: OTHER INVESTMENTS
($ millions)
Fair value through other comprehensive income
Corporate investments
Fair value through profit or loss
Equity securities
Proprietary investment funds
68 |
DECEMBER 31, 2020
DECEMBER 31, 2019
COST
FAIR VALUE
COST
FAIR VALUE
$ 251.4
$ 593.3
$ 245.0
$ 301.2
1.5
35.3
36.8
1.5
37.5
39.0
1.6
51.3
52.9
1.8
54.4
56.2
$ 288.2
$ 632.3
$ 297.9
$ 357.4
2020 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis
TABLE 24: LOANS
($ millions)
Amortized cost
Less: Allowance for expected credit losses
Fair value through profit or loss
DECEMBER 31, 2020
DECEMBER 31, 2019
$ 6,329.4
0.8
6,328.6
3.3
$ 7,198.7
0.7
7,198.0
–
$ 6,331.9
$ 7,198.0
loans being held pending sale or securitization are $334.5 million
In the fourth quarter of 2020, the Company securitized loans
at December 31, 2020, compared to $344.5 million at
through its mortgage banking operations with cash proceeds of
December 31, 2019.
Residential mortgages originated by IG Wealth Management are
funded primarily through sales to third parties on a fully serviced
basis, including Canada Mortgage and Housing Corporation
(CMHC) or Canadian bank sponsored securitization programs.
At December 31, 2020, IG Wealth Management serviced
$422.8 million compared to $277.8 million in 2019. Additional
information related to the Company’s securitization activities,
including the Company’s hedges of related reinvestment and
interest rate risk, can be found in the Financial Risk section of
this MD&A and in Note 6 to the Annual Financial Statements.
$11.0 billion of residential mortgages, including $2.4 billion
INVESTMENT IN ASSOCIATES
originated by subsidiaries of Lifeco.
SECURITIZATION ARRANGEMENTS
Great-West Lifeco Inc. (Lifeco)
At December 31, 2020, the Company held a 4% equity interest
in Lifeco. IGM Financial and Lifeco are controlled by Power
Through the Company’s mortgage banking operations, residential
Corporation of Canada.
mortgages originated by IG Wealth Management mortgage
planning specialists are sold to securitization trusts sponsored
by third parties that in turn issue securities to investors. The
Company securitizes residential mortgages through the CMHC
sponsored National Housing Act Mortgage‑Backed Securities
The equity method is used to account for IGM Financial’s
investment in Lifeco, as it exercises significant influence. Changes
in the carrying value for the three and twelve months ended
December 31, 2020 compared with 2019 are shown in Table 25.
(NHA MBS) and the Canada Mortgage Bond Program (CMB
In December 2020, Lifeco recorded a gain in relation to the
Program) and through Canadian bank‑sponsored asset‑backed
revaluation of a deferred tax asset less certain restructuring and
commercial paper (ABCP) programs. The Company retains
transaction costs. The Company’s after‑tax proportionate share
servicing responsibilities and certain elements of credit risk and
of these adjustments was $3.4 million.
prepayment risk associated with the transferred assets. The
Company’s credit risk on its securitized mortgages is partially
mitigated through the use of insurance. Derecognition of
financial assets in accordance with IFRS is based on the transfer
In April 2019, the Company participated on a proportionate
basis in the Lifeco substantial issuer bid by selling 2,400,255
of its shares in Lifeco for proceeds of $80.4 million.
of risks and rewards of ownership. As the Company has retained
In June 2019, Lifeco recorded a one‑time loss in relation to
prepayment risk and certain elements of credit risk associated
the sale of substantially all of its United States individual life
with the Company’s securitization transactions through the
insurance and annuity business. In December 2019, Lifeco
CMB and ABCP programs, they are accounted for as secured
recorded one‑time charges in relation to the revaluation of
borrowings. The Company records the transactions under these
a deferred tax asset, restructuring costs and the net gain on
programs as follows: i) the mortgages and related obligations
the Scottish Friendly transaction. The Company’s after‑tax
are carried at amortized cost, with interest income and interest
proportionate share of these charges was $17.2 million.
expense, utilizing the effective interest rate method, recorded
over the term of the mortgages, ii) the component of swaps
China Asset Management Co., Ltd. (China AMC)
entered into under the CMB Program whereby the Company
pays coupons on Canada Mortgage Bonds and receives
investment returns on the reinvestment of repaid mortgage
principal, are recorded at fair value, and iii) cash reserves held
under the ABCP program are carried at amortized cost.
Founded in 1998 as one of the first fund management
companies in China, China AMC has developed and maintained
a position among the market leaders in China’s asset
management industry.
| 69
Management’s Discussion and Analysis | 2020 IGM Financial Inc. Annual Report
TABLE 25: INVESTMENT IN ASSOCIATES
($ millions)
LIFECO CHINA AMC
CAPITAL NORTHLEAF
TOTAL
LIFECO CHINA AMC
CAPITAL
TOTAL
PERSONAL
PERSONAL
DECEMBER 31, 2020
DECEMBER 31, 2019
THREE MONTHS ENDED
Carrying value, October 1
Investment
Dividends
Proportionate share of:
Earnings (losses)(1)
Associate’s adjustments(1)
Associate’s one‑time
charges(1)
Other comprehensive
income (loss) and
other adjustments
$ 942.8
–
(16.3)
$ 713.0
–
–
$
27.3
3.4
11.8
–
–
–
5.2
(4.5)
Carrying value, December 31 $ 962.4
$ 720.3
$
–
–
–
–
–
–
–
–
–
–
$
–
247.5
–
$ 1,655.8
247.5
(16.3)
$ 898.7
–
(15.4)
$
651.2
–
–
$
202.8
–
–
$ 1,752.7
–
(15.4)
1.0(2)
–
40.1
3.4
29.9
–
–
(9.2)
7.2
–
–
(4.5)
–
32.6
–
–
(9.2)
0.7
(7.3)
4.3
(3.8)
(6.8)
$ 248.5
$ 1,931.2
$ 896.7
$
662.7
$
194.5
$ 1,753.9
TWELVE MONTHS ENDED
Carrying value, January 1
Investment
Transfer from corporate
investments (FVTOCI)
Proceeds from substantial
issuer bid
Dividends
Proportionate share of:
Earnings (losses)(1)
Associate’s adjustments(1)
Associate’s one‑time
charges(1)
Other comprehensive
income (loss) and
other adjustments
Disposition
$ 896.7
–
$ 662.7
–
$ 194.5
–
$
–
247.5
$ 1,753.9
247.5
$ 967.8
–
$
683.5
–
$
–
–
$ 1,651.3
–
–
–
–
(65.4)
109.1
3.4
–
(13.7)
41.5
–
–
–
–
(4.6)
–
–
–
–
18.6
–
29.8
–
8.8
(198.7)
–
–
–
1.0
–
–
–
–
–
–
–
217.0
217.0
–
(79.1)
147.0
3.4
(80.4)
(62.6)
109.1
–
–
(10.3)
30.1
–
–
–
(16.8)
–
(80.4)
(72.9)
122.4
–
–
(17.2)
–
–
(17.2)
57.2
(198.7)
(20.0)
–
(40.6)
–
(5.7)
–
(66.3)
–
Carrying value, December 31 $ 962.4
$ 720.3
$
–
$ 248.5
$ 1,931.2
$ 896.7
$
662.7
$
194.5
$ 1,753.9
(1) The proportionate share of earnings from the Company’s investment in associates is recorded in the Strategic Investments and Other segment.
(2) The Company’s proportionate share of Northleaf’s earnings, net of Non-controlling interest, was $0.8 million.
China AMC’s total assets under management, excluding
Personal Capital Corporation (Personal Capital)
subsidiary assets under management, were RMB¥ 1,461.1 billion
During the third quarter, the Company sold its equity interest in
($285.1 billion) at December 31, 2020, representing an increase
Personal Capital to a subsidiary of Lifeco, Empower Retirement,
of 41.6% (CAD$ increase of 48.1%) from RMB¥ 1,032.1 billion
for proceeds of $232.8 million (USD $176.2 million) and up to an
($192.4 billion) at December 31, 2019.
The equity method is used to account for the Company’s 13.9%
additional USD $24.6 million in consideration subject to Personal
Capital achieving certain target growth objectives.
equity interest in China AMC, as it exercises significant influence.
As a result of the sale, the Company has derecognized its
Changes in the carrying value for the three and twelve months
investment in Personal Capital and recorded an accounting gain
ended December 31, 2020 are shown in Table 25. The change
of $37.2 million ($31.4 million net of tax) in Net investment
in other comprehensive income of negative $4.5 million in
income and other in the Annual Financial Statements.
the three month period ended December 31, 2020 was due
to a 0.5% depreciation of the Chinese yuan relative to the
Canadian dollar.
The Company’s economic gain based on the cost of its
investment in Personal Capital of $189.1 million was
approximately $43.7 million ($37.9 million net of tax).
70 |
2020 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis
Northleaf Capital Group Ltd. (Northleaf)
voting interest in Northleaf commencing in approximately five
On October 28, 2020, the Company’s subsidiary, Mackenzie,
years and extending into future periods. The equity method
together with Lifeco, acquired a non‑controlling interest
is used to account for the acquisition vehicle’s 70% economic
in Northleaf, a global private equity, private credit and
infrastructure fund manager headquartered in Toronto.
The transaction was executed through an acquisition vehicle
interest as it exercises significant influence. Significant influence
arises from board representation, participating in the policy
making process and shared strategic initiatives.
80% owned by Mackenzie and 20% owned by Lifeco for
The Company controls the acquisition vehicle therefore it
cash consideration of $241 million and up to an additional
recognizes the full 70% economic interest in Northleaf and
$245 million in consideration at the end of five years subject
recognizes Non‑controlling interest (NCI) related to Lifeco’s
to the business achieving exceptional growth in certain
performance measures over the period. Any additional
net interest in Northleaf of 14%. Net of NCI, IGM’s investment
at December 31, 2020 was $199.6 million, comprised of
consideration will be recognized as expense over the five year
$192.6 million in cash consideration, $6.2 million in capitalized
period based on the fair value of the expected payment, which
transaction costs and proportionate share of 2020 earnings of
is revalued at each reporting period date.
$0.8 million.
The acquisition vehicle acquired a 49.9% voting interest and a
70% economic interest in Northleaf. Mackenzie and Lifeco have
Northleaf’s assets under management, including invested
capital and uninvested commitments, were $14.6 billion as
an obligation and right to purchase the remaining equity and
at December 31, 2020.
| 71
Management’s Discussion and Analysis | 2020 IGM Financial Inc. Annual Report Consolidated Liquidity and Capital Resources
LIQUIDITY
Cash and cash equivalents totalled $771.6 million at December 31,
2020 compared with $720.0 million at December 31, 2019. Cash
and cash equivalents related to the Company’s deposit operations
sales commissions) totalled $1,226.4 million for the year ended
December 31, 2020, compared to $1,294.0 million for 2019.
EBITDA before sales commissions excludes the impact of both
commissions paid and commission amortization (refer to
were $5.2 million at December 31, 2020, compared to $2.2 million
Table 1).
at December 31, 2019, as shown in Table 26.
Client funds on deposit represents cash balances held by
clients within their investment accounts and with the offset
included in deposit liabilities. The increase in the balance since
December 31, 2019 is primarily due to market volatility that
has caused clients to hold larger cash positions and due to the
migration of IG Wealth clientele to nominee accounts that may
hold deposit balances.
Working capital, which consists of current assets less current
liabilities, totalled $330.8 million at December 31, 2020 compared
with $464.3 million at December 31, 2019 (Table 27). The
decrease in working capital reflects the closing of the Company’s
acquisitions as previously discussed.
Working capital is utilized to:
• Finance ongoing operations, including the funding of
sales commissions.
• Temporarily finance mortgages in its mortgage banking
operations.
• Pay interest and dividends related to long‑term debt and
preferred shares.
• Maintain liquidity requirements for regulated entities.
Earnings Before Interest, Taxes,
Depreciation and Amortization (EBITDA)
For the financial year ($ millions)
1,321
1,355
1,333
1,294
1,226
EBITDA before
sales commissions
1,086
1,083
1,145
1,129
1,087
EBITDA after
sales commissions
2016
2017
2018
2019
2020
Adjusted EBITDA before and after sales commissions excluded
the following:
2017 – charges related to restructuring and other, a favourable
revaluation of the Company’s pension plan obligation, charges
representing the Company’s proportionate share in Great‑West
Lifeco Inc.’s one‑time charges and restructuring provision.
2018 – charges related to restructuring and other and the premium
• Pay quarterly dividends on its outstanding common shares.
paid on the early redemption of debentures.
• Finance common share repurchases and retirement of
2019 – the Company’s proportionate share of associate’s one‑time
long‑term debt.
charges.
IGM Financial continues to generate significant cash flows from
its operations. Earnings before interest, taxes, depreciation
and amortization before sales commissions (EBITDA before
2020 – the gain on sale of Personal Capital, gain on sale of Quadrus
Group of Funds net of acqusition costs, the Company’s
proportionate share of associate’s one‑time adjustments and
restructuring and other.
TABLE 26: DEPOSIT OPERATIONS – FINANCIAL POSITION
AS AT DECEMBER 31 ($ millions)
Assets
Cash and cash equivalents
Client funds on deposit
Accounts and other receivables
Loans
Total assets
Liabilities and shareholders’ equity
Deposit liabilities
Other liabilities
Shareholders’ equity
Total liabilities and shareholders’ equity
72 |
2020
2019
$
5.2
1,063.4
36.5
10.5
$ 1,115.6
$ 1,104.9
0.3
10.4
$
$
$
2.2
561.3
12.3
20.4
596.2
584.3
0.5
11.4
$ 1,115.6
$
596.2
2020 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis
TABLE 27: WORKING CAPITAL
AS AT DECEMBER 31 ($ millions)
Current Assets
Cash and cash equivalents
Client funds on deposit
Accounts receivable and other assets
Current portion of securitized mortgages and other
Current Liabilities
Accounts and other payables
Deposits and certificates
Current portion of obligations to securitization entities and other
2020
2019
$
771.6
1,063.4
391.3
1,518.6
3,744.9
756.5
1,101.4
1,556.2
3,414.1
$
720.0
561.3
345.3
1,531.7
3,158.3
611.9
579.0
1,503.1
2,694.0
Working Capital
$
330.8
$
464.3
Earnings before interest, taxes, depreciation and amortization
Adjustments to determine net cash from operating activities
after sales commissions (EBITDA after sales commissions)
during the year ended 2020 compared to 2019 consist of non‑
totalled $1,086.9 million for the year ended December 31, 2020,
cash operating activities offset by cash operating activities:
compared to $1,128.9 million for 2019. EBITDA after sales
commissions excludes the impact of commission amortization
(refer to Table 1).
Refer to the Financial Instruments Risk section of this MD&A
for information related to other sources of liquidity and to
the Company’s exposure to and management of liquidity and
funding risk.
CASH FLOWS
Table 28 – Cash Flows is a summary of the Consolidated
Statements of Cash Flows which forms part of the Consolidated
Financial Statements for the year ended December 31, 2020.
Cash and cash equivalents increased by $51.6 million in 2020
compared to an increase of $69.8 million in 2019.
• The add‑back of amortization of capitalized sale commissions
offset by the deduction of capitalized sales commissions paid.
• The add‑back of amortization of capital, intangible and
other assets.
• The deduction of investment in associates’ equity earnings
offset by dividends received.
• The add‑back of pension and other post‑employment
benefits offset by cash contributions.
• Changes in operating assets and liabilities and other.
• The adjustment for other items in 2020, which included the
add‑back of restructuring provision and other and the deduction
of the gain on the sale of the Company’s investment in Personal
Capital and the gain on the sale of the Quadrus Group of Funds.
• The deduction of restructuring provision cash payments.
TABLE 28: CASH FLOWS
TWELVE MONTHS ENDED
($ millions)
Operating activities
Earnings before income taxes
Income taxes paid
Adjustments to determine net cash from operating activities
Financing activities
Investing activities
Change in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
2020
DEC. 31
2019
DEC. 31
% CHANGE
$
965.4
(172.3)
(56.5)
736.6
(1,358.4)
673.4
51.6
720.0
$
968.7
(236.7)
(19.9)
712.1
(1,068.9)
426.6
69.8
650.2
(0.3) %
27.2
(183.9)
3.4
(27.1)
57.9
(26.1)
10.7
$
771.6
$
720.0
7.2 %
| 73
Management’s Discussion and Analysis | 2020 IGM Financial Inc. Annual Report
Financing activities during the year ended December 31, 2020
CAPITAL RESOURCES
compared to 2019 related to:
• An increase in obligations to securitization entities of
$1,568.5 million and repayments of obligations to securitization
entities of $2,359.8 million in 2020 compared to an increase
in obligations to securitization entities of $1,456.3 million
and repayments of obligations to securitization entities of
$1,960.8 million in 2019.
• The payment of regular common share dividends which
totalled $536.2 million in 2020 compared to $539.0 million
in 2019.
The Company’s capital management objective is to maximize
shareholder returns while ensuring that the Company is
capitalized in a manner which appropriately supports regulatory
capital requirements, working capital needs and business
expansion. The Company’s capital management practices are
focused on preserving the quality of its financial position by
maintaining a solid capital base and a strong balance sheet.
Capital of the Company consists of long‑term debt and
common shareholders’ equity which totalled $7.1 billion at
December 31, 2020, compared to $6.6 billion at December 31,
2019. The Company regularly assesses its capital management
2019 also included the following financing activities:
practices in response to changing economic conditions.
• Issuance of debentures of $250.0 million.
The Company’s capital is primarily utilized in its ongoing business
• Redemption of preferred shares of $150.0 million.
• The purchase of 2,762,788 common shares under
IGM Financial’s normal course issuer bid at a cost of
$100.0 million.
• Payment of perpetual preferred share dividends which totalled
$4.4 million.
operations to support working capital requirements, long‑term
investments made by the Company, business expansion and
other strategic objectives. Subsidiaries subject to regulatory capital
requirements include investment dealers, mutual fund dealers,
exempt market dealers, portfolio managers, investment fund
managers and a trust company. These subsidiaries are required
to maintain minimum levels of capital based on either working
Investing activities during the year ended December 31, 2020
capital, liquidity or shareholders’ equity. The Company’s subsidiaries
compared to 2019 primarily related to:
have complied with all regulatory capital requirements.
• The purchases of other investments totalling $32.7 million
The total outstanding long‑term debt was $2.1 billion at
and sales of other investments with proceeds of $38.8 million
December 31, 2020, unchanged from December 31, 2019.
in 2020 compared to $118.9 million and $85.5 million,
Long‑term debt is comprised of debentures which are senior
respectively, in 2019.
• An increase in loans of $1,793.0 million with repayments of
loans and other of $2,679.7 million in 2020 compared to
$1,682.1 million and $2,211.5 million, respectively, in 2019,
primarily related to residential mortgages in the Company’s
mortgage banking operations.
• Net cash used in additions to intangible assets and acquisitions
was $68.8 million in 2020 compared to $64.1 million in 2019.
• The acquisition of GLC Asset Management Group Ltd. for
$175.8 million in 2020.
• The investment in Northleaf Capital Group Ltd. of $198.8 million
in 2020.
• The sales of the Company’s investment in Personal Capital and
the Quadrus Group of Funds with proceeds of $262.8 million.
2019 also included the following investing activities:
• An additional investment in Personal Capital of $66.8 million.
• Proceeds of $80.4 million from the sale of 2,400,255 Lifeco
shares as a result of the Company’s participation in the Lifeco
unsecured debt obligations of the Company subject to standard
covenants, including negative pledges, but which do not include
any specified financial or operational covenants.
Capital
As at December 31 ($ millions)
7,000
2,175
6,072
1,325
6,452
6,599
1,850
2,100
150
150
150
7,143
2,100
49
4,597
4,675
4,452
4,499
4,994
substantial issuer bid.
2016
2017
2018
2019
2020
Long-term Debt
Perpetual Preferred Shares
Common Shareholders’ Equity
Non-controlling Interest
74 |
8000
7000
6000
5000
4000
3000
2000
1000
0
2020 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis Other activities in 2020 included the declaration of common
The A (High) rating assigned to IGM Financial’s senior unsecured
share dividends of $536.2 million or $2.25 per share. Changes in
debentures by DBRS is the fifth highest of the 26 ratings used
common share capital are reflected in the Annual Consolidated
for long‑term debt. Under the DBRS long‑term rating scale,
Statements of Changes in Shareholders’ Equity.
debt securities rated A (High) are of good credit quality and the
Standard & Poor’s (S&P) current rating on the Company’s senior
unsecured debentures is “A” with a stable outlook. Dominion Bond
Rating Service’s (DBRS) current rating on the Company’s senior
unsecured debentures is “A (High)” with a stable rating trend.
Credit ratings are intended to provide investors with an
independent measure of the credit quality of the securities of
a company and are indicators of the likelihood of payment and
the capacity of a company to meet its obligations in accordance
with the terms of each obligation. Descriptions of the rating
categories for each of the agencies set forth below have been
obtained from the respective rating agencies’ websites.
These ratings are not a recommendation to buy, sell or hold
capacity for the payment of financial obligations is substantial.
While this is a favourable rating, entities in the A (High) category
may be vulnerable to future events, but qualifying negative
factors are considered manageable.
FINANCIAL INSTRUMENTS
Table 29 presents the carrying amounts and fair values of
financial assets and financial liabilities. The table excludes fair
value information for financial assets and financial liabilities not
measured at fair value if the carrying amount is a reasonable
approximation of fair value. These items include cash and
cash equivalents, accounts and other receivables, certain other
financial assets, accounts payable and accrued liabilities and
the securities of the Company and do not address market price
certain other financial liabilities.
or other factors that might determine suitability of a specific
security for a particular investor. The ratings also may not
reflect the potential impact of all risks on the value of securities
and are subject to revision or withdrawal at any time by the
rating organization.
The A rating assigned to IGM Financial’s senior unsecured
debentures by S&P is the sixth highest of the 22 ratings used
for long‑term debt. This rating indicates S&P’s view that the
Company’s capacity to meet its financial commitment on the
obligation is strong, but the obligation is somewhat more
susceptible to the adverse effects of changes in circumstances
and economic conditions than obligations in higher
rated categories.
Fair value is determined using the following methods
and assumptions:
• Other investments and other financial assets and liabilities
are valued using quoted prices from active markets, when
available. When a quoted market price is not readily available,
valuation techniques are used that require assumptions
related to discount rates and the timing and amount of future
cash flows. Wherever possible, observable market inputs are
used in the valuation techniques.
• Loans classified as held for trading are valued using market
interest rates for loans with similar credit risk and maturity,
specifically lending rates offered to retail borrowers by
financial institutions.
TABLE 29: FINANCIAL INSTRUMENTS
($ millions)
Financial assets recorded at fair value
Other investments
– Fair value through other comprehensive income
– Fair value through profit or loss
Loans
– Fair value through profit or loss
Derivative financial instruments
Financial assets recorded at amortized cost
Loans
– Amortized cost
Financial liabilities recorded at fair value
Derivative financial instruments
Financial liabilities recorded at amortized cost
Deposits and certificates
Obligations to securitization entities
Long‑term debt
DECEMBER 31, 2020
DECEMBER 31, 2019
CARRYING VALUE
FAIR VALUE
CARRYING VALUE
FAIR VALUE
$
593.3
39.0
$
593.3
39.0
$
301.2
56.2
$
301.2
56.2
3.3
37.3
3.3
37.3
–
15.2
–
15.2
6,328.6
6,532.8
7,198.0
7,273.8
34.5
34.5
17.2
17.2
1,104.9
6,173.9
2,100.0
1,105.4
6,345.2
2,653.8
584.3
6,913.6
2,100.0
584.7
6,997.0
2,453.6
| 75
Management’s Discussion and Analysis | 2020 IGM Financial Inc. Annual Report
• Loans classified as amortized cost are valued by discounting
• Derivative financial instruments are valued based on quoted
the expected future cash flows at prevailing market yields.
market prices, where available, prevailing market rates for
• Obligations to securitization entities are valued by discounting
the expected future cash flows at prevailing market yields for
securities issued by these securitization entities having similar
terms and characteristics.
instruments with similar characteristics and maturities, or
discounted cash flow analysis.
See Note 23 of the Annual Financial Statements which provides
additional discussion on the determination of fair value of
• Deposits and certificates are valued by discounting the
financial instruments.
contractual cash flows using market interest rates currently
offered for deposits with similar terms and credit risks.
• Long‑term debt is valued using quoted prices for each
debenture available in the market.
Although there were changes to both the carrying values and
fair values of financial instruments, these changes did not have
a material impact on the financial condition of the Company for
the twelve months ended December 31, 2020.
76 |
2020 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis Risk Management
IGM Financial is exposed to a variety of risks that are inherent in
• The Related Party and Conduct Review Committee oversees
our business activities. Our ability to manage these risks is key
conflicts of interest.
to our ongoing success. The Company emphasizes a strong risk
management culture and the implementation of an effective
risk management approach. Our approach coordinates risk
management across the organization and its business units
and seeks to ensure prudent and measured risk‑taking in order
to achieve an appropriate balance between risk and return.
Fundamental to our enterprise risk management program is
protecting and enhancing our reputation.
RISK MANAGEMENT FRAMEWORK
The Company’s risk management approach is undertaken
through our comprehensive Enterprise Risk Management
(ERM) Framework which is composed of five core elements:
risk governance, risk appetite, risk principles, a defined risk
management process, and risk management culture. The ERM
Framework is established under our ERM Policy, which is
approved by the Executive Risk Management Committee.
RISK GOVERNANCE
Our risk governance structure emphasizes ownership of
risk management in each business unit and oversight by an
executive Risk Management Committee accountable to the Risk
Committee of the Board (Risk Committee) and ultimately to the
Board of Directors. Additional oversight is provided by the ERM
Department, compliance groups, and Internal Audit Department.
The Risk Committee provides primary oversight and carries
out its risk management mandate. The Risk Committee is
responsible for assisting the Board in reviewing and overseeing
the risk governance structure and risk management program of
the Company by: i) ensuring that appropriate procedures are in
place to identify and manage risks and establish risk tolerances,
ii) ensuring that appropriate policies, procedures and controls
are implemented to manage risks, and iii) reviewing the risk
management process on a regular basis to ensure that it is
functioning effectively.
Other specific risks are managed with the support of the
following Board committees:
• The Audit Committee has specific risk oversight responsibilities
in relation to financial disclosure, internal controls and the
control environment as well as our compliance activities,
including administration of the Code of Conduct.
• The Human Resource Committee oversees compensation
policies and practices.
• The Governance and Nominating Committee oversees
corporate governance practices.
Management oversight for risk management resides with the
executive Risk Management Committee which is comprised
of the Chief Executive Officers of IGM Financial, IG Wealth
Management and Mackenzie Investments, the Chief Financial
Officer, the General Counsel, the Chief Operating Officer, the
Chief Strategy and Corporate Development Officer and the
Chief Human Resources Officer. The committee is responsible
for oversight of IGM Financial’s risk management process by:
i) establishing and maintaining the risk framework and policy;
ii) defining the risk appetite; iii) ensuring our risk profile and
processes are aligned with corporate strategy and risk appetite;
and iv) establishing “tone at the top” and reinforcing a strong
culture of risk management.
The Chief Executive Officers of the operating companies have
overall responsibility for overseeing risk management of their
respective companies.
The Company has assigned responsibility for risk management
using the Three Lines of Defence model, with the First Line
reflecting the business units having primary responsibility for
risk management, supported by Second Line risk management
functions and a Third Line (the Internal Audit function) providing
assurance and validation of the design and effectiveness of the
ERM Framework.
In response to the impact of COVID‑19, the Company is
focusing our teams on addressing and managing COVID‑19
issues and has established new committees and processes
where required.
First Line of Defence
The leaders of the various business units and support functions
have primary ownership and accountability for the ongoing
risk management associated with their respective activities.
Responsibilities of business unit and support function leaders
include: i) establishing and maintaining procedures for the
identification, assessment, documentation and escalation
of risks, ii) implementing control activities to mitigate risks,
iii) identifying opportunities for risk reduction or transfer, and
iv) aligning business and operational strategies with the risk
culture and risk appetite of the organization as established by
the Risk Management Committee.
Second Line of Defence
The Enterprise Risk Management (ERM) Department provides
oversight, analysis and reporting to the Risk Management
Committee on the level of risks relative to the established risk
| 77
Management’s Discussion and Analysis | 2020 IGM Financial Inc. Annual Report appetite for all activities of the Company. Other responsibilities
We use a consistent methodology across our organizations
include: i) developing and maintaining the enterprise risk
and business units for identification and assessment of risks.
management program and framework, ii) managing the
Risks are assessed by evaluating the impact and likelihood of
enterprise risk management process, and iii) providing guidance
the potential risk event after consideration of controls and any
and training to business unit and support function leaders.
risk transfer activities. The results of these assessments are
The Company has a number of committees of senior business
leaders which provide oversight of specific business risks,
considered relative to risk appetite and tolerances and may
result in action plans to adjust the risk profile.
including the Financial Risk Management and Operational Risk
Risk assessments are monitored and reviewed on an ongoing
Management committees. These committees perform critical
basis by business units and by oversight areas including the ERM
reviews of risk assessments, risk management practices and risk
Department. The ERM Department promotes and coordinates
response plans developed by business units and support functions.
communication and consultation to support effective risk
Other oversight accountabilities reside with the Company’s
corporate and compliance groups which are responsible for
ensuring compliance with policies, laws and regulations.
Third Line of Defence
The Internal Audit Department is the third line of defence and
provides independent assurance to senior management and
the Board of Directors on the effectiveness of risk management
policies, processes and practices.
management and escalation. The ERM Department regularly
reports on the results of risk assessments and on the assessment
process to the Risk Management Committee and to the Board
of Directors.
RISK MANAGEMENT CULTURE
Risk management is intended to be everyone’s responsibility
within the organization. The ERM Department engages
all business units in workshops to foster awareness and
incorporation of our risk framework into our business activities.
RISK APPETITE AND RISK PRINCIPLES
We have an established business planning process which
The Risk Management Committee establishes the Company’s
reinforces our risk management culture. Our compensation
appetite for different types of risk through the Risk Appetite
programs are typically objectives‑based, and do not encourage
Framework. Under the Risk Appetite Framework, one of four
or reward excessive or inappropriate risk taking, and often are
appetite levels is established for each risk type and business
aligned specifically with risk management objectives.
activity of the Company. These appetite levels range from
those where the Company has no appetite for risk and seeks to
minimize any losses, to those where the Company readily accepts
exposure while seeking to ensure that risks are well understood
and managed. These appetite levels guide our business units as
they engage in business activities, and inform them in establishing
policies, limits, controls and risk transfer activities.
A Risk Appetite Statement and Risk Principles provide further
guidance to business leaders and employees as they conduct risk
management activities. The Risk Appetite Statement’s emphasis
is to maintain the Company’s reputation and brand, ensure
Our risk management program emphasizes integrity, ethical
practices, responsible management and measured risk‑taking
with a long‑term view. Our standards of integrity and ethics are
reflected within our Code of Conduct which applies to directors,
officers and employees.
KEY RISKS OF THE BUSINESS
Significant risks that may adversely affect our ability to achieve
strategic and business objectives are identified through our
ongoing risk management process.
financial flexibility, and focus on mitigating operational risk.
We use a consistent methodology across our organizations and
RISK MANAGEMENT PROCESS
business units to identify and assess risks, considering factors
both internal and external to the organization. These risks are
The Company’s risk management process is designed to foster:
broadly grouped into five categories: financial, operational,
• Ongoing assessment of risks and tolerance in a changing
operating environment.
• Appropriate identification and understanding of existing and
emerging risks and risk response.
• Timely monitoring and escalation of risks based upon
changing circumstances.
Significant risks that may adversely affect the Company’s ability
to achieve its strategic and business objectives are identified
through the Company’s ongoing risk management process.
strategic, business, and environmental and social.
1) FINANCIAL RISK
LIQUIDITY AND FUNDING RISK
This is the risk of an inability to generate or obtain sufficient
cash in a timely and cost‑effective manner to meet contractual
or anticipated commitments as they come due or arise.
Our liquidity management practices include:
78 |
2020 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis • Maintaining liquid assets and lines of credit to satisfy near
by CMHC. The availability of mortgage insurance is dependent
term liquidity needs.
upon market conditions and is subject to change.
• Ensuring effective controls over liquidity management processes.
As part of ongoing liquidity management during 2020 and 2019,
• Performing regular cash forecasts and stress testing.
the Company:
• Regular assessment of capital market conditions and the
Company’s ability to access bank and capital market funding.
• Ongoing efforts to diversify and expand long‑term mortgage
funding sources.
• Oversight of liquidity management by the Financial Risk
Management Committee, a committee of finance and other
business leaders.
• Continued to assess additional funding sources for the
Company’s mortgage banking operations.
• Issued $250 million 4.206% debentures in March 2019
maturing March 21, 2050. The net proceeds were used by
the Company to fund the redemption of $150 million 5.90%
Non‑Cumulative First Preferred Shares, Series B and for
general corporate purposes. The Company redeemed the
A key funding requirement is the funding of Consultant network
Series B Preferred Shares on April 30, 2019.
compensation paid for the distribution of financial products and
• Participated in the Lifeco substantial issuer bid by selling
services. This compensation continues to be paid from operating
2,400,255 of its shares in Lifeco for proceeds of $80.4 million.
cash flows.
The Company also maintains sufficient liquidity to fund and
temporarily hold mortgages pending sale or securitization
to long‑term funding sources and to manage any derivative
collateral requirements. Through its mortgage banking
operations, residential mortgages are sold to third parties
including certain mutual funds, institutional investors through
private placements, Canadian bank‑sponsored securitization
trusts, and by issuance and sale of National Housing Act
Mortgage‑Backed Securities (NHA MBS) securities including
sales to Canada Housing Trust under the CMB Program. The
Company maintains committed capacity within certain Canadian
bank‑sponsored securitization trusts. Capacity for sales under
the CMB Program consists of participation in new CMB issues
and reinvestment of principal repayments held in the Principal
Reinvestment Accounts. The Company’s continued ability to
fund residential mortgages through Canadian bank‑sponsored
securitization trusts and NHA MBS is dependent on securitization
market conditions and government regulations that are subject
to change. A condition of the NHA MBS and CMB Program is
that securitized loans be insured by an insurer that is approved
• Received proceeds from the sales of the Company’s investment
in Personal Capital and the Quadrus Group of Funds of
$262.8 million.
The Company’s contractual obligations are reflected in Table 30.
The maturity schedule for long‑term debt of $2.1 billion
is reflected in the accompanying chart (Long‑Term Debt
Maturity Schedule).
In addition to IGM Financial’s current balance of cash and
cash equivalents, liquidity is available through the Company’s
lines of credit. The Company’s lines of credit with various
Schedule I Canadian chartered banks totalled $825 million at
December 31, 2020, unchanged from December 31, 2019. The
lines of credit at December 31, 2020 consisted of committed
lines of $650 million and uncommitted lines of $175 million,
unchanged from December 31, 2019. The Company has
accessed its uncommitted lines of credit in the past; however,
any advances made by a bank under the uncommitted lines of
credit are at the bank’s sole discretion. As at December 31, 2020
and December 31, 2019, the Company was not utilizing its
committed lines of credit or its uncommitted lines of credit.
TABLE 30: CONTRACTUAL OBLIGATIONS
AS AT DECEMBER 31, 2020
($ millions)
Derivative financial instruments
Deposits and certificates
Obligations to securitization entities
Leases(1)
Long‑term debt
Pension funding(2)
$
DEMAND
–
1,099.4
–
–
–
–
LESS THAN
1 YEAR
$
13.1
2.1
1,543.1
27.6
–
14.1
$
1-5
YEARS
21.4
2.5
4,610.1
88.2
–
–
$
AFTER
5 YEARS
–
0.9
20.7
131.1
2,100.0
–
$
TOTAL
34.5
1,104.9
6,173.9
246.9
2,100.0
14.1
Total contractual obligations
$ 1,099.4
$ 1,600.0
$ 4,722.2
$ 2,252.7
$ 9,674.3
(1) Includes remaining lease payments related to office space and equipment used in the normal course of business.
(2) The next required actuarial valuation will be completed based on a measurement date of December 31, 2020. Pension funding requirements beyond 2021 are subject to significant
variability and will be determined based on future actuarial valuations. Pension contribution decisions are subject to change, as contributions are affected by many factors including
market performance, regulatory requirements, changes in assumptions and management’s ability to change funding policy.
| 79
Management’s Discussion and Analysis | 2020 IGM Financial Inc. Annual Report
Long‑Term Debt Maturity Schedule
($ millions)
525
175
150
150
200
450
250
200
2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046
2047
2048 2049 2050
Year
The actuarial valuation for funding purposes related to the
Management believes cash flows from operations, available
Company’s registered defined benefit pension plan, based on
cash balances and other sources of liquidity described above are
a measurement date of December 31, 2017, was completed
sufficient to meet the Company’s liquidity needs. The Company
in May 2018. The valuation determines the plan surplus
continues to have the ability to meet its operational cash
or deficit on both a solvency and going concern basis. The
flow requirements, its contractual obligations, and its declared
solvency basis determines the relationship between the plan
dividends. The current practice of the Company is to declare
assets and its liabilities assuming that the plan is wound up
and pay dividends to common shareholders on a quarterly basis
and settled on the valuation date. A going concern valuation
at the discretion of the Board of Directors. The declaration of
compares the relationship between the plan assets and the
dividends by the Board of Directors is dependent on a variety
present value of the expected future benefit cash flows,
of factors, including earnings which are significantly influenced
assuming the plan will be maintained indefinitely. Based on
by the impact that debt and equity market performance has on
the actuarial valuation, the registered pension plan had a
the Company’s fee income and commission and certain other
solvency deficit of $47.2 million compared to $82.7 million
expenses. The Company’s liquidity position and its management
in the previous actuarial valuation, which was based on a
of liquidity and funding risk have not changed materially since
measurement date of December 31, 2016. The decrease in
December 31, 2019.
the solvency deficit resulted primarily from higher assets due
to contribution and investment returns and is required to be
CREDIT RISK
funded over five years. The registered pension plan had a going
This is the risk of financial loss to the Company if a counterparty
concern surplus of $46.1 million compared to $24.4 million in
to a transaction fails to meet its obligations.
the previous valuation. The next required actuarial valuation
will be based on a measurement date of December 31, 2020.
During the year ended December 31, 2020, the Company
made contributions of $25.6 million (2019 – $26.4 million). The
Manitoba Government announced that they will temporarily
waive certain contributions businesses are required to make to
their defined benefit pension plans including solvency funding
payments for the 13 months from December 2020 to December
2021. IGM has elected this special payment moratorium
and as a result, the Company expects to only make current
service cost contributions of approximately $14.1 million in
2021. Pension contribution decisions are subject to change, as
contributions are affected by many factors including market
performance, regulatory requirements, changes in assumptions
and management’s ability to change funding policy.
The Company’s cash and cash equivalents, other investment
holdings, mortgage portfolios, and derivatives are subject to
credit risk. The Company monitors its credit risk management
practices on an ongoing basis to evaluate their effectiveness.
Cash and Cash Equivalents and Client Funds on Deposit
At December 31, 2020, cash and cash equivalents of $771.6 million
(2019 – $720.0 million) consisted of cash balances of $76.6 million
(2019 – $68.0 million) on deposit with Canadian chartered banks
and cash equivalents of $695.0 million (2019 – $652.0 million).
Cash equivalents are comprised of Government of Canada
treasury bills totalling $96.0 million (2019 – $34.5 million),
provincial government treasury bills and promissory notes of
$148.8 million (2019 – $206.5 million), and bankers’ acceptances
80 |
2020 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis and other short‑term notes issued by Canadian chartered banks of
recorded over the life of the mortgages. This risk is further
$450.2 million (2019 – $411.0 million).
mitigated by insurance with 3.0% of mortgages held in ABCP
Client funds on deposit of $1,063.4 million (December 31,
Trusts insured at December 31, 2020 (2019 – 4.6%).
2019 – $561.3 million) represent cash balances held in client
At December 31, 2020, residential mortgages recorded on
accounts which are deposited at Canadian financial institutions.
balance sheet were 55.3% insured (2019 – 59.1%). As at
The Company manages credit risk related to cash and cash
equivalents by adhering to its Investment Policy that outlines
credit risk parameters and concentration limits. The Company
regularly reviews the credit ratings of its counterparties. The
maximum exposure to credit risk on these financial instruments
is their carrying value.
The Company’s exposure to and management of credit risk
related to cash and cash equivalents and fixed income securities
have not changed materially since December 31, 2019.
Mortgage Portfolio
As at December 31, 2020, residential mortgages, recorded on
the Company’s balance sheet, of $6.3 billion (2019 – $7.2 billion)
December 31, 2020, impaired mortgages on these portfolios
were $4.8 million, compared to $2.4 million at December 31,
2019. Uninsured non‑performing mortgages over 90 days
on these portfolios were $2.3 million at December 31, 2020,
compared to $1.6 million at December 31, 2019.
The Company also retains certain elements of credit risk on
mortgage loans sold to the Investors Mortgage and Short
Term Income Fund and to the Investors Canadian Corporate
Bond Fund through an agreement to repurchase mortgages
in certain circumstances benefiting the funds. These loans are
not recorded on the Company’s balance sheet as the Company
has transferred substantially all of the risks and rewards of
ownership associated with these loans.
consisted of $6.0 billion sold to securitization programs (2019 –
The Company regularly reviews the credit quality of the mortgages
$6.8 billion), $334.5 million held pending sale or securitization
and the adequacy of the allowance for expected credit losses.
(2019 – $344.5 million) and $14.1 million related to the
Company’s intermediary operations (2019 – $24.2 million).
The Company’s allowance for expected credit losses was
$0.8 million at December 31, 2020, compared to $0.7 million
The Company manages credit risk related to residential
at December 31, 2019, and is considered adequate by
mortgages through:
• Adhering to its lending policy and underwriting standards;
• Its loan servicing capabilities;
management to absorb all credit‑related losses in the mortgage
portfolios based on: i) historical credit performance experience,
ii) recent trends including the economic impact of COVID‑19
and Canada’s COVID‑19 Economic Response Plan to support
• Use of client‑insured mortgage default insurance and mortgage
Canadians and businesses, iii) current portfolio credit metrics
portfolio default insurance held by the Company; and
and other relevant characteristics, iv) our strong financial
• Its practice of originating its mortgages exclusively through its
planning relationship with our clients, and v) stress testing of
own network of Mortgage Planning Specialists and IG Wealth
losses under adverse real estate market conditions.
Management Consultants as part of a client’s IG Living Plan.
The Company’s exposure to and management of credit risk
In certain instances, credit risk is also limited by the terms and
related to mortgage portfolios have not changed materially
nature of securitization transactions as described below:
since December 31, 2019.
• Under the NHA MBS program totalling $3.2 billion (2019 –
$3.9 billion), the Company is obligated to make timely
payment of principal and coupons irrespective of whether
such payments were received from the mortgage borrower.
However, as required by the NHA MBS program, 100% of the
loans are insured by an approved insurer.
• Credit risk for mortgages securitized by transfer to bank‑
sponsored securitization trusts totalling $2.8 billion
(2019 – $2.9 billion) is limited to amounts held in cash
reserve accounts and future net interest income, the fair
values of which were $73.0 million (2019 – $71.9 million)
and $45.6 million (2019 – $37.9 million), respectively, at
December 31, 2020. Cash reserve accounts are reflected
on the balance sheet, whereas rights to future net interest
income are not reflected on the balance sheet and will be
Derivatives
The Company is exposed to credit risk through derivative contracts
it utilizes to hedge interest rate risk, to facilitate securitization
transactions and to hedge market risk related to certain stock‑
based compensation arrangements. These derivatives are discussed
more fully under the Market Risk section of this MD&A.
To the extent that the fair value of the derivatives is in
a gain position, the Company is exposed to credit risk
that its counterparties fail to fulfil their obligations under
these arrangements.
The Company’s derivative activities are managed in accordance
with its Investment Policy which includes counterparty limits
and other parameters to manage counterparty risk. The
aggregate credit risk exposure related to derivatives that
| 81
Management’s Discussion and Analysis | 2020 IGM Financial Inc. Annual Report are in a gain position of $35.8 million (2019 – $15.7 million)
to or held pending sale or securitization to long‑term
does not give effect to any netting agreements or collateral
funding sources. The Company enters into interest rate
arrangements. The exposure to credit risk, considering netting
swaps to hedge the interest rate risk related to funding
agreements and collateral arrangements and including rights
costs for mortgages held by the Company pending sale or
to future net interest income, was $3.8 million at December 31,
securitization. Hedge accounting is applied to the cost of
2020 (2019 – $0.7 million). Counterparties are all Canadian
funds on certain securitization activities. The effective portion
Schedule I chartered banks and, as a result, management
of fair value changes of the associated interest rate swaps
has determined that the Company’s overall credit risk related
are initially recognized in Other comprehensive income and
to derivatives was not significant at December 31, 2020.
subsequently recognized in Wealth Management revenue
Management of credit risk related to derivatives has not
over the term of the related Obligations to securitization
changed materially since December 31, 2019.
entities. The negative fair value of these swaps was
Additional information related to the Company’s securitization
activities and utilization of derivative contracts can be found in
Notes 2, 6 and 22 to the Annual Financial Statements.
MARKET RISK
$0.3 million (December 31, 2019 – positive $0.6 million)
on an outstanding notional amount of $191.3 million at
December 31, 2020 (December 31, 2019 – $180.4 million).
As at December 31, 2020, the impact to annual net earnings of
a 100 basis point increase in interest rates would have been a
This is the risk of loss arising from changes in the values of the
decrease of approximately $1.3 million (December 31, 2019 –
Company’s financial instruments due to changes in foreign
decrease of $2.0 million). The Company’s exposure to and
exchange rates, interest rates or equity prices.
management of interest rate risk have not changed materially
since December 31, 2019.
Interest Rate Risk
IGM Financial is exposed to interest rate risk on its mortgage
Equity Price Risk
portfolio and on certain of the derivative financial instruments
IGM Financial is exposed to equity price risk on our equity
used in our mortgage banking operations.
The Company manages interest rate risk associated with its
mortgage banking operations by entering into interest rate
swaps with Canadian Schedule I chartered banks as follows:
• The Company has in certain instances funded floating rate
mortgages with fixed rate Canada Mortgage Bonds as part
of the securitization transactions under the CMB Program. As
previously discussed, as part of the CMB Program, the Company
is party to a swap whereby it is entitled to receive investment
returns on reinvested mortgage principal and is obligated to
pay Canada Mortgage Bond coupons. This swap had a negative
fair value of $21.1 million (December 31, 2019 – negative
$0.9 million) and an outstanding notional amount of $0.7 billion
at December 31, 2020 (December 31, 2019 – $0.8 billion).
The Company enters into interest rate swaps with Canadian
Schedule I chartered banks to hedge the risk that the interest
rates earned on floating rate mortgages and reinvestment
returns decline. The fair value of these swaps totalled
$19.9 million (December 31, 2019 – negative $4.9 million), on
an outstanding notional amount of $1.3 billion at December 31,
investments which are classified as either fair value through
other comprehensive income or fair value through profit or
loss or investments in associates. The fair value of the equity
investments was $632.3 million at December 31, 2020
(December 31, 2019 – $357.4 million), as shown in Table 23.
The Company sponsors a number of deferred compensation
arrangements for employees where payments to participants
are deferred and linked to the performance of the common
shares of IGM Financial Inc. The Company hedges its exposure
to this risk through the use of forward agreements and total
return swaps.
Foreign Exchange Risk
IGM Financial is exposed to foreign exchange risk on its
investment in China AMC. Changes to the carrying value due
to changes in foreign exchange rates is recognized in Other
comprehensive income. A 5% appreciation (depreciation) in
Canadian currency relative to foreign currencies would decrease
(increase) the aggregate carrying value of foreign investments
by approximately $34.0 million ($37.6 million).
2020 (December 31, 2019 – $1.6 billion). The net fair value of
The Company’s proportionate share of China AMC’s earnings,
these swaps of negative $1.2 million at December 31, 2020
recorded in Proportionate share of associates’ earnings in the
(December 31, 2019 – negative $5.8 million) is recorded on
Consolidated Statements of Earnings, is also affected by changes
the balance sheet and has an outstanding notional amount of
$2.0 billion (December 31, 2019 – $2.4 billion).
in foreign exchange rates. A 5% appreciation (depreciation) in
Canadian currency relative to foreign currencies would decrease
• The Company is exposed to the impact that changes in
interest rates may have on the value of mortgages committed
(increase) the Company’s proportionate share of associates’
earnings (losses) by approximately $2.0 million ($2.1 million).
82 |
2020 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis RISKS RELATED TO ASSETS UNDER
MANAGEMENT AND ADVISEMENT
also increased communication to support the independent
financial advisors and its institutional clients with a focus on
At December 31, 2020, IGM Financial’s total assets under
providing capital market and economic updates, ongoing
management and advisement were $240.0 billion compared to
commentary, and access to investment management to ensure
$190.0 billion at December 31, 2019.
they have the resources they need to support their clients in
The Company’s primary sources of revenues are advisory fees
light of COVID‑19.
and asset management fees which are applied as an annual
The Company’s exposure to the value of assets under
percentage of the level of assets under management and
management and advisement aligns it with the experience of
advisement. As a result, the level of the Company’s revenues
its clients. Assets under management are broadly diversified by
and earnings are indirectly exposed to a number of financial
asset class, geographic region, industry sector, investment team
risks that affect the value of assets under management and
and style. The Company regularly reviews the sensitivity of its
advisement on an ongoing basis. These include market risks,
assets under management, revenues, earnings and cash flow to
such as changes in equity prices, interest rates and foreign
changes in financial markets.
exchange rates, as well as credit risk on debt securities, loans
and credit exposures from other counterparties within our
2) OPERATIONAL RISK
client portfolios.
Changing financial market conditions may also lead to a change
in the composition of the Company’s assets under management
between equity and fixed income instruments, which could
This is the risk of financial loss, reputational damage or regulatory
actions resulting from inadequate or failed internal processes
or systems, human interaction or external events. This excludes
business risk, which is a separate category in our ERM framework.
result in lower revenues depending upon the management fee
We are exposed to a broad range of operational risks, including
rates associated with different asset classes and mandates.
information technology security and system failures, errors
During 2020, there has been significant global market volatility, as
discussed in the Operational Assessment section of the MD&A.
The Company believes that over the long term, exposure to
investment returns on its client portfolios is beneficial to the
Company’s results and consistent with stakeholder expectations,
and generally it does not engage in risk transfer activities such
as hedging in relation to these exposures.
The Company has increased its communication to clients and
others of market conditions and changes and the Company
and its Consultants have actively been reaching out to clients
to discuss their financial planning needs and goals in light of
COVID‑19 and will continue those efforts. The Company has
relating to transaction processing, financial models and
valuations, fraud and misappropriation of assets, and inadequate
application of internal control processes.
Operational risks relating to people and processes are mitigated
through policies and process controls. Oversight of risks and
ongoing evaluation of the effectiveness of controls is provided by
the Company’s Compliance Department, ERM Department and
Internal Audit Department.
The Company has an insurance review process where it
assesses and determines the nature and extent of insurance
that is appropriate to provide adequate protection against
unexpected losses, and where it is required by law, regulators or
contractual agreements.
TABLE 31: IGM FINANCIAL ASSETS UNDER MANAGEMENT – ASSET AND CURRENCY MIX
AS AT DECEMBER 31, 2020
Cash
Short‑term fixed income and mortgages
Other fixed income
Domestic equity
Foreign equity
Real Property
CAD
USD
Other
INVESTMENT FUNDS
TOTAL
1.6 %
5.1
26.0
19.8
44.9
2.6
2.6 %
5.0
25.5
24.3
40.6
2.0
100.0 %
100.0 %
52.9 %
30.4
16.7
58.7 %
27.1
14.2
100.0 %
100.0 %
| 83
Management’s Discussion and Analysis | 2020 IGM Financial Inc. Annual Report
Operational risk affects all business activities, including the
implemented threat and vulnerability assessment and response
processes in place to manage other risks. As a result, operational
capabilities. Extended duration of work from home programs
risk can be difficult to measure, given that it forms part of other
introduces increased need to mitigate risk of potential data loss.
risks of the Company and may not always be separately identified.
The Company’s risk management framework emphasizes
operational risk management and internal control. The
Company has a very low appetite for risk in this area.
OUTSOURCING
We regularly engage third parties to provide expertise and
efficiencies that support our operational activities. Our exposure
to third party service provider risk could include reputational,
The business unit leaders are responsible for management of the
regulatory and other operational risks. Policies, standard
day to day operational risks of their respective business units.
operating procedures and dedicated resources, including a
Specific programs, policies, training, standards and governance
supplier code of conduct and outsourcing policy, have been
processes have been developed to help manage operational risk.
developed and implemented to specifically address third party
The Company has a crisis response plan which outlines crisis
response coordination policies and procedures in the event
of a crisis that could significantly impact the organization’s
reputation, brands or business operations. The Company
executes simulation exercises on a regular basis. The Company
has a crisis assessment team comprised of senior leadership
who are responsible for crisis confirmation and management. In
addition, this team is responsible for setting strategy, overseeing
response and ensuring appropriate subject matter experts are
engaged in the scenario‑dependent crisis response team.
The Company also has a business continuity management
program to enable critical operations and processes to function
in the event of a business disruption.
For the health and safety of the Company’s employees and clients
and to help efforts to limit the speed and spread of the COVID‑19
infection, the Company moved substantially all of its employees
and Consultants to work from home and temporarily closed its
offices in March 2020. The Company is continuously assessing its
plan and protocols, and taking direction from external governing
bodies such as the Medical Officers of Health, to determine when
employees and advisors will return to the office.
The Company’s business continuity plan has been effective
at ensuring the Company is able to continue operations and
provide client service with minimal disruptions.
TECHNOLOGY AND CYBER RISK
We use systems and technology to support business operations
and the client and financial advisor experience. As a result, we
are exposed to risks relating to technology and cyber security
such as data breaches, identity theft and hacking, including
the risk of denial of service or malicious software attacks.
The volume of these activities in our society has increased
since the onset of COVID‑19. Such attacks could compromise
confidential information of the Company and that of clients or
other stakeholders, and could result in negative consequences
including lost revenue, litigation, regulatory scrutiny or
reputational damage. To remain resilient to such threats, we
have established enterprise‑wide cyber security programs,
benchmarked capabilities to sound industry practices, and
service provider risk. We perform due diligence and monitoring
activities before entering into contractual relationships with
third‑party service providers and on an ongoing basis. As our
reliance on external service providers continues to grow, we
continue to enhance resources and processes to support third
party risk management.
MODEL RISK
We use a variety of models to assist in: the valuation of financial
instruments, operational scenario testing, management of
cash flows, capital management, and assessment of potential
acquisitions. These models incorporate internal assumptions,
observable market inputs and available market prices. Effective
controls exist over the development, implementation and
application of these models. However, changes in the internal
assumptions or other factors affecting the models could have an
adverse effect on the Company’s consolidated financial position
and reputation.
LEGAL AND REGULATORY COMPLIANCE
This is the risk of not complying with laws, contractual
agreements or regulatory requirements. These risks relate
to regulation governing product distribution, investment
management, accounting, reporting and communications.
IGM Financial is subject to complex and changing legal, taxation
and regulatory requirements, including the requirements of
agencies of the federal, provincial and territorial governments
in Canada which regulate the Company and its activities. The
Company and its subsidiaries are also subject to the requirements
of self‑regulatory organizations to which they belong. These
and other regulatory bodies regularly adopt new laws, rules,
regulations and policies that apply to the Company and its
subsidiaries. These requirements include those that apply to
IGM Financial as a publicly traded company and those that
apply to the Company’s subsidiaries based on the nature of their
activities. They include regulations related to the management
and provision of financial products and services, including
securities, insurance and mortgages, and other activities carried
on by the Company in the markets in which it operates.
Regulatory standards affecting the Company and the financial
84 |
2020 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis services industry are significant and continually evolve. The
the governance process. We believe that sound corporate
Company and its subsidiaries are subject to reviews as part of the
governance is essential to the well‑being of the Company and
normal ongoing process of oversight by the various regulators.
our shareholders.
Failure to comply with laws, rules or regulations could lead to
Oversight of IGM Financial is performed by the Board of
regulatory sanctions and civil liability, and may have an adverse
Directors directly and through its five committees. The
reputational or financial effect on the Company. The Company
Company’s President and Chief Executive Officer has overall
manages legal and regulatory compliance risk through its efforts
responsibility for management of the Company. The Company’s
to promote a strong culture of compliance. The monitoring of
activities are carried out principally by three operating
regulatory developments and their impact on the Company is
companies – Investors Group Inc., Mackenzie Financial
overseen by the Regulatory Initiatives Committee chaired by
Corporation and Investment Planning Counsel Inc. – each of
the Executive Vice‑President, General Counsel. The Company
which are managed by a President and Chief Executive Officer.
also continues to develop and maintain compliance policies,
processes and oversight, including specific communications on
compliance and legal matters, training, testing, monitoring and
reporting. The Audit Committee of the Board receives regular
reporting on compliance initiatives and issues.
We have a business planning process that supports development
of an annual business plan, approved by the Board of Directors,
which incorporates objectives and targets for the Company.
Components of management compensation are associated
with the achievement of earnings targets and other objectives
IGM Financial promotes a strong culture of ethics and integrity
associated with the plan. Strategic plans and direction are part
through its Code of Conduct approved by the Board of
of this planning process and are integrated into the Company’s
Directors, which outlines standards of conduct that apply to
risk management program.
all IGM Financial directors, officers and employees. The Code
of Conduct references many policies relating to the conduct of
REGULATORY DEVELOPMENT RISK
directors, officers and employees. Other corporate policies cover
This is the potential for changes to regulatory, legal, or tax
anti‑money laundering and privacy. Training is provided on these
requirements that may have an adverse impact on the
policies on an annual basis. Individuals subject to the Code of
Company’s business activities or financial results.
Conduct attest annually that they understand the requirements
and have complied with its provisions.
We are exposed to the risk of changes in laws, taxation and
regulation that could have an adverse impact on the Company.
Business units are responsible for management of legal and
Particular regulatory initiatives may have the effect of making
regulatory compliance risk, and implementing appropriate
the products of the Company’s subsidiaries appear to be
policies, procedures and controls. The Company’s Compliance
less competitive than the products of other financial service
Departments are responsible for providing oversight of all
providers, to third party distribution channels and to clients.
regulated compliance activities. The Internal Audit Department
Regulatory differences that may impact the competitiveness
also provides oversight concerning regulatory compliance matters.
of the Company’s products include regulatory costs, tax
CONTINGENCIES
treatment, disclosure requirements, transaction processes or
other differences that may be as a result of differing regulation
The Company is subject to legal actions arising in the normal
or application of regulation. Regulatory developments may
course of its business. In December 2018, a proposed class
also impact product structures, pricing, and dealer and advisor
action was filed in the Ontario Superior Court against Mackenzie
compensation. While the Company and its subsidiaries actively
which alleges that the company should not have paid mutual
monitor such initiatives, and where feasible comment upon or
fund trailing commissions to order execution only dealers.
discuss them with regulators, the ability of the Company and its
Although it is difficult to predict the outcome of any such legal
subsidiaries to mitigate the imposition of differential regulatory
actions, based on current knowledge and consultation with legal
treatment of financial products or services is limited.
counsel, management does not expect the outcome of any of
these matters, individually or in aggregate, to have a material
adverse effect on the Company’s consolidated financial position.
3) STRATEGIC RISK
This is the risk of potential adverse impacts resulting from
inadequate or inappropriate governance, oversight, management
of incentives and conflicts, regulatory developments and strategy.
The Company continuously monitors regulatory developments,
guidance and communications, and has been engaged in
ongoing discussions with regulators as the industry works to
address issues resulting from COVID‑19.
ACQUISITION RISK
The Company is exposed to risks related to its acquisitions and
strategic investments. The Company undertakes thorough due
IGM Financial believes in the importance of good corporate
diligence prior to completing an acquisition, but there is no
governance and the central role played by directors in
assurance that the Company will achieve the expected strategic
| 85
Management’s Discussion and Analysis | 2020 IGM Financial Inc. Annual Report objectives or cost and revenue synergies subsequent to an
Catastrophic events can cause economic uncertainty, affect
acquisition. Subsequent changes in the economic environment
investor confidence, income levels and financial planning
and other unanticipated factors may affect the Company’s ability
decisions. This could affect the level and volatility of financial
to achieve expected earnings growth or expense reductions. The
markets and the level of the Company’s assets under
success of an acquisition is dependent on retaining assets under
management and advisement.
management, clients, and key employees of an acquired company.
4) BUSINESS RISK
The global COVID‑19 pandemic has caused economic disruption,
adversely impacted economic conditions, has caused significant
volatility and reductions in the level of financial markets, and has
GENERAL BUSINESS CONDITIONS
increased unemployment in Canada and globally.
This risk refers to the potential for unfavourable impacts on
IGM Financial resulting from competitive or other external
factors relating to the marketplace.
Global economic conditions, changes in equity markets,
demographics and other factors including geopolitical risk and
government instability, can affect investor confidence, income
levels and savings decisions. This could result in reduced sales of
IGM Financial’s products and services and/or result in investors
redeeming their investments. These factors may also affect
the level and volatility of financial markets and the value of the
Company’s assets under management, as described more fully
under the Risks Related to Assets Under Management section of
this MD&A.
To manage this risk, the Company, across its operating
subsidiaries, communicates with clients and underscores the
importance of financial planning across economic cycles.
The Company and the industry continue to take steps to
educate Canadian investors on the merits of financial planning,
diversification and long‑term investing. In periods of volatility,
Consultants and independent financial advisors play a key role in
assisting investors in maintaining perspective and focus on their
long‑term objectives.
In response, the Company has implemented its business
continuity plans and has transitioned substantially all of its
employees and Consultants to working from home.
It is difficult to predict how significant the COVID‑19 pandemic
and government measures taken in response will be to world
economies, our clients and our business. This event could have
a material impact on the financial positions and results of the
Company, subject to duration and severity.
PRODUCT / SERVICE OFFERING
This risk refers to the potential for unfavourable impacts on
IGM Financial resulting from inadequate product or service
performance, quality or breadth.
IGM Financial and its subsidiaries operate in a highly competitive
environment, competing with other financial service providers,
investment managers and product and service types. Client
development and retention can be influenced by a number
of factors, including investment performance, products and
services offered by competitors, relative service levels, relative
pricing, product attributes, reputation and actions taken by
competitors. This competition could have an adverse impact
upon the Company’s financial position and operating results.
Redemption rates for long‑term funds are summarized in
Please refer to The Competitive Landscape section of this MD&A
Table 32 and are discussed in the Wealth Management and
for further discussion.
the Asset Management Segment Operating Results sections
of this MD&A.
CATASTROPHIC EVENTS OR LOSS
Catastrophic events or loss refers to the risk that events such
as earthquakes, floods, fire, tornadoes, pandemics, or terrorism
could adversely affect the Company’s financial performance.
We provide Consultants, independent financial advisors, as well
as retail and institutional clients with a high level of service
and support and a broad range of investment products, with
a focus on building enduring relationships. The Company’s
subsidiaries also continually review their respective product
and service offering and pricing to ensure competitiveness in
the marketplace.
TABLE 32: TWELVE MONTH TRAILING REDEMPTION RATE FOR LONG‑TERM FUNDS
IGM Financial Inc.
IG Wealth Management
Mackenzie
Counsel
86 |
2020
DEC. 31
2019
DEC. 31
9.8 %
16.6 %
20.1 %
10.3 %
15.6 %
19.3 %
2020 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis
We strive to deliver strong investment performance on our
and its long‑term investment performance record, marketing,
products relative to benchmarks and peers. Poor investment
educational and service support has made Mackenzie one of
performance relative to benchmarks or peers could reduce
Canada’s leading investment management companies. These
the level of assets under management and sales and asset
factors are discussed further in the Asset Management Review
retention, as well as adversely impact our brands and reputation.
of the Business section of this MD&A.
Meaningful and/or sustained underperformance could affect
the Company’s results. Our objective is to cultivate investment
PEOPLE RISK
processes and disciplines that give us a competitive advantage,
This risk refers to the potential inability to attract or retain
and we do this by diversifying our assets under management
employees or Consultants, develop them to an appropriate level
and product shelf by investment team, brand, asset class,
of proficiency, or manage engagement and personnel succession
mandate, style and geographic region.
or transition.
BUSINESS / CLIENT RELATIONSHIPS
This risk refers to the potential for unfavourable impacts on
IGM Financial resulting from changes to key business or client
relationships. These relationships primarily include IG Wealth
Management clients and Consultants, Mackenzie retail
distribution, strategic and significant business partners, clients of
Management, investment and distribution personnel play an
important role in developing, implementing, managing and
distributing products and services offered by IGM Financial. The
loss of these individuals or an inability to attract, retain and
motivate sufficient numbers of qualified personnel could negatively
affect IGM Financial’s business and financial performance.
Mackenzie funds, and sub‑advisors and other product suppliers.
We have a Diversity and Inclusion Strategy with the purpose
IG Wealth Management Consultant network – IG Wealth
Management derives all of its mutual fund sales through its
Consultant network. IG Wealth Management Consultants have
regular direct contact with clients which can lead to a strong
and personal client relationship based on the client’s confidence
in that individual Consultant. The market for financial advisors
of driving an inclusive, equitable and consistent experience for
employees and clients that supports our business objectives now
and into the future. To achieve the desired outcomes, we focus
on three pillars of action: raising awareness; improving inclusive
leadership behaviours; and building external partnerships and
community engagement.
is extremely competitive. The loss of a significant number of key
Our activities have a current focus on enabling the upward
Consultants could lead to the loss of client accounts which could
mobility of women and other under‑represented groups. We
have an adverse effect on IG Wealth Management’s results of
had a goal to have at least 35% of our executive roles – Vice‑
operations and business prospects. IG Wealth Management is
President and above – held by women by the end of 2020. As
focused on strengthening its distribution network of Consultants
of December 31, 2020, 33% of these roles were held by women
and on responding to the complex financial needs of its
and 27% of IG Wealth Management Consultants were women.
clients by delivering a diverse range of products and services
We are supporters of the UN Women’s Empowerment Principles
in the context of personalized financial advice, as discussed in
and also work with Catalyst, the Institute for Gender and the
the Wealth Management Review of the Business section of
Economy and Women in Capital Markets to advance gender
this MD&A.
Asset Management – Mackenzie derives the majority of its mutual
fund sales through third party financial advisors. Financial
equality. In 2020, the IGM Financial companies also signed a
pledge through the BlackNorth Initiative that reinforces our
shared commitment to end anti‑Black systemic racism.
advisors generally offer their clients investment products in
COVID‑19 has caused significant disruption in peoples’ lives
addition to, and in competition with Mackenzie. Mackenzie
both professionally and personally. The Company’s actions
also derives sales of its investment products and services from
have included:
its strategic alliance and institutional clients. Due to the nature
of the distribution relationship in these relationships and the
relative size of these accounts, gross sale and redemption
activity can be more pronounced in these accounts than in a
retail relationship. Mackenzie’s ability to market its investment
products is highly dependent on continued access to these
distribution networks. Lack of access could have a material
adverse effect on Mackenzie’s operating results and business
• Implementing a work at home strategy to maintain social
distance for our employees and Consultants.
• Providing the tools and processes to enable our employees
and Consultants to continue to operate effectively from home.
• Providing Employee Assistance Programs and other programs
to support the mental and physical well‑being of our
employees, Consultants, and their families.
prospects. Mackenzie is well positioned to manage this
• Developing a return to office strategy to safely allow employees
risk and to continue to build and enhance its distribution
and advisors to return to the office when appropriate.
relationships. Mackenzie’s diverse portfolio of financial products
| 87
Management’s Discussion and Analysis | 2020 IGM Financial Inc. Annual Report 5) ENVIRONMENTAL AND SOCIAL RISK
a long‑standing participant in the CDP (formerly Carbon
This is the potential for financial loss or other unfavourable
Disclosure Project), which promotes corporate disclosures on
impacts resulting from environmental or social issues connected
greenhouse gas emissions and climate change management
to our business operations or investment activities.
Environmental risks include issues such as climate change,
biodiversity, pollution, waste, and the unsustainable use of
including setting and monitoring emission reduction targets.
We have been recognized by CDP at the leadership level for
the past three years for our climate disclosures.
energy, water and other resources. Social risks include issues
Global practices are continually evolving relating to the
such as human rights, labour standards, diversity and inclusion,
identification, analysis, and management of climate risks and
and community impacts.
IGM Financial has a long‑standing commitment to responsible
management, as articulated in our Corporate Responsibility
Statement approved by the Board of Directors. The Board’s
risk management oversight includes ensuring that material
environmental and social risks are appropriately identified,
managed and monitored.
opportunities. The Financial Stability Board’s Task Force on
Climate‑related Financial Disclosures (TCFD) was established
in response to investor demand for enhanced information on
climate‑related risks and opportunities. IGM Financial and its
operating companies support the TCFD recommendations which
include a framework for consistent, voluntary climate‑related
financial disclosures that provide decision‑useful information to
investors, analysts, rating agencies and other stakeholders.
The Company’s executive Risk Management Committee is
responsible for oversight of the risk management process. Other
TCFD DISCLOSURE
management committees provide oversight of specific risks
The TCFD recommends that organizations disclose information
including the Corporate Responsibility (CR) Committee and the
about climate‑related risks and opportunities in four areas:
Diversity and Inclusion Executive Council. The CR Committee is
governance, strategy, risk management, and metrics and targets.
composed of senior executives who are responsible for ensuring
Full implementation of TCFD will be a multi‑year journey.
implementation of policy and strategy, establishing goals and
initiatives, measuring progress, and approving annual reporting
for environmental, social and governance (ESG) matters.
Governance: IGM Financial’s Board is responsible for providing
oversight on risk and strategy, which includes climate‑related
matters. Through its Risk Committee, the Board is responsible for
Our commitment to responsible management is demonstrated
ensuring that material climate‑related issues are appropriately
through various mechanisms. These include our Code of
identified, managed and monitored. Our Chief Financial Officer
Conduct for employees, contractors, and directors; our
(CFO) oversees implementation of the CR and Enterprise Risk
Supplier Code of Conduct for the firms that do business with
Management programs. We have established an enterprise
us; our Respectful Workplace Policy; our Diversity Policy; our
wide TCFD Working Group of senior leaders to lead the
Environmental Policy; and other related policies.
planning and implementation of the TCFD recommendations.
IG Wealth Management and Mackenzie Investments are
signatories to the Principles for Responsible Investment (PRI).
IG Wealth Management sub‑advisors were also required to
be signatories to the PRI by the end of 2019. Under the PRI,
investors formally commit to incorporate ESG issues into their
investment decision making and active ownership processes. In
This working group is focused on enhancing our knowledge
and tools to quantify climate risks in tandem with our
industry, further integrating climate into our business strategy
and product offering for clients, evolving our engagement
approach with investee companies, and addressing increased
disclosure expectations.
addition, IG Wealth Management, Mackenzie Investments and
Strategy: Climate‑related opportunities are identified and
Investment Planning Counsel have implemented Responsible
assessed within IGM Financial through our business planning
Investment Policies outlining the practices at each company.
processes which define our strategic priorities, initiatives and
IGM Financial reports annually on ESG management and
performance in its Corporate Responsibility Report available
on our website. The Company has been recognized for
demonstrating strong ESG performance through positions
earned on the FTSE4Good Index Series, Jantzi Social Index,
budgets. In addition to our commitments described above to
be responsible investors through engagement and integration
of material climate issues into our investment processes, we
also offer investment products with specific environmental or
social mandates.
Corporate Knights’ 2021 Global 100 and Best 50 Corporate
At Mackenzie Investments, sustainable investing is one of our
Citizens, and has been recognized by CDP at the leadership level
key areas of strategic emphasis, and we have established a
for the past three years for its climate disclosures.
dedicated function which reports to the CEO. We also have an
We believe that financial services companies have an important
role to play in addressing climate change. IGM Financial is
investment boutique, Greenchip, which is exclusively focused on
thematic investing to fight climate change.
88 |
2020 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis At IG Wealth, we have integrated environmental and climate
engagement. To help aid in the assessment of material climate
issues into our sub‑advisory selection and oversight processes,
risks and opportunities, Mackenzie Investments is in the process
and have requirements for all sub‑advisors to our product
of implementing the Sustainability Accounting Standards Board
offering to be UN PRI signatories. We have a Sustainable
framework and a tool to enhance climate data and analytics.
and Responsible Investing Committee whose responsibilities
We are following the development of climate scenario tools
include incorporation of climate change awareness and
for our industry in order to incorporate scenario planning to
management into our product and service offerings, and we
enhance our understanding of how our clients and the Company
have established education and communication programs for
will be impacted by various climate change scenarios.
our financial planners.
Metrics and Targets: We set, monitor and report on climate
Risk Management: Assessment and management of climate‑
change‑related metrics and targets annually in our CDP
related risks is integrated into our ERM framework. At
response and our CR Report which are available at igmfinancial.
Mackenzie Investments, our boutique investment teams are
com/en/corporate‑responsibility. We are reviewing tools to
each responsible for determining when and how climate change
expand our reporting of emissions metrics in our investment
is material and how to incorporate transition and physical risks
portfolios. We have set emission reduction and renewable
into their investment process. The teams have access to ESG
energy targets in our operations and are on track to meet these
data tools and a service provider for comprehensive global
goals. As we continue to develop our climate strategy, we will
investor engagement who places a priority on climate change
review our targets to continue measuring our progress.
| 89
Management’s Discussion and Analysis | 2020 IGM Financial Inc. Annual Report The Financial Services Environment
Canadians held $5.0 trillion in discretionary financial assets
continue to place increased emphasis on both financial planning
with financial institutions at December 31, 2019 based on
and mutual funds. In addition, each of the “big six” banks has
the most recent report from Investor Economics. The nature
one or more mutual fund management subsidiaries. Collectively,
of holdings was diverse, ranging from demand deposits held
mutual fund assets of the “big six” bank‑owned mutual fund
for short‑term cash management purposes to longer‑term
managers and affiliated firms represented 42% of total industry
investments held for retirement purposes. Approximately 66%
long‑term mutual fund assets at December 31, 2020.
($3.3 trillion) of these financial assets are held within the context
of a relationship with a financial advisor, and this is the primary
channel serving the longer‑term savings needs of Canadians. Of
the $1.7 trillion held outside of a financial advisory relationship,
approximately 61% consisted of bank deposits.
The Canadian mutual fund industry continues to be very
concentrated, with the 10 largest firms and their subsidiaries
representing 73% of industry long‑term mutual fund assets
and 73% of total mutual fund assets under management at
December 31, 2020. We anticipate continuing consolidation in
Financial advisors represent the primary distribution channel for
this segment of the industry as smaller participants are acquired
IGM Financial’s products and services, and the core emphasis of
by larger organizations.
our business model is to support these financial advisors as they
work with clients to plan for and achieve their financial goals.
Multiple sources of emerging research show significantly better
We believe that the financial services industry will continue to
be influenced by the following trends:
financial outcomes for Canadians who use financial advisors
• Shifting demographics as the number of Canadians in their
compared to those who do not. We actively promote the value
prime savings and retirement years continues to increase.
of financial advice and the importance of a relationship with an
advisor to develop and remain focused on long‑term financial
• Changes in investor attitudes based on economic conditions.
• Continued importance of the role of the financial advisor.
plans and goals.
Approximately 41% of Canadian discretionary financial assets or
$2.0 trillion resided in investment funds at December 31, 2019,
making it the largest financial asset class held by Canadians.
Other asset types include deposit products and direct securities
such as stocks and bonds. Approximately 77% of investment
• Public policy related to retirement savings.
• Changes in the regulatory environment.
• A highly competitive landscape.
• Advancing and changing technology.
funds are comprised of mutual fund products, with other
THE COMPETITIVE LANDSCAPE
product categories including segregated funds, hedge funds,
pooled funds, closed end funds and exchange traded funds.
With $162 billion in investment fund assets under management
at December 31, 2020, IGM Financial is among the country’s
largest investment fund managers. We believe that investment
funds are likely to remain the preferred savings vehicle of
Canadians. They offer the benefits of diversification, professional
management, flexibility and convenience, and are available in a
broad range of mandates and structures to meet most investor
requirements and preferences.
Traditional distinctions between bank branches, full‑service
brokerages, financial planning firms and insurance agent sales
forces have become obscured as many of these financial
service providers strive to offer comprehensive financial
advice implemented through access to a broad product
shelf. Accordingly, the Canadian financial services industry
is characterized by a number of large, diversified, vertically‑
integrated participants, similar to IGM Financial, that offer both
financial planning and investment management services.
Canadian banks distribute financial products and services
through their traditional bank branches, as well as through their
full service and discount brokerage subsidiaries. Bank branches
Our subsidiaries IG Wealth Management and Investment
Planning Counsel compete directly with other retail financial
service providers in the advice segment, including other financial
planning firms, as well as full service brokerages, banks and
insurance companies. Our asset management subsidiary,
Mackenzie Investments, competes directly with other investment
managers for assets under management, and our products
compete with stocks, bonds and other asset classes for a share
of Canadians’ investment assets.
Competition from other financial service providers, alternative
product types or delivery channels, and changes in regulations
or public preferences could impact the characteristics of
our product and service offerings, including pricing, product
structures, dealer and advisor compensation and disclosure.
We monitor developments on an ongoing basis, and engage in
policy discussions and develop product and service responses
as appropriate.
IGM Financial continues to focus on our commitment to
provide quality investment advice and financial products, service
innovations, effective and responsible management of the
Company and long‑term value for our clients and shareholders.
We are midway through a five‑year transformation to modernize
90 |
2020 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis our digital platforms and technology infrastructure to enhance
Mackenzie also, in its growing strategic alliance business,
operations, achieve efficiencies and improve the service
partners with global manufacturing and distribution entities
experience for our clients. We believe that IGM Financial is well‑
to provide investment management services.
positioned to meet competitive challenges and capitalize on
future growth opportunities.
BROAD PRODUCT CAPABILITIES
Our competitive strength includes:
Our subsidiaries continue to develop and launch innovative
products and strategic investment planning tools to assist
• Broad and diversified distribution through more than 35,000
advisors in building optimized portfolios for clients.
financial advisors, with an emphasis on comprehensive
financial planning.
ENDURING CLIENT RELATIONSHIPS
• Broad product capabilities, leading brands and quality
IGM Financial enjoys significant advantages as a result of the
sub‑advisory relationships.
• Enduring client relationships and the long‑standing heritages
and cultures of its subsidiaries.
• Benefits of being part of the Power Corporation group
of companies.
BROAD AND DIVERSIFIED DISTRIBUTION
In addition to owning two of Canada’s largest financial planning
organizations, IG Wealth Management and Investment Planning
Counsel, IGM Financial has, through Mackenzie, access to
distribution through over 30,000 independent financial advisors.
enduring relationships that advisors have developed with clients.
In addition, our subsidiaries have strong heritages and cultures
which are challenging for competitors to replicate.
PART OF THE POWER CORPORATION
GROUP OF COMPANIES
As part of the Power Corporation group of companies,
IGM Financial benefits through expense savings from shared
service arrangements, as well as through access to distribution,
products and capital.
| 91
Management’s Discussion and Analysis | 2020 IGM Financial Inc. Annual Report Critical Accounting Estimates and Policies
SUMMARY OF CRITICAL
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with IFRS
requires management to exercise judgment in the process of
applying accounting policies and requires management to make
estimates and assumptions that affect amounts reported in the
Consolidated Financial Statements and accompanying notes.
In applying these policies, management makes subjective and
complex judgments that frequently require estimates about
matters that are inherently uncertain. Many of these policies are
common in the financial services industry; others are specific
to IGM Financial’s businesses and operations. IGM Financial’s
These tests involve the use of estimates and assumptions
appropriate in the circumstances. In assessing the recoverable
amounts, valuation approaches are used that include
discounted cash flow analysis and application of capitalization
multiples to financial and operating metrics based upon
precedent acquisition transactions and trading comparables.
Assumptions and estimates employed include future changes
in assets under management resulting from net sales and
investment returns, pricing and profit margin changes,
discount rates, and capitalization multiples.
The Company completed its annual impairment tests of
goodwill and indefinite life intangible assets as at April 1,
significant accounting policies are described in detail in Note 2
2020, and determined there was no impairment in the value
of the Consolidated Financial Statements.
of those assets.
Critical accounting estimates relate to the fair value of financial
instruments, goodwill and intangibles, income taxes, capitalized
sales commissions, provisions and employee benefits.
• Income taxes – The provision for income taxes is determined
on the basis of the anticipated tax treatment of transactions
recorded in the Consolidated Statements of Earnings. The
determination of the provision for income taxes requires
The major critical accounting estimates are summarized below:
interpretation of tax legislation in a number of jurisdictions.
• Fair value of financial instruments – The Company’s financial
instruments are carried at fair value, except for loans, deposits
and certificates, obligations to securitization entities, and
long‑term debt which are all carried at amortized cost.
The fair value of publicly traded financial instruments is
determined using published market prices. The fair value
of financial instruments where published market prices are
not available, including derivatives related to the Company’s
securitized loans, are determined using various valuation
models which maximize the use of observable market inputs
where available. Valuation methodologies and assumptions
used in valuation models are reviewed on an ongoing basis.
Changes in these assumptions or valuation methodologies
could result in significant changes in net earnings.
• Goodwill and intangible assets – Goodwill, indefinite life
intangible assets, and definite life intangible assets are
reflected in Note 11 of the Consolidated Financial Statements.
The Company tests the fair value of goodwill and indefinite
life intangible assets for impairment at least once a year and
more frequently if an event or circumstance indicates the
asset may be impaired. An impairment loss is recognized
if the amount of the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of
an asset’s fair value less costs of disposal and its value in use.
For the purposes of assessing impairment, assets are grouped
at the lowest levels for which there are separately identifiable
cash inflows (cash generating units). Finite life intangible
assets are tested for impairment whenever events or changes
in circumstances indicate that the carrying amounts may not
be recoverable.
Tax planning may allow the Company to record lower
income taxes in the current year and income taxes recorded
in prior years may be adjusted in the current year to reflect
management’s best estimates of the overall adequacy
of its provisions. Any related tax benefits or changes in
management’s best estimates are reflected in the provision
for income taxes. The recognition of deferred tax assets
depends on management’s assumption that future earnings
will be sufficient to realize the future benefit. The amount
of the deferred tax asset or liability recorded is based on
management’s best estimate of the timing of the realization
of the assets or liabilities. If our interpretation of tax legislation
differs from that of the tax authorities or if timing of reversals
is not as anticipated, the provision for income taxes could
increase or decrease in future periods. Additional information
related to income taxes is included in the Summary of
Consolidated Operating Results in this MD&A and in Note 15
to the Consolidated Financial Statements.
• Capitalized sales commissions – Commissions paid directly by
the client on the sale of certain mutual fund products are
deferred and amortized over a maximum period of seven
years. The Company regularly reviews the carrying value of
capitalized sales commissions with respect to any events or
circumstances that indicate impairment. Among the tests
performed by the Company to assess recoverability is the
comparison of the future economic benefits derived from the
capitalized sales commission asset in relation to its carrying
value. At December 31, 2020, there were no indications of
impairment to capitalized sales commissions.
• Provisions – A provision is recognized when there is a present
obligation as a result of a past transaction or event, it is
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2020 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis “probable” that an outflow of resources will be required to
market performance of $26.1 million comprised of interest
settle the obligation and a reliable estimate can be made
income of $14.9 million calculated based on the discount
of the obligation. In determining the best estimate for a
rate, which was recorded as a reduction to the pension
provision, a single estimate, a weighted average of all possible
expense, and actuarial gains of $11.2 million, which were
outcomes, or the midpoint where there is a range of equally
recorded in Other comprehensive income. The assets in
possible outcomes are all considered. A significant change in
the Company’s registered defined benefit pension plan also
assessment of the likelihood or the best estimate may result
increased due to the Company contributing $25.6 million
in additional adjustments to net earnings.
(2019 – $26.4 million) to the pension plan. The decrease in
• Employee benefits – The Company maintains a number
of employee benefit plans. These plans include a funded
registered defined benefit pension plan for all eligible
employees, unfunded supplementary executive retirement
plans for certain executive officers (SERPs) and an unfunded
post‑employment health care and life insurance plan for
eligible retirees. The funded registered defined benefit
pension plan provides pensions based on length of service
and final average earnings. The measurement date for the
Company’s defined benefit pension plan assets and for the
accrued benefit obligations on all defined benefit plans is
December 31.
Due to the long‑term nature of these plans, the calculation of
the accrued benefit liability depends on various assumptions
including discount rates, rates of return on assets, the level
and types of benefits provided, healthcare cost trend rates,
projected salary increases, retirement age, and mortality and
termination rates. The discount rate assumption is determined
using a yield curve of AA corporate debt securities. All
other assumptions are determined by management and
reviewed by independent actuaries who calculate the pension
and other future benefits expenses and accrued benefit
obligations. Actual experience that differs from the actuarial
assumptions will result in actuarial gains or losses as well as
changes in benefits expense. The Company records actuarial
gains and losses on all of its defined benefit plans in Other
comprehensive income.
During 2020, the performance of the defined benefit
pension plan assets was positively impacted by market
the discount rate utilized to value the defined benefit pension
plan obligation resulted in actuarial losses of $57.2 million
which were recorded in Other comprehensive income.
Demographic assumptions and experience adjustments
were revised which resulted in nominal net actuarial
gains. The total defined benefit pension plan obligation
was $650.1 million at December 31, 2020 compared to
$565.6 million at December 31, 2019. As a result of these
changes, the defined benefit pension plan had an accrued
benefit liability of $133.1 million at December 31, 2020
compared to $99.1 million at the end of 2019. The unfunded
SERPs and other post‑retirement benefits plans had an
accrued benefit liability of $74.8 million and $42.1 million,
respectively, at December 31, 2020 compared to $69.2 million
and $39.1 million in 2019.
A decrease of 0.25% in the discount rate utilized in 2020
would result in a change of $31.4 million in the accrued
pension obligation, $29.3 million in other comprehensive
income, and $2.1 million in pension expense. Additional
information regarding the Company’s accounting and
sensitivities related to pensions and other post‑retirement
benefits is included in Notes 2 and 14 of the Consolidated
Financial Statements.
CHANGES IN ACCOUNTING POLICIES
IGM Financial has not adopted any changes in accounting
policies in 2020.
conditions. Corporate bond yields decreased in 2020 thereby
FUTURE ACCOUNTING CHANGES
impacting the discount rate used to measure the Company’s
The Company continuously monitors the potential changes
accrued benefit liability. The discount rate utilized to value
proposed by the International Accounting Standards Board
the defined benefit pension plan accrued benefit liability
(IASB) and analyzes the effect that changes in the standards
at December 31, 2020 was 2.70% compared to 3.20%
may have on the Company’s operations.
at December 31, 2019. Pension plan assets increased to
$517.0 million at December 31, 2020 from $466.5 million at
December 31, 2019. The increase in plan assets was due to
The IASB is currently undertaking a number of projects which
will result in changes to existing IFRS standards that may affect
the Company. Updates will be provided as the projects develop.
| 93
Management’s Discussion and Analysis | 2020 IGM Financial Inc. Annual Report Disclosure Controls and Procedures
The Company’s disclosure controls and procedures are designed
The Company’s management, under the supervision of the
to provide reasonable assurance that (a) material information
President and Chief Executive Officer and the Chief Financial
relating to the Company is made known to the President and
Officer, has evaluated the effectiveness of the Company’s
Chief Executive Officer and the Chief Financial Officer by others,
disclosure controls and procedures. Based on their evaluations
particularly during the period in which the annual filings are
as of December 31, 2020, the President and Chief Executive
being prepared, and (b) information required to be disclosed by
Officer and the Chief Financial Officer have concluded that the
the Company in its annual filings, interim filings or other reports
Company’s disclosure controls and procedures are effective.
filed or submitted by it under securities legislation is recorded,
processed, summarized and reported within the time periods
specified in securities legislation.
Internal Control Over Financial Reporting
The Company’s internal control over financial reporting is
that this outsourcing has not materially affected the Company’s
designed to provide reasonable assurance regarding the
internal controls in 2020. As the transition proceeds over
reliability of financial reporting and the preparation of financial
the coming months and years, management will continually
statements for external purposes in accordance with IFRS. The
reassess its impact on the Company’s internal control over
Company’s management is responsible for establishing and
financial reporting.
maintaining adequate internal control over financial reporting.
The Company’s management, under the supervision of the
All internal control systems have inherent limitations and may
President and Chief Executive Officer and the Chief Financial
become inadequate because of changes in conditions. Therefore,
Officer, has evaluated the effectiveness of the Company’s
even those systems determined to be effective can provide
internal control over financial reporting based on the Internal
only reasonable assurance with respect to financial statement
Control – Integrated Framework (COSO 2013 Framework)
preparation and presentation.
Effective November 18, 2019, IGM Financial entered into an
outsourcing agreement with CIBC Mellon to assume most
of IGM Financial’s fund services functions. This adds fund
administration servicing solutions to the custody and related
services that CIBC Mellon already performs for IGM Financial.
As a result of the outsourcing, substantially all of IGM Financial’s
employees in the outsourced functions were hired by CIBC
Mellon and continued performing the same functions during
published by The Committee of Sponsoring Organizations of the
Treadway Commission. The Company transitioned to the COSO
2013 Framework during 2014. Based on their evaluations
as of December 31, 2020, the President and Chief Executive
Officer and the Chief Financial Officer have concluded that the
Company’s internal control over financial reporting is effective
in providing reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements
for external purposes in accordance with IFRS.
the remainder of the fourth quarter. Contractually, CIBC Mellon
Notwithstanding the above, during the fourth quarter of 2020,
is required to develop and implement internal controls and has
there have been no changes in the Company’s internal control
agreed to work with IGM Financial to implement compliance
over financial reporting that have materially affected, or are
measures to satisfy CSA National Instrument 52‑109. CIBC
reasonably likely to materially affect, the Company’s internal
Mellon has agreed to make minimal changes to processes and
control over financial reporting.
systems through 2020. Accordingly, management has concluded
94 |
2020 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis Other Information
TRANSACTIONS WITH RELATED PARTIES
the Power Corporation of Canada group whereby shares of a
IGM Financial enters into transactions with The Canada Life
Assurance Company (Canada Life), which is a subsidiary of
its affiliate, Lifeco, which is a subsidiary of Power Corporation
of Canada. On January 1, 2020, Great‑West, London Life and
Canada Life, amalgamated into a single company, The Canada
Life Assurance Company. These transactions are in the normal
course of operations and have been recorded at fair value:
• During 2020 and 2019, the Company provided to and
received from Canada Life certain administrative services
enabling each organization to take advantage of economies
of scale and areas of expertise. In 2020, IGM notified Canada
Life of its intention to terminate its long‑term technology
infrastructure related sharing agreement.
• The Company distributes insurance products under a
distribution agreement with Canada Life and received
$45.1 million in distribution fees (2019 – $54.8 million). The
Company received $18.4 million (2019 – $17.1 million) and
paid $29.6 million (2019 – $26.2 million) to Canada Life and
related subsidiary companies for the provision of sub‑advisory
services for certain investment funds. The Company paid
$78.3 million (2019 – $78.8 million) to Canada Life related to
the distribution of certain mutual funds of the Company.
• In order to manage its overall liquidity position, the Company’s
mortgage banking operation is active in the securitization
market and also sells residential mortgage loans to third
subsidiary that has generated tax losses may be acquired in each
year up to and including 2020. The Company recognized the
benefit of the tax losses realized throughout the year. On each
of December 31, 2020 and December 31, 2019, the Company
acquired shares of such loss companies and recorded the benefit
of the tax losses acquired. The benefits from these tax loss
consolidation arrangements ended at December 31, 2020.
Additional transactions with related parties included the sale of
Personal Capital, the investment in Northleaf, the acquisition
of GLC Asset Management Group Ltd. and the sale of Quadrus
Group of Funds (Note 8 and Note 29 of the Consolidated
Financial Statements).
For further information on transactions involving related
parties, see Notes 8 and 26 to the Company’s Consolidated
Financial Statements.
OUTSTANDING SHARE DATA
Outstanding common shares of IGM Financial as at December 31,
2020 totalled 238,308,284. Outstanding stock options as at
December 31, 2020 totalled 11,930,224 of which 6,326,067
were exercisable. As at February 5, 2021, outstanding common
shares totalled 238,312,192 and outstanding stock options
totalled 11,918,854 of which 6,322,159 were exercisable.
parties, on a fully serviced basis. During 2020, the Company
SEDAR
sold residential mortgage loans to Canada Life for $20.9 million
compared to $10.8 million in 2019.
After obtaining advanced tax rulings in October 2017, the
Company agreed to tax loss consolidation transactions with
Additional information relating to IGM Financial, including
the Company’s most recent financial statements and Annual
Information Form, is available at www.sedar.com.
| 95
Management’s Discussion and Analysis | 2020 IGM Financial Inc. Annual Report consolidated
financial statements
Management’s Responsibility for Financial Reporting
Independent Auditor’s Report
Consolidated Statements of Earnings
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Changes in Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Note 1 Corporate information
Note 2
Summary of significant accounting policies
Note 3 Expenses
Note 4 Other investments
Note 5
Loans
Note 6
Securitizations
Note 7 Other assets
Note 8
Investment in associates
Note 9 Capital assets
Note 10 Capitalized sales commissions
Note 11 Goodwill and intangible assets
Note 12 Deposits and certificates
Note 13 Other liabilities
Note 14 Employee benefits
Note 15 Income taxes
Note 16 Long‑term debt
Note 17 Share capital
Note 18 Capital management
Note 19 Share‑based payments
Note 20 Accumulated other comprehensive income (loss)
Note 21 Risk management
Note 22 Derivative financial instruments
Note 23 Fair value of financial instruments
Note 24 Earnings per common share
Note 25 Contingent liabilities and Guarantees
Note 26 Related party transactions
Note 27 COVID‑19
Note 28 Segmented information
Note 29 Acquisitions
97
98
102
103
104
105
106
107
107
115
115
116
117
117
118
120
121
121
122
122
123
126
128
128
129
129
131
131
135
136
138
138
139
140
140
143
96 |
2020 IGM Financial Inc. Annual Report
Management’s Responsibility
for Financial Reporting
The Consolidated Financial Statements of IGM Financial Inc. have been prepared by Management, which is responsible for the integrity,
objectivity and reliability of the information presented, including selecting appropriate accounting principles and making judgments
and estimates. These Consolidated Financial Statements have been prepared in accordance with International Financial Reporting
Standards. Financial information presented elsewhere in this Annual Report is consistent with that in the Consolidated Financial
Statements for comparable periods.
Systems of internal control and supporting procedures are maintained to provide reasonable assurance of the reliability of financial
information and the safeguarding of all assets controlled by the Company. These controls and supporting procedures include
quality standards in hiring and training employees, the establishment of organizational structures providing a well‑defined division
of responsibilities and accountability for performance, and the communication of policies and guidelines through the organization.
Internal controls are reviewed and evaluated extensively by the internal auditor and are subject to scrutiny by the external auditors.
Ultimate responsibility for the Consolidated Financial Statements rests with the Board of Directors. The Board is assisted in discharging
this responsibility by an Audit Committee, consisting entirely of independent directors. This Committee reviews the Consolidated Financial
Statements and recommends them for approval by the Board. In addition, the Audit Committee reviews the recommendations of the
internal auditor and the external auditors for improvements in internal control and the action of Management to implement such
recommendations. In carrying out its duties and responsibilities, the Committee meets regularly with Management and with both the
internal auditor and the external auditors to review the scope and timing of their respective audits, to review their findings and to satisfy
itself that their responsibilities have been properly discharged.
Deloitte LLP, independent auditors appointed by the shareholders, have examined the Consolidated Financial Statements of the
Company in accordance with Canadian generally accepted auditing standards, and have expressed their opinion upon the completion
of their examination in their Report to the Shareholders. The external auditors have full and free access to the Audit Committee to
discuss their audit and related findings.
James O’Sullivan
President and Chief Executive Officer
Luke Gould
Executive Vice-President and
Chief Financial Officer
| 97
Consolidated Financial Statements | 2020 IGM Financial Inc. Annual Report
Independent Auditor’s Report
To the Shareholders of IGM Financial Inc.
OPINION
We have audited the consolidated financial statements of IGM Financial Inc. (the “Company”), which comprise the consolidated
balance sheets as at December 31, 2020 and 2019, and the consolidated statements of earnings, comprehensive income, changes in
shareholders’ equity and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary
of significant accounting policies (collectively referred to as the “financial statements”).
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company
as at December 31, 2020 and 2019, and its financial performance and its cash flows for the years then ended in accordance with
International Financial Reporting Standards (“IFRS”).
BASIS FOR OPINION
We conducted our audit in accordance with Canadian generally accepted auditing standards (“Canadian GAAS”). Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We
are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements
in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial
statements for the year ended December 31, 2020. These matters were addressed in the context of our audit of the consolidated financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Goodwill – Asset Management cash generating unit – Refer to Notes 2 and 11 to the financial statements
Key Audit Matter Description
The Company’s evaluation of goodwill for impairment involves the comparison of the recoverable amount of each cash generating
unit (“CGU”) to its carrying value. The recoverable amount of the Asset Management CGU is based on fair value less costs of disposal,
which is determined using both a market approach based on valuation multiples and an income approach based on a discounted
cash flow analysis. In determining the recoverable amount of the Asset Management CGU, management made significant estimates
and assumptions related to market multiples, changes in future assets under management resulting from net sales and investment
returns, pricing levels, and discount rates. The recoverable amount of the Asset Management CGU exceeded its carrying value as of the
measurement date and no impairment was recognized.
While there are several estimates and assumptions that are required to determine the recoverable amount of the Asset Management
CGU, the estimates and assumptions with the highest degree of subjectivity are the valuation multiples used in the market approach
and the future changes in assets under management resulting from net sales and investment returns, pricing levels, and discount rates
used in the income approach. This required significant auditor attention as these estimates are subject to estimation uncertainty and
the impact to the assumptions from the COVID‑19 pandemic. Auditing these estimates and assumptions required a high degree of
subjectivity in applying audit procedures and in evaluating the results of those procedures which resulted in an increased extent of audit
effort and the involvement of fair value specialists.
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2020 IGM Financial Inc. Annual Report | Consolidated Financial Statements How the Key Audit Matter Was Addressed in the Audit
Our audit procedures related to market multiples, future changes in assets under management resulting from net sales and investment
returns, pricing levels, and discount rates used to determine the recoverable amount of the Asset Management CGU included the
following, among others:
• With the assistance of fair value specialists, evaluated the valuation multiples by analyzing precedent business acquisition
transactions and comparable public company multiples and developing a range of independent market multiples and comparing
them to those selected by management.
• Evaluated management’s ability to accurately forecast future changes in assets under management resulting from net sales and
investment returns, and pricing levels by comparing actual results to management’s historical forecasts.
• Evaluated the reasonableness of forecasted future changes in assets under management resulting from net sales and investment
returns, and pricing levels by comparing the forecasts to:
– Historical changes in assets under management resulting from net sales and investment returns with consideration to historical
market and industry returns;
– Historical pricing levels; and
– Known changes to the Asset Management CGU’s operations and its industry, including the impact of the COVID‑19 pandemic to
future operating performance.
• With the assistance of fair value specialists, evaluated the discount rates by testing the source information underlying the determination
of the discount rates and developing a range of independent discount rates and comparing to those selected by management.
Investment in Associates – Acquisition of Northleaf Capital Group Ltd.– Refer to Notes 2 and 8 to the financial statements
Key Audit Matter Description
On October 29, 2020, the Company acquired a non‑controlling interest in Northleaf Capital Group Ltd. (“Northleaf”) and owns a 49.9%
voting interest and 70% economic interest in Northleaf with a future obligation and right to purchase additional economic and voting
interest commencing in approximately five years and extending into the future. The Company determined that it does not have control
over the investment in Northleaf but rather significant influence, and as such applied the equity method of accounting.
The determination of the accounting treatment for the investment in Northleaf required management to evaluate whether the
Company exercised control or significant influence over the investment. This involved significant management judgment to interpret
the key agreement and legal terms of the purchase agreement and other legal agreements associated with the acquisition. Auditing
whether the Company exercised control or significant influence over the investment in Northleaf required a high degree of auditor
judgment which resulted in an increased extent of audit effort and the involvement of professionals in our firm with expertise in
business combinations and consolidation.
How the Key Audit Matter Was Addressed in the Audit
Our audit procedures related to the evaluation of whether the Company exercised control or significant influence over the investment
in Northleaf, included the following, among others:
• Confirmed the key agreement and legal terms of the purchase agreement and other legal agreements directly with legal counsel and
assessed the terms of the purchase agreement and other legal agreements to determine whether all key facts and circumstances
were incorporated into management’s assessment.
• With the assistance of professionals in our firm with expertise in business combinations and consolidation, evaluated management’s
assessment of whether the Company exercised control or significant influence over the investment in Northleaf by analyzing specific
facts and circumstances to relevant accounting guidance.
| 99
Consolidated Financial Statements | 2020 IGM Financial Inc. Annual Report Independent Auditor’s Report (continued)
OTHER INFORMATION
Management is responsible for the other information. The other information comprises:
• Management’s Discussion and Analysis
• The information, other than the financial statements and our auditor’s report thereon, in the Annual Report.
Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance
conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified
above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the audit, or otherwise appears to be materially misstated.
We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we have performed
on this other information, we conclude that there is a material misstatement of this other information, we are required to report that
fact in this auditor’s report. We have nothing to report in this regard.
The Annual Report is expected to be made available to us after the date of the auditor’s report. If, based on the work we will perform
on this other information, we conclude that there is a material misstatement of this other information, we are required to report that
fact to those charged with governance.
RESPONSIBILITIES OF MANAGEMENT AND THOSE CHARGED WITH GOVERNANCE FOR THE FINANCIAL STATEMENTS
Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS, and for such
internal control as management determines is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either
intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian GAAS will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with Canadian GAAS, we exercise professional judgment and maintain professional skepticism
throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform
audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud
may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
100 |
2020 IGM Financial Inc. Annual Report | Consolidated Financial Statements • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures
made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s
ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our
auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion.
Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or
conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the
financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the
Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the
group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance
in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these
matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so
would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is David Dalziel.
Chartered Professional Accountants
Winnipeg, Manitoba
February 11, 2021
| 101
Consolidated Financial Statements | 2020 IGM Financial Inc. Annual Report CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31
(in thousands of Canadian dollars, except per share amounts)
Revenues
Wealth management
Asset management
Dealer compensation expense
Net asset management
Net investment income and other (Notes 8 and 29)
Proportionate share of associates’ earnings (Note 8)
Expenses (Note 3)
Advisory and business development
Operations and support
Sub‑advisory
Interest (Note 16)
Earnings before income taxes
Income taxes (Note 15)
Net earnings
Non‑controlling interest (Note 8)
Perpetual preferred share dividends
2020
2019
$ 2,259,576
$ 2,299,048
812,931
(283,163)
529,768
78,209
150,429
792,327
(277,075)
515,252
24,825
105,225
3,017,982
2,944,350
1,040,146
830,650
71,213
110,597
1,066,021
733,045
68,232
108,386
2,052,606
1,975,684
965,376
200,770
764,606
(198)
–
968,666
219,719
748,947
–
(2,213)
Net earnings available to common shareholders
$
764,408
$
746,734
Earnings per share (in dollars) (Note 24)
– Basic
– Diluted
(See accompanying notes to consolidated financial statements.)
$
$
3.21
3.21
$
$
3.12
3.12
102 |
2020 IGM Financial Inc. Annual Report | Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31
(in thousands of Canadian dollars)
Net earnings
Other comprehensive income (loss), net of tax
Items that will not be reclassified to Net earnings
Fair value through other comprehensive income investments
2020
2019
$
764,606
$
748,947
Other comprehensive income (loss) (Note 4), net of tax of $(38,565) and $(1,651)
247,085
10,597
Employee benefits
Net actuarial gains (losses), net of tax of $11,461 and $6,243
Investment in associates – employee benefits and other
Other comprehensive income (loss), net of tax of nil
Items that may be reclassified subsequently to Net earnings
Investment in associates and other
Other comprehensive income (loss), net of tax of $(1,900) and $3,448
Total comprehensive income
(See accompanying notes to consolidated financial statements.)
(31,002)
(16,895)
(2,906)
(19,129)
50,889
264,066
(35,009)
(60,436)
$ 1,028,672
$
688,511
| 103
Consolidated Financial Statements | 2020 IGM Financial Inc. Annual Report
CONSOLIDATED BALANCE SHEETS
AS AT DECEMBER 31
(in thousands of Canadian dollars)
Assets
Cash and cash equivalents
Other investments (Note 4)
Client funds on deposit
Accounts and other receivables
Income taxes recoverable
Loans (Note 5)
Derivative financial instruments (Note 22)
Other assets (Note 7)
Investment in associates (Note 8)
Capital assets (Note 9)
Capitalized sales commissions (Note 10)
Deferred income taxes (Note 15)
Intangible assets (Note 11)
Goodwill (Note 11)
Liabilities
Accounts payable and accrued liabilities
Income taxes payable
Derivative financial instruments (Note 22)
Deposits and certificates (Note 12)
Other liabilities (Note 13)
Obligations to securitization entities (Note 6)
Lease obligations
Deferred income taxes (Note 15)
Long‑term debt (Note 16)
Shareholders’ Equity
Share capital (Note 17)
Common shares
Contributed surplus
Retained earnings
Accumulated other comprehensive income (loss) (Note 20)
Non‑controlling interest (Note 8)
2020
2019
$
771,585
632,300
1,063,442
444,458
30,366
6,331,855
37,334
49,782
1,931,168
329,690
231,085
84,624
1,321,590
2,803,075
$
720,005
357,362
561,269
394,210
11,925
7,198,043
15,204
45,843
1,753,882
216,956
149,866
76,517
1,230,127
2,660,267
$ 16,062,354
$ 15,391,476
$
486,575
7,146
34,514
1,104,889
536,141
6,173,886
188,334
388,079
2,100,000
$
434,957
4,867
17,193
584,331
441,902
6,913,636
90,446
305,049
2,100,000
11,019,564
10,892,381
1,598,381
51,663
3,207,469
136,364
48,913
1,597,860
48,677
2,980,260
(127,702)
–
5,042,790
4,499,095
$ 16,062,354
$ 15,391,476
These financial statements were approved and authorized for issuance by the Board of Directors on February 11, 2021.
James O’Sullivan
Director
John McCallum
Director
(See accompanying notes to consolidated financial statements.)
104 |
2020 IGM Financial Inc. Annual Report | Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
SHARE CAPITAL
PERPETUAL
PREFERRED
SHARES
(Note 17)
COMMON
SHARES
(Note 17)
CONTRIBUTED
SURPLUS
ACCUMULATED
OTHER
COMPREHENSIVE
INCOME (LOSS)
(Note 20)
RETAINED
EARNINGS
NON‑
CONTROLLING
INTEREST
TOTAL
SHAREHOLDERS’
EQUITY
–
–
–
–
–
–
–
–
–
–
–
$ 1,597,860
$
48,677
$ 2,980,260
$
(127,702)
$
–
–
–
521
–
–
–
–
–
–
–
–
–
3,010
(24)
–
–
–
764,606
–
–
764,606
264,066
264,066
–
–
–
(536,194)
(198)
(1,005)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
48,913
–
$ 4,499,095
764,606
264,066
1,028,672
521
3,010
(24)
(536,194)
48,715
(1,005)
$ 1,598,381
$
51,663
$ 3,207,469
$
136,364
$
48,913
$ 5,042,790
(in thousands of Canadian dollars)
2020
Balance, beginning of year
$
Net earnings
Other comprehensive
income (loss), net of tax
Total comprehensive income
Common shares
Issued under stock
option plan
Stock options
Current period expense
Exercised
Common share dividends
Issuance of non‑controlling
interest
Other
Balance, end of year
$
2019
Balance, beginning of year
Net earnings
Other comprehensive
income (loss), net of tax
Total comprehensive income
Redemption of
preferred shares
Common shares
Issued under stock
option plan
Purchased for cancellation
Stock options
Current period expense
Exercised
Perpetual preferred
share dividends
Common share dividends
Transfer out of fair value
through other
comprehensive income
Common share cancellation
excess and other
$
150,000
$ 1,611,263
$
45,536
$ 2,834,998
$
(45,798)
$
–
–
–
(150,000)
–
–
–
–
–
–
–
–
–
–
–
–
–
5,111
(18,514)
–
–
–
–
–
–
–
–
–
–
–
–
3,406
(265)
–
–
–
–
748,947
–
–
748,947
(60,436)
(60,436)
–
–
–
–
–
(2,213)
(537,588)
–
–
–
–
–
–
–
21,468
(21,468)
(85,352)
–
$ 1,597,860
$
48,677
$ 2,980,260
$
(127,702)
$
Balance, end of year
$
(See accompanying notes to consolidated financial statements.)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
$ 4,595,999
748,947
(60,436)
688,511
(150,000)
5,111
(18,514)
3,406
(265)
(2,213)
(537,588)
–
(85,352)
$ 4,499,095
| 105
Consolidated Financial Statements | 2020 IGM Financial Inc. Annual Report
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
(in thousands of Canadian dollars)
Operating activities
Earnings before income taxes
Income taxes paid
Adjustments to determine net cash from operating activities
Capitalized sales commission amortization
Capitalized sales commissions paid
Amortization of capital, intangible and other assets
Proportionate share of associates’ earnings, net of dividends received
Pension and other post‑employment benefits
Restructuring provisions and other
Gain on sale of Personal Capital Corporation
Gain on sale of Quadrus Group of Funds
Changes in operating assets and liabilities and other
Cash from operating activites before restructuring provision payments
Restructuring provision cash payments
Financing activities
Net decrease in deposits and certificates
Increase in obligations to securitization entities
Repayments of obligations to securitization entities and other
Repayment of lease obligations
Issue of debentures
Redemption of preferred shares
Issue of common shares
Common shares purchased for cancellation
Perpetual preferred share dividends paid
Common share dividends paid
Investing activities
Purchase of other investments
Proceeds from the sale of other investments
Increase in loans
Repayment of loans and other
Net additions to capital assets
Net cash used in additions to intangible assets and acquisitions
Investment in Northleaf Capital Group Ltd. (Note 8)
Acquisition of GLC Asset Management Group Ltd. (Note 29)
Proceeds from sale of Personal Capital Corporation (Note 8)
Investment in Personal Capital Corporation
Proceeds from sale of Quadrus Group of Funds (Note 8)
Proceeds from substantial issuer bid (Note 8)
Increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Cash
Cash equivalents
Supplemental disclosure of cash flow information related to operating activities
Interest and dividends received
Interest paid
(See accompanying notes to consolidated financial statements.)
106 |
2020
2019
$
965,376
(172,319)
$
968,666
(236,676)
36,433
(117,652)
83,498
(71,328)
(4,758)
74,460
(37,232)
(30,000)
26,772
753,250
(16,625)
736,625
(5,832)
1,568,521
(2,359,844)
(25,579)
–
–
498
–
–
(536,186)
22,387
(67,209)
79,496
(32,251)
(4,810)
–
–
–
9,316
738,919
(26,853)
712,066
(2,472)
1,456,265
(1,960,757)
(23,370)
250,000
(150,000)
4,846
(99,963)
(4,425)
(539,046)
(1,358,422)
(1,068,922)
(32,651)
38,840
(1,792,995)
2,679,740
(38,991)
(68,808)
(198,793)
(175,788)
232,823
–
30,000
–
673,377
51,580
720,005
771,585
76,617
694,968
$
$
(118,917)
85,462
(1,682,079)
2,211,504
(18,813)
(64,121)
–
–
–
(66,811)
–
80,408
426,633
69,777
650,228
720,005
67,986
652,019
$
$
$
771,585
$
720,005
$
$
267,369
256,272
$
$
301,738
271,914
2020 IGM Financial Inc. Annual Report | Consolidated Financial Statements
Notes to
Consolidated Financial Statements
December 31, 2020 and 2019 (In thousands of Canadian dollars, except shares and per share amounts)
NOTE 1 CORPORATE INFORMATION
IGM Financial Inc. (the Company) is a publicly listed company (TSX: IGM), incorporated and domiciled in Canada. The registered address
of the Company is 447 Portage Avenue, Winnipeg, Manitoba, Canada. The Company is controlled by Power Corporation of Canada.
IGM Financial Inc. is a wealth and asset management company which serves the financial needs of Canadians through its principal
subsidiaries, each operating distinctly within the advice segment of the financial services market. The Company’s wholly‑owned
principal subsidiaries are Investors Group Inc. and Mackenzie Financial Corporation (Mackenzie).
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Consolidated Financial Statements of the Company have been prepared in accordance with International Financial Reporting
Standards (IFRS), as issued by the International Accounting Standards Board (IASB). The policies set out below were consistently
applied to all the periods presented unless otherwise noted.
USE OF JUDGMENT, ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with IFRS requires management to exercise judgment in the process of applying
accounting policies and requires management to make estimates and assumptions that affect the amounts reported in the Consolidated
Financial Statements. The key areas where judgment has been applied include: the determination of which financial assets should be
derecognized; the assessment of the appropriate classification of financial instruments, including those classified as fair value through
profit or loss; and the assessment that significant influence exists for its investment in associates. Key components of the financial
statements requiring management to make estimates include: the fair value of financial instruments, goodwill, intangible assets, income
taxes, capitalized sales commissions, provisions and employee benefits. Actual results may differ from such estimates. Further detail of
judgments and estimates are found in the remainder of Note 2 and in Notes 6, 8, 10, 11, 13, 14, 15, 23 and 29. The twelve months
ended December 31, 2020 were characterized by increased uncertainty due to COVID‑19. The Company is closely monitoring the
current environment and assessing the impacts, if any, on its significant assumptions related to critical estimates.
BASIS OF CONSOLIDATION
The Consolidated Financial Statements include the accounts of the Company and all subsidiaries on a consolidated basis after elimination
of intercompany transactions and balances. Subsidiaries are entities the Company controls when it is exposed, or has rights, to variable
returns from its involvement and has the ability to affect those returns through its power to direct the relevant activities of the entity.
The Company’s investments in Great‑West Lifeco Inc. (Lifeco), China Asset Management Co., Ltd. (China AMC) and Northleaf Capital
Group Ltd. (Northleaf) are accounted for using the equity method. The investments were initially recorded at cost and the carrying
amounts are increased or decreased to recognize the Company’s share of the investments’ comprehensive income (loss) and the
dividends received since the date of acquisition. The equity method was used to account for the Company’s equity interest in Personal
Capital Corporation (Personal Capital) until the announcement of the sale of the investment on June 29, 2020.
CHANGES IN PRESENTATION
In the third quarter of 2020, the Company realigned its reportable segments and made disclosure enhancements to its Consolidated
Statements of Earnings to better characterize the Company’s business lines and improve transparency into the key drivers of the
business. These changes have had no impact on the reported earnings of the Company.
The Company restated comparative figures in its Consolidated Statements of Earnings and Segmented information note to conform to
the current period’s presentation. The changes had no impact to prior period earnings and no impact to the Consolidated Balance Sheets.
| 107
Notes to Consolidated Financial Statements | 2020 IGM Financial Inc. Annual Report NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
CHANGES IN PRESENTATION (continued)
Segment reporting
The Company has realigned its reportable segments (Note 28) as follows:
• Wealth Management – reflects the activities of operating companies that are principally focused on providing financial planning and
related services to Canadian households. This segment includes the activities of IG Wealth Management and Investment Planning
Counsel. These firms are retail distribution organizations who serve Canadian households through their securities dealers, mutual
fund dealers and other subsidiaries licensed to distribute financial products and services. A majority of the revenues of this segment
are derived from providing financial advice and distributing financial products and services to Canadian households. This segment
also includes the investment management activities of these organizations, including mutual fund management and discretionary
portfolio management services.
• Asset Management – reflects the activities of operating companies primarily focused on providing investment management
services, and represents the operations of Mackenzie Investments. Investment management services are provided to a suite of
investment funds that are distributed through third party dealers and financial advisors, and also through institutional advisory
mandates to financial institutions, pensions and other institutional investors.
• Strategic Investments and Other – primarily represents the key strategic investments made by the Company, including China Asset
Management Co., Ltd., Great‑West Lifeco Inc., Northleaf Capital Group Ltd., Wealthsimple Financial Corp., and Portag3 Ventures LPs.
Unallocated capital is also included within this segment.
Statements of Earnings
The Company has reclassified its Statement of Earnings as follows:
• Wealth management revenue – revenues earned by the Wealth Management segment for providing financial planning, investment
advisory and related financial services. Revenues include financial advisory fees, investment management and related administration
fees, distribution revenue associated with insurance and banking products and services, and revenue relating to mortgage
lending activities.
• Asset management revenue – revenues earned by the Asset Management segment related to investment management advisory
and administrative services.
• Dealer compensation – asset based and sales based compensation paid to dealers by the Asset Management segment.
• Advisory and business development expenses – expenses incurred on activities directly associated with providing financial planning
services to clients of the Wealth Management segment. Expenses include compensation, recognition and other support provided to
our financial advisors, field management, product and planning specialists; expenses associated with facilities, technology and training
relating to our financial advisors and specialists; other business development activities including direct marketing and advertising;
and wholesale distribution activities performed by the Asset Management segment. A significant component of these expenses
vary directly with levels of assets under management or advisement, business development measures including sales and client
acquisition, and the number of advisor and client relationships.
• Operations and support expenses – expenses associated with business operations including technology and business processes;
in‑house investment management and product shelf management; corporate management and support functions. These expenses
primarily reflect compensation and technology and other service provider expenses.
• Sub-advisory expenses – reflects fees relating to investment management services provided by third party or related party
investment management organizations. These fees typically are variable with the level of assets under management. These fees
include investment advisory services performed for the Wealth Management segment by the Asset Management segment.
108 |
2020 IGM Financial Inc. Annual Report | Notes to Consolidated Financial Statements NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
CHANGES IN PRESENTATION (continued)
Statements of Earnings (continued)
The following tables provide reconciliations from current presentation to prior period presentation for the Consolidated Statement
of Earnings.
2020
PRIOR
PRESENTATION
CURRENT
PRESENTATION
MANAGEMENT
AND ADVISORY ADMINISTRATION
FEES
FEES
DISTRIBUTION
FEES
NET PROPORTIONATE
SHARE OF
ASSOCIATES’
EARNINGS
INVESTMENT
INCOME
AND OTHER
COMMISSION
EXPENSE
NON-
COMMISSION
EXPENSE
INTEREST
EXPENSE
EARNINGS
BEFORE
INCOME
TAXES
$ 2,282,908 $ 403,417 $ 346,289 $ 129,412 $ 150,429 $ 1,088,343 $ 1,148,139 $ 110,597 $ 965,376
Revenues
Wealth management $ 2,259,576
Asset management
Dealer compensation
812,931
(283,163)
1,564,667
301,902
341,804
51,203
718,241
101,515
4,485
(11,310)
(283,163)
Net asset
management
Net investment
income and other
Proportionate share
of associates’
earnings (Note 8)
529,768
718,241
101,515
4,485
(283,163)
(11,310)
78,209
150,429
78,209
150,429
3,017,982
2,282,908
403,417
346,289
129,412
150,429
(283,163)
(11,310)
Expenses
Advisory and business
development
Operations and
support
Sub‑advisory
Interest
Earnings before
income taxes
1,040,146
830,650
71,213
110,597
2,052,606
$ 965,376
805,180
234,966
830,650
71,213
110,597
805,180 1,136,829
110,597
| 109
Notes to Consolidated Financial Statements | 2020 IGM Financial Inc. Annual Report
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
CHANGES IN PRESENTATION (continued)
Statements of Earnings (continued)
2019
PRIOR
PRESENTATION
CURRENT
PRESENTATION
MANAGEMENT
AND ADVISORY ADMINISTRATION
FEES
FEES
DISTRIBUTION
FEES
NET PROPORTIONATE
SHARE OF
ASSOCIATES’
EARNINGS
INVESTMENT
INCOME
AND OTHER
COMMISSION
EXPENSE
NON-
COMMISSION
EXPENSE
INTEREST
EXPENSE
EARNINGS
BEFORE
INCOME
TAXES
$ 2,267,960 $ 414,457 $ 368,036 $
76,928 $ 105,225 $ 1,101,165 $ 1,054,389 $ 108,386 $ 968,666
REVENUES
Wealth management $ 2,299,048
Asset management
Dealer compensation
792,327
(277,075)
1,568,346
316,309
362,290
52,103
699,614
98,148
5,746
(11,181)
(277,075)
Net asset
management
Net investment
income and other
Proportionate share
of associates’
earnings (Note 8)
515,252
699,614
98,148
5,746
(277,075)
(11,181)
24,825
105,225
24,825
105,225
2,944,350
2,267,960
414,457
368,036
76,928
105,225
(277,075)
(11,181)
Expenses
Advisory and business
development
Operations and
support
Sub‑advisory
Interest
Earnings before
income taxes
1,066,021
733,045
68,232
108,386
1,975,684
$ 968,666
REVENUE RECOGNITION
814,263
251,758
9,827
723,218
68,232
824,090 1,043,208
108,386
108,386
Wealth management revenue is earned for providing financial planning, investment advisory and related financial services. Revenues
from financial advisory fees and investment management and related administration fees are based on the net asset value of investment
funds or other assets under advisement and are accrued as services are performed. Distribution revenue associated with insurance and
banking products and services are also recognized on an accrual basis while distribution fees derived from investment fund and securities
transactions are recognized on a trade date basis.
Asset management revenue related to investment management advisory and administrative services is based on the net asset value of
investment funds and other assets under management and is accrued as services are performed.
FINANCIAL INSTRUMENTS
All financial assets are initially recognized at fair value in the Consolidated Balance Sheets and are subsequently classified as measured
at FVTPL, fair value through other comprehensive income (FVTOCI) or amortized cost based on the Company’s assessment of the
business model within which the financial asset is managed and the financial asset’s contractual cash flow characteristics.
110 |
2020 IGM Financial Inc. Annual Report | Notes to Consolidated Financial Statements
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
FINANCIAL INSTRUMENTS (continued)
A financial asset is measured at amortized cost if it is held within a business model of holding financial assets and collecting contractual
cash flows and those cash flows are comprised solely of payments of principal and interest. A financial asset is measured at FVTOCI if
the financial asset is held within a business model of both collecting contractual cash flows and selling the financial assets or through
an irrevocable election for equity instruments that are not held for trading. All other financial assets are measured at FVTPL. A financial
asset that would otherwise be measured at amortized cost or FVTOCI can be designated as FVTPL through an irrevocable election if
doing so eliminates or significantly reduces an accounting mismatch.
Financial assets can only be reclassified when there is a change to the business model within which they are managed. Such
reclassifications are applied on a prospective basis.
Financial liabilities are classified either as measured at amortized cost using the effective interest method or as FVTPL, which are
recorded at fair value.
Unrealized gains and losses on financial assets classified as FVTOCI as well as other comprehensive income amounts, including
unrealized foreign currency translation gains and losses related to the Company’s investment in its associates, are recorded in the
Consolidated Statements of Comprehensive Income on a net of tax basis. Accumulated other comprehensive income forms part of
Shareholders’ equity.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash and temporary investments consisting of highly liquid investments with short‑term maturities.
Interest income is recorded on an accrual basis in Net investment income and other in the Consolidated Statements of Earnings.
OTHER INVESTMENTS
Other investments, which are recorded on a trade date basis, are classified as either FVTOCI or FVTPL.
The Company has elected to classify certain equity investments that are not held for trading as FVTOCI. Unrealized gains and losses on
these FVTOCI investments are recorded in Other comprehensive income and transferred directly to retained earnings when realized
without being recorded through profit or loss. Dividends declared are recorded in Net investment income and other in the Consolidated
Statements of Earnings.
FVTPL investments are held for trading and are comprised of fixed income and equity investments and investments in proprietary
investment funds. Unrealized and realized gains and losses, dividends declared, and interest income on these investments are recorded
in Net investment income and other in the Consolidated Statements of Earnings.
LOANS
Loans are classified as either FVTPL or amortized cost, based on the Company’s assessment of the business model within which the loan is
managed. Revenues from mortgage activities are included in Wealth Management revenues in the Consolidated Statement of Earnings.
Changes in fair value of loans measured at FVTPL are recorded in Wealth management revenue in the Consolidated Statements of
Earnings. Loans measured at amortized cost are recorded net of an allowance for expected credit losses. Interest income is accounted
for on the accrual basis using the effective interest method for all loans and is recorded in Wealth management revenue in the
Consolidated Statements of Earnings.
The Company applies a three‑stage impairment approach to measure expected credit losses on loans: 1) On origination, an allowance
for 12‑month expected credit losses is established, 2) Lifetime expected credit losses are recognized where there is a significant
deterioration of credit quality, and 3) A loan is considered credit impaired when there is no longer reasonable assurance of collection.
DERECOGNITION
The Company enters into transactions where it transfers financial assets recognized on its balance sheet. The determination of whether
the financial assets are derecognized is based on the extent to which the risks and rewards of ownership are transferred. The gains
or losses and the servicing fee revenue for financial assets that are derecognized are reported in Wealth management revenue in the
Consolidated Statements of Earnings. The transactions for financial assets that are not derecognized are accounted for as secured
financing transactions.
| 111
Notes to Consolidated Financial Statements | 2020 IGM Financial Inc. Annual Report NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
SALES COMMISSIONS
Commissions are paid on investment product sales where the Company either receives a fee directly from the client or where it receives
a fee directly from the investment fund.
Commissions paid on investment product sales where the Company earns fees from a client are capitalized and amortized over their
estimated useful lives, not exceeding a period of seven years. The Company regularly reviews the carrying value of capitalized selling
commissions with respect to any events or circumstances that indicate impairment. Among the tests performed by the Company to
assess recoverability is the comparison of the future economic benefits derived from the capitalized selling commission asset in relation
to its carrying value.
All other commissions paid on investment product sales are expensed as incurred.
CAPITAL ASSETS
Capital assets are comprised of Property and equipment and Right‑of‑use assets.
Property and equipment
Buildings, furnishings and equipment are amortized on a straight‑line basis over their estimated useful lives, which range from 3 to
17 years for equipment and furnishings and 10 to 50 years for the building and its components. Capital assets are tested for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
Right-of-use assets
A right‑of‑use asset representing the Company’s property leases is depreciated using the straight‑line method from the commencement
date to the end of the lease term and is recorded in Advisory and business development and Operations and support expenses.
LEASES
For contracts that contain a lease, the Company recognizes a right‑of‑use asset and a lease liability. Imputed interest on the lease
liability is recorded in Interest expense.
Lease payments included in the measurement of the lease liability comprises fixed payments less any lease incentives receivable, variable
payments that depend on an index or a rate, and payments or penalties for terminating the lease, if any. The lease payments are discounted
using the Company’s incremental borrowing rate, which is applied to portfolios of leases with reasonably similar characteristics.
The Company does not recognize a right‑of‑use asset or lease liability for leases that, at commencement date, have a lease term of
12 months or less, and leases for which the underlying asset is of low value. The Company recognizes the payments associated with
these leases as an expense on a straight‑line basis over the term of the lease.
GOODWILL AND INTANGIBLE ASSETS
The Company tests the carrying value of goodwill and indefinite life intangible assets for impairment at least once a year and more
frequently if an event or circumstance indicates the asset may be impaired. An impairment loss is recognized if the amount of the
asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of
disposal or its value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash inflows (cash generating units).
Investment fund management contracts have been assessed to have an indefinite useful life as the contractual right to manage the
assets has no fixed term.
Trade names have been assessed to have an indefinite useful life as they contribute to the revenues of the Company’s integrated asset
management business as a whole and the Company intends to utilize them for the foreseeable future.
Intangible assets with finite lives are amortized on a straight‑line basis over their estimated useful lives. Software assets are amortized
over a period not exceeding 7 years and distribution and other management contracts are amortized over a period not exceeding
20 years. Finite life intangible assets are tested for impairment whenever events or changes in circumstances indicate that the carrying
amounts may not be recoverable.
112 |
2020 IGM Financial Inc. Annual Report | Notes to Consolidated Financial Statements NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
EMPLOYEE BENEFITS
The Company maintains a number of employee benefit plans including defined benefit plans and defined contribution pension plans
for eligible employees. These plans are related parties in accordance with IFRS. The Company’s defined benefit plans include a funded
defined benefit pension plan for eligible employees, unfunded supplementary executive retirement plans (SERP) for certain executive
officers, and an unfunded post‑employment health care, dental and life insurance plan for eligible retirees.
The defined benefit pension plan provides pensions based on length of service and final average earnings.
The cost of the defined benefit plans is actuarially determined using the projected unit credit method prorated on service based upon
management’s assumptions about discount rates, compensation increases, retirement ages of employees, mortality and expected
health care costs. Any changes in these assumptions will impact the carrying amount of pension obligations. The Company’s accrued
benefit liability in respect of defined benefit plans is calculated separately for each plan by discounting the amount of the benefit that
employees have earned in return for their service in current and prior periods and deducting the fair value of any plan assets. The
Company determines the net interest component of the pension expense for the period by applying the discount rate used to measure
the accrued benefit liability at the beginning of the annual period to the net accrued benefit liability. The discount rate used to value
liabilities is determined using a yield curve of AA corporate debt securities.
If the plan benefits are changed, or a plan is curtailed, any past service costs or curtailment gains or losses are recognized immediately
in net earnings.
Current service costs, past service costs and curtailment gains or losses are included in Operations and support expenses.
Remeasurements arising from defined benefit plans represent actuarial gains and losses and the actual return on plan assets, less
interest calculated at the discount rate. Remeasurements are recognized immediately through Other comprehensive income (OCI) and
are not reclassified to net earnings.
The accrued benefit liability represents the deficit related to defined benefit plans and is included in Other liabilities.
Payments to the defined contribution pension plans are expensed as incurred.
SHARE-BASED PAYMENTS
The Company uses the fair value based method to account for stock options granted to employees. The fair value of stock options is
determined on each grant date. Compensation expense is recognized over the period that the stock options vest, with a corresponding
increase in Contributed surplus. When stock options are exercised, the proceeds together with the amount recorded in Contributed
surplus are added to Share capital.
The Company recognizes a liability for cash settled awards including those granted under the Performance Share Unit, Restricted Share
Unit and Deferred Share Unit plans. Compensation expense is recognized over the vesting period, net of related hedges. The liability is
remeasured at fair value at each reporting period.
PROVISIONS
A provision is recognized if, as a result of a past event, the Company has a present obligation where a reliable estimate can be made,
and it is probable that an outflow of resources will be required to settle the obligation.
INCOME TAXES
The Company uses the liability method in accounting for income taxes whereby deferred income tax assets and liabilities reflect the
expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities and their tax bases
and tax loss carryforwards. Deferred income tax assets and liabilities are measured based on the enacted or substantively enacted tax
rates which are anticipated to be in effect when the temporary differences are expected to reverse.
| 113
Notes to Consolidated Financial Statements | 2020 IGM Financial Inc. Annual Report NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
EARNINGS PER SHARE
Basic earnings per share is determined by dividing Net earnings available to common shareholders by the weighted average number
of common shares outstanding for the year. Diluted earnings per share is determined using the same method as basic earnings per
share except that the average number of common shares outstanding includes the potential dilutive effect of outstanding stock options
granted by the Company as determined by the treasury stock method.
DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments are utilized by the Company in the management of equity price and interest rate risks. The Company
does not utilize derivative financial instruments for speculative purposes.
The Company formally documents all hedging relationships, as well as its risk management objective and strategy for undertaking
various hedging transactions. This process includes linking all derivatives to specific assets and liabilities on the Consolidated Balance
Sheets or to anticipated future transactions. The Company also formally assesses, both at the hedge’s inception and on an ongoing
basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows
of hedged items. Derivative financial instruments are recorded at fair value in the Consolidated Balance Sheets.
Derivative financial instruments specifically designated as a hedge and meeting the criteria for hedge effectiveness offset the changes
in fair values or cash flows of hedged items. A hedge is designated either as a cash flow hedge or a fair value hedge. A cash flow hedge
requires the change in fair value of the derivative, to the extent effective, to be recorded in Other comprehensive income, which is
reclassified to the Consolidated Statements of Earnings when the hedged item affects earnings. The change in fair value of the ineffective
portion of the derivative in a cash flow hedge is recorded in the Consolidated Statements of Earnings. A fair value hedge requires the
change in fair value of the hedging derivative and the change in fair value of the hedged item relating to the hedged risk to both be
recorded in the Consolidated Statements of Earnings.
The Company enters into interest rate swaps as part of its mortgage banking and intermediary operations. These swap agreements
require the periodic exchange of net interest payments without the exchange of the notional principal amount on which the payments
are based. Swaps entered into to hedge the costs of funds on certain securitization activities are designated as hedging instruments
(Note 21). The effective portion of changes in fair value are initially recorded in Other comprehensive income and subsequently
recorded in Wealth management revenue in the Consolidated Statements of Earnings over the term of the associated Obligations to
securitization entities. Remaining mortgage related swaps are not designated as hedging instruments and changes in fair value are
recorded directly in Wealth management revenue in the Consolidated Statements of Earnings.
The Company also enters into total return swaps and forward agreements to manage its exposure to fluctuations in the total return of
its common shares related to deferred compensation arrangements. Total return swap and forward agreements require the exchange
of net contractual payments periodically or at maturity without the exchange of the notional principal amounts on which the payments
are based. Certain of these derivatives are not designated as hedging instruments and changes in fair value are recorded in Operations
and support expenses in the Consolidated Statements of Earnings.
Derivatives continue to be utilized on a basis consistent with the risk management policies of the Company and are monitored by the
Company for effectiveness as economic hedges even if specific hedge accounting requirements are not met.
OFFSETTING OF FINANCIAL ASSETS AND LIABILITIES
Financial assets and liabilities are offset and the net amount is presented on the Consolidated Balance Sheets when the Company has
a legally enforceable right to set off the recognized amounts and intends to settle on a net basis or to realize the assets and settle the
liabilities simultaneously.
FUTURE ACCOUNTING CHANGES
The Company continuously monitors the potential changes proposed by the IASB and analyzes the effect that changes in the standards
may have on the Company’s operations.
114 |
2020 IGM Financial Inc. Annual Report | Notes to Consolidated Financial Statements NOTE 3 EXPENSES
Commissions
Salaries and employee benefits
Restructuring and other
Occupancy
Amortization of capital, intangible and other assets
Other
Sub‑advisory
Interest
2020
2019
$
787,684
556,115
74,460
28,608
83,498
340,431
1,870,796
71,213
110,597
$
824,090
517,796
–
27,840
79,496
349,844
1,799,066
68,232
108,386
$ 2,052,606
$ 1,975,684
During 2020, the Company incurred restructuring and other charges of $74.5 million related to the ongoing multi‑year transformation
initiatives and efforts to enhance our operational effectiveness and also from the acquisition of GLC Asset Management (GLC) and
other changes to our investment management teams. As a result of these initiatives, the Company is recording costs relating to
restructuring and downsizing certain related party sharing services activities as well as impairment of redundant internally generated
software assets.
NOTE 4 OTHER INVESTMENTS
Fair value through other comprehensive income (FVTOCI)
Corporate investments
Fair value through profit or loss (FVTPL)
Equity securities
Proprietary investment funds
2020
2019
COST
FAIR VALUE
COST
FAIR VALUE
$ 251,417
$ 593,273
$
244,989
$
301,196
1,499
35,254
36,753
1,513
37,514
39,027
1,575
51,304
52,879
1,759
54,407
56,166
$ 288,170
$ 632,300
$
297,868
$
357,362
FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
Corporate investments is primarily comprised of the Company’s investments in Wealthsimple Financial Corp. (Wealthsimple) and
Portag3 Ventures LP and Portag3 Ventures II LP (Portag3).
In 2020, the Company invested $4.2 million related to Portag3 (2019 – Wealthsimple $51.9 million and Portag3 $14.8 million).
The total fair value of Corporate investments of $593.3 million is presented net of certain costs incurred within the limited partnership
structures holding the underlying investments.
INVESTMENT IN WEALTHSIMPLE
Wealthsimple Financial Corp. (Wealthsimple) is an online investment manager that provides financial investment guidance. As at
December 31, 2020, the Company had invested a total of $186.9 million in Wealthsimple through a limited partnership controlled by
Power Financial Corporation, a subsidiary of Power Corporation of Canada. The investment is classified at Fair Value Through Other
Comprehensive Income.
On October 14, 2020, Wealthsimple announced a $114 million equity fundraising led by TCV, a growth equity investor focused on
technology, along with Greylock, Meritech, Two Sigma Ventures and existing investor Allianz X. The purchase price associated with this
fundraising values the common equity of Wealthsimple at $1.5 billion ($1.4 billion pre‑money valuation).
IGM Financial Inc. holds, directly and indirectly, a 36% interest in Wealthsimple (2019 – 42%). As a result of this valuation, the fair value
of the Company’s investment increased by $298 million and is recorded at $550 million at December 31, 2020.
| 115
Notes to Consolidated Financial Statements | 2020 IGM Financial Inc. Annual Report
NOTE 4 OTHER INVESTMENTS (continued)
INVESTMENT IN PORTAG3
Portag3 is an early‑stage investment fund dedicated to backing innovating financial services companies. Portag3 is controlled by the
Company’s parent, Power Financial Corporation.
FAIR VALUE THROUGH PROFIT OR LOSS
Proprietary investment funds
The Company manages and provides services and earns management and administration fees, in respect of investment funds that
are not recognized in the Consolidated Balance Sheets. As at December 31, 2020, there were $162.3 billion in investment fund
assets under management (2019 – $161.8 billion). The Company’s investments in proprietary investment funds are classified on the
Company’s Consolidated Balance Sheets as fair value through profit or loss. These investments are generally made in the process of
launching a new fund and are sold as third‑party investors subscribe. The Company’s maximum exposure to loss is limited to its direct
investment in the proprietary investment funds.
Certain investment funds are consolidated where the Company has made the assessment that it controls the investment fund. As at
December 31, 2020, the underlying investments related to these consolidated investment funds primarily consisted of cash and short‑
term investments of $7.5 million (2019 – $7.1 million), equity securities of $10.9 million (2019 – $21.8 million) and fixed income securities
of $5.8 million (2019 – $6.0 million). The underlying securities of these funds are classified as FVTPL and recognized at fair value.
NOTE 5 LOANS
Amortized cost
Residential mortgages
Less: Allowance for expected credit losses
Fair value through profit or loss
The change in the allowance for expected credit losses is as follows:
Balance, beginning of year
Write‑offs, net of recoveries
Expected credit losses
Balance, end of year
CONTRACTUAL MATURITY
1 YEAR
OR LESS
1 – 5
YEARS
OVER
5 YEARS
2020
TOTAL
2019
TOTAL
$ 1,500,141
$ 4,820,230
$
8,971
$ 6,329,342
$ 7,198,718
778
675
6,328,564
3,291
7,198,043
–
$ 6,331,855
$ 7,198,043
$
$
$
675
(562)
665
778
$
801
(863)
737
675
Total credit impaired loans as at December 31, 2020 were $4,807 (2019 – $2,381).
In 2020, the Company worked with clients that were financially impacted by COVID‑19 to defer mortgage payments for up to
six months. This program expired for new applicants on September 30, 2020. As at December 31, 2020, there were no mortgages
in the deferral program.
At December 31, 2020, the Company’s allowance for expected credit losses was $778 compared to $675 at December 31, 2019.
Total interest income on loans was $191.2 million (2019 – $218.3 million). Total interest expense on obligations to securitization
entities, related to securitized loans, was $148.5 million (2019 – $171.9 million). Gains realized on the sale of residential mortgages
totalled $9.8 million (2019 – $3.2 million). Fair value adjustments related to mortgage banking operations totalled negative $5.1 million
(2019 – negative $4.3 million). These amounts were included in Wealth management revenue. Wealth management revenue also
includes other mortgage banking related items including portfolio insurance, issue costs, and other items.
116 |
2020 IGM Financial Inc. Annual Report | Notes to Consolidated Financial Statements
NOTE 6 SECURITIZATIONS
The Company securitizes residential mortgages through the Canada Mortgage and Housing Corporation (CMHC) sponsored National
Housing Act Mortgage‑Backed Securities (NHA MBS) Program and Canada Mortgage Bond (CMB) Program and through Canadian
bank‑sponsored asset‑backed commercial paper (ABCP) programs. These transactions do not meet the requirements for derecognition
as the Company retains prepayment risk and certain elements of credit risk. Accordingly, the Company has retained these mortgages
on its balance sheets and has recorded offsetting liabilities for the net proceeds received as Obligations to securitization entities which
are recorded at amortized cost.
The Company earns interest on the mortgages and pays interest on the obligations to securitization entities. As part of the CMB
transactions, the Company enters into a swap transaction whereby the Company pays coupons on CMBs and receives investment
returns on the NHA MBS and the reinvestment of repaid mortgage principal. A component of this swap, related to the obligation to
pay CMB coupons and receive investment returns on repaid mortgage principal, and the hedging swap used to manage exposure to
changes in variable rate investment returns, are recorded as derivatives with a negative fair value of $1.2 million at December 31, 2020
(2019 – negative $5.8 million).
The Government of Canada introduced measures to support Canadians through the COVID‑19 crisis where mortgage payments can
be deferred for up to six months and repaid over the life of the mortgage. The program expired for new applicants on September 30,
2020. Under the NHA MBS and CMB Program, the Company has an obligation to make timely payments to security holders regardless
of whether amounts are received from mortgagors. All mortgages securitized under the NHA MBS and CMB Program are insured by
CMHC or another approved insurer under the program. As part of the ABCP transactions, the Company has provided cash reserves for
credit enhancement which are recorded at cost. Credit risk is limited to these cash reserves and future net interest income as the ABCP
Trusts have no recourse to the Company’s other assets for failure to make payments when due. Credit risk is further limited to the
extent these mortgages are insured.
2020
Carrying value
NHA MBS and CMB Program
Bank sponsored ABCP
Total
Fair value
2019
Carrying value
NHA MBS and CMB Program
Bank sponsored ABCP
Total
Fair value
SECURITIZED
MORTGAGES
OBLIGATIONS TO
SECURITIZATION
ENTITIES
$ 3,216,158
2,767,743
$ 3,307,428
2,866,458
$ 5,983,901
$ 6,173,886
$ 6,186,410
$ 6,345,189
$ 3,890,955
2,938,910
$ 3,938,732
2,974,904
$ 6,829,865
$ 6,913,636
$ 6,907,742
$ 6,996,953
NET
(91,270)
(98,715)
(189,985)
(158,779)
(47,777)
(35,994)
(83,771)
(89,211)
$
$
$
$
$
$
The carrying value of Obligations to securitization entities, which is recorded net of issue costs, includes principal payments received
on securitized mortgages that are not due to be settled until after the reporting period. Issue costs are amortized over the life of the
obligation on an effective interest rate basis.
NOTE 7 OTHER ASSETS
Deferred and prepaid expenses
Other
2020
48,763
1,019
$
2019
44,673
1,170
49,782
$
45,843
$
$
Total other assets of $24.2 million as at December 31, 2020 (2019 – $19.1 million) are expected to be realized within one year.
| 117
Notes to Consolidated Financial Statements | 2020 IGM Financial Inc. Annual Report
NOTE 8 INVESTMENT IN ASSOCIATES
2020
Balance, beginning of year
Investment
Dividends
Proportionate share of:
Earnings (losses)
Associate’s adjustments
Other comprehensive income (loss)
and other adjustments
Disposition
Balance, end of year
2019
Balance, beginning of year
Transfer from corporate investments (FVTOCI)
Proceeds from substantial issuer bid
Dividends received
Proportionate share of:
Earnings (losses)
Associate’s one‑time charges
Other comprehensive income (loss)
and other adjustments
Balance, end of year
LIFECO
CHINA AMC
PERSONAL
CAPITAL
NORTHLEAF
TOTAL
$
$
896,651
–
(65,415)
$
662,694
–
(13,686)
194,537
–
–
$
–
247,508
–
$ 1,753,882
247,508
(79,101)
109,148
3,400
18,604
–
41,531
–
29,743
–
(4,640)
–
8,817
(198,714)
990(1)
–
–
–
147,029
3,400
57,164
(198,714)
$
962,388
$
720,282
$
–
$
248,498
$ 1,931,168
$
967,829
–
(80,408)
(62,673)
109,088
(17,200)
$
$
683,475
–
–
(10,301)
–
216,952
–
–
$
30,119
–
(16,782)
–
(19,985)
(40,599)
(5,633)
$
896,651
$
662,694
$
194,537
$
–
–
–
–
–
–
–
–
$ 1,651,304
216,952
(80,408)
(72,974)
122,425
(17,200)
(66,217)
$ 1,753,882
(1) The Company’s proportionate share of Northleaf’s earnings, net of Non-controlling interest, was $0.8 million.
The Company uses the equity method to account for its investments in Great‑West Lifeco Inc., China Asset Management Co., Ltd. and
Northleaf Capital Group Ltd. as it exercises significant influence. The equity method was used up to June 29, 2020 to account for the
Company’s 24.8% equity interest in Personal Capital Corporation (Personal Capital), as it exercised significant influence.
GREAT-WEST LIFECO INC. (LIFECO)
Lifeco is a publicly listed company that is incorporated and domiciled in Canada and is controlled by Power Corporation of Canada.
Lifeco is a financial services holding company with interests in the life insurance, health insurance, retirement savings, investment
management and reinsurance businesses, primarily in Canada, the United States, Europe and Asia.
At December 31, 2020, the Company held 37,337,133 (2019 – 37,337,133) shares of Lifeco, which represented an equity interest of
4.0% (2019 – 4.0%). Significant influence arises from several factors, including but not limited to the following: common control of
Lifeco by Power Corporation of Canada, directors common to the boards of the Company and Lifeco, certain shared strategic alliances
and significant intercompany transactions that influence the financial and operating policies of both companies. The Company’s
proportionate share of Lifeco’s earnings is recorded in the Consolidated Statements of Earnings.
In December 2020, Lifeco recorded a gain in relation to the revaluation of a deferred tax asset less certain restructuring and transaction
costs. The Company’s after‑tax proportionate share of these adjustments was $3.4 million.
In April 2019, the Company participated on a proportionate basis in the Lifeco substantial issuer bid by selling 2,400,255 of its shares in
Lifeco for proceeds of $80.4 million.
In June 2019, Lifeco recorded a one‑time loss in relation to the sale of substantially all of its United States individual life insurance and
annuity business. In December 2019, Lifeco recorded one‑time charges in relation to the revaluation of a deferred tax asset, restructuring
costs and the net gain on the Scottish Friendly transaction. The Company’s after‑tax proportionate share of these charges was $17.2 million.
The fair value of the Company’s investment in Lifeco totalled $1,133.2 million at December 31, 2020 (2019 – $1,241.8 million). The
Company has elected to apply the exemption in IFRS 4 Insurance Contracts to retain Lifeco’s relevant accounting policies related to
Lifeco’s deferral of the adoption of IFRS 9 Financial Instruments.
118 |
2020 IGM Financial Inc. Annual Report | Notes to Consolidated Financial Statements
NOTE 8 INVESTMENT IN ASSOCIATES (continued)
GREAT-WEST LIFECO INC. (LIFECO) (continued)
Lifeco directly owned 9,200,000 shares of the Company at December 31, 2020 (2019 – 9,200,000).
Lifeco’s financial information as at December 31, 2020 can be obtained in its publicly available information.
CHINA ASSET MANAGEMENT CO., LTD. (CHINA AMC)
China AMC is an asset management company established in Beijing, China and is controlled by CITIC Securities Company Limited.
As at December 31, 2020, the Company held a 13.9% ownership interest in China AMC (2019 – 13.9%). Significant influence arises
from board representation, participating in the policy making process, shared strategic initiatives including joint product launches and
collaboration between management and investment teams.
The following table sets forth certain summary financial information from China AMC:
AS AT DECEMBER 31 (millions)
Total assets
Total liabilities
FOR THE YEAR ENDED DECEMBER 31
Revenue
Net earnings available to common shareholders
Total comprehensive income
CANADIAN
DOLLARS
2,672
720
1,078
311
300
2020
CHINESE
YUAN
13,695
3,688
5,539
1,598
1,542
CANADIAN
DOLLARS
2,171
504
763
230
234
2019
CHINESE
YUAN
11,645
2,701
3,977
1,201
1,219
NORTHLEAF CAPITAL GROUP LTD. (NORTHLEAF)
On October 28, 2020, the Company’s subsidiary, Mackenzie, together with Lifeco, acquired a non‑controlling interest in Northleaf
Capital Group Ltd. (Northleaf), a global private equity, private credit and infrastructure fund manager headquartered in Toronto.
The transaction was executed through an acquisition vehicle 80% owned by Mackenzie and 20% owned by Lifeco for cash consideration
of $241.0 million and up to an additional $245.0 million in consideration at the end of five years subject to the business achieving
exceptional growth in certain performance measures over the period. Any additional consideration will be recognized as expense over
the five year period based on the fair value of the expected payment, which is revalued at each reporting period date.
The acquisition vehicle acquired a 49.9% non‑controlling voting interest and a 70% economic interest in Northleaf. Mackenzie and
Lifeco have an obligation and right to purchase the remaining economic and voting interest in Northleaf commencing in approximately
five years and extending into future periods. The equity method is used to account for the acquisition vehicle’s 70% economic interest
as it exercises significant influence. Significant influence arises from board representation, participation in the policy making process and
shared strategic initiatives.
The Company controls the acquisition vehicle and therefore recognizes the full 70% economic interest in Northleaf and recognizes
Non‑controlling interest (NCI) related to Lifeco’s net interest in Northleaf of 14%. Net of NCI, IGM’s investment at December 31, 2020
was $199.6 million, comprised of $192.6 million in cash consideration, $6.2 million in capitalized transaction costs and proportionate
share of 2020 earnings of $0.8 million.
The following table sets forth certain summary financial information from Northleaf:
AS AT DECEMBER 31 (millions)
Total assets
Total liabilities
FOR THE THREE MONTHS ENDED DECEMBER 31(1)
Revenue
Net earnings available to common shareholders
Total comprehensive income
(1) Q4 2020 earnings presented; however, the Company’s proportionate share of Northleaf’s earnings was effective October 28, 2020.
2020
115.9
98.5
21.7
3.1
3.1
| 119
Notes to Consolidated Financial Statements | 2020 IGM Financial Inc. Annual Report
NOTE 8 INVESTMENT IN ASSOCIATES (continued)
PERSONAL CAPITAL CORPORATION (PERSONAL CAPITAL)
During the third quarter of 2020, the Company sold its equity interest in Personal Capital to a subsidiary of Lifeco, Empower Retirement,
for proceeds of $232.8 million (USD $176.2 million) and up to an additional USD $24.6 million in consideration subject to Personal
Capital achieving certain target growth objectives.
As a result of the sale, the Company has derecognized its investment in Personal Capital and recorded an accounting gain of $37.2 million
($31.4 million net of tax) in Net investment income and other.
As at December 31, 2019, the Company held a 24.8% equity interest in Personal Capital. IGM Financial’s equity earnings from Personal
Capital includes its proportionate share of Personal Capital’s net loss adjusted by IGM Financial’s amortization of intangible assets that
it recognized as part of its investment in the company.
In January 2019, the Company invested an additional amount of $66.8 million (USD $50.0 million) in Personal Capital which increased
its voting interest to 22.7% and, combined with its board representation, resulted in the Company exercising significant influence.
FURNITURE AND
EQUIPMENT
BUILDING AND
COMPONENTS
RIGHT‑OF‑USE
ASSETS
TOTAL
$
$
$
357,351
(258,315)
$
68,009
(16,598)
$ 227,872
(48,629)
$ 653,232
(323,542)
99,036
$
51,411
$ 179,243
$ 329,690
84,299
37,799
(3,653)
(19,409)
$
51,801
1,192
–
(1,582)
$
80,856
123,529
–
(25,142)
$ 216,956
162,520
(3,653)
(46,133)
$
99,036
$
51,411
$ 179,243
$ 329,690
$
$
$
321,108
(236,809)
84,299
88,185
–
16,679
(893)
(19,672)
$
$
$
66,817
(15,016)
51,801
50,462
–
2,841
–
(1,502)
$
$
$
104,343
(23,487)
$
492,268
(275,312)
80,856
$
216,956
–
96,065
8,278
–
(23,487)
$
138,647
96,065
27,798
(893)
(44,661)
$
84,299
$
51,801
$
80,856
$
216,956
NOTE 9 CAPITAL ASSETS
2020
Cost
Less: accumulated amortization
Changes in capital assets:
Balance, beginning of year
Additions
Disposals
Amortization
Balance, end of year
2019
Cost
Less: accumulated amortization
Changes in capital assets:
Balance, beginning of year
Adoption of IFRS 16
Additions
Disposals
Amortization
Balance, end of year
120 |
2020 IGM Financial Inc. Annual Report | Notes to Consolidated Financial Statements
NOTE 10 CAPITALIZED SALES COMMISSIONS
Cost
Less: accumulated amortization
Changes in capitalized sales commissions
Balance, beginning of year
Changes due to:
Sales of investment funds
Amortization
Balance, end of year
NOTE 11 GOODWILL AND INTANGIBLE ASSETS
2020
2019
$
310,127
(79,042)
$
192,504
(42,638)
$
231,085
$
149,866
$
149,866
$
105,044
117,652
(36,433)
81,219
67,209
(22,387)
44,822
$
231,085
$
149,866
FINITE LIFE
DISTRIBUTION
INDEFINITE LIFE
AND OTHER MUTUAL FUND
MANAGEMENT
CONTRACTS
MANAGEMENT
CONTRACTS
TRADE
NAMES
TOTAL
INTANGIBLE
ASSETS
SOFTWARE
GOODWILL
2020
Cost
Less: accumulated amortization
$
293,412
(137,489)
$
228,167
(88,236)
$
740,559
–
$
285,177
–
$ 1,547,315
(225,725)
$ 2,803,075
–
$
155,923
$
139,931
$
740,559
$
285,177
$ 1,321,590
$ 2,803,075
Changes in goodwill and intangible assets:
Balance, beginning of year
Additions(1)
Disposals
Amortization
$
$
138,499
43,606
(1,421)
(24,761)
$
65,892
81,950
(490)
(7,421)
740,559
–
–
–
$
285,177
–
–
–
$ 1,230,127
125,556
(1,911)
(32,182)
$ 2,660,267
142,808
–
–
Balance, end of year
$
155,923
$
139,931
$
740,559
$
285,177
$ 1,321,590
$ 2,803,075
2019
Cost
Less: accumulated amortization
Changes in goodwill and intangible assets:
Balance, beginning of year
Additions
Disposals
Amortization
$
$
$
256,365
(117,866)
$
147,248
(81,356)
$
740,559
–
$
285,177
–
$ 1,429,349
(199,222)
$ 2,660,267
–
138,499
$
65,892
$
740,559
$
285,177
$ 1,230,127
$ 2,660,267
$
116,697
44,421
–
(22,619)
$
48,635
25,457
(1,726)
(6,474)
740,559
–
–
–
$
285,177
–
–
–
$ 1,191,068
69,878
(1,726)
(29,093)
$ 2,660,267
–
–
–
Balance, end of year
$
138,499
$
65,892
$
740,559
$
285,177
$ 1,230,127
$ 2,660,267
(1) The Company completed its acquisition of GLC on December 31, 2020 and Greenchip on December 22, 2020 (Note 29)
| 121
Notes to Consolidated Financial Statements | 2020 IGM Financial Inc. Annual Report
NOTE 11 GOODWILL AND INTANGIBLE ASSETS (continued)
The goodwill and indefinite life intangible assets consisting of investment fund management contracts and trade names are allocated
to each cash generating unit (CGU) as summarized in the following table:
Wealth Management
Asset Management
Total
2020
INDEFINITE
LIFE
INTANGIBLE
ASSETS
GOODWILL
2019
INDEFINITE
LIFE
INTANGIBLE
ASSETS
GOODWILL
$ 1,491,687
1,311,388
$
23,055
1,002,681
$ 1,491,687
1,168,580
$
23,055
1,002,681
$ 2,803,075
$ 1,025,736
$ 2,660,267
$ 1,025,736
The Company tests whether goodwill and indefinite life intangible assets are impaired by assessing the carrying amounts with the
recoverable amounts. The recoverable amount of the Company’s CGUs is based on the best available evidence of fair value less costs
of disposal.
In assessing the recoverable amounts, valuation approaches are used that may include discounted cash flow analysis and application
of capitalization multiples to financial and operating metrics based upon precedent acquisition transactions and trading comparables.
Assumptions and estimates employed in discounted cash flows include future changes in assets under management resulting from net
sales and investment returns, pricing and profit margin changes and discount rates, which represent level 3 fair value inputs. Valuation
multiples may include price‑to‑earnings or other conventionally used measures for investment managers or other financial service
providers (multiples of value to assets under management, revenues, or other measures of profitability). This assessment may give
regard to a variety of relevant considerations, including expected growth, risk and capital market conditions, among other factors. The
valuation multiples used in assessing fair value represent Level 2 fair value inputs.
The fair value less costs of disposal of the Company’s CGUs was compared with the carrying amount and it was determined there was
no impairment. Changes in assumptions and estimates used in determining the recoverable amounts of CGUs can result in significant
adjustments to the valuation of the CGUs.
NOTE 12 DEPOSITS AND CERTIFICATES
Deposits and certificates are classified as other financial liabilities measured at amortized cost.
Included in the assets of the Consolidated Balance Sheets are cash and cash equivalents, client funds on deposit and loans amounting
to $1,104.9 million (2019 – $584.3 million) related to deposits and certificates.
TERM TO MATURITY
DEMAND
1 YEAR
OR LESS
$ 1,099,365
–
$
1,655
410
$
1–5
YEARS
1,938
570
OVER
5 YEARS
2020
TOTAL
2019
TOTAL
$
169
782
$ 1,103,127
1,762
$
582,382
1,949
$ 1,099,365
$
2,065
$
2,508
$
951
$ 1,104,889
$
584,331
$
2020
2019
$
134,048
27,500
250,079
77,495
47,019
134,040
30,127
207,441
20,513
49,781
$
536,141
$
441,902
Deposits
Certificates
NOTE 13 OTHER LIABILITIES
Dividends payable
Interest payable
Accrued benefit liabilities (Note 14)
Provisions
Other
122 |
2020 IGM Financial Inc. Annual Report | Notes to Consolidated Financial Statements
NOTE 13 OTHER LIABILITIES (continued)
The Company establishes restructuring provisions related to business acquisitions, divestitures and other items, as well as other
provisions in the normal course of its operations. Changes in provisions during 2020 consisted of additional estimates of $77.8 million
(2019 – $2.2 million), provision reversals of $2.2 million (2019 – $3.3 million) and payments of $18.6 million (2019 – $29.2 million).
Total other liabilities of $276.0 million as at December 31, 2020 (2019 – $221.5 million) are expected to be settled within one year.
NOTE 14 EMPLOYEE BENEFITS
DEFINED BENEFIT PLANS
The Company maintains a number of employee pension and post‑employment benefit plans. These plans include a funded registered
defined benefit pension plan for all eligible employees, unfunded supplementary executive retirement plans (SERPs) for certain executive
officers, and an unfunded post‑employment health care, dental and life insurance plan for eligible retirees.
Effective July 1, 2012, the defined benefit pension plan was closed to new members. For all eligible employees hired after July 1, 2012,
the Company has a registered defined contribution pension plan.
The defined benefit pension plan is a separate trust that is legally separated from the Company. The defined benefit pension plan is
registered under the Pension Benefits Act of Manitoba (Act) and the Income Tax Act (ITA). As required by the Act, the defined benefit
pension plan is governed by a pension committee which includes current and retired employees. The Pension Committee has certain
responsibilities as described in the Act but may delegate certain activities to the Company. The ITA governs the employer’s ability to
make contributions and also has parameters that the plan must meet with respect to investments in foreign property.
The defined benefit pension plan provides lifetime pension benefits to all eligible employees based on length of service and final average
earnings subject to limits established by the ITA. Death benefits are available on the death of an active member or a retired member.
Employees who are not senior officers are required to make annual contributions based on a percentage of salaries which are subject
to a maximum amount.
The actuarial valuation for funding purposes related to the Company’s registered defined benefit pension plan, based on a measurement
date of December 31, 2017, was completed in May 2018. The valuation determines the plan surplus or deficit on both a solvency and
going concern basis. The solvency basis determines the relationship between the plan assets and its liabilities assuming that the plan
is wound up and settled on the valuation date. A going concern valuation compares the relationship between the plan assets and
the present value of the expected future benefit cash flows, assuming the plan will be maintained indefinitely. Based on the actuarial
valuation, the registered pension plan had a solvency deficit of $47.2 million compared to $82.7 million in the previous actuarial
valuation, which was based on a measurement date of December 31, 2016. The decrease in the solvency deficit resulted primarily from
higher assets due to contribution and investment returns, and is required to be funded over five years. The registered pension plan had
a going concern surplus of $46.1 million compared to $24.4 million in the previous valuation. The next required actuarial valuation will
be based on a measurement date of December 31, 2020. During 2020, the Company made contributions of $25.6 million (2019 –
$26.4 million). The Manitoba Government announced that they will temporarily waive certain contributions businesses are required
to make to their defined benefit pension plans including solvency funding payments for the 13 months from December 2020 to
December 2021. IGM has elected this special payment moratorium and as a result, the Company expects to only make current service
cost contributions of approximately $14.1 million in 2021. Pension contribution decisions are subject to change, as contributions are
affected by many factors including market performance, regulatory requirements, changes in assumptions and management’s ability to
change funding policy.
The SERPs are non‑registered, non‑contributory defined benefit plans which provide supplementary benefits to certain retired executives.
The other post‑employment benefit plan is a non‑contributory plan and provides eligible employees a reimbursement of medical costs
or a fixed amount per year to cover medical costs during retirement.
The SERPs and other post‑employment benefit plans are managed by the Company with oversight from the Board of Directors.
| 123
Notes to Consolidated Financial Statements | 2020 IGM Financial Inc. Annual Report NOTE 14 EMPLOYEE BENEFITS (continued)
DEFINED BENEFIT PLANS (continued)
The defined benefit plans expose the Company to actuarial risks such as mortality risk which represents life expectancy and impacts the
calculation of the obligations; interest rate risk which impacts the discount rate used to calculate the obligations and the actual return
on plan assets; salary risk as estimated salary increases are used in the calculation of the obligations; and investment risk as the nature
of the investments impact the actual return on the plan assets. The risks are managed by regular monitoring of the plans, applicable
regulations and other factors that could impact the Company’s expenses and cash flows.
Plan assets, benefit obligations and funded status:
Fair value of plan assets
Balance, beginning of year
Employee contributions
Employer contributions
Benefits paid
Interest income
Additions
Remeasurements:
Return on plan assets
Balance, end of year
Accrued benefit obligation
Balance, beginning of year
Benefits paid
Current service cost
Past service costs
Employee contributions
Interest expense
Additions
Remeasurements:
Actuarial losses (gains)
Demographic assumption
Experience adjustments
Financial assumptions
DEFINED
BENEFIT
PENSION PLAN
OTHER POST–
EMPLOYMENT
BENEFITS
DEFINED
BENEFIT
PENSION PLAN
SERPS
2020
2019
OTHER POST–
EMPLOYMENT
BENEFITS
SERPS
$
$
466,547
1,979
25,468
(27,792)
14,935
11,200
24,608
516,945
565,606
(27,792)
20,728
–
1,979
17,688
14,700
–
(33)
57,188
$
–
–
–
–
–
–
–
–
$
–
–
–
–
–
–
–
–
69,236
(3,267)
1,639
(1,588)
–
2,072
–
–
1,345
5,388
39,147
(1,942)
587
–
–
1,156
–
830
(535)
2,892
$
407,428
2,316
26,368
(32,014)
16,065
–
46,384
466,547
496,715
(32,014)
18,540
–
2,316
19,048
–
–
(970)
61,971
$
–
–
–
–
–
–
–
–
62,084
(3,308)
1,462
–
–
2,265
–
–
1,934
4,798
–
–
–
–
–
–
–
–
37,742
(2,266)
539
–
–
1,337
–
–
(648)
2,443
Balance, end of year
650,064
74,825
42,135
565,606
69,235
39,147
Accrued benefit liability
$
133,119
$
74,825
$
42,135
$
99,059
$
69,235
$
39,147
Significant actuarial assumptions used to calculate the defined benefit obligation:
Discount rate
Rate of compensation increase
Health care cost trend rate(1)
Mortality rates at age 65
for current pensioners
DEFINED
BENEFIT
PENSION PLAN
OTHER POST–
EMPLOYMENT
BENEFITS
DEFINED
BENEFIT
PENSION PLAN
SERPS
2020
2019
OTHER POST–
EMPLOYMENT
BENEFITS
SERPS
2.70%
3.75%
N/A
1.85%-2.50%
3.75%
N/A
2.35%
N/A
5.60%
3.20%
3.90%
N/A
2.95%‑3.10%
3.75%
N/A
3.05%
N/A
4.00%
23.0 years
23.0 years
23.0 years
23.6 years
23.6 years
23.6 years
(1) Trending to 4.00% in 2040 and remaining at that rate thereafter.
The weighted average duration of the pension plan’s defined benefit obligation at the end of the reporting period is 19.3 years (2019 –
19.1 years).
124 |
2020 IGM Financial Inc. Annual Report | Notes to Consolidated Financial Statements
NOTE 14 EMPLOYEE BENEFITS (continued)
DEFINED BENEFIT PLANS (continued)
Benefit expense:
DEFINED
BENEFIT
PENSION PLAN
$
$
20,728
–
2,753
2020
OTHER POST–
EMPLOYMENT
BENEFITS
DEFINED
BENEFIT
PENSION PLAN
$
$
587
–
1,156
$
18,540
–
2,983
SERPS
1,639
(1,588)
2,072
SERPS
1,462
–
2,265
$
23,481
$
2,123
$
1,743
$
21,523
$
3,727
$
2019
OTHER POST–
EMPLOYMENT
BENEFITS
$
539
–
1,337
1,876
Current service cost
Past service costs
Net interest cost
Sensitivity analysis:
The calculation of the accrued benefit liability and the related benefit expense are sensitive to the significant actuarial assumptions. The
following table presents the sensitivity analysis:
Defined benefit pension plan
Discount rate (+ / – 0.25%)
Increase
Decrease
Rate of compensation (+ / – 0.25%)
Increase
Decrease
Mortality
Increase 1 year
SERPs
Discount rate (+ / – 0.25%)
Increase
Decrease
Rate of compensation (+ / – 0.25%)
Increase
Decrease
Mortality
Increase 1 year
Other post-employment benefits
Discount rate (+ / – 0.25%)
Increase
Decrease
Health care cost trend rates (+ / – 1.00%)
Increase
Decrease
Mortality
Increase 1 year
INCREASE
(DECREASE)
IN LIABILITY
2020
INCREASE
(DECREASE)
IN EXPENSE
INCREASE
(DECREASE)
IN LIABILITY
2019
INCREASE
(DECREASE)
IN EXPENSE
$
(29,334)
31,391
$
(2,081)
2,110
$
(25,523)
27,313
$
(1,782)
1,815
11,121
(10,981)
1,075
(1,057)
9,676
(9,555)
14,339
849
12,476
(1,922)
2,001
41
(42)
1,645
(1,056)
1,106
1,476
(1,273)
1,270
87
(93)
21
(15)
45
52
(55)
35
(30)
42
(1,825)
1,908
79
(78)
1,681
(982)
1,028
1,372
(1,183)
1,180
812
(806)
686
52
(56)
23
(22)
58
43
(46)
39
(35)
44
The sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is
unlikely to occur as changes in certain assumptions may be correlated.
Asset allocation of defined benefit pension plan by asset category:
Equity securities
Fixed income securities
Alternative strategies
Cash and cash equivalents
2020
2019
60.8 %
29.6
8.6
1.0
59.2 %
30.3
9.4
1.1
100.0 %
100.0 %
| 125
Notes to Consolidated Financial Statements | 2020 IGM Financial Inc. Annual Report
NOTE 14 EMPLOYEE BENEFITS (continued)
DEFINED BENEFIT PLANS (continued)
The defined benefit pension plan adheres to its Statement of Investment Policies and Procedures which includes investment objectives,
asset allocation guidelines and investment limits by asset class. The defined benefit pension plan assets are invested in proprietary
investment funds with the exception of cash on deposit with Schedule I Canadian chartered banks.
DEFINED CONTRIBUTION PENSION PLANS
The Company maintains a number of defined contribution pension plans for eligible employees. The total expense recorded in Advisory
and business development and Operations and support expenses was $6.2 million (2019 – $5.5 million).
GROUP RETIREMENT SAVINGS PLAN (RSP)
The Company maintains a group RSP for eligible employees. The Company’s contributions are recorded in Advisory and business
development and Operations and support expenses as paid and totalled $7.6 million (2019 – $6.9 million).
NOTE 15 INCOME TAXES
Income tax expense:
Income taxes recognized in net earnings
Current taxes
Tax on current year’s earnings
Adjustments in respect of prior years
Deferred taxes
Effective income tax rate:
Income taxes at Canadian federal and provincial statutory rates
Effect of:
Proportionate share of associates’ earnings (Note 8)
Proportionate share of associate’s adjustments (Note 8)
Tax loss consolidation (Note 26)
Disposition of assets and other acquisition costs
Other items
Effective income tax rate
2020
2019
$
170,441
(2,003)
$
168,438
32,332
200,736
513
201,249
18,470
$
200,770
$
219,719
2020
2019
26.68 %
26.77 %
(3.71)
(0.09)
(1.15)
(0.82)
(0.11)
(3.31)
0.48
(1.41)
–
0.15
20.80 %
22.68 %
126 |
2020 IGM Financial Inc. Annual Report | Notes to Consolidated Financial Statements
NOTE 15 INCOME TAXES (continued)
DEFERRED INCOME TAXES
Composition and changes in net deferred taxes are as follows:
ACCRUED
BENEFIT
LOSS
LIABILITIES CARRYFORWARDS
CAPITALIZED
SALES
COMMISSIONS
INTANGIBLE
ASSETS
OTHER
INVESTMENTS
OTHER
TOTAL
FOR THE YEAR ENDED
DECEMBER 31, 2020
Balance, beginning of year
Recognized in
statements of:
Earnings
Comprehensive income
Equity
Business acquisitions
Foreign exchange rate
charges and other
$ 55,994
$ 33,700
$
(40,006)
$ (268,734)
$
(8,104)
$
(1,382)
$ (228,532)
(933)
11,461
–
945
(6,096)
–
–
–
(21,573)
–
–
–
(4,485)
–
–
(15,010)
708
(38,565)
–
–
47
(1,900)
–
488
(32,332)
(29,004)
–
(13,577)
–
–
–
–
–
(10)
(10)
Balance, end of year
$
67,467
$ 27,604
$
(61,579)
$ (288,229)
$
(45,961)
$
(2,757)
$ (303,455)
FOR THE YEAR ENDED
DECEMBER 31, 2019
Balance, beginning of year
Recognized in
statements of:
Earnings
Comprehensive income
Equity
Business acquisitions
Foreign exchange rate
charges and other
$
51,025
$ 33,165
$
(28,254)
$ (265,343)
$
(7,714)
$
(2,991)
$ (220,112)
(1,274)
6,243
–
–
–
535
–
–
–
–
(11,752)
–
–
–
(3,391)
–
–
–
(2,091)
1,701
–
–
(497)
3,448
(1,341)
–
(18,470)
11,392
(1,341)
–
–
–
–
(1)
(1)
Balance, end of year
$
55,994
$ 33,700
$
(40,006)
$ (268,734)
$
(8,104)
$
(1,382)
$ (228,532)
Deferred income tax assets and liabilities are presented on the Consolidated Balance Sheets as follows:
Deferred income tax assets
Deferred income tax liabilities
2020
2019
$
84,624
388,079
$
76,517
305,049
$
303,455
$
228,532
As at December 31, 2020, the Company had non‑capital losses of $12.2 million (2019 – $10.0 million) available to reduce future
taxable income, the benefit of which had not been recognized. $11.4 million of the losses can be carried forward indefinitely and the
remainder expire on December 31, 2037.
| 127
Notes to Consolidated Financial Statements | 2020 IGM Financial Inc. Annual Report
NOTE 16 LONG‑TERM DEBT
MATURITY
January 26, 2027
December 13, 2027
May 9, 2031
December 31, 2032
March 7, 2033
December 10, 2040
January 25, 2047
December 9, 2047
July 13, 2048
March 21, 2050
RATE
3.44 %
6.65 %
7.45 %
7.00 %
7.11 %
6.00 %
4.56 %
4.115 %
4.174 %
4.206 %
2020
2019
400,000
125,000
150,000
175,000
150,000
200,000
200,000
250,000
200,000
250,000
400,000
125,000
150,000
175,000
150,000
200,000
200,000
250,000
200,000
250,000
$ 2,100,000
$ 2,100,000
Long‑term debt consists of unsecured debentures which are redeemable by the Company, in whole or in part, at any time, at the
greater of par and a formula price based upon yields at the time of redemption.
Long‑term debt is classified as other financial liabilities and is recorded at amortized cost.
Interest expense relating to long‑term debt was $106.7 million (2019 – $104.3 million).
On March 20, 2019, the Company issued $250.0 million 4.206% debentures maturing March 21, 2050. The net proceeds were used
by the Company to fund the redemption of $150.0 million of its issued and outstanding 5.90% Non‑Cumulative First Preferred Shares,
Series B and for general corporate purposes. The Company redeemed the Series B Preferred Shares on April 30, 2019.
NOTE 17 SHARE CAPITAL
AUTHORIZED
Unlimited number of:
First preferred shares, issuable in series
Second preferred shares, issuable in series
Class 1 non‑voting shares
Common shares, no par value
ISSUED AND OUTSTANDING
Common shares:
Balance, beginning of year
Issued under Stock Option Plan (Note 19)
Purchased for cancellation
Balance, end of year
2020
STATED
VALUE
SHARES
2019
STATED
VALUE
SHARES
238,294,090
14,194
–
$ 1,597,860
521
–
240,885,317
171,561
(2,762,788)
$ 1,611,263
5,111
(18,514)
238,308,284
$ 1,598,381
238,294,090
$ 1,597,860
The Company redeemed its First preferred shares, Series B for $150.0 million on April 30, 2019.
NORMAL COURSE ISSUER BID
The Company commenced a normal course issuer bid on March 26, 2019 which was effective until March 25, 2020. Pursuant to this
bid, the Company was authorized to purchase up to 4.0 million or 1.7% of its common shares outstanding as at March 14, 2019.
There were no common shares purchased in 2020. In 2019, there were 2,762,788 shares purchased at a cost of $100.0 million. The
premium paid to purchase the shares in excess of the stated value was charged to Retained earnings.
128 |
2020 IGM Financial Inc. Annual Report | Notes to Consolidated Financial Statements
NOTE 18 CAPITAL MANAGEMENT
The Company’s capital management objective is to maximize shareholder returns while ensuring that the Company is capitalized in a
manner which appropriately supports regulatory capital requirements, working capital needs and business expansion. The Company’s
capital management practices are focused on preserving the quality of its financial position by maintaining a solid capital base and a
strong balance sheet. Capital of the Company consists of long‑term debt and common shareholders’ equity. The Company regularly
assesses its capital management practices in response to changing economic conditions.
The Company’s capital is primarily utilized in its ongoing business operations to support working capital requirements, long‑term
investments made by the Company, business expansion and other strategic objectives. Subsidiaries subject to regulatory capital
requirements include investment dealers, mutual fund dealers, exempt market dealers, portfolio managers, investment fund managers
and a trust company. These subsidiaries are required to maintain minimum levels of capital based on either working capital, liquidity or
shareholders’ equity. The Company’s subsidiaries have complied with all regulatory capital requirements.
The total outstanding long‑term debt was $2,100.0 million at December 31, 2020, unchanged from December 31, 2019. Long‑term
debt is comprised of debentures which are senior unsecured debt obligations of the Company subject to standard covenants, including
negative pledges, but which do not include any specified financial or operational covenants.
Other activities in 2020 included the declaration of common share dividends of $536.2 million or $2.25 per share. Changes in common
share capital are reflected in the Consolidated Statements of Changes in Shareholders’ Equity.
NOTE 19 SHARE‑BASED PAYMENTS
STOCK OPTION PLAN
Under the terms of the Company’s Stock Option Plan (Plan), options to purchase common shares are periodically granted to employees
at prices not less than the weighted average trading price per common share on the Toronto Stock Exchange for the five trading
days preceding the date of the grant. The options are subject to time vesting conditions set out at the grant date. Options vest over a
period of up to 7.5 years from the grant date and are exercisable no later than 10 years after the grant date. At December 31, 2020,
20,401,157 (2019 – 20,415,351) common shares were reserved for issuance under the Plan.
During 2020, the Company granted 2,104,365 options to employees (2019 – 1,511,540). The weighted‑average fair value of options
granted during the year ended December 31, 2020 has been estimated at $1.43 per option (2019 – $1.82) using the Black‑Scholes
option pricing model. The weighted‑average closing share price at the grant dates was $35.05 (2019 – $34.35). The assumptions used
in these valuation models include:
Exercise price
Risk‑free interest rate
Expected option life
Expected volatility
Expected dividend yield
2020
2019
$
36.82
$
34.34
1.11%
7 years
18.62%
6.45%
2.07%
7 years
18.00%
6.55%
Expected volatility has been estimated based on the historic volatility of the Company’s share price over seven years which is reflective
of the expected option life. Stock options were exercised regularly throughout 2020 and the average share price in 2020 was $32.65
(2019 – $36.22).
The Company recorded compensation expense related to its stock option program of $3.0 million (2019 – $3.4 million).
| 129
Notes to Consolidated Financial Statements | 2020 IGM Financial Inc. Annual Report
NOTE 19 SHARE‑BASED PAYMENTS (continued)
STOCK OPTION PLAN (continued)
Balance, beginning of year
Granted
Exercised
Forfeited
Balance, end of year
Exercisable, end of year
OPTIONS OUTSTANDING AT DECEMBER 31, 2020
2020
WEIGHTED-
AVERAGE
EXERCISE PRICE
$
$
$
41.22
36.82
35.08
42.64
40.37
43.00
NUMBER OF
OPTIONS
10,529,360
2,104,365
(14,194)
(689,307)
11,930,224
6,326,067
2019
WEIGHTED‑
AVERAGE
EXERCISE PRICE
$
$
$
42.27
34.34
28.25
45.20
41.22
43.99
NUMBER OF
OPTIONS
9,701,894
1,511,540
(171,561)
(512,513)
10,529,360
5,470,178
EXPIRY
DATE
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
EXERCISE
PRICE $
OPTIONS
OUTSTANDING
OPTIONS
EXERCISABLE
42.49 – 46.72
45.56 – 47.23
44.73 – 47.26
53.81
43.28 – 43.97
34.88 – 38.17
39.71 – 41.74
37.58 – 40.10
34.29 – 36.91
31.85 – 38.65
424,545
655,701
994,895
715,859
1,082,924
1,914,022
1,273,796
1,307,536
1,463,846
2,097,100
424,545
655,701
994,895
669,565
917,597
1,173,633
670,077
524,911
295,143
–
11,930,224
6,326,067
SHARE UNIT PLANS
The Company has share unit plans for eligible employees to assist in retaining and further aligning the interests of senior management
with those of the shareholders. These plans include Performance Share Unit (PSU), Deferred Share Unit (DSU) and Restricted Share
Unit (RSU) plans. Under the terms of the plans, share units are awarded annually and are subject to time vesting conditions. In addition,
the PSU and DSU plans are subject to performance vesting conditions. The value of each share unit is based on the share price of the
Company’s common shares. The PSUs and RSUs are cash settled and vest over a three year period. Certain employees can elect at the
time of grant to receive a portion of their PSUs in the form of deferred share units which vest over a three year period. Deferred share
units are redeemable when a participant is no longer an employee of the Company or any of its affiliates by a lump sum payment
based on the value of the deferred share unit at that time. Additional share units are issued in respect of dividends payable on common
shares based on a value of the share unit at the dividend payment date. The Company recorded compensation expense, excluding
the impact of hedging, of $16.8 million in 2020 (2019 – $17.0 million) and a liability of $31.5 million at December 31, 2020 (2019 –
$26.5 million).
SHARE PURCHASE PLANS
Under the Company’s share purchase plans, eligible employees and IG Wealth Management consultants can elect each year to have
a percentage of their annual earnings withheld, subject to a maximum, to purchase the Company’s common shares. The Company
matches 50% of the contribution amounts. All contributions are used by the plan trustee to purchase common shares in the open
market. Shares purchased with Company contributions vest after a maximum period of 3 years following the date of purchase. The
Company’s contributions are recorded in Advisory and business development and Operations and support expenses as paid and totalled
$3.8 million (2019 – $10.0 million).
130 |
2020 IGM Financial Inc. Annual Report | Notes to Consolidated Financial Statements
NOTE 19 SHARE‑BASED PAYMENTS (continued)
DIRECTORS’ DEFERRED SHARE UNIT PLAN
The Company has a Deferred Share Unit (DSU) plan for the directors of the Company to promote a greater alignment of interests
between directors and shareholders of the Company. Under the terms of the plan, directors are required to receive 50% of their annual
board retainer in the form of DSUs and may elect to receive the balance of their annual board retainer in cash or DSUs. Directors may
elect to receive certain fees in a combination of DSUs and cash. The number of DSUs granted is determined by dividing the amount
of remuneration payable by the average closing price on the Toronto Stock Exchange of the common shares of the Company on the
last five days of the fiscal quarter (value of DSU). A director who has elected to receive DSUs will receive additional DSUs in respect
of dividends payable on common shares, based on the value of a DSU at the dividend payment date. DSUs are redeemable when a
participant is no longer a director, officer or employee of the Company or any of its affiliates by cash payments, based on the value of
the DSUs at that time. At December 31, 2020, the fair value of the DSUs outstanding was $21.2 million (2019 – $18.6 million). Any
difference between the change in fair value of the DSUs and the change in fair value of the total return swap, which is an economic
hedge for the DSU plan, is recognized in Operations and support expense in the period in which the change occurs.
NOTE 20 ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
2020
Balance, beginning of year
Other comprehensive income (loss)
Balance, end of year
2019
Balance, beginning of year
Other comprehensive income (loss)
Transfer out of FVTOCI
Balance, end of year
Amounts are recorded net of tax.
EMPLOYEE
BENEFITS
OTHER
INVESTMENTS
INVESTMENT
IN ASSOCIATES
AND OTHER
TOTAL
$
(165,947)
(31,002)
$
46,363
247,085
$
(8,118)
47,983
$
(127,702)
264,066
$
(196,949)
$ 293,448
$
39,865
$ 136,364
$
(149,052)
(16,895)
–
$
57,234
10,597
(21,468)
$
46,020
(54,138)
–
$
(45,798)
(60,436)
(21,468)
$
(165,947)
$
46,363
$
(8,118)
$
(127,702)
NOTE 21 RISK MANAGEMENT
The Company actively manages its liquidity, credit and market risks.
LIQUIDITY AND FUNDING RISK RELATED TO FINANCIAL INSTRUMENTS
Liquidity and funding risk is the risk of the inability to generate or obtain sufficient cash in a timely and cost‑effective manner to meet
contractual or anticipated commitments as they come due or arise.
The Company’s liquidity management practices include:
• Maintaining liquid assets and lines of credit to satisfy near term liquidity needs.
• Ensuring effective controls over liquidity management processes.
• Performing regular cash forecasts and stress testing.
• Regular assessment of capital market conditions and the Company’s ability to access bank and capital market funding.
• Ongoing efforts to diversify and expand long‑term mortgage funding sources.
• Oversight of liquidity management by the Financial Risk Management Committee, a committee of finance and other business leaders.
A key funding requirement for the Company is the funding of Consultant network compensation paid for the distribution of financial
products and services. This compensation continues to be paid from operating cash flows.
| 131
Notes to Consolidated Financial Statements | 2020 IGM Financial Inc. Annual Report
NOTE 21 RISK MANAGEMENT (continued)
LIQUIDITY AND FUNDING RISK RELATED TO FINANCIAL INSTRUMENTS (continued)
The Company also maintains sufficient liquidity to fund and temporarily hold mortgages pending sale or securitization to long‑term
funding sources and to manage any derivative collateral requirements. Through its mortgage banking operations, residential mortgages
are sold to third parties including certain mutual funds, institutional investors through private placements, Canadian bank‑sponsored
securitization trusts, and by issuance and sale of National Housing Act Mortgage Backed Securities (NHA MBS) securities including sales
to Canada Housing Trust under the Canada Mortgage Bond Program (CMB Program).
Certain subsidiaries of the Company are approved issuers of NHA MBS and are approved sellers into the CMB Program. Capacity
for sales under the CMB Program consists of participation in new CMB issues and reinvestment of principal repayments held in the
Principal Reinvestment Accounts.
The Company maintains committed capacity within certain Canadian bank‑sponsored securitization trusts.
The Company’s contractual maturities of certain financial liabilities were as follows:
AS AT DECEMBER 31, 2020 ($ millions)
Derivative financial instruments
Deposits and certificates
Obligations to securitization entities
Leases(1)
Long‑term debt
Pension funding(2)
Total contractual maturities
DEMAND
$
–
1,099.4
–
–
–
LESS THAN
1 YEAR
$
13.1
2.1
1,543.1
27.6
–
14.1
1 – 5 YEARS
AFTER 5 YEARS
$
21.4
2.5
4,610.1
88.2
–
–
$
–
0.9
20.7
131.1
2,100.0
–
$
TOTAL
34.5
1,104.9
6,173.9
246.9
2,100.0
14.1
$ 1,099.4
$ 1,600.0
$ 4,722.2
$ 2,252.7
$ 9,674.3
(1) Includes remaining lease payments related to office space and equipment used in the normal course of business.
(2) The next required actuarial valuation will be completed based on a measurement date of December 31, 2020. Pension funding requirements beyond 2021 are subject to significant
variability and will be determined based on future actuarial valuations. Pension contribution decisions are subject to change, as contributions are affected by many factors including
market performance, regulatory requirements, changes in assumptions and management’s ability to change funding policy.
In addition to the Company’s current balance of cash and cash equivalents, liquidity is available through the Company’s lines of credit.
The Company’s lines of credit with various Schedule I Canadian chartered banks totalled $825 million at December 31, 2020, unchanged
from December 31, 2019. The lines of credit at December 31, 2020 consisted of committed lines of $650 million and uncommitted lines
of $175 million, unchanged from December 31, 2019. The Company has accessed its uncommitted lines of credit in the past; however,
any advances made by a bank under the uncommitted lines of credit are at the bank’s sole discretion. As at December 31, 2020 and
December 31, 2019, the Company was not utilizing its committed lines of credit or its uncommitted lines of credit.
The Company’s liquidity position and its management of liquidity and funding risk have not changed materially since December 31, 2019.
CREDIT RISK RELATED TO FINANCIAL INSTRUMENTS
This is the risk of financial loss to the Company if a counterparty to a transaction fails to meet its obligations. The Company’s cash and
cash equivalents, other investment holdings, mortgage portfolios, and derivatives are subject to credit risk. The Company monitors its
credit risk management practices on an ongoing basis to evaluate their effectiveness.
At December 31, 2020, cash and cash equivalents of $771.6 million (2019 – $720.0 million) consisted of cash balances of $76.6 million
(2019 – $68.0 million) on deposit with Canadian chartered banks and cash equivalents of $695.0 million (2019 – $652.0 million). Cash
equivalents are comprised of Government of Canada treasury bills totalling $96.0 million (2019 – $34.5 million), provincial government
treasury bills and promissory notes of $148.8 million (2019 – $206.5 million), and bankers’ acceptances and other short‑term notes
issued by Canadian chartered banks of $450.2 million (2019 – $411.0 million).
Client funds on deposit of $1,063.4 million (2019 – $561.3 million) represent cash balances held in client accounts which are deposited
at Canadian financial institutions.
The Company manages credit risk related to cash and cash equivalents by adhering to its Investment Policy that outlines credit risk
parameters and concentration limits. The Company regularly reviews the credit ratings of its counterparties. The maximum exposure to
credit risk on these financial instruments is their carrying value.
132 |
2020 IGM Financial Inc. Annual Report | Notes to Consolidated Financial Statements
NOTE 21 RISK MANAGEMENT (continued)
CREDIT RISK RELATED TO FINANCIAL INSTRUMENTS (continued)
As at December 31, 2020, residential mortgages, recorded on the Company’s balance sheet, of $6.3 billion (2019 – $7.2 billion)
consisted of $6.0 billion sold to securitization programs (2019 – $6.8 billion), $334.5 million held pending sale or securitization (2019 –
$344.5 million) and $14.1 million related to the Company’s intermediary operations (2019 – $24.2 million).
The Company manages credit risk related to residential mortgages through:
• Adhering to its lending policy and underwriting standards;
• Its loan servicing capabilities;
• Use of client‑insured mortgage default insurance and mortgage portfolio default insurance held by the Company; and
• Its practice of originating its mortgages exclusively through its own network of Mortgage Planning Specialists and IG Wealth
Management Consultants as part of a client’s IG Living Plan™.
In certain instances, credit risk is also limited by the terms and nature of securitization transactions as described below:
• Under the NHA MBS program totalling $3.2 billion (2019 – $3.9 billion), the Company is obligated to make timely payment of
principal and coupons irrespective of whether such payments were received from the mortgage borrower. However, as required by
the NHA MBS program, 100% of the loans are insured by an approved insurer.
• Credit risk for mortgages securitized by transfer to bank‑sponsored securitization trusts totalling $2.8 billion (2019 – $2.9 billion) is
limited to amounts held in cash reserve accounts and future net interest income, the fair values of which were $73.0 million (2019 –
$71.9 million) and $45.6 million (2019 – $37.9 million), respectively, at December 31, 2020. Cash reserve accounts are reflected on
the balance sheet, whereas rights to future net interest income are not reflected on the balance sheet and will be recorded over the
life of the mortgages. This risk is further mitigated by insurance with 3.0% of mortgages held in ABCP Trusts insured at December 31,
2020 (2019 – 4.6%).
At December 31, 2020, residential mortgages recorded on balance sheet were 55.3% insured (2019 – 59.1%). As at December 31,
2020, impaired mortgages on these portfolios were $4.8 million, compared to $2.4 million at December 31, 2019. Uninsured non‑
performing mortgages over 90 days on these portfolios were $2.3 million at December 31, 2020, compared to $1.6 million at
December 31, 2019.
The Company also retains certain elements of credit risk on mortgage loans sold to the Investors Mortgage and Short Term Income
Fund and to the Investors Canadian Corporate Bond Fund through an agreement to repurchase mortgages in certain circumstances
benefiting the funds. These loans are not recorded on the Company’s balance sheet as the Company has transferred substantially all of
the risks and rewards of ownership associated with these loans.
The Company regularly reviews the credit quality of the mortgages and the adequacy of the allowance for expected credit losses.
The Company’s allowance for expected credit losses was $0.8 million at December 31, 2020, compared to $0.7 million at December 31,
2019, and is considered adequate by management to absorb all credit‑related losses in the mortgage portfolios based on: i) historical
credit performance experience, ii) recent trends including the economic impact of COVID‑19 and Canada’s COVID‑19 Economic
Response Plan to support Canadians and businesses, iii) current portfolio credit metrics and other relevant characteristics, iv) our strong
financial planning relationship with our clients, and v) stress testing of losses under adverse real estate market conditions.
The Company’s exposure to and management of credit risk related to cash and cash equivalents, fixed income securities and mortgage
portfolios have not changed materially since December 31, 2019.
The Company is exposed to credit risk through derivative contracts it utilizes to hedge interest rate risk, to facilitate securitization
transactions and to hedge market risk related to certain stock‑based compensation arrangements. These derivatives are discussed
more fully under the Market Risk section.
To the extent that the fair value of the derivatives is in a gain position, the Company is exposed to credit risk that its counterparties fail
to fulfil their obligations under these arrangements.
| 133
Notes to Consolidated Financial Statements | 2020 IGM Financial Inc. Annual Report NOTE 21 RISK MANAGEMENT (continued)
CREDIT RISK RELATED TO FINANCIAL INSTRUMENTS (continued)
The Company’s derivative activities are managed in accordance with its Investment Policy which includes counterparty limits and
other parameters to manage counterparty risk. The aggregate credit risk exposure related to derivatives that are in a gain position of
$35.8 million (2019 – $15.7 million) does not give effect to any netting agreements or collateral arrangements. The exposure to credit
risk, considering netting agreements and collateral arrangements and including rights to future net interest income, was $3.8 million at
December 31, 2020 (2019 – $0.7 million). Counterparties are all Canadian Schedule I chartered banks and, as a result, management
has determined that the Company’s overall credit risk related to derivatives was not significant at December 31, 2020. Management of
credit risk related to derivatives has not changed materially since December 31, 2019.
MARKET RISK RELATED TO FINANCIAL INSTRUMENTS
This is the risk of loss arising from changes in the values of the Company’s financial instruments due to changes in foreign exchange
rates, interest rates or equity prices.
Interest Rate Risk
The Company is exposed to interest rate risk on its loan portfolio and on certain of the derivative financial instruments used in the
Company’s mortgage banking operations.
The Company manages interest rate risk associated with its mortgage banking operations by entering into interest rate swaps with
Canadian Schedule I chartered banks as follows:
• The Company has in certain instances funded floating rate mortgages with fixed rate Canada Mortgage Bonds as part of the
securitization transactions under the CMB Program. As previously discussed, as part of the CMB Program, the Company is party to a
swap whereby it is entitled to receive investment returns on reinvested mortgage principal and is obligated to pay Canada Mortgage
Bond coupons. This swap had a negative fair value of $21.1 million (2019 – negative $0.9 million) and an outstanding notional
amount of $0.7 billion at December 31, 2020 (2019 – $0.8 billion). The Company enters into interest rate swaps with Canadian
Schedule I chartered banks to hedge the risk that the interest rates earned on floating rate mortgages and reinvestment returns
decline. The fair value of these swaps totalled $19.9 million (2019 – negative $4.9 million), on an outstanding notional amount of
$1.3 billion at December 31, 2020 (2019 – $1.6 billion). The net fair value of these swaps of negative $1.2 million at December 31,
2020 (2019 – negative $5.8 million) is recorded on the balance sheet and has an outstanding notional amount of $2.0 billion
(2019 – $2.4 billion).
• The Company is exposed to the impact that changes in interest rates may have on the value of mortgages committed to or held
pending sale or securitization to long‑term funding sources. The Company enters into interest rate swaps to hedge the interest
rate risk related to funding costs for mortgages held by the Company pending sale or securitization. Hedge accounting is applied to
the cost of funds on certain securitization activities. The effective portion of fair value changes of the associated interest rate swaps
are initially recognized in Other comprehensive income and subsequently recognized in Wealth management revenue over the
term of the related Obligations to securitization entities. The negative fair value of these swaps was $0.3 million (2019 – positive
$0.6 million) on an outstanding notional amount of $191.3 million at December 31, 2020 (December 31, 2019 – $180.4 million).
As at December 31, 2020, the impact to annual net earnings of a 100 basis point increase in interest rates would have been a decrease
of approximately $1.3 million (2019 – decrease of $2.0 million). The Company’s exposure to and management of interest rate risk have
not changed materially since December 31, 2019.
Equity Price Risk
The Company is exposed to equity price risk on its equity investments (Note 4) which are classified as either fair value through other
comprehensive income or fair value through profit or loss or investments in associates. The fair value of the equity investments was
$632.3 million at December 31, 2020 (2019 – $357.4 million).
The Company sponsors a number of deferred compensation arrangements for employees where payments to participants are deferred
and linked to the performance of the common shares of IGM Financial Inc. The Company hedges its exposure to this risk through the
use of forward agreements and total return swaps.
134 |
2020 IGM Financial Inc. Annual Report | Notes to Consolidated Financial Statements NOTE 21 RISK MANAGEMENT (continued)
MARKET RISK RELATED TO FINANCIAL INSTRUMENTS (continued)
Foreign Exchange Risk
The Company is exposed to foreign exchange risk on its investment in China AMC. Changes to the carrying value due to changes in
foreign exchange rates is recognized in Other comprehensive income. A 5% appreciation (depreciation) in Canadian currency relative
to foreign currencies would decrease (increase) the aggregate carrying value of foreign investments by approximately $34.0 million
($37.6 million).
The Company’s proportionate share of China AMC’s earnings, recorded in Proportionate share of associates’ earnings in the
Consolidated Statements of Earnings, is also affected by changes in foreign exchange rates. A 5% appreciation (depreciation) in
Canadian currency relative to foreign currencies would decrease (increase) the Company’s proportionate share of associates’ earnings
(losses) by approximately $2.0 million ($2.1 million).
RISKS RELATED TO ASSETS UNDER MANAGEMENT
Risks related to the performance of the equity markets, changes in interest rates and changes in foreign currencies relative to the
Canadian dollar can have a significant impact on the level and mix of assets under management. These changes in assets under
management directly impact earnings.
NOTE 22 DERIVATIVE FINANCIAL INSTRUMENTS
The Company enters into derivative contracts which are either exchange‑traded or negotiated in the over‑the‑counter market on
a diversified basis with Schedule I chartered banks or Canadian bank‑sponsored securitization trusts that are counterparties to the
Company’s securitization transactions. In all cases, the derivative contracts are used for non‑trading purposes. Interest rate swaps
are contractual agreements between two parties to exchange the related interest payments based on a specified notional amount
and reference rate for a specified period. Total return swaps are contractual agreements to exchange payments based on a specified
notional amount and the underlying security for a specific period. Options are contractual agreements which convey the right, but
not the obligation, to buy or sell specific financial instruments at a fixed price at a future date. Forward contracts are contractual
agreements to buy or sell a financial instrument on a future date at a specified price.
Certain of the Company’s derivative financial instruments are subject to master netting arrangements and are presented on a gross
basis. The amount subject to credit risk is limited to the current fair value of the instruments which are in a gain position and recorded
as assets on the Consolidated Balance Sheets. The total estimated fair value represents the total amount that the Company would
receive or pay to terminate all agreements at each year end. However, this would not result in a gain or loss to the Company as the
derivative instruments which correlate to certain assets and liabilities provide offsetting gains or losses.
The following table summarizes the Company’s derivative financial instruments:
2020
Swaps
Hedge accounting
No hedge accounting
Forward contracts
Hedge accounting
2019
Swaps
Hedge accounting
No hedge accounting
Forward contracts
Hedge accounting
1 YEAR
OR LESS
1–5
YEARS
OVER
5 YEARS
TOTAL
CREDIT
RISK
ASSET
LIABILITY
NOTIONAL AMOUNT
FAIR VALUE
$
–
992,444
$
20,831
1,058,001
$
135,731
15,081
$
156,562
2,065,526
$
–
35,770
$
–
35,770
$
214
32,854
14,890
36,650
–
51,540
1,564
1,564
1,446
$ 1,007,334
$ 1,115,482
$
150,812
$ 2,273,628
$
37,334
$
37,334
$
34,514
$
–
914,441
$
59,559
1,466,479
$
46,504
76,973
$
106,063
2,457,893
$
373
12,049
$
373
12,049
$
10
17,183
10,175
33,440
–
43,615
2,782
2,782
–
$
924,616
$ 1,559,478
$
123,477
$ 2,607,571
$
15,204
$
15,204
$
17,193
| 135
Notes to Consolidated Financial Statements | 2020 IGM Financial Inc. Annual Report
NOTE 22 DERIVATIVE FINANCIAL INSTRUMENTS (continued)
The credit risk related to the Company’s derivative financial instruments after giving effect to any netting agreements was $3.8 million
(2019 – $0.7 million).
The credit risk related to the Company’s derivative financial instruments after giving effect to netting agreements and including rights
to future net interest income, was $3.8 million (2019 – $0.7 million). Rights to future net interest income are related to the Company’s
securitization activities and are not reflected on the Consolidated Balance Sheets.
NOTE 23 FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair values are management’s estimates and are calculated using market conditions at a specific point in time and may not reflect
future fair values. The calculations are subjective in nature, involve uncertainties and are matters of significant judgment.
All financial instruments measured at fair value and those for which fair value is disclosed are classified into one of three levels that
distinguish fair value measurements by the significance of the inputs used for valuation.
Fair value is determined based on the price that would be received for an asset or paid to transfer a liability in the most advantageous
market, utilizing a hierarchy of three different valuation techniques, based on the lowest level input that is significant to the fair value
measurement in its entirety.
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2 – Observable inputs other than Level 1 quoted prices for similar assets or liabilities in active markets; quoted prices for
identical or similar assets or liabilities in markets that are not active; or inputs other than quoted prices that are observable
or corroborated by observable market data; and
Level 3 – Unobservable inputs that are supported by little or no market activity. Valuation techniques are primarily model‑based.
Markets are considered inactive when transactions are not occurring with sufficient regularity. Inactive markets may be characterized by
a significant decline in the volume and level of observed trading activity or through large or erratic bid/offer spreads. In those instances
where traded markets are not considered sufficiently active, fair value is measured using valuation models which may utilize predominantly
observable market inputs (Level 2) or may utilize predominantly non‑observable market inputs (Level 3). Management considers all
reasonably available information including indicative broker quotations, any available pricing for similar instruments, recent arm’s length
market transactions, any relevant observable market inputs, and internal model‑based estimates. Management exercises judgment in
determining the most appropriate inputs and the weighting ascribed to each input as well as in the selection of valuation methodologies.
Fair value is determined using the following methods and assumptions:
Other investments and other financial assets and financial liabilities are valued using quoted prices from active markets, when
available. When a quoted market price is not readily available, valuation techniques are used that require assumptions related
to discount rates and the timing and amount of future cash flows. Wherever possible, observable market inputs are used in the
valuation techniques.
Loans classified as Level 2 are valued using market interest rates for loans with similar credit risk and maturity.
Loans classified as Level 3 are valued by discounting the expected future cash flows at prevailing market yields.
Obligations to securitization entities are valued by discounting the expected future cash flows at prevailing market yields for securities
issued by these securitization entities having similar terms and characteristics.
Deposits and certificates are valued by discounting the contractual cash flows using market interest rates currently offered for
deposits with similar terms and credit risks.
Long‑term debt is valued using quoted prices for each debenture available in the market.
Derivative financial instruments are valued based on quoted market prices, where available, prevailing market rates for instruments
with similar characteristics and maturities, or discounted cash flow analysis.
Level 1 financial instruments include exchange‑traded equity investments and open‑end investment fund units and other financial
liabilities in instances where there are quoted prices available from active markets.
136 |
2020 IGM Financial Inc. Annual Report | Notes to Consolidated Financial Statements NOTE 23 FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
Level 2 assets and liabilities include fixed income securities, loans, derivative financial instruments, deposits and certificates and long‑
term debt. The fair value of fixed income securities is determined using quoted market prices or independent dealer price quotes. The
fair value of derivative financial instruments and deposits and certificates are determined using valuation models, discounted cash flow
methodologies, or similar techniques using primarily observable market inputs. The fair value of long‑term debt is determined using
indicative broker quotes.
Level 3 assets and liabilities include investments with little or no trading activity valued using broker‑dealer quotes, loans, other financial
assets, obligations to securitization entities and derivative financial instruments. Derivative financial instruments consist of principal
reinvestment account swaps which represent the component of a swap entered into under the CMB Program whereby the Company
pays coupons on Canada Mortgage Bonds and receives investment returns on the reinvestment of repaid mortgage principal. Fair value
is determined by discounting the projected cashflows of the swaps. The notional amount, which is an input used to determine the
fair value of the swap, is determined using an average unobservable prepayment rate of 15% which is based on historical prepayment
patterns. An increase (decrease) in the assumed mortgage prepayment rate increases (decreases) the notional amount of the swap.
The following table presents the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the
fair value hierarchy. The table distinguishes between those financial instruments recorded at fair value and those recorded at amortized
cost. The table also excludes fair value information for financial assets and financial liabilities not measured at fair value if the carrying
amount is a reasonable approximation of fair value. These items include cash and cash equivalents, accounts and other receivables,
certain other financial assets, accounts payable and accrued liabilities, and certain other financial liabilities.
2020
CARRYING VALUE
LEVEL 1
LEVEL 2
LEVEL 3
TOTAL
FAIR VALUE
Financial assets recorded at fair value
Other investments
– FVTOCI
– FVTPL
Loans
– FVTPL
Derivative financial instruments
Financial assets recorded at amortized cost
Loans
– Amortized cost
Financial liabilities recorded at fair value
Derivative financial instruments
Financial liabilities recorded at amortized cost
Deposits and certificates
Obligations to securitization entities
Long‑term debt
2019
Financial assets recorded at fair value
Other investments
– FVTOCI
– FVTPL
Loans
– FVTPL
Derivative financial instruments
Financial assets recorded at amortized cost
Loans
– Amortized cost
Financial liabilities recorded at fair value
Derivative financial instruments
Other financial liabilities
Financial liabilities recorded at amortized cost
Deposits and certificates
Obligations to securitization entities
Long‑term debt
$
593,273
39,027
$
–
38,748
$
$
–
–
593,273
279
$
593,273
39,027
3,291
37,334
6,328,564
34,514
1,104,889
6,173,886
2,100,000
–
–
–
–
–
–
–
3,291
35,389
–
1,945
3,291
37,334
346,428
6,186,410
6,532,838
11,466
23,048
34,514
1,105,384
–
2,653,814
–
6,345,189
–
1,105,384
6,345,189
2,653,814
$
301,196
56,166
$
–
55,603
$
$
–
–
301,196
563
$
301,196
56,166
–
15,204
7,198,043
17,193
–
584,331
6,913,636
2,100,000
–
–
–
–
–
–
–
–
–
10,762
–
4,442
–
15,204
366,020
6,907,743
7,273,763
11,845
–
584,662
–
2,453,564
5,348
–
–
6,996,953
–
17,193
–
584,662
6,996,953
2,453,564
| 137
Notes to Consolidated Financial Statements | 2020 IGM Financial Inc. Annual Report
NOTE 23 FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
There were no significant transfers between Level 1 and Level 2 in 2020 and 2019.
The following table provides a summary of changes in Level 3 assets and liabilities measured at fair value on a recurring basis.
2020
Other investments
– FVTOCI
– FVTPL
Derivative financial
instruments, net
2019
Other investments
– FVTOCI
– FVTPL
Derivative financial
instruments, net
GAINS/
(LOSSES)
GAINS/(LOSSES)
INCLUDED IN
OTHER
INCLUDED IN COMPREHENSIVE
INCOME
BALANCE
JANUARY 1 NET EARNINGS(1)
PURCHASES
AND
ISSUANCES
SETTLEMENTS
TRANSFERS
IN/OUT
BALANCE
DECEMBER 31
$
301,196
563
$
$
–
(194)
285,650
–
$
6,427
–
$
$
–
90
(906)
(27,143)
–
1,727
(5,219)
–
–
–
$
593,273
279
(21,103)
$
372,396
552
$
$
–
11
12,248
–
$
66,693
–
$
–
–
$
(150,141)(2) $
–
301,196
563
4,899
(5,207)
–
(1,551)
(953)
–
(906)
(1) Included in Wealth management revenue or Operations and support expenses in the Consolidated Statements of Earnings.
(2) Reclassification of investment in Personal Capital from Other investments (FVTOCI) to Investment in associates (equity method).
NOTE 24 EARNINGS PER COMMON SHARE
Earnings
Net earnings
Non‑controlling interest
Perpetual preferred share dividends
Net earnings available to common shareholders
Number of common shares (in thousands)
Weighted average number of common shares outstanding
Add: Potential exercise of outstanding stock options(1)
Average number of common shares outstanding – Diluted basis
Earnings per common share (in dollars)
Basic
Diluted
2020
2019
$
$
764,606
(198)
–
748,947
–
(2,213)
$
764,408
$
746,734
238,307
–
238,307
239,105
76
239,181
$
$
3.21
3.21
$
$
3.12
3.12
(1) Excludes 2,934 thousand shares in 2020 related to outstanding stock options that were anti-dilutive (2019 – 1,591 thousand).
NOTE 25 CONTINGENT LIABILITIES AND GUARANTEES
CONTINGENT LIABILITIES
The Company is subject to legal actions arising in the normal course of its business. In December 2018, a proposed class action was
filed in the Ontario Superior Court against Mackenzie Financial Corporation which alleges that the company should not have paid
mutual fund trailing commissions to order execution only dealers. Although it is difficult to predict the outcome of any such legal
actions, based on current knowledge and consultation with legal counsel, management does not expect the outcome of any of these
matters, individually or in aggregate, to have a material adverse effect on the Company’s consolidated financial position.
138 |
2020 IGM Financial Inc. Annual Report | Notes to Consolidated Financial Statements
NOTE 25 CONTINGENT LIABILITIES AND GUARANTEES (continued)
GUARANTEES
In the normal course of operations, the Company executes agreements that provide for indemnifications to third parties in transactions
such as business dispositions, business acquisitions, loans and securitization transactions. The Company has also agreed to indemnify
its directors and officers. The nature of these agreements precludes the possibility of making a reasonable estimate of the maximum
potential amount the Company could be required to pay third parties as the agreements often do not specify a maximum amount and
the amounts are dependent on the outcome of future contingent events, the nature and likelihood of which cannot be determined.
Historically, the Company has not made any payments under such indemnification agreements. No provisions have been recognized
related to these agreements.
NOTE 26 RELATED PARTY TRANSACTIONS
TRANSACTIONS AND BALANCES WITH RELATED ENTITIES
The Company enters into transactions with The Canada Life Assurance Company (Canada Life), which is a subsidiary of its affiliate,
Lifeco, which is a subsidiary of Power Corporation of Canada. On January 1, 2020, The Great‑West Life Assurance Company, London
Life Insurance Company and Canada Life amalgamated into a single company, The Canada Life Assurance Company. These transactions
are in the normal course of operations and have been recorded at fair value:
• During 2020 and 2019, the Company provided to and received from Canada Life certain administrative services. In 2020, the
Company notified Canada Life of its intention to terminate its long‑term technology infrastructure related sharing agreement. The
Company distributes insurance products under a distribution agreement with Canada Life and received $45.1 million in distribution
fees (2019 – $54.8 million). The Company received $18.4 million (2019 – $17.1 million) and paid $29.6 million (2019 – $26.2 million)
to Canada Life and related subsidiary companies for the provision of sub‑advisory services for certain investment funds. The Company
paid $78.3 million (2019 – $78.8 million) to Canada Life related to the distribution of certain investment funds of the Company.
• During 2020, the Company sold residential mortgage loans to Canada Life for $20.9 million (2019 – $10.8 million).
After obtaining advanced tax rulings in October 2017, the Company agreed to tax loss consolidation transactions with the Power
Corporation of Canada group whereby shares of a subsidiary that has generated tax losses may be acquired in each year up to and
including 2020. The Company recognized the benefit of the tax losses realized throughout the year. On each of December 31, 2020
and December 31, 2019, the Company acquired shares of such loss companies and recorded the benefit of the tax losses acquired. The
benefits from these tax loss consolidation arrangements ended at December 31, 2020.
Additional transactions with related parties included the sale of Personal Capital (Note 8), the investment in Northleaf (Note 8), the
acquisition of GLC Asset Management Group Ltd. and the sale of Quadrus Group of Funds (Note 29).
KEY MANAGEMENT COMPENSATION
The total compensation and other benefits to directors and employees classified as key management, being individuals having authority
and responsibility for planning, directing and controlling the activities of the Company, are as follows:
Compensation and employee benefits
Post‑employment benefits
Share‑based payments
2020
2019
$ 3,848
13,522
1,431
$ 4,260
3,988
2,023
$ 18,801
$ 10,271
Share‑based payments exclude the fair value remeasurement of the deferred share units associated with changes in the Company’s
share price (Note 19).
| 139
Notes to Consolidated Financial Statements | 2020 IGM Financial Inc. Annual Report
NOTE 27 COVID‑19
Governments worldwide have enacted emergency measures to combat the spread of a novel strain of coronavirus (COVID‑19). These
measures, which include the implementation of travel bans, closing of non‑essential businesses, self‑imposed quarantine periods and
social distancing, have caused significant volatility and weakness in global equity markets and material disruption to businesses globally
resulting in an economic slowdown. Governments and central banks have reacted with significant monetary and fiscal interventions
designed to stabilize economic conditions.
The Company has implemented its business continuity plan as a result of these events, which has included moving substantially all
employees and consultants to work from home and further supporting the Company’s information technology infrastructure.
The duration and full impact of the COVID‑19 pandemic is unknown at this time, as is the efficacy of the government and central bank
interventions. As a result, it is not possible to reliably estimate the length and severity of these developments and the impact on the
financial results and condition of the Company and its operating subsidiaries in future periods.
NOTE 28 SEGMENTED INFORMATION
The Company’s reportable segments are:
• Wealth Management
• Asset Management
• Strategic Investments and Other
These segments reflect the Company’s internal financial reporting and performance measurement.
• Wealth Management – reflects the activities of operating companies that are principally focused on providing financial planning and
related services to Canadian households. This segment includes the activities of IG Wealth Management and Investment Planning
Counsel. These firms are retail distribution organizations who serve Canadian households through their securities dealers, mutual
fund dealers and other subsidiaries licensed to distribute financial products and services. A majority of the revenues of this segment
are derived from providing financial advice and distributing financial products and services to Canadian households. This segment
also includes the investment management activities of these organizations, including mutual fund management and discretionary
portfolio management services.
• Asset Management – reflects the activities of operating companies primarily focused on providing investment management
services, and represents the operations of Mackenzie Investments. Investment management services are provided to a suite of
investment funds that are distributed through third party dealers and financial advisors, and also through institutional advisory
mandates to financial institutions, pensions and other institutional investors.
• Strategic Investments and Other – primarily represents the key strategic investments made by the Company, including China Asset
Management Co., Ltd., Great‑West Lifeco Inc., Northleaf Capital Group Ltd., Wealthsimple Financial Corp., and Portag3 Ventures LPs.
Unallocated capital is also included within this segment.
140 |
2020 IGM Financial Inc. Annual Report | Notes to Consolidated Financial Statements NOTE 28 SEGMENTED INFORMATION (continued)
2020
Revenues
Wealth management
Asset management
Dealer compensation
Net asset management
Net investment income
WEALTH
ASSET
MANAGEMENT MANAGEMENT
STRATEGIC
INVESTMENTS
AND OTHER
INTERSEGMENT
TOTAL
SEGMENT
ADJUSTMENTS(1)
TOTAL
$ 2,275,955
–
–
$
–
913,579
(299,530)
$
–
614,049
–
–
–
–
$
(16,379)
(100,648)
16,367
$ 2,259,576
812,931
(283,163)
$
(84,281)
529,768
–
–
–
–
$ 2,259,576
812,931
(283,163)
529,768
and other
2,299
2,900
5,960
(182)
10,977
67,232
78,209
Proportionate share of
associates’ earnings
(Note 8)
Expenses
Advisory and business
development
Operations and support
Sub‑advisory
–
–
2,278,254
616,949
147,029
152,989
–
147,029
3,400
150,429
(100,842)
2,947,350
70,632
3,017,982
959,946
453,738
163,197
1,576,881
80,212
293,755
8,664
382,631
–
4,063
–
4,063
(12)
(182)
(100,648)
1,040,146
751,374
71,213
(100,842)
1,862,733
–
79,276
–
79,276
1,040,146
830,650
71,213
1,942,009
Earnings before undernoted
$
701,373
$
234,318
$
148,926
$
–
1,084,617
(8,644)
1,075,973
Interest expense(2)
Gain on sale of Personal Capital
Gain on sale of QGOF net of acquisition costs
Proportionate share of associate’s adjustments
Restructuring and other charges
Earnings before income taxes
Income taxes
Net earnings
Non‑controlling interest
(110,597)
37,232
25,184
3,400
(74,460)
965,376
200,770
764,606
(198)
Net earnings available to common shareholders
$
764,408
$
Identifiable assets
Goodwill
$ 8,984,472
1,491,687
$ 1,507,729
1,311,388
$ 2,767,078
–
$
Total assets
$ 10,476,159
$ 2,819,117
$ 2,767,078
$
–
–
–
$ 13,259,279
2,803,075
$ 16,062,354
–
(37,232)
(25,184)
(3,400)
74,460
–
–
–
–
–
(110,597)
–
–
–
–
965,376
200,770
764,606
(198)
$
764,408
(1) Gain on sale of Personal Capital, Gain on sale of Quadrus Group of Funds (QGOF) net of acquisition costs, Proportionate share of associate’s adjustments, and Restructuring and
other changes are not related to a specific segment and therefore excluded from segment results. These items have been added back to their respective revenue or expense line item to
reconcile Total Segment results to the Company’s Consolidated Statements of Earnings.
(2) Interest expense includes interest on long-term debt and interest on leases.
| 141
Notes to Consolidated Financial Statements | 2020 IGM Financial Inc. Annual Report
NOTE 28 SEGMENTED INFORMATION (continued)
2019
Revenues
Wealth management
Asset management
Dealer compensation
Net asset management
Net investment income
WEALTH
MANAGEMENT
ASSET
MANAGEMENT
STRATEGIC
INVESTMENTS
AND OTHER
INTERSEGMENT
TOTAL
SEGMENT
ADJUSTMENTS(1)
TOTAL
$ 2,315,254
–
–
$
$
–
896,498
(292,896)
–
603,602
–
–
–
–
$
(16,206)
(104,171)
15,821
$ 2,299,048
792,327
(277,075)
$
(88,350)
515,252
–
–
–
–
–
$ 2,299,048
792,327
(277,075)
515,252
24,825
and other
13,601
4,238
7,273
(287)
24,825
Proportionate share of
associates’ earnings
(Note 8)
Expenses
Advisory and business
development
Operations and support
Sub‑advisory
–
–
2,328,855
607,840
122,425
129,698
–
122,425
(17,200)
105,225
(104,843)
2,961,550
(17,200)
2,944,350
986,479
435,944
161,546
1,583,969
79,869
295,209
10,855
385,933
–
2,239
–
2,239
(327)
(347)
(104,169)
1,066,021
733,045
68,232
(104,843)
1,867,298
–
–
–
–
1,066,021
733,045
68,232
1,867,298
Earnings before undernoted
$
744,886
$
221,907
$
127,459
$
–
1,094,252
(17,200)
1,077,052
Interest expense(2)
Proportionate share of associate’s one‑time charges
Earnings before income taxes
Income taxes
Net earnings
Perpetual preferred share dividends
(108,386)
(17,200)
968,666
219,719
748,947
(2,213)
Net earnings available to common shareholders
$
746,734
$
Identifiable assets
Goodwill
$ 9,021,978
1,491,687
$ 1,332,705
1,168,580
$ 2,376,526
–
$
Total assets
$ 10,513,665
$ 2,501,285
$ 2,376,526
$
–
–
–
$ 12,731,209
2,660,267
$ 15,391,476
–
17,200
–
–
–
–
–
(108,386)
–
968,666
219,719
748,947
(2,213)
$
746,734
(1) Proportionate share of Associate’s one-time charges is not related to a specific segment and therefore excluded from segment results. These items have been added back to their
respective revenue or expense line item to reconcile Total Segment results to the Company’s Consolidated Statements of Earnings.
(2) Interest expense includes interest on long-term debt and, beginning January 1, 2019, includes interest on leases of $4.1 million as a result of the Company’s adoption of IFRS 16, Leases.
142 |
2020 IGM Financial Inc. Annual Report | Notes to Consolidated Financial Statements
NOTE 29 ACQUISITIONS
GLC ASSET MANAGEMENT GROUP LTD. (GLC)
On December 31, 2020, the Company’s subsidiary, Mackenzie, acquired all of the common shares of GLC, a wholly‑owned subsidiary of
Great‑West Lifeco Inc. (Lifeco), for cash consideration of $185.0 million. Net cash outflow related to the transaction was $175.8 million,
including acquisition costs of $3.8 million and $13.0 million in cash acquired.
In a separate transaction, Lifeco’s subsidiary, Canada Life Assurance Company (Canada Life) acquired the fund management contracts
relating to private label Quadrus Group of Funds (QGOF) from Mackenzie for cash consideration of $30.0 million. Mackenzie
was previously the manager and trustee of the QGOF. Subsequent to the sale, Mackenzie continues to provide investment and
administration services to the QGOF.
The purchase price allocation is preliminary and subject to change during the measurement period, which will not exceed one year
from the transaction date.
Purchase price allocation
Cash and cash equivalents
Other current assets
Deferred tax asset
Intangible assets
Goodwill(1)
Accounts payable and accrued liabilities
Deferred tax liability
(1) Nil deductible for tax purposes
$
13,003
2,528
945
56,763
134,799
(8,482)
(14,522)
$
185,034
Goodwill is attributable to synergies including expansion of Mackenzie’s distribution reach into the fast‑growing group retirement
business. Identified intangible assets are comprised of finite life management contracts valued at $56.8 million.
The acquisition had no impact to the Company’s revenues and expenses for the year ended December 31, 2020.
GREENCHIP FINANCIAL CORP. (GREENCHIP)
On December 22, 2020 Mackenzie acquired 100% of Greenchip, a Canadian firm focused exclusively on the environmental economy
since 2007.
| 143
Notes to Consolidated Financial Statements | 2020 IGM Financial Inc. Annual Report
Quarterly Review
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31
($ millions, except per share amounts)
Q4
Q3
Q2
2020
Q1
Q4
Q3
Q2
2019
Q1
Revenues
Wealth management
Asset management
Dealer compensation expense
Net asset management
Net investment income and other
Proportionate share of associates’ earnings
Expenses
Advisory and business development
Operations and support
Sub‑advisory
Interest
Earnings before income taxes
Income taxes
Net earnings
Non‑controlling interest
Perpetual preferred share dividends
Net earnings available to
common shareholders
Reconciliation of Non-IFRS
financial measures(1) ($ millions)
Adjusted net earnings available to common
shareholders – non‑IFRS measure
Other items:
Gain on sale of Personal Capital, net of tax
Gain on sale of Quadrus Group of Funds
net of acquisition costs, net of tax
Proportionate share of associate’s
adjustments
Restructuring and other, net of tax
Proportionate share of associate’s
one‑time charges
Net earnings available to common
shareholders – IFRS
Diluted Earnings per Share (¢)
Adjusted net earnings available to
common shareholders(1)
Net earnings available to common shareholders
$
594.2
$
571.6
$
531.1
$
562.7
$
587.1
$
581.1
$
577.5
$
553.3
216.3
(74.3)
142.0
33.2
43.5
812.9
283.1
193.8
18.3
27.9
523.1
289.8
60.5
229.3
(0.2)
–
207.4
(71.3)
136.1
39.4
43.5
790.6
252.6
256.4
18.5
27.9
555.4
235.2
44.3
190.9
–
–
190.7
(66.1)
124.6
7.6
43.3
706.6
245.4
185.4
16.9
27.5
475.2
231.4
47.9
183.5
–
–
198.5
(71.4)
127.1
(2.0)
20.1
707.9
259.1
195.1
17.5
27.3
499.0
208.9
48.0
160.9
–
–
203.4
(69.8)
133.6
6.7
23.4
750.8
270.9
182.6
18.1
27.8
499.4
251.4
59.8
191.6
–
–
201.2
(68.9)
132.3
2.0
28.9
744.3
257.1
180.3
17.4
27.8
482.6
261.7
59.2
202.5
–
–
198.5
(69.6)
128.9
4.9
20.2
731.5
267.7
178.5
17.0
27.6
490.8
240.7
55.6
185.1
–
–
189.2
(68.7)
120.5
11.2
32.7
717.7
270.3
191.7
15.7
25.2
502.9
214.8
45.1
169.7
–
(2.2)
$
229.1
$
190.9
$
183.5
$
160.9
$
191.6
$
202.5
$
185.1
$
167.5
$
204.3
$
214.2
$
183.5
$
160.9
$
200.8
$
202.5
$
193.1
$
167.5
–
21.4
3.4
–
–
31.4
–
–
(54.7)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(9.2)
–
–
–
–
–
–
–
–
–
(8.0)
–
–
–
–
–
$
229.1
$
190.9
$
183.5
$
160.9
$
191.6
$
202.5
$
185.1
$
167.5
86
96
90
80
77
77
68
68
84
80
85
85
81
77
70
70
Dividends per Share (¢)
56.25
56.25
56.25
56.25
56.25
56.25
56.25
56.25
(1) Refer to page 24 of the MD&A for an explanation of the Company’s use of non-IFRS financial measures.
144 |
2020 IGM Financial Inc. Annual Report | Quarterly Review
Quarterly Review
STATISTICAL INFORMATION
FOR THE YEARS ENDED DECEMBER 31
($ millions)
Mutual fund gross sales
Wealth management(1)
IG Wealth Management
IPC
Asset management
Mackenzie Investments
IGM Consolidated
Dealer gross inflows
IG Wealth Management
IPC
Wealth management(1)
Net flows – by segment
IG Wealth Management net flows
IPC net flows
Wealth management net flows(1)
Asset Management net sales(2)
Eliminations(3)
IGM Consolidated
Net flows – by product
Mutual fund gross sales
Mutual fund redemptions
Mutual fund net sales
ETFs(4)
Investment funds
Institutional SMA
Consolidated AUM
Other AUA
Consolidated net flows
Redemption rate – long-term funds (%)
IG Wealth Management
IPC
Mackenzie Investments
Assets under management and
advisement – by segment
IG Wealth AUA
IPC AUA
$
Q4
Q3
Q2
$
2,572
177
2,749
4,501
7,250
2,938
1,487
4,425
485
249
737
1,673
(189)
2,221
7,250
5,972
1,278
372
1,650
(75)
1,575
646
2,221
9.8
20.1
16.6
$
$
1,949
97
2,046
2,903
4,949
2,132
892
3,024
(9)
(146)
(155)
627
(64)
408
4,949
4,436
513
97
610
(319)
291
117
408
9.8
19.0
16.2
1,780
110
1,890
2,505
4,395
1,901
1,063
2,964
(62)
154
93
3,599
(43)
3,649
4,395
4,212
183
681
864
2,542
3,406
243
3,649
10.0
19.3
16.5
$
2020
Q1
2,686
193
2,879
3,656
6,535
3,006
1,318
4,324
381
116
498
351
(28)
821
6,535
6,311
224
82
306
(86)
220
601
821
10.7
20.7
17.0
Q4
Q3
Q2
$
2,251
147
2,398
2,587
4,985
2,467
1,150
3,617
(109)
(23)
(131)
147
(23)
(7)
4,985
5,328
(343)
202
(141)
(73)
(214)
207
(7)
10.3
19.3
15.6
$
2,077
154
2,231
2,253
4,484
2,189
947
3,136
(233)
(179)
(410)
(678)
(28)
(1,116)
4,484
4,696
(212)
315
103
(1,132)
(1,029)
(87)
(1,116)
10.2
20.9
15.7
$
2,045
174
2,219
2,541
4,760
2,184
942
3,126
(500)
(189)
(688)
75
7
(606)
4,760
5,172
(412)
48
(364)
(180)
(544)
(62)
(606)
9.9
20.7
16.2
2019
Q1
2,350
219
2,569
2,505
5,074
2,467
1,306
3,773
62
(198)
(135)
183
17
65
5,074
4,956
118
142
260
(107)
153
(88)
65
9.5
20.1
17.0
103,273
29,318
97,538
27,484
93,836
26,637
85,834
24,372
97,100
27,728
94,529
27,176
93,858
27,181
93,013
27,064
Wealth Management AUA(1)
132,583
125,015
120,467
110,199
124,820
121,697
121,031
120,069
Asset Management AUM (ex sub‑advisory
to Wealth Management)(5)
Sub‑advisory to Wealth Management
Asset Management AUM
Asset Management through
Wealth Management
Consolidated assets under
management & advisement
Assets under management and
advisement – by product
Mutual fund AUM(5)
ETF AUM(4)
Investment Fund AUM
Institutional SMA(5)
Consolidated AUM
Other AUA
Consolidated assets under
management & advisement
Consolidated AUM, excluding
110,938
75,821
74,600
72,660
70,821
70,135
60,898
65,103
68,257
73,575
66,392
72,565
66,756
73,261
65,630
73,577
186,759
147,260
140,956
126,001
141,832
138,957
140,017
139,207
(79,392)
(75,855)
(73,163)
(67,844)
(76,617)
(75,505)
(76,169)
(76,462)
239,950
196,420
188,260
168,356
190,035
185,149
184,879
182,814
158,495
3,788
162,283
51,688
213,971
25,979
161,612
3,330
164,942
7,671
172,613
23,807
154,706
3,132
157,838
7,557
165,395
22,865
140,887
2,335
143,222
4,275
147,497
20,859
159,391
2,372
161,763
5,046
166,809
23,226
155,419
2,159
157,578
4,958
162,536
22,613
154,436
1,865
156,301
6,027
162,328
22,551
152,531
1,804
154,335
6,132
160,467
22,347
239,950
196,420
188,260
168,356
190,035
185,149
184,879
182,814
Asset Management segment AUM
27,212
25,353
24,439
21,496
24,977
23,579
22,311
21,260
Corporate assets
$
16,062
$
15,863
$
15,449
$
15,553
$
15,391
$
15,574
$
15,706
$
15,970
(1) Assets under management recorded within both operating companies’ results are eliminated on consolidation.
(2) Does not include net sales relating to sub-advisory mandates to Wealth Management segment.
(3) Mackenzie mutual funds distributed through Wealth Management.
(4) Excludes IGM investment fund investments in ETFs.
(5) The fourth quarter of 2020 reflects the impact of net business acquisitions of $30.3 billion, which included the acquisitions of GLC Asset Management Group Ltd. (GLC) and Greenchip Financial
Corporation (Greenchip), and the divestiture of the fund management contracts relating to private label Quadrus Group of Funds (QGOF). As a result, mutual fund AUM decreased by $13.2 billion
and institutional SMA increased by $43.5 billion.
| 145
Quarterly Review | 2020 IGM Financial Inc. Annual Report
Ten Year Review
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31
($ millions, except
per share amounts)
Revenues(2)
Wealth and Asset
Management revenues
Net investment income
and other
Proportionate share of
associate’s earnings
Expenses(2)
Earnings before undernoted
Income taxes
Discontinued operations
Net earnings
Non‑controlling interest
Perpetual preferred
share dividends
Net earnings available to
common shareholders
Adjusted net earnings
available to
common shareholders(3)
Diluted earnings per share ($)
Net earnings
Adjusted net earnings(3)
Dividends per share ($)
Return on average common
equity (ROE) (%)
Net earnings
Adjusted net earnings(3)
Average shares
outstanding (thousands)
– Basic
– Diluted
2020
2019
2018
2017
CAGR(1)
5 YEAR
%
2016
2015
2014
2013
2012
RESTATED
CAGR(1)
10 YEAR
%
2011
2,789.4
2,814.3
2,792.1
2,749.1
2,642.9
1.4
2,607.2
2,520.1
2,307.4
2,231.6
2,361.7
2.2
78.2
24.8
20.0
13.8
11.8
48.0
11.0
16.5
21.6
18.6
10.7
20.0
150.4
105.2
150.0
95.6
104.2
3,018.0
2,052.7
2,944.3
1,975.7
2,962.1
1,976.0
2,858.5
2,073.9
2,758.9
1,812.0
965.3
200.7
764.6
–
764.6
(0.2)
968.6
219.7
748.9
–
748.9
–
986.1
210.0
776.1
–
776.1
–
784.6
173.9
610.7
–
610.7
–
946.9
167.6
779.3
–
779.3
–
6.3
2.0
3.4
(0.5)
(0.9)
(0.4)
(0.4)
111.0
96.5
93.8
72.0
79.5
2,729.2
1,738.4
2,633.1
1,668.2
2,422.8
1,441.4
2,322.2
1,364.1
990.8
210.3
780.5
–
780.5
–
964.9
202.8
762.1
–
762.1
–
981.4
210.7
770.7
–
770.7
–
958.1
190.5
767.6
–
767.6
–
2,451.9
1,354.6
1,097.3
250.5
846.8
62.6
909.4
–
9.2
2.7
4.6
(0.4)
(2.9)
0.3
0.3
–
(2.2)
(8.8)
(8.8)
(8.8)
(8.8)
(8.8)
(8.8)
(8.8)
(8.8)
764.4
746.7
767.3
601.9
770.5
(0.2)
771.7
753.3
761.9
758.8
900.6
0.5
762.9
763.9
791.8
727.8
736.5
(0.8)
796.0
826.1
763.5
746.4
833.0
0.1
3.21
3.20
2.25
3.12
3.19
2.25
3.18
3.29
2.25
2.50
3.02
2.25
3.19
3.05
2.25
0.6
(0.1)
–
3.11
3.21
2.25
2.98
3.27
2.18
3.02
3.02
2.15
2.97
2.92
2.15
3.48
3.22
2.10
1.4
1.0
0.9
16.1
16.1
16.9
17.2
17.7
18.2
12.9
15.6
17.1
16.3
16.9
17.4
16.2
17.8
17.3
17.3
17.6
17.3
21.3
19.7
238,307
238,307
239,105
239,181
240,815
240,940
240,585
240,921
241,300
241,402
248,173
248,299
252,108
252,778
252,013
252,474
254,853
255,277
258,151
259,075
Share price (closing $)
34.51
37.28
31.03
44.15
38.20
(0.5)
35.34
46.31
56.09
41.60
44.23
(2.3)
(1) Compound annual growth rate.
(2) Revenues and expense have been restated to retroactively reflect the disclosure enhancements introduced in 2020, as disclosed in Note 2 to the audited Consolidated Financial Statements.
(3) Non-IFRS Financial Measures – Excludes other items as follows:
2020 – After-tax gain of $31.4 million on sale of Personal Capital Corporation, after-tax gain on sale of Quadrus Group of Funds net of acquisition costs of $21.4 million, the Company’s
proportionate share in Great-West Lifeco Inc.’s (Lifeco) after-tax adjustments of $3.4 million, and restructuring and other charges of $54.7 million after-tax.
2019 – After-tax charge of $17.2 million representing the Company’s proportionate share in Lifeco’s one-time charges.
2018 – After-tax charge of $16.7 million related to restructuring and other and an after-tax charge of $7.8 million representing a premium paid on the early redemption of the $375 million
debentures.
2017 – After-tax charges of $126.8 million and $16.8 million related to restructuring and other charges, an after-tax reduction of $36.8 million in expenses related to the Company’s pension
plan, after-tax charges of $14.0 million and $5.1 million related to the proportionate share in Lifeco’s one-time charges and restructuring provision, respectively.
2016 – A favourable change in income tax provision estimates of $34.0 million related to certain tax filings.
2015 – An after-tax charge of $24.3 million related to restructuring and other charges.
2014 – An after-tax charge of $59.2 million related to distributions to clients, as well as other costs and an after-tax charge of $13.6 million related to restructuring and other charges.
2013 – An after-tax charge of $10.6 million related to restructuring and other charges and an after-tax benefit of $9.0 million representing the Company’s proportionate share of net changes in
Lifeco’s litigation provision.
2012 – A favourable change in income tax provision estimates of $24.4 million related to certain tax filings, an after-tax charge of $5.6 million representing the Company’s proportionate share
of net changes in Lifeco’s litigation provisions, and a non-cash income tax charge of $6.4 million resulting from increases in Ontario corporate income tax rates and their effect on the
deferred income tax liability related to indefinite life intangible assets arising from prior business acquisitions.
2011 – Net earnings from discontinued operations of $62.6 million and an after-tax benefit of $5.0 million representing the Company’s proportionate share of net changes in Lifeco’s
litigation provisions.
146 |
2020 IGM Financial Inc. Annual Report | Ten Year Review
Ten Year Review
STATISTICAL INFORMATION
FOR THE YEARS ENDED DECEMBER 31
($ millions)
2020
2019
2018
2017
CAGR(1)
5 YEAR
%
2016
2015
2014
2013
2012
2011
CAGR(1)
10 YEAR
%
Wealth Management
IG Wealth Management(2)
Assets under management
Mutual fund gross sales
Mutual fund redemption
rate – long‑term funds (%)
Net sales (redemptions)
Ending assets
Assets under advisement(3)
Net flows
Ending assets
Investment Planning Counsel(2)
Assets under management
Mutual fund gross sales
Mutual fund redemption
rate – long‑term funds (%)
Net sales (redemptions)
Assets under management
Assets under advisement(3)
Net flows
Ending assets
Asset Management
(Mackenzie Investments)
Mutual fund gross sales
Mutual fund redemption
rate – long‑term funds (%)
Investment fund net sales
(redemptions)
Assets under management
Mutual fund
ETF
ETFs excluding those held
by IGM investment funds
Investment fund(4)
Total assets under
management excluding
subadvisory to
Wealth Management(3)
Total assets under
management(3)
Consolidated assets
under management(5)
Investment fund assets
under management
Assets under management
Assets under management
and advisement
8,987
8,723
9,075
9,693
7,760
2.6
7,890
7,461
6,668
5,778
6,021
4.6
9.8
(451)
97,713
10.3
(1,089)
93,161
9.2
485
83,137
8.4
1,944
88,008
8.8
366
81,242
N/M
5.5
8.7
754
74,897
8.7
651
73,459
9.4
159
68,255
10.0
(724)
60,595
8.8
39
57,735
N/M
4.7
795
103,273
(780)
97,100
739
86,422
577
694
960
889
955
(4.9)
741
682
485
401
543
1.5
20.1
(307)
5,320
19.3
(272)
5,391
19.2
(18)
5,125
16.7
79
5,377
15.7
293
4,908
N/M
3.6
13.6
177
4,452
12.6
207
3,850
13.2
52
3,406
14.3
(24)
2,950
10.9
225
2,811
N/M
7.1
373
29,318
(589)
27,728
(148)
25,706
13,565
9,886
9,951
9,124
6,939
14.3
6,965
7,070
6,700
5,490
5,645
8.8
16.6
15.6
17.1
14.8
15.0
16.2
14.6
16.0
17.9
15.8
4,188
1,219
973
1,780
(555)
N/M
(1,258)
(209)
(487)
(1,974)
(1,548)
N/M
55,462
8,451
3,788
59,250
60,839
4,748
2,372
63,211
53,407
2,949
1,613
55,020
55,615
1,296
928
56,543
51,314
113
113
51,427
2.7
48,445
48,782
46,024
40,394
39,141
2.5
4.1
48,445
48,782
46,024
40,394
39,141
3.1
110,938
68,257
60,804
186,759
141,832
130,733
162,283
213,971
161,763
166,809
143,282
149,066
149,818
156,513
137,575
142,688
4.9
9.7
127,791
134,398
126,039
141,919
117,649
131,777
103,915
120,694
99,685
118,713
4.2
5.2
239,950
190,035
170,216
Corporate assets
16,062
15,391
15,609
16,499
15,625
1.6
14,831
14,417
12,880
11,962
11,144
2.8
(1) Compound annual growth rate.
(2) IG Wealth Management and Investment Planning Counsel total assets under management and net sales include separately managed accounts.
(3) As a result of revised segment reporting introduced in 2020, as discussed in the MD&A included in this Annual Report, these metrics were not reported on this basis prior to 2018.
(4) Excludes IGM investment fund investments in ETFs.
(5) Adjusted for inter-segment assets.
| 147
Ten Year Review | 2020 IGM Financial Inc. Annual Report
shareholder information
HEAD OFFICE
447 Portage Avenue
Winnipeg, Manitoba R3B 3H5
Telephone: 204 943 0361
Fax: 204 947 1659
AUDITOR
Deloitte llp
TRANSFER AGENT AND REGISTRAR
Computershare Investor Services Inc.
Telephone: 1 800 564 6253
service@computershare.com
800, 324 - 8th Avenue S.W.
Calgary, Alberta T2P 2Z2
1500 Robert-Bourassa Boulevard, 7th Floor
Montreal, Quebec H3A 3S8
100 University Avenue, 8th Floor
Toronto, Ontario M5J 2Y1
510 Burrard Street, 2nd Floor
Vancouver, British Columbia V6C 3B9
STOCK EXCHANGE LISTING
Toronto Stock Exchange
Shares of IGM Financial Inc. are listed
on the Toronto Stock Exchange under
the following listings:
Common Shares: IGM
ANNUAL MEETING
The Annual Meeting of IGM Financial Inc.
will be held as a virtual only meeting
via webcast online at
https://web.lumiagm.com/262817145
on Friday, May 7, 2021 at 12:00 p.m.,
Eastern Time.
SHAREHOLDER INFORMATION
For additional financial information
about the Company, please contact:
Investor Relations
investor.relations@igmfinancial.com
WEBSITES
Visit our websites at
www.igmfinancial.com
www.investorsgroup.com
www.mackenzieinvestments.com
www.ipcc.ca
For copies of the annual or quarterly
reports, please contact the Corporate
Secretary’s office at 204 956 8328 or visit
our website at www.igmfinancial.com
™ Trademarks, including IG Wealth Management, are owned by IGM Financial Inc. and licensed to its subsidiary corporations, except as noted below.
Investment Planning Counsel’s trademark is owned by Investment Planning Counsel Inc. and used with permission.
Mackenzie Investments’ trademark is owned by Mackenzie Financial Corporation and used with permission.
†
Banking products and services are distributed through Solutions Banking™. Solutions Banking products and services are provided by National Bank of Canada. Solutions Banking
is a trademark of Power Financial Corporation. National Bank of Canada is a licensed user of these trademarks. Morningstar and the Morningstar Ratings are trademarks of
Morningstar Inc. Quadrus Group of Funds is a trademark of Quadrus Investment Services Ltd.
CFP® and Certified Financial Planner® are certification trademarks owned outside the U.S. by Financial Planning Standards Board Ltd. (FPSB). Financial Planning Standards Council
is the marks licensing authority for the CFP marks in Canada, through agreement with FPSB.
“IGM Financial Inc. 2020 Annual Report” © Copyright IGM Financial Inc. 2021
A MEMBER OF THE POWER CORPORATION GROUP OF COMPANIES
148 |
2020 IGM Financial Inc. Annual Report