IGM Financial Inc.

Welcome to the IGM Financial Second Quarter 2024 Analyst Call and Webcast. As a reminder, all participants are in a listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then zero. I would now like to turn the conference over to Kyle Martin, Treasurer and Head of Investor Relations. Please go ahead.

Thank you, Betsy. And good morning, everyone. Welcome to our second quarter 2024 earnings call. Joining me today on the call, we have James O'Sullivan, President and CEO of IGM Financial. Damon Murchison, President and CEO of IG Wealth Management. Luke Gould, President and CEO of McKinsey Investments. and Keith Potter, Executive Vice President and CFO of IGM Financial. Before we get started, I would like to draw your attention to our cautions concerning forward-looking statements on slide three of the presentation. Slides four and five summarize non-IFRS financial measures and other financial measures used in the material. And on slide six, we provide a list of documents that are available on our website related to IGM Financial's second quarter results. I'll turn it over to James.

Okay, thank you, Kyle, and good morning, everyone. And thank you for joining us today as we discuss IGM Financial's second quarter results, which demonstrate how our businesses are successfully executing against their growth strategies. Turning to slide eight, adjusted EPS was 93 cents during the quarter, up 4.5% year over year. Our earnings were supported by strong growth in our AUM&A across our core operating companies and strategic investments, up almost 15% relative to last year. IGM's Q2 ending AUM&A, which represents our core companies, is also our highest on record. We're seeing positive signs and indicators in each of our businesses. In wealth management, IG Wealth has been very successful in the mass affluent and high net worth segments, and we've seen this success accelerate further in recent months and quarters. Rockefeller Capital Management's growth in the high net worth and ultra high net worth segment of the U.S. wealth market continues to impress. Driven by a combination of strong organic growth from their existing advisors, and their ability to attract top financial advisors to Rockefeller's leading platform. Wealthsimple's proven ability to deliver for Canadians continues to drive impressive new client acquisition and expansion of share of wallet within their existing clientele. Within asset management, McKenzie's gross sales have rebounded impressively, relative to both 2022 and 2023. Their ability to bring relevant investment management solutions to independent financial advisors and wealth management partners such as PFSL and Wealthsimple is driving this growth. China AMC, the second largest asset manager in China, continues to take advantage of their leading competitive positioning to drive AUM growth across product and distribution categories. And Northleaf achieved higher fundraising results this quarter than any period we've recorded to date. The team is leveraging their global private market investment solutions across private equity, infrastructure, and private credit to drive continued growth. In the context of these strong results, we continue to invest to drive growth while also returning capital to shareholders through our attractive dividend and opportunistic share buybacks, which we maintained through July and into August. We are reiterating our 4% expense growth guidance for full year 2024, which includes just under 3% growth in the first half of the year and slightly higher growth in the second half of the year due to seasonality differences. Turning to the current operating environment for our businesses, starting with recent financial market conditions on slide nine. Equity markets generally continued to rise during the second quarter and into the month of July. However, recent volatility has partially offset gains from the first seven months of the year. On slide 10, we present the Canadian fund industry. The Canadian mutual fund industry remained in net redemptions during Q2, though we are seeing year over year improvements in net sales across a number of product categories. This is encouraging. While the Bank of Canada decision in June and July to begin lowering its overnight rate is constructive, for medium-term industry flow outlook, the effect of interest rates normalizing will, all else being equal, improve the industry environment over a period of quarters, not months. We anticipate industry net redemptions will continue into the second half of the year with a gradual improvement as we move forward to 2025. Slide 11 outlines IGM's consolidated AUM&A, which reached a record high at the end of Q2 and began in July. On the right is our second quarter earnings, which I spoke to on a previous slide. Slide 12 contains our earnings contributions by segment. Keith will speak to this in more detail later in the call. On slide 13, we present ending AUM and aid by business. My earlier comments highlighted the key drivers that are contributing to the solid 15% year-over-year growth, including our strategic investments. With that, I will turn the call over to Damon, who will speak to the performance in our wealth management segment.

Thank you, James, and good morning, everyone. Turn to slide 15 in the wealth management second quarter highlights, including IG Wealth, Rockefeller, and Wealthsimple. IG Wealth ended the quarter with AUA of $130 billion, up a solid 11% year-over-year, and 1.3% during the second quarter, driven by financial markets. Gross inflows of $3.6 billion represented our best second quarter in gross inflows on record. Net outflows were $173 million during the quarter. As released earlier this week, flows during July were very strong. It was our best July on record for gross inflows, with net sales into IGM product of $271 million, and net inflows of $262 million. Total gross inflows from newly acquired clients of $1.2 billion represented the best quarter in our history. As highlighted on this slide, we continue to see an increasing proportion of new client inflows from both the mass-influent and high-net-worth segments. We are proud of these results and we're encouraged by the signs of improving sentiment. I'll reinforce what James just spoke to. We view these improvements as continuing to unfold over quarters, not months. As our advisors work with their clients to navigate the shifting environment, we will continue to look for and capitalize on additional positive trends as they emerge. Similar to last quarter, our insurance business continues to deliver strong results while we saw strong volumes within our mortgage business despite the competitive environment. We look forward to continuing these positive momentum as we develop leverage and benefit from the partnerships we've established in both of these businesses. Both Rockefeller and Wealthsimple once again had very strong quarters, which I'll speak to on the coming slides. Turn to slide 16. You can see IG's Q2 flows. As you can see on the left-hand side, July has traditionally been a relatively strong month for us. This July was no different and was our best July on record for gross inflows. We believe a contributing factor to our July results was the opportunity presented by the changes to Canada's capital gains rate policy. These changes drove opportunity for additional conversations, engagement with our clients and prospects alike, allowing us to both reinforce our financial planning expertise and discuss the benefits presented by our investment shelf. Our gross inflows continue to be very strong, with Q2 representing our best second quarter on record. Our year-to-date gross inflows are also tracking well. On the right-hand side, you can see a clear positive turn in our total net flows and IGM product net sales. There's a little bit of noise in our IGM product net flows today, and client cash during June relating to the country's capital gain policy change, which reversed in July, as I just spoke to. As we look for positive sentiment to fully return, our advisors continue to work with their clients to save and build wealth. Turning to slide 17. Near the top left, you can see the strength of our gross inflows, which were 28% higher than Q2 of last year. Our gross outflow rate remains elevated versus last year, and redemptions continued predominantly to be partial in nature. At the bottom right, you can see our last 12-month trailing net flows rate, which is now showing a clear indication of a bottom and a turn back to positive. Turn to slide 18. As mentioned, the $1.2 billion of gross inflows from newly acquired clients during the second quarter represented our best quarter on record for new client acquisition. During the second quarter, gross inflows from massive fluid and high net worth clients represented over 75% of gross flows from newly acquired clients. with million-dollar-plus clients accounting for 32%. We have a track record for executing on growth within our target markets, and as we move forward, we fully expect to see further progress as Canadians continue to seek financial planning advice. Turn to slide 19. This shows the productivity of our advisors. As we drive growth in the massive fluid and high-worth segments, the increases in productivity that we continue to show are a testament to where we have invested. We expect to see a continuation of this trend. Turn to slide 20, an update on our focus of building our business to capitalize on industry wealth drivers. During the quarter, we entered into a number of partnerships which support our capabilities and will assist us in capitalizing on the industry wealth drivers. These partnerships include better equipping our advisors with tools needed for tax planning conversations. This also parallels well with our insurance partnership with Life Design Analysis, which we highlighted last quarter. A partnership with a major healthcare provider that will allow our high net worth clients to access additional healthcare assessments and diagnostics at reduced rates, and enhanced technology to provide our small and medium-sized business owners with the tools needed to value their companies, a crucial step as they look to either grow or monetize their business. Our ongoing focus on the industry wealth drivers will allow us to continue to grow in key client segments and drive increased productivity of our advisors. Now let's turn to slide 21 and talk about Rockefeller's progress. Over the last 12 months, organic growth has driven $4.9 billion in client assets. Rockefeller continues to add to their private advisory network, having added 57 new advisors over the last 12 months. Now turning to slide 22, let's talk about Wealthsimple. Wealthsimple continue to reinforce their position as an important and growing player in the Canadian wealth management ecosystem. Wealthsimple ended Q2 with over $43 billion in AUA, increasing 13% during the quarter and 87% on a year-over-year basis. Client count also expanded by 15% year-over-year to 2.5 million clients. With that, I'll turn the call over to Luke Gould.

Thanks, Damon. Good morning, everyone. So, true to page 24, a few comments on the quarter. Similar to Q1, This continued to be a very good quarter for clients and shareholders, with AUM up 4.5%, and average client account value is up over 10% in the last 12 months. Higher asset levels and operating leverage led to our earnings at McKinsey being up 12% in the quarter and the highest Q2 in 15 years. On point two, investment funds experienced net redemptions of $745 million during the quarter, and this is in the context of continued net redemptions in the industry. We saw slight year-over-year improvements for industry long-term fund flows in Q2, as reviewed by James and Damon, and this trend continued until July, and we at McKenzie had gross sales up 38% and noticeable net sales improvements. In point three, the share of our assets in four- and five-star funds remained relatively unchanged quarter-over-quarter at 52%, and during the quarter we had a number of product launches. We launched a suite of low-vol ETFs. with our global quant equity boutique that brings their impressive track records in this space to retail, as well as an emerging markets ex-China equity fund with this boutique. It's early days, but we're seeing very good momentum within retail with this global quant equity team, and we'll be focusing on these newly launched products, as well as the global equity EM and PE replication offerings managed by this team in the back half of the year. We also launched an ETF version of our flagship global dividend fund, and you can expect us to bring more active equity mandates to ETF structure in the future for those advisors who like the characteristics of ETFs. We also launched a global corporate fixed income fund that fills a gap that we have in our shelf relative to some of the important flagships of our competitors in the market. Both China AMC on the right and Northleaf delivered strong results as reviewed by James. China AMC had another strong quarter of net flows with 41 billion won or 8 billion Canadian dollars in long-term fund net sales in the quarter. And their AUM grew by 25% during the last year as a result of these strong net sales. And Northleaf delivered 1.8 billion in new commitments during the quarter, which was our highest quarter for new commitments since we made our investment and was spread across private equity, private credit, and infrastructure. In page 25, you can see the trended history of McKinsey's net flows. On the right, you can see that last full month trailing net flows were relatively stable in the quarter. We had some net sales softness in some of our larger flagship mandates who have weaker short-term performance but have adhered to their discipline. This is being offset by improvements elsewhere that I'll review on coming slides. I'd also highlight in the top left the improvement in gross and net sales in July, with gross sales up 38% and net redemptions improved to 73 million from 224 million the prior year. We're encouraged by these signs of improvement in the industry. And as we move through the back half of 2024, we feel we're well-positioned, with compelling performance across multiple relevant mandates. Turning to page 26, the only remark I'm going to make is to the top right. You can see our Morningstar rankings remain relatively in line with last quarter and the industry. On performance, I'd highlight that the broadening of market movements in July and August has been very favorable to many of our boutiques, and we're expecting higher Morningstar and percentile rankings as we continue into Q3. Straight at page 27, you can see our performance in net sales for our retail mutual funds and ETFs by boutique. In the middle, I'd highlight that our growth, blue water, and green chip boutiques have remained true to their respective disciplines, but this has kept them out of some of the narrow places that have performed well recently. You can see the year-over-year net sales declines here, and I'd also comment that growth sales have remained very resilient with these boutiques. I'd also highlight the performance strength and the emerging sales momentum in some very large categories with our global equity team – sorry, our global quant equity team, our global equity and income team, as well as the Putnam-advised U.S. all-cap growth mandate, which is located in the right column. Also, as mentioned earlier, it's remarkable how interesting – how much things can change in five weeks, and we've seen meaningful performance improvements in some of our batiks, for example, in IVY. Most mandates now sit top quartile across time horizons as we've moved through July and August. Turning to page 28, you can see the continuous strength of both AUM growth and net flows in the Chinese investment fund industry. On the left-hand side, the second quarter once again had very strong flows, with Q2 net sales of 1.8 trillion yuan, or approximately $340 billion Canadian dollars. Long-term fund net sales made up the majority of... Long-term fund net sales was the majority of Q2 sales as opposed to money market funds, and this was driven by significant sales into fixed income funds. Industry long-term fund AUM grew by 7% in the quarter and is up 10% year-over-year. And importantly, on the right, you can see China MC's continued strong market position, ranking number two in both long-term funds and overall, with a meaningful increase in market share from 4.8% to 5.4%. as their assets grew by 24% in the last 12 months versus the industry growth of 10%. I should also highlight that China MC was the net sales leader over the last 12 months, with $282 billion won, or $50 billion over the period. On page 29, you can see the continued growth in China MC's AUM, with investment fund AUM up 3% during the quarter and 25% over the year, driven by growth in both long-term and money market funds. And as mentioned, these increases were driven substantially by net sales, which you can see in the chart at the bottom. And lastly, on page 30, you can see another quarter of continued strong growth at Northleaf with $1.8 billion in new commitments and $4.6 billion over the last 12 months. Northleaf has consistently put on about a billion new commitments each quarter since we formed our partnership with them in 2000, and this $1.8 billion was the strongest quarter yet. The fundraising during the quarter was well diversified across Canadian and international clients, and as mentioned, was a good mix of private equity, private credit, and infrastructure mandates. And I'll turn the call over to Keith Potter.

Thank you, Luke, and good morning, everyone. On slide 32, you can see key highlights for Q2. Adjusted EPS of $0.93, excluding other items at Lifeco, and one-time debt refinancing charges at Rockefeller. Adjusted earnings were $4.5. percent year over year, our second highest Q2 on record. We returned $171 million to shareholders in the quarter through quarterly dividend and continued to be active in our NCID program, repurchasing $37 million in shares. As Damon spoke to already, Wealthsimple continued to execute on its strategy and driven by continued exceptional performance, we have once again marked up the fair value of our investment from $722 million to $835 million, which is fair value with our other comprehensive income. And finally, on China MC, we had another strong quarter with earnings surpassing levels that were last experienced prior to few reductions announced in July of 2023. Turning to slide 33, you can see our AUM&A and flows, and coming off a strong Q1, ending AUM&A was relatively unchanged, up 0.1%, while average assets increased 2.4%. Turning to slide 34, We have our consolidated earnings at IGM. Growth in average AUM&A supported higher revenues in both our wealth and asset management segments. And on point two, as James highlighted earlier in the call, our operations and support and business development expenses were up 4.9% on our year-over-year basis and 2.7% year-to-date. And on a full year basis, we are maintaining our guidance of 4% growth over 2023. On slide 35, we present the key profitability drivers for IG wealth, and I'll highlight a few points here. First, on the far left, you can see average assets were up 3.4% in the quarter. And on the right, our advisory fee rate reflects the strong quarterly increase in AUA and clients moving up wealth bands, including our continued success with the acquisition of mass affluent and high net worth clients. The rate is also impacted by a rotation of client cash balances and other solutions, including increases in other cash-like products such as GICs and HESAs. With stable product mix and continued success in the mass affluent high network segment, we'd expect a decrease of closer to 0.5 basis points per quarter in this rate. And finally, you can also see product fees and asset-based compensation rates were stable for the quarter. On slide 36, IG's overall earnings were $111.7 million in Q2, On point one, advisory and product and program fees are up year-over-year and relative to last quarter. And on point two, year-over-year financial planning revenues are in line with 2023, and another strong quarter for insurance results were offset by lower mortgage income. As Damon commented, we saw strong mortgage volumes within a competitive environment, which is great. Our lower mortgage income was driven by negative fair value adjustments, which are primarily accounting-related volatility versus economic in nature. The insurance business had another very strong quarter relative to a year ago and posts similar results as the first quarter. Looking forward, we expect to continue to see year-over-year growth in the business. And as a reminder, other product commissions will move in a similar direction as revenue, which you can see in the table included in point two, and has been at 63% of revenue for the last two quarters. Moving to slide 37, we have McKinsey's AUM by client and product type. as well as net revenue rates. On the left, you can see average AUM is up 1.4%. And on the right, the overall third-party rate was unchanged in the quarter at 53 basis points. And the top line, where it represents a smaller AUM base excluding Canada Life, is driven by continued strength with our PFSL and Wealthsimple Wealth Management Partnerships. Turning to slide 38, you can see McKenzie's earnings of $55.9 million is up 11.6% year-over-year, With higher AUM, net asset management fees are up year-over-year and sequentially, and net investment income is reflective of positive market growth in the quarter. Slide 39 has China NC results. Two quick points. First, on the left, AUM continues to increase, with ending AUM of RMB 2.2 trillion up 20% year-over-year, including RMB 65 billion in Q2 total net flows. And on the right-hand side, we have quarterly earnings in Q2, now exceeding earnings prior to the fee rate reductions from Q3 of 2023. Slide 40 has earnings contributions from companies in each segment. I have a couple of comments on Rockefeller. Adjusted earnings improved in Q1, driven by revenue growth as they build out their global family office business. And as mentioned, Rockefeller has refinanced debt this quarter on more favorable terms, which is reflective of the progress being made And the $3.3 million adjustment to earnings is reflective of a one-time prepayment and refinancing fees. Slide 41 provides a summary view of earnings and ownership and the value of our strategic investments by segment. Main comment is on Wealthsimple. And once again, we have increased the fair value to $835 million. It's reflective of their exceptional performance during Q2, public peer evaluations, and also revised revenue expectations for the company. And from IGM's valuation perspective, our strategic investments now represent $5.3 billion in value. And as a reminder, wealth simple is fair value for OCI. Rockefeller currently does not contribute in a meaningful way to earnings, but both have significant value. Slide 42 highlights execution against our capital allocation priorities. As James said at the beginning of the call, we are investing to drive growth while also returning capital to shareholders. And we continue to execute on share repurchases while maintaining financial flexibility with gross debt to EBITDA ratio of 1.6 times and unallocated capital of $379 million. As we move into the back half of the year, we will continue to execute on our NCIB while focusing on our growth-oriented business priorities. Before I turn over the call to the operator, on behalf of IGM, we would like to acknowledge that this will be Jeff Kwan's last call covering IGM. I would like to thank him for his 17 years of coverage. and the professionalism that he's brought to the business day in, day out, and we wish him all the best in his future endeavors. And that concludes my remarks, and I'll turn over the call for questions.

We will now begin the question and answer session. To join the question queue, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then 2. We will pause for a moment as callers join the queue. Thank you for your patience. The first question today comes from Jeffrey Kwan with RVC-CM. Please go ahead.

Great. Thanks, and Keith, thanks for the kind words. I don't know if I deserve it, but thank you very much for it. My first question for you is just, you know, how you're thinking about capital allocation given, I guess, the pause on M&A, the free cash regeneration of the business, and how you think about buybacks, because obviously you've been doing some share buybacks lately, the deleveraging as well as the organic growth initiatives that you've got in place.

Yeah, thanks, Jeff. And again, congratulations to you. You know, we stated at Investor Day that we We feel we were and are done with M&A, at least for a period of time. And by that, I mean kind of chunky M&A, M&A of any kind of moderate to large size. There's always very small stuff to be done. And I think we're in that period now. I mean, as I said at Investor Day, it might be a two- or three-year period where you should expect us to be focused internally. You should expect us to be focused on our core businesses and on strengthening those businesses. And, you know, that's very much what we're doing. So, you know, the first use of free cash flow very clearly is the dividends. We remain as committed as ever to that. We have started a buyback, and I believe this quarter we repurchased about $37 million worth of shares from I think that's a reasonable run rate. I think you should expect that to continue. I mean, we would buy more at lower levels and less at higher levels, but, you know, it's not a bad estimate, I would say. And so, you know, with the free cash flow that we have, what doesn't go to the dividend, what doesn't go to the buyback, we continue to invest in projects across IGM, IG, and McKenzie. So that's how we're seeing it. I would not expect any chunky M&A here, although, as I've said, just to cover myself, if the phone rings, we'll answer it. But we're really happy with the architecture that we have with two divisions, three wealth management companies, three asset management companies. We think it's a great lineup. We're investing in it, and we believe it will generate higher growth and ultimately higher dividends over time.

Thanks for that, James. I guess maybe that was a little bit my follow-on question is kind of the two to three years that you talked about at Investor Day. Is that guided to a certain extent on where leverage is and you want to get to a certain level before you consider it? Is it driven by leverage? you know, the activity that you've done in the past while and just want to kind of focus and execute on those? And similarly, when you do get to that time, you're perhaps ready to do a transaction if it's available. Is there, you know, all else equal, something that interests you the most? Like is it making a bigger stake in Rockefeller? Is it, you know, acquiring an asset manager as a capability to the shelf or something else?

Sure. Well, it's not driven by leverage. Our leverage ratio as we disclose this quarter is about 1.6 times. So, we continue to have a very conservative leverage profile or debt to EBITDA profile. So, leverage is not it at all. I'd say it's driven by two things. One is following a period where we did a fair bit of M&A. obviously China AMC and Rockefeller and ITC and there were others too. There is a bit of a desire to just kind of hunker down and focus on our great core businesses being IG and McKinsey and use our capital and not just our capital, our human resource talent, our time and attention to make those businesses as strong as they can possibly be in what we know are very competitive and fast-moving markets. One was really kind of a desire to put our head down and focus on our core businesses for a period. The second thing I would say, Jeff, is we're also kind of looking out and we're saying, you know, when might, like I said, we love the architecture, two divisions, three businesses in each division. When might opportunity next present itself in respect of things we currently own some of? And all of that kind of aligns with you know, the two- or three-year window that I talked about. And so there will be an opportunity to do more at Norfleet. There will, I expect, in the fullness of time, be an opportunity to do more with Rockefeller. And we'll see how the others, you know, we'll see what happens to others, including, for example, Wealthsimple. So it was not leverage. It was a desire, really, to focus on and spend a period of time focused on our two big core businesses and Then we looked out over the horizon and we said, you know, the next batch of opportunities in terms of what we currently own is likely to be a couple or a few years out. And so that's really all it is.

Okay, that's helpful. And if I can maybe sneak in one last question for Luke and Damon. It sounds like the message was July, the stronger net sales performance may have been a bit seasonality, a bit driven by the capital gains tax changes. But bigger picture, the industry net redemptions are hopefully going to improve as we exit 2024, albeit maybe gradually. Is that correct? And then also the other part of my question is on the gross sales that did come in for July or even June, like are you seeing any changes in the types of funds clients are putting money into versus what you might have seen over the past one to two years?

Thanks, Jeff, and congratulations again. In terms of the first part of your question, I would characterize July and the flows in July. There are three primary drivers there. One would be, as you mentioned, the capital gains and working with our clients and allowing them to crystallize some gains and take advantage of the lower inclusion rate. That drove money into cash. A lot of it was invested in June, but some of it remained in July. We were able to reinvest in July. But the good thing about that as well is that we were able to work with our clients and with prospects who weren't clients yet to do the same thing for the money they had at other dealers and crystallize some gains. And we were able to bring that money over to IG in July. That's the first thing. The second, I would say that the sentiment – It's slowly, but it is changing in this country, so there's a lot of money sitting in cash in this country, short-term investments, and at this firm, and we're starting to see some money be invested, which is great to see. And the third, which is the largest driver, is that we've just done a fantastic job on new client acquisition. What you see right now is a firm where our advisors are not just enabled, but they're motivated and squarely focused on working with Canadians that have financial challenges and need serious people to answer the questions that they have. You can see the build-up, and we've steadily been improving here, and I fully expect that to continue over time. In terms of the gross sales and what we see, we're a managed solution shop, so there hasn't been much change there in terms of what people are invested in. You see the performance of our shelf, and it's been very, very strong. So our advisors are committed to making sure that our clients invested in the future as per their financial plan. So we haven't seen much change as it relates to growth sales.

Yeah, Jeff, it's Luke. I guess two things. One, thanks again for your coverage. It's been great over a very, very long time, as Keith said, and I echo his sentiments. On page 10, You've got to walk up for your run. It was encouraging to see year-over-year improvement in Q2. And as you know, that's something we haven't seen for a while. And I think page 10 lays out what we saw in Q2 by product category. And what was noteworthy is the improvement that came in the foreign equity. So there was global equity and U.S. equity. We did see some noteworthy improvement in Q2. And then, as mentioned, we got IFIX preliminary numbers for July yesterday, and it did show a meaningful year-over-year improvement. It was positive overall. And from the vantage point that we have, it was in those same product categories with good flows into income as well as good flows into global and U.S. equity.

Okay, perfect. Thanks, everyone.

As a reminder, if you would like to ask a question, please press star then 1 to join the question queue. Star then 1. The next question comes from Jamie Goyne with NVF. Please go ahead.

Yeah, thanks. Actually, I just wanted to kind of follow on that last question, just looking at McKenzie's results and the net flows rate at McKenzie. You know, the industry had a little bit of a pickup here in the last few months, but it looks like McKenzie is still somewhat stable. somewhat stabilized at a slightly lower trend. So maybe talk through some of the potential drivers of that performance, given that some of the positive remarks you made about the underlying fund performance and success of the ratings.

Yeah, you got it, Jim. Good question. And back on page 27, I'm going to refer some of my remarks there. We've got a few things going on One is mentioned in some of our flagships, we've had high conviction, high discipline boutiques like Blue Water and Green Ship, which focuses on obviously thematic investing to combat climate change. What we've seen there is weaker short-term performance as these boutiques have stuck to their discipline. And you can see on this slide the year-over-year net sales declined, and that's been a feature of our overall net sales. At the same time with our boutique approach, we obviously try and make sure that we can be a provider of choice and have something relevant and compelling in all environments for all client needs. And you can see that the declines in those boutiques is being offset by a sales momentum in the global quant equity boutique, the global equity and income boutique, and again, I mentioned our U.S. all-cap growth mandate advised by Putnam, as well as some improvement in fixed income. And so I characterize that we're going really strong where we have such compelling performance in large categories like global equity, and we're going to keep on leaning in there during the back half of the year. But that's what you see is some sales declines in some of our flagships that are being offset by momentum elsewhere.

Okay, understood. Over to the IG Wealth Management business, you highlighted the decline in advisor fee rates. I appreciate that color. And just as we kind of look out over the next few years, I believe the commentary previously was that we would see about maybe like 50 basis points of decline on a quarterly basis. and remind me what that sort of run rate would be. Can you just refresh that outlook and how you're seeing the shifting mix to high net worth clients and maybe some product mix and how that's going to play out over the next few quarters?

Yeah, sure. It's Keith here. Thanks, James. Yeah, so I did comment that if you just have product mix fairly stable as we move toward uh positive net flows and you just have the mix shift uh toward uh the mass affluent high net worth you know about 0.5 basis points per quarter would be pretty reasonable and we would have been in that territory a little bit higher than that this quarter but there was strong market returns the other influencing factor would be we have internal cash where we're in a spread and then we don't charge advisory fees to speak of when we're into other short-term And that's what you saw this quarter that we wouldn't expect that to continue. There will be volatility. We saw that in that last quarter as well. And prior quarters, it was fairly stable. But I would guide to 0.5 basis points subject to mix in product mix.

Just following on that, do you have a view as to the length of time that should persist? Or is it just you have visibility over the next, say, four to six quarters, but beyond that, it's more challenging? What are some thoughts on that?

Yeah, I would say visibility over the next few quarters, Jim. And as we move longer term, we can provide more visibility at that point. But I'd keep it to the next couple of quarters, a few quarters.

Yeah, okay, understood. Thanks very much.

This concludes the question and answer session. I would like to turn the conference back over to Kyle Martins for any closing remarks.

Okay, thanks, Betsy. And once again, we'd like to thank everyone for joining the call this morning. And Betsy, with that, we can end today's conference call.

This brings an end to today's conference call. You may now disconnect your lines. Thank you for participating and have a pleasant day.