five years after stock markets around the world fell off a cliff, Murray Taylor, president and CEO of Investors Group Inc. (IG) since 2005, believes the Winnipeg-based company is back where it should be – in growth mode.
The recovery has taken longer than Taylor would have liked. But with IG’s mutual fund assets under management (AUM) and network of veteran financial advisors, which the company calls “consultants,” recently hitting all-time highs, Taylor likes the view from his Portage Avenue office.
“We see ourselves back in a growth phase after the financial crisis wiped out many companies. If anything, [the crisis] made us stronger,” Taylor says, noting that IG clients made median investment returns last year of 12.2% (after fees) – more than double the median return of 5.6% in 2012.
Investors Dividend Fund, which recently broke through the $17-billion mark in AUM, and Investors Real Property Fund, through which clients participate in the ownership of real estate, were two of the biggest drivers in that increase.
The return to stronger performance has also cemented the firm’s commitment to the company’s exclusive sales force model, says Taylor: “The exclusive association we have with our consultants means that we’re able to give them more support than many of our competitors would provide to an advisor directly. That support comes in training, awareness and case work with our tax and legal support group. The world has become more complex, not less complex.”
For example, Taylor says, IG is well prepared for the upcoming deadlines for Phase 2 of the client relationship model (CRM2), which will have a fundamental impact on advisors’ relationships with their clients. CRM2’s new performance reporting requirements will give clients a much more precise picture about how their mutual fund units have performed.
IG has been working on its own dollar-weighted personalized rate of return for fund performance, Taylor says, and has waited to implement it to avoid having to change its performance reporting systems twice.
“We will make [the new system] available to our clients and consultants before the [2016] deadline,” says Taylor. “We believe our competitors may have a more difficult time in a number of dimensions.”
The financial crisis caused clients to ask more questions about their personal situations, Taylor says, including whether they’ll have enough money to retire and if their assets have been invested properly. In addition, as clients age, their lives are becoming increasingly complicated with children, blended families and estate issues.
“Financial planning has been huge for us,” Taylor says. “It’s been central [to our success], and it’s what we’re very strong at.”
One of IG’s financial planning tools, called The Plan, is software that helps advisors to create the all-important financial plan document for their clients.
“That creates the context,” Taylor says, “for making the best decisions around ‘What do I do with my assets today; my savings vs consumption decisions; my trade for today vs the future; am I properly insured; and am I building up a tax-effective approach to my investments?'”
Partly as a result of the demand for more financial planning, IG’s advisors have increased their focus on both insurance and dealing with debt and mortgages; these have been increasingly popular topics in the aftermath of the 2008 downturn. IG has an in-house mortgage business, and IG advisors use insurance products from Canada Life Assurance Co., Manulife Financial Corp. and Sun Life Financial Inc.
Taylor’s belief in the IG approach also explains why he’s not overly concerned about the growing buzz about exchange-traded funds (ETFs). He thinks the popularity of ETFs needs to be examined in more detail. While he acknowledges their success in the U.S., he believes that their popularity in Canada has been overstated.
“When you bear down on what has been sold in Canada on the ETF side,” Taylor says, “a ton of it has been fixed-income, not equities.”
(Neither IG nor its sister company, Mackenzie Financial Corp., offer ETFs.)
ETFs are, no doubt, an investment vehicle to be reckoned with from a sales perspective, but they don’t provide any advice in and of themselves, says Taylor: “The marketplace continues to be very dominant around advice being provided [to clients]. In terms of actual usage of ETFs, they have continued to be [a substitute for owning equities directly] more than they have become a [mutual] fund substitute.”
One of the metrics that fills Taylor with pride is the expansion of the ranks of IG’s veteran advisors, which the company defines as having more than four years of experience in the business. At the end of 2013, IG had 2,797 such advisors, an all-time high, up from 2,100 in 2005. At the same time, the company now boasts record mutual fund AUM of $68.3 billion as of Dec. 31, 2013, up by 12.6% from a year earlier.
Taylor’s response to competitors who suggest that IG offers a limited range of investment choices to its clients because the vast majority of the firm’s sales come from proprietary products: “We offer more than 100 [mutual funds] within our fund family. Within every category, whether it’s Canadian equities or balanced funds or U.S. equities, you’ll have a multiple number of Investors Group managed funds that you can use. And for each of those categories, you can choose [funds] from our other partners” – which include AGF Management Ltd. and Franklin Templeton Investments Corp., among others.
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