CI Financial Corp.

Good morning, ladies and gentlemen. At this time, I would like to welcome everyone to the CI Financial 2021 third quarter results webcast. All lines are in listen-only mode. After the speaker's remarks, there will be a question and answer session. If you wish to ask a question during this time, please press Start followed by 1 on your telephone keypad. Please take note of the cautionary language regarding forward-looking statements and non-IFRS measures on the second page of the presentation. I would now like to turn the call over to Mr. Kirk McAlpine, CEO of CI Financial. Mr. McAlpine, you may begin.

And welcome to CI Financial's third quarter earnings call. Before we begin, I'd like to take a moment to acknowledge Remembrance Day in Canada and Veterans Day in the U.S. On behalf of everyone at CI, I want to recognize everyone who courageously served and those who are currently serving in the armed forces in both countries. We thank you for your service and sacrifice. I also want to personally thank the veterans within the CI family. You have my respect and gratitude. And now turning to today's call. Joining me this morning is our CFO, Amit Meuni. Together we will cover the following topics. A discussion of the highlights of the quarter, a review of our financial performance during the quarter, an update on our sales to date for the fourth quarter, an update on the execution of select items of our corporate strategy, then we will take your questions. Growing contributions from our wealth management segment, further expansion of the positive net flows that emerged last quarter in asset management, and continued operational discipline drove another quarter with a number of record metrics, including record-adjusted EPS of 80 cents. We continue to take a dynamic approach to our capital allocation. During the quarter, we deployed $134 million towards M&A, returned $99 million to shareholders through the repurchases of 4 million shares, and $36 million through a regular $0.18 quarterly dividend. Asset management net sales accelerated during the quarter, and we delivered our strongest Canadian retail net sales results in six years. We will take a closer look at the flows in a moment, but it's undeniable the changes we've made to the business are gaining traction and driving improved sales results. Within wealth management, strong organic growth across both our Canadian and U.S. platforms continues to drive client assets to record levels. We also continue to make progress against our three strategic priorities. During the quarter, we closed two U.S. acquisitions, adding $10 billion of client assets, and expanding our capabilities and geographic footprint. Additionally, we announced and have since closed the acquisition of Ohio-based BRR and announced the acquisitions of McCutcheon Group, a Seattle-based ultra-high net worth RIA with $4 billion of assets, RH Blue Steam, a Detroit and New York City-based ultra-high net worth and high net worth RIA with $5 billion of assets, and Gopin and Glossberg, a Chicago-based high net worth RIA with $9 billion of client assets. All of these deals are expected to close by year-end. Last night, we also announced that we made a strategic investment in Glass Funds, a leading alternative investments execution platform that provides us with a pathway to majority ownership. Finally, we announced plans to open a U.S. headquarters in Miami. The decision reflects the importance of our U.S. expansion and the considerable scale we have built since launching our new strategic priorities. Just 18 months ago, CI was an entirely Canadian company And as we sit today, our U.S. wealth business is well on its way to being CI's largest business based on assets. I'll now turn the call over to Amit to review our financial results.

Thank you, Kurt, and good morning, everyone. I'll focus my comments on our adjusted numbers. Turning to slide four, our global assets increased to $320 billion at the end of September. The increase was from a combination of positive markets and net inflows across all our major businesses. In addition, we closed on the acquisition of two RIAs and $10 billion of client assets in the quarter. Turning to the next slide. Translated into adjusted revenue, increasing to $292 million, adjusted EBITDA, reaching a record $258 million, and adjusted net income of $159 million, or $0.80 a share, also a record result. Turning to slide six, we can take a deeper dive into revenue changes. Total adjusted revenues increased by $55 million as compared to the second quarter. Management fees were driven by our asset management business increased by $20 million due to higher average core asset management driven by a combination of positive market movement and positive debt inflows. Wealth management fees increased by $29 million primarily due to the acquisition during the quarter and the total quarter impact of the deals that closed at the end of April. Other incomes declined $15 million, primarily reflecting a swing in investment gains and losses and lower redemption fees. On the next slide, you can see the changes in our adjusted expenses. On a comparative basis, the four additional SG&A expenses from acquisitions not total expenses increased approximately 6%. driven largely by variable items due to our strong fundamentals. SG&A increased $10 million, primarily reflecting a combination of higher incentive compensation due to continued strong investment performance and accelerating net sales results. Higher T&E levels, as in-person activity levels, begin to revert, as well as technology consulting and one-time costs associated with new product launches. Dealer fees increased $11 million, providing higher payouts associated with stronger revenue generation from our Canadian health business. Interest expense increased $7 million due to the full quarter effect of the 30-year bonds we raised in June. We had $36 million in additional expenses from acquisitions completed in the second quarter and third quarter. We remain disciplined on costs and balanced with investing in the right areas to support our strategic initiatives. On slide eight, we can review our capital priorities. We generated strong free cash flows of $180 million for the quarter. We deployed $135 million for buybacks and $36 million for dividends. Over the last five years, we have repurchased nearly 100 million shares at an average price of just over $23, generating considerable value for shareholders. The buyback also represents a 37% reduction in our share count over that time period, driving significant earnings accretion. Our operating model allows us the benefit of generating strong cash flows, which we're able to invest back into our business to support our strategic initiatives, return excess capital to our shareholders, and manage our chiefs. On the next slide, we're going to review our debt statistics. As of September, we had approximately $3.4 billion of debt outstanding on a gross basis and $7 billion on a net basis, and our net leverage is 2.6 times based on our annualized third quarter adjusted EBITDA. The slight increase in gross debt during the quarter reflects the translation of our U.S. dollar bonds to CABS, while the net leverage is a combination of the translation and CABS deployed towards M&A during the quarter. Slide 10 looks at a breakdown of the $622 million of acquisition liabilities that sit on our balance sheet, primarily related to the build-out of our U.S. wealth platform. When we close on acquisitions, we usually defer a portion of the guaranteed proceeds for a period of 90 to 270 years. These outstanding deferrals total $198 million at the end of the third quarter. While generally paid in cash, in some cases a portion will be satisfied with shares of our public company stock, or beginning in January, partnership shares of CI private wealth, which Kirk will speak more of later on the call. Also part of the acquisition liabilities is $270 million of contingent consideration. This represents the estimated fair value of earn-out payments. Keep in mind, for a firm to be eligible for this payment, they must generate growth stronger than prior to joining CI. So while there is a potential additional payment, it comes as a result of faster growth and better financial results, which benefits CI. While we are showing the expense and liability from recording the estimated fair value of the earn-out, we are not yet showing the positive financial impact associated with the contingent consideration. Said plainly, higher contingent consideration means the RIAs are generating higher earnings than we had anticipated when we initially did the deals. A further proof point on the quality of the firms we are acquiring. Finally, we have $154 million of non-cash liability, which represents the fair value of options we have granted to the owners of the minority stakes in certain acquisitions. As Kurt will discuss in detail shortly, we have created a unique partnership structure for our USRA platform. Prior to the minority owners of these businesses having visibility into the features of the partnership, we structured certain acquisitions to provide liquidity for the remaining equity in their business. We expect this liability to be extinguished with the minority owners rolling their remaining equity positions into the CI Private Wealth Partnership around January 1st. Let me turn the call back to Kirk to give you an update on the progress we've made on our strategic priorities.

Thank you, Ahmed. This slide provides a recap of our three corporate strategic priorities. Moving on to the next slide, as highlighted earlier, asset management net sales of $820 million marked the second consecutive quarter of positive net sales and the strongest flows in six years. The continued turnaround is a direct result of the initiatives we've undertaken over the past two years to modernize our business and position the platform for sustainable organic growth. We've made a series of structural, strategic, and tactical changes to our product development process and believe we are now an industry leader and well-positioned to win in high-growth categories, including liquid alternatives, thematic strategies, cryptocurrencies, and ETFs. During the quarter, we expanded our offering with the launch of a cost-competing suite of beta ETFs, ESG ETF portfolios, and thematic funds. CI has built one of the most robust ETF offerings in Canada, including smart beta, active, liquid alternatives, digital assets, and passive strategies. We believe our investment performance track records position us for continued net sales success. At September 30th, 67% of our mutual fund assets were outperforming peer averages on a three-year basis, compared to just 39% a year ago. The primary objective for integrating our legacy investment boutiques into an integrated investment management platform was to drive better performance for our clients. Despite being only 12 months in, we are already seeing an impact as evidenced by our improvements versus our competitors. The fourth quarter is off to a solid start, with total client assets up 4% in October, driven by the favorable market backdrop and continued net inflows. In the asset management business, we generated October inflows of 69 million, with 143 million coming from our Canadian retail business, which is our sixth consecutive month of positive net flows. The leading RAs continue to choose CI as their preferred strategic partner, and our acquisition pipeline remains robust as CI's value proposition continues to resonate with the highest quality and fastest growing firms. Since the start of Q3, we've closed three acquisitions, Radner, Portola, and BRR, adding $11 billion U.S. of assets to our platform, and announced the acquisitions of three other high-quality firms, Seattle-based McCutcheon Group, Detroit and New York City-based RH Bluestein, and Chicago-based Gofin and Glossberg, which will collectively add an additional 15 billion U.S. once they close. These recent deals have further enhanced our capabilities and expanded our geographic reach. In a moment, we will dive a bit deeper into our M&A strategy and the unique structuring of our RA platform. Since the start of 2020, we've transformed our wealth management business with assets now over $200 billion, including the recently announced transactions, which positions us with $50 billion more in assets in our wealth management business than our asset management business. As I mentioned last quarter, only a year ago, our asset management business was 2.5 times larger than our wealth management business. While M&A has been a core driver of growth, We've also seen strong organic growth from our Canadian wealth franchise and our U.S. RIAs. Through the first nine months of 2021, we generated $118 million of wealth management segment EBITDA, with a number of large transactions only contributing for a portion of the year, including McCutcheon, Bluestein, and Goffin & Glossberg, Acquisitions that are expected to close late in Q4, run rate adjusted EBITDA for wealth management is now $263 million. This is nearly $250 million increase since we initiated the strategy less than two years ago. Consistent with prior quarters, I want to be clear that this is not a forecast. This number only includes our current interest in these companies and does not include any growth or market assumptions. It excludes any strategic or cost synergies, asset management, product sales, business model improvements, or planned but unannounced transactions. We are confident that meaningful synergy opportunities exist, but we prefer not to give guidance. Over the next two slides, I'll dive deeper into the US strategy, what we're building, how we're going about it, and how we've structured the business to set us up for long-term success. As we've stated in the past, our objective is to build the leading ultra high net worth and high net worth focused wealth management business in the U.S. We believe our success to date has been driven by three primary factors. Having a differentiated strategy relative to other potential buyers, which we believe is a no compromise model for the leading RAs. Being incredibly disciplined and only focusing our M&A efforts on the highest quality, well-run businesses, and offering a unique entrepreneurial opportunity that creates attractive career paths for incredibly talented colleagues. There are four distinct components to our M&A process. Our first step is to determine the quality of the business on a standalone basis. We are only looking for the highest quality, most well-run firms in the industry. that offer an exceptional client experience, have strong organic growth, attractive margins, and great people. Put differently, if a firm needs to be a seller, CI will not be the buyer. We then undergo an exhaustive diligence process to make sure there's strong strategic, cultural, and financial alignment. Strategically, we're looking to partner with entrepreneurs that share our vision and want to collaborate to build the leading US platform for wealth management. Cultural alignment is also imperative. This is a human capital business, and people are our primary asset. It is important that our colleagues want to work together. Having all firms that we are considering transacting meet other partners in our network is a required step in our due diligence process. And finally, financial alignment is also critical. which we address through our unique approach to structuring our U.S. business, which I'll cover in more detail on the next slide. We have structured CI private wealth to maximize the client experience and impact while promoting growth, collaboration, and alignment. Within CI, we have set up a differentiated partnership model where RAs exchange the equity in their business for equity in the broader U.S. wealth management platform. This partnership model is designed to create alignment across the business and ensures that we create compelling financial opportunities for people who are partners in their respective firms today, those that are at the firms but not yet partners, and even those who are not yet at the companies. Often when an RA transacts, it eliminates ownership opportunities for the next generation. Our partnership model expands ownership opportunities and provides future generations of partners the same or better wealth creation opportunities than a firm's founding partner. This is very unique and was designed this way intentionally. Wealth management is entirely a human capital business, and this will allow us to continue to attract, retain, and grow the industry's top talent. The partnership model also directly addresses the shortfalls of traditional partnerships by providing clarity around valuation, liquidity, and distributions. Understanding the value of most partnerships is challenging. We've addressed this ambiguity by making evaluation formulated and based on key business drivers that incentivize collaboration. Our partners have full transparency on how value is created. Knowing where and how to get liquidity in most partnerships is a real challenge and often comes with unintended consequences for the firm. Our partners have full clarity and certainty on liquidity and when and how that can be realized. Distributions and many other partnerships can often be unpredictable and opaque. Our partnership model will pay off the majority of cash flows on a scheduled basis, providing partners with clarity, certainty, and individual flexibility. The partnership shares also provide CI with additional flexibility and M&A, as we can use the currency to transact, which reduces our cash flow needs during transactions while creating alignment across the business and driving future wealth for generations to come. We believe what we have created through this unique partnership is one of the many factors that differentiates us in the market and has contributed to our success in attracting the industry's top RAs. Finally, yesterday evening, we announced a strategic minority investment in Glass Funds with a path to become the majority owner over the next four years. Glass is a leading tech-enabled solution helping advisors more efficiently and effectively administer alternative investments. Their platform helps advisors aggregate private market investments, simplify subscriptions, provide client reporting, consolidate K1s, and unify billing. Alternative assets are an increasingly important part of high net worth and ultra high net worth portfolios. And having a platform like Glass Funds is a critical foundational component to our strategy in the space. These are the types of strategic investments that will maintain CI's position as the industry consolidator of choice for the highest quality RIAs and will help us collectively enhance our offering to clients and achieve our objective of becoming the leading high net worth and ultra high net worth platform in the U.S. With that, we will open up the call for your questions.

If you would like to ask a question, please press star by 1 on your telephone keypad now. If you change your mind, it is star followed by 2. Our first question comes from Kyle Voigt of KBW. Your line is open. Please go ahead. Hi.

Good morning. So maybe a two-part question, if I could. First part, you note the pipeline is robust given a unique market environment. Just wondering if you could comment on what's creating that unique market environment and how much of this M&A activity you think might be RIAs wanting to get ahead of potential tax changes versus something that maybe could persist over the next year or more. And then the second part of the question is really, again, around the pace of the acquisition activity. You're clearly having success as an RIA acquirer, but part of the pitch is really around creating this integrated platform as you laid out. So does this level or the pace of acquisition activity, does that make it hard to simultaneously integrate? And do you think you'll have to take a breather at some point on the pace of acquisitions to really transfer attention to kind of building, integrating that CI private wealth platform?

Sure. Okay, so I'll take the questions in order. So when I look at the opportunity from an M&A perspective for us in the RIA marketplace, I would say we're still in the first or second inning of industry consolidations. When I look at other segments of wealth management in the U.S., scale would be defined as having hundreds of billions, if not trillions of dollars of assets. Where in the RIA marketplace, scale is typically defined today as having two or three billion dollars of assets. So clearly there's a significant gap between what defines scale in an RIA versus what would define scale in a wire house or an independent broker-dealer platform. On top of that, there are several thousand RIAs that remain independent today. many of which over the next few years are going to be looking for ability or opportunities to access that. So I do think that we're in a very early stage of consolidation. Now, with that being said, I do think that uncertainty around tax and the various tax proposals have forced some of RIAs who might have been contemplating selling or looking for a partner over the next couple of years to pull that process forward into 2021. So I do anticipate that the trends will remain consistent. I do think there will probably be a slight slowing in 2022 of activity, as I mentioned, just because some people who are planning to transact next year have moved it forward to help avoid tax-related uncertainty. On the second part of your question, you're right. The goal is to have the leading integrated high net worth and ultra high net worth platform in the U.S. We're actually looking to do three things in parallel to help us achieve that aspiration. continuing to transact with the highest quality RAs in the marketplace. And I think we've demonstrated our ability to do that well since we've entered the space early in 2020. The second thing is to grow our platform post-close. And as you heard from Ahmed earlier, we've seen better success than what we had anticipated growth perspective across the firms that we've acquired post-close. And then the third piece is to work together to bring these platforms together strategically. Part of our ability to do all three of those things in parallel is a function of the partnership model that we've put in place that I just described. Our partners are incented to want to work together to achieve the collective scale benefits. So instead of being imposed by CI, as you would see in many different integration models. Our integration priorities are set by the members of the partnership more broadly. We're focusing those on the areas where we can have the greatest impact for our clients and our employees in the short term, and we're structuring and sequencing them in a way that allows us to capture them in a very structured and consistent manner. So there's been a number of things, despite continuing to grow at a very fast pace, inorganically experiencing great organic growth, where we have been capturing synergies already. We've seen synergies around compliance. We've seen synergies around our ops and tech platform. We've seen synergies in marketing, in legal. We talked today about glass funds and providing us with an execution platform to do more for our clients in the alternative investment space. And we have a number of other priorities that we're working on. So I think the benefits of CI's collective scale allow us to pursue all three of those things in parallel without taking our eye off the ball for attractive M&A operations and without compromising the great organic growth that we're experiencing today.

It's very helpful. Thank you. Sure.

The next question comes from Tom McKeenan of BMO Capital. Your line is open. Please go ahead.

Yeah, good morning, and thanks for taking my question here. A question on the CIPW structure here. Is this really the put option is going to go away and what they're going to get instead is a share of future EBITDA? Is that the way I should be thinking of that? Is that how that CIPW would essentially work? Help me understand that.

Yeah, sure. So, Tom, think of it this way. Oftentimes when you're acquiring a business, you're buying the majority of the business, and a business owner will retain a minority equity stake in their business, right? It ensures entrepreneurial alignment, keeps them invested in the business, and things of that nature. What we're doing is instead of being an entrepreneur in your legacy business, you're becoming an entrepreneur or a partner in our broader U.S. wealth management So essentially, you'd be swapping equity from a standalone RAA for equity in our $97 or $98 billion U.S. wealth management platform. So I think what's compelling about it to the entrepreneurs and the leaders of these businesses, they're every bit the entrepreneur the day after they sell the CI. We're either more of an entrepreneur because we're collectively working together on a platform that has much greater scale. So when you link it to Amit's point around the puts, we have been working on designing this partnership for the last 15 months. As you can imagine, doing something of this nature is very innovative and unique, and it took us a while to stand it up. So while we were standing it up, we were transacting with firms and didn't have the clarity on the partnership structure. at that point to give them the full comfort as to what it would look like. So we said in the event that it doesn't play out the way that we have wanted it to play out, we would give you a put option for remaining shares in your business. I can tell you now being deep into the subscription process, we're oversubscribed from an interest standpoint. So the currency is actually working out significantly stronger in our favor than what we had even anticipated. So those put liabilities, as Ahmed mentioned, will go away. The only reason we're still showing them today is because the partnership formally launches on January 1st. So by the time we're next speaking to you, those will have disappeared. And those stub equity shares that people owned in their business will be fully exchanged for shares in our U.S. wealth management partnership model.

And how would they get compensated out of that?

Would there be a share of the wealth management earnings that would go to these holders of the IPW?

Yes. So essentially you're – owning or swapping. So if you own X percentage of your own RA today, you would be entitled to that representative portion of the cash flows or the distribution. That's the same thing in our partnership model. So one of the features that I mentioned in the prepared remarks was it was a fully distributing structure, essentially, minus working capital. So partners would have shares in CI private wealth. Those shares would come with appreciation as the formula plays out, as I had mentioned. And then on an ongoing basis, you are getting consistent distributions. So everyone who's working together is getting a distribution based upon the representative ownership stake, and they have the ability to influence the valuation because of the formula or the formulaic approach we've set up to take the ambiguity around what people's shares are ultimately worth. And what's going to fund the distributions? Is that future EBITDA that comes out of U.S. Wealth Management? Current and future, yes. But presumably, your guide here doesn't have any synergies. So is it safe to say that if there are synergies that come out of this, that they'll be probably distributed back through these shares? Of course. Yeah, they'll be distributed to shareholders on a per share basis. So CI would benefit and every one individual shareholder would benefit. And you're hitting on a very important point because there's perfect incentives for people to collaborate together, to strategize together, and to synergize together because there's a direct personal benefit for our partners on their wealth creation and their distributions. So we have essentially this structure allows us to have total alignment financially across all partners in our network.

And Tom, just to add a point, CIs will be the majority owner of the partnership.

So it's not like you're giving all of it away. Oh, no.

When you look at the $263 million of adjusted wealth management earnings that I had shared, that's CI's share of the businesses we've acquired. So there's others here, we didn't acquire the full business. So there's additional wealth earnings that would be sitting in the hands today of people that are in the various RAs. Their earnings today are they're participating in the earnings of their respective individual RA. In our partnership, they'll just be swapping that equity, which isn't reflected in the numbers that I've shared, for equity assets. in the private wealth partnership and be realizing a current distribution and a future distribution. So the numbers that we shared with you aren't going to change as a result of this partnership happening. It already factors in the stub equity that remains outstanding in those businesses. Right.

But so any potential synergies over and above those numbers, some would be shared with the – some would go to CIO. CI as a majority holder and some would go to the other shareholders.

Is that the way to think of it, Ben?

All of the synergies will flow through to the partnership representative of each individual's partnership stake. So yes, CI being the majority shareholder will receive the majority of the total synergies, but every individual partner will receive a representative share of those synergies through their share ownership.

Right. And this probably shouldn't change your leverage as well, because your EBITDA, as you alluded to, has not included any of these potential synergies. Is that right?

Correct. I think on a consistent level of M&A activity, this would probably decrease our leverage because we now would be able, we have a currency by which we can transact. So when we first started down the path, we were doing more cash transactions, taking on more leverage. Now that we have different tools that we can use to structure a transaction. So obviously, it's fantastic to do an acquisition, have people take a meaningful stake, not in their business, but in the broader wealth partnership as we're all working together to grow as effectively as possible and to synergize the platform. So I think as you look forward, this is going to be very, very additive to our M&A efforts, both from a differentiation standpoint, but also from a cash needs standpoint.

Okay, thanks for that. And just as a quick follow-up, leverage at 2.6 times has been picking up here. What are your thoughts on that? What are you hearing from rating agencies? Maybe share that with us. Thanks.

Sure. So we've seen a slight uptick in the leverage, and that's mostly a result of the deal activity that we're seeing. I think, you know, over time you will see a natural deleveraging of that as we continue to generate earnings from the overall business, not just from the RIAs. And then the level of just deal activity. So there will be a little bit of offset. But overall, I'm very comfortable with the leverage levels where they are.

And, Tom, as Kyle had mentioned in the previous question in my response, a lot of the planned 2022 activity had been pulled forward. So I think you'll naturally see a little bit of a slowing down next year, which will allow us to be levered as well.

And is there a target?

No, we take a very dynamic approach to our capital allocation. We're kind of balancing a couple of things at once. But as Amit mentioned, we're very comfortable with where we're at today and we're committed to de-levering over time.

Okay. Thanks very much.

Thanks.

The next question comes from Nick Proob of CIBC. Your line is open. Please go ahead.

Thanks. Just staying on the topic of the private wealth franchise, talk a bit about what you're doing to win shelf space with some of those advisory firms and achieve some level of product penetration in that channel to drive the conversion of AUA to AUM. I'm just wondering if there's been any early success, pushback, or any learnings to speak of on that front. No, Nick, so where would –

Describe our U.S. platform. So we're a fiduciary, and we're to operate in the best interest of our clients at all times. So our goal, as I mentioned, is to position ourselves to have the leading high net worth and ultra high net worth platform in the U.S. Oftentimes, particularly in a Canadian context, given how distribution businesses are structured here relative to the U.S., The value creation from wealth management comes from different sources. So as I mentioned two years ago, we were making $15 million a year of EBITDA in wealth management, and now fast forward seven quarters, we're running at $263 million. So lots of room and economic opportunity there. That will include, and that number will get bigger through a combination of revenue synergies, growing the platform faster, expanding the suite of services that we offer, potentially being helpful in products. And the glass transaction that I announced yesterday evening was a very important step in enabling the effective delivery of private market investments from us through to our end client and really allowing us to do that in a very seamless experience. So a lot of service opportunities, potentially investment opportunities as well, that being a major catalyst for us delivering those strategies. And on the cost front, you'll see that number increase as well. As I described in the partnership, we're giving an opportunity for people now to be entrepreneurs in a broader business. And because the valuation, so what the partnership is worth, is determined by a formula that has, you could imagine, a meaningful component to synergies, and also distributions are driven by the economics of the partnership, given we're fully distributing. There's a huge incentive there to collaborate on the cost side as well. So when I look at the opportunity, I would say, to answer your question directly, certainly there's opportunities, but that's one of many incredible revenue and cost synergies that we have as we work together at ramping this platform up. Okay.

And maybe along the same vein as your response, you know, if that platform continues to scale, what are the KPIs that we should monitor to measure performance of that segment? Like, you know, would you consider introducing something like AUA net flows to your disclosure or maybe some productivity metrics like flows or assets per advisor? I'm just wondering how you think about that internally and how you think we should – best use information available in the public domain to evaluate performance of that segment?

Sure. So, Nick, you know, obviously there's several metrics that we monitor internally of how the RIA businesses are performing. We are looking at that holistically and looking at our overall disclosures to see how we would get some more clarity about how the overall U.S. business is doing. So I would say keep an eye out for a next earnings call where we may be talking a little bit more about segments and changes to our disclosures as our business continues to rapidly change.

Yeah, I think, Nick, just to add, the two most important pieces, how effectively are we scaling the platform and what are the economics that are coming along with the associated scale, which is why every quarter I provide an update on the size of our overall wealth business and the EBITDA contributions that we're ultimately generating. Periodically, we've been disclosing flows from our wealth management business, which most firms traditionally don't. So we disclosed flows of the firms that we had acquired last year. At the six-month point or at the end of the second quarter, we had disclosed the $4 billion of wealth management flows that we had generated as well. So trying to provide some periodic updates on that as well so people can really understand how well these businesses are growing organically in addition to the inorganic growth.

Okay, that's helpful. I will pass the line. Thank you.

The next question comes from Scott Chan of Canaccord. Your line is open. Please go ahead.

A bunch of follow-ups on the wealth management, and maybe just first on the clarification. The $263 million EBITDA run rate, is that just the US RIAs, or is that the North American wealth management run rate?

No, it's a North American wealth management business, Scott. That is, as you could imagine, the major change in assets and growth from the $15 million starting point in 2019 through to today has been the growth that we've experienced in the U.S., but it is inclusive of our Canadian business.

Okay. That's what I thought. And then you kind of broke up, Kurt, when you were talking about the full transparency on valuation. So I don't know if you mentioned it, but what – What are these, like in terms of the transparency on the valuation of that segment, what are the minority stakeholders buying in that? And I think you alluded to that most of them or all of them are willing to participate in this starting January 1st.

I didn't fully understand the question, Scott. So yes, we are oversubscribed relative to our expectations in the partnership, but I didn't understand your specific question on the valuation. It is formulaic, so we do have a formula.

Like, is there a valuation set, like an EBITDA multiple set for these stakeholders to come in for CIPW shares is kind of a way to put it. Or another way to put it is there incremental value accretion outside of EBITDA growth and partnership units on valuation multiple increases.

So the formula, without getting into too much detail just from a – reasons. Obviously, this is very unique for our industry or for any industry, so I don't want to share too much about the nuances of the formula. But if you step back and think about what contributes to value creation in a wealth management business, obviously scale is important. growth is important, earnings are important, and other factors are important as well. So when people do know the valuation that they're coming into, so this partnership model has a valuation, that valuation changes based upon business performance tied to the specific formula. So people coming in this quarter will have a different valuation than people coming in next quarter and the quarter after and things like that. So it's an ever-evolving based upon the overall success of the business.

Okay. So it will change with future RIA acquisitions just depending on the market and how that partnership is doing.

Yeah, but the primary reason for the change is going to be a function of business performance. How well is the business doing? So, yes, the partnership model does change because we have a formula, and that formula updates as we produce financial results on an ongoing basis.

And Kurt, does that tie into your point that it creates an attractive currency to conduct future M&A? Is that the linkage?

It does. So when we first started in 2020, we were essentially using cash, right? We didn't have this partnership model. And I was reluctant to use our stock too much because, as I've described, I feel like we are very undervalued relative to what we think is worth. So a lot of it was cash. Now we not only have the ability to use cash, We have the ability to essentially swap equity, I guess, if you will, so they can swap with sub-equity for shares in our broader business, which not only helps us in the cash flow perspective, which is fine. More importantly, it sets this business up so well for success because oftentimes when people acquire RAs, they're buying stakes of a bunch of different RAs where there's no incentive for people to work together. Everyone in our partnership has total incentive to work together, and that's why our process is so focused on you need to be bringing into the partnership an exceptional business. You need to be focused on the strategy and agree and have a desire to take the business where we collectively want to take it. You need to fit in culturally because it's so important that people want to get together to work together to do something what we think can be truly special for clients and employees, and then you reap the benefits of the financial benefits impact associated with being a partner and focused on the right things.

Maybe just lastly, so CI is going to be the majority holder, and that's going to be the majority of that $263 million of EBITDA. And let's say the minority interest could be about 15%, maybe aggregated in all your transactions. Over time, is there a way that we, like, are you going to report CIPW? Like, are we going to be able to see any of the drivers that you kind of talked about, Kurt, in terms of the dog growth or earnings outside of the aggressive run rate that you show us, which is pretty hard to kind of see just based on the aggressive path you've taken?

Yeah, so as Ahmed had mentioned, so we are sharing – what we're sharing today, the assets and then the representative EBITDA, is this share that CI owns. There are other stakes or representative stakes that would push that number higher. As we move into 2022, we are looking at providing, as this business continues to scale, becomes more meaningful overall, we're looking for different ways to – I guess, better articulate some of the components of it. So as Ahmed mentioned, the plan is to likely do that on the next call heading into 2022.

OK. Thank you very much.

Thanks.

As a reminder, if you would like to ask a question, please press star followed by 1 on your telephone keypad now. Our next question comes from Graham Riding of TB Securities. Your line is open. Please go ahead.

I think in the past you said that you have about an 80% majority position in that U.S. wealth platform. Is that still a realistic number, or what is your majority ownership position on aggregate?

Yeah, it would be in and around that range. I don't have the exact percentage in front of me, but it would be vast majority. It would be in that range, if not slightly higher.

And will that materially change here if you do use some of this U.S. private wealth equity to fund some of those contingent liabilities that are coming due over, I guess, the near term?

It'll change a little bit from transaction to transaction as every one is ultimately unique. But if you look at the collective scale that we have in the platform today, like 98.7 billion, I believe is the disclosed number, every individual transaction is a fraction the size of that. So as the individual contribution or mix might change a little bit, just given the size and scale of the platform today, CI will remain the vast majority shareholder.

Okay. And then just to be clear then, in terms of your financials, you're not going to be building in 2022 minority interest stakes in CI overall. This is going to be a net number that's flowing through into your wealth management. That's going to reflect this structure.

We're working through the accounting, but yes, we'll have to figure out how exactly we reflect those distributions. Is it still NCI or... or just what the right presentation is. But as Kurt mentioned, we're working through how do we provide some more transparency around the U.S. business so you can see exactly how it's growing and adding value to the overall CI business.

Okay. Understood. My last question would just be on the asset management side. There's been a lot of changes in recent months. both on that signature team and also the Cambridge team. Can you just give us some context perhaps on how you're feeling about those adjustments internally and what's the reception been like from your retail advisors and also some of your institutional accounts? Any concerns or how you've been effectively able to communicate the changes?

Look, it's a great question. When I look at the strength of the business, so at the beginning of 2020, we decided to take a series of independent projects. unaffiliated boutiques and create an integrated global asset management platform and work very hard in a very collaborative manner to achieve that objective, which we wrapped up in September of 2020 last year. We have had a couple of departures. We've also had a series of very significant additions to our platform, including the appointment of our first ever chief investment officer who joined us from the Abu Dhabi Investment Authority and has relocated to Toronto to oversee that platform. So when I look at the outputs associated with the changes, as I mentioned earlier, our investment performance has improved considerably from the old model to the new model. And the flows we disclose on a quarterly basis, our flows have improved considerably as well. So I'd say when I look at the net impact of the changes that we've made, we're delivering better investment performance for our clients, which is our primary objective. and immediately that has flowed through to our net flows, and we're in a stronger position today from an asset gathering perspective than we've been for any of the last six years. So I think we're very excited to see the platform grow transform so quickly. And we worked very hard to change every element of the business. It wasn't just the investment platform. We completely revamped our approach to product development. We've integrated our sales and marketing teams powered by advanced analytics and data. But I think it's hard to argue that when your investment performance has improved as much as ours has and the flows have improved as much as ours have, that the changes we've made have certainly been extremely overwhelming and positive.

Great. That's it for me. Thank you. Thank you.

There are no further questions on the telephone lines at this time.

Great. Well, look, thank you so much for your participation in today's call, and we look forward to chatting next quarter.

This concludes today's call. Thank you for joining. You may now disconnect your lines.