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CI Financial Corp
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Good morning, ladies and gentlemen. At this time, I would like to welcome everyone to the CI Financial 2018 Fourth Quarter Results Webcast. [Operator Instructions]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. Peter Anderson, CEO of CI Financial. Mr. Anderson, you may begin.
Thank you very much, and welcome to the CI Financial conference call for the fourth quarter and fiscal year 2018. Joining me on the call is Doug Jamieson, CI's Chief Financial Officer, who'll provide details on our financial results. As always, there are several CI executives available to answer questions about our various businesses. 2018 was the most challenging year for asset managers since the global financial crisis. We saw significant declines in global markets, especially in Q4, resulting in the Canadian industry having its worst sales and performance results in almost a decade. Increased market volatility, along with a much more stranded regulatory regime, ongoing fee pressure, among other issues, dramatically impacted the valuation of active asset management firms. Forward PEs for North American asset managers are at levels not seen since the financial crisis.M&A activity was also part of the story during the year, with 3 large independent Canadian asset managers being acquired by banks. This was also an important theme internationally, as some firms decided that bulking up was the best response for today's environment. Others believe that exiting was the -- their best option, look for this trend to continue in 2019. Throughout 2018, CI remained focused on executing our corporate plan. Our strategy is simple, to meet the needs of our clients today and position our business for the future. Our goal is to be the leading independent, Canadian wealth management firm with broad, diverse and competitive business lines.The key elements of our strategy include building additional scale, but not at any cost; expanding our channels of distribution and broadening our access to investors; and finally, investing in digital technologies to transform our company to thrive in a rapidly changing landscape. This is how long-term shareholder value is achieved.In 2018, we made a number of advances in line with these objectives. We completed the integration of Sentry, acquired an additional digital platform in WealthBar Financial Services and began a multiyear project to simplify, rationalize and modernize our product lineup and enhance our services to meet the evolving needs of advisers and investors.As part of that, over the past 4 months, we also successfully launched 3 new innovative investment solutions, alternative products for retail investors, ETF's for the mutual fund adviser channel and fixed-rate pools for discretionary advisers. By focusing on the controllable parts of our business, which includes, as always, expense management, we were able to report record earnings and record cash flow in 2018. However, as we've shown year after year, we continue to invest in the business, where we see long-term opportunities.Another important change in 2018 at CI Financial was the decision by management and the board to adopt a new capital allocation policy, under which we directed more of our free cash flow towards share buybacks. It was a bold decision that provided CI with greater flexibility and optionality. In the future, we can quickly redirect our free cash towards new opportunities that meet our strategic priorities. For now, we believe that the best use of our free cash continues to be repurchasing shares, and we expect to be buyers of our stock in 2019, unless as I said earlier, we see better opportunities. Doug will provide more details in a couple of minutes. I'll make additional comments on our business results and corporate strategy after Doug's comments. I will say I'm pleased with CI's strategic position. Despite the very challenging environment in 2018, we managed CI Financial as we always do, focusing on what is controllable, thinking long-term and adapting to a changing industry. And with that, I'll turn the call over to Doug.
Thank you, Peter. First, let's look at 2018 compared to 2017. Average assets under management were up $11 billion or 9%. This was primarily due to the inclusion of Sentry assets for a full year in 2018 and only the fourth quarter of 2017. Assets under advisement declined 2% year-over-year after growing 4% in the first 3 quarters before a market-related slide of 6% in the fourth quarter. Net income as reported was up 12% but after adjusting for the items noted below, was down 2%. On a per share basis, earnings were flat due to the accretion from share repurchases. And free cash flow was up slightly, as we've had a slightly higher mix of noncash expenses this year and an $8 million unrealized loss on marketable securities this quarter. Here we have CI's highlights on a quarter-over-quarter basis comparing Q4 to Q3. Average AUM decreased $9 billion or 7% to $129.3 billion from $138.3 billion. Assets under advisement fell 6% to $41.8 billion. Net income was $140.3 million compared to $158.2 million, a drop of 11%. Earnings per share of $0.57 was down from $0.62 per share last quarter, a drop of 8%, with the difference from the change in net income due to the accretion on the shares repurchased during the quarter. Free cash flow of $156.5 million dropped 8% from $169.2 million last quarter. There were several reasons for the drop in earnings. The market declined in the fourth quarter, which drove down assets, the average fee rate declined slightly, and we also had an unrealized loss on marketable securities of $8 million, which did not impact free cash flow, but reduced earnings per share by almost $0.03. Now looking quickly at Q4 year-over-year highlights. Average assets under management were down 9% from $142.5 billion in last year's fourth quarter. Assets under advisement were down 2% from $42.7 billion last year.Reported net income was up from $139.4 million, and on an adjusted basis, down from $173.7 million and $0.63 per share last quarter. Free cash flow declined 13% from $180.6 million. The decrease over the prior year is primarily due to the drop in average AUM and a decline in margins, as net management fees in basis points were down about 1% year-over-year and SG&A in basis points was up about 6%. CI's SG&A was $126.2 million in the fourth quarter, down from $131.4 million in the third quarter. As I indicated on the last call, all discretionary spend was under review, given the weakness in markets, and we managed to reduce spend 4% in the fourth quarter. In 2019, we are targeting a significant reduction in the $425 million spend in the Asset Management segment, and this is the first step in a long-term plan. CI spends 31 basis points of AUM on SG&A in the asset management segment of its business, and this ratio must come down. Historically, this has happened through scale, and we will continue to look for appropriate scale opportunities, but it must also happen through controlling costs. As average management fees trend lower, so must SG&A. We still intend to spend our new initiatives in innovation, particularly on the digital side of our business. But with some of that spend on innovation, we will introduce technology to replace manual processes. In effect, we will redesign and digitize our back and middle offices. Here we have the last 5 quarters of CI's quarterly free cash flow and the return to shareholders. Shareholders received $205 million in the fourth quarter, down from $250 million last quarter, as the new dividend rate took effect, and 0.5 million pure shares were bought and at a lower average price. We repurchased 8.3 million shares in the fourth quarter for a total of $160 million. Gross debt increased $60 million this quarter to $1.504 billion and with annualized EBITDA at $830 million, CI's gross debt-to-EBITDA ratio is at 1.8x. Net debt was $1.255 billion and the net debt-to-EBITDA ratio is 1.5x. We plan to repurchase the full 25.3 million shares under this normal course issuer bid by mid-June 2019, and that means buying about 7.2 million shares in the first 2 quarters of 2019, which would cost around $130 million at current prices. Dividends would be about $85 million in the first 2 quarters, giving a total return to shareholders of about $215 million. Excess free cash flow above this will be available to pay down debt and complete the WealthBar transaction. The issuer bid will be renewed in June for approximately 23 million shares. Completing it, even at $20 per share would require $460 million, plus annual dividends of $170 million total $630 million, an amount roughly equivalent to current free cash flow rate. So we would not expect debt to increase absent an acquisition. And this is our plan for 2019, to maintain debt in the $1.5 billion range and debt to EBITDA in the 1.7x range. We do, however, continue to have the flexibility to manage the amount of issuer bid repurchases, while considering CI's share price, changes to CI's EBITDA in cash flows and any acquisitions. I will now turn it back to Peter.
Thanks, Doug. Now let me provide more details on CI's overall corporate strategy, what we have accomplished to date and where we plan to go over the next 5 years. Our business is undergoing extraordinary change over the last 25 years, from a small mutual fund company to a diverse, independent wealth management firm. Through those years, under the leadership of Ray Chang, Bill Holland, Steve MacPhail, myself and others, we have made bold, strategic decisions. We understood the value of being aligned with distribution, so we acquired Assante and built a long-term partnership with Sun Life. We knew that scale would be vital, and we acquired firms such as BPI, Spectrum, Synergy, Hartford Canada and Sentry. As part of these transactions, we gained exceptional talent, including some of the best portfolio managers in Canada, with exceptional long-term performance records.These decisions created the foundation for our business today. At CI, we have never been complacent, moving quickly to adapt to change is part of our DNA. Since returning to CI 3 years ago, the pace of change has accelerated. At the same time, the value of advice and active management is constantly being questioned. At CI, we fully intend to continue to be a leader as our industry evolves and supporting advisers and offering actively managed solutions will remain important pillars of our firm. However, we fully expect our industry will be different in the future. The 5 acquisitions we have made over the past 3 years, all met 1 or more of our strategic priorities. First, scale. We believe that our industry will become even more dominated by large, diverse players, able to spread capital investments as well as operating cost over a large -- larger asset base, even though we are currently one of the largest firms in the Canadian industry, scale continues to be important. However, we'll only make acquisitions at reasonable valuations. Our acquisition of Sentry provided us with additional scale and remains a positive transaction for CI. Second, access to investors. Although it was common in the past for asset managers in Canada to operate with other affiliated distribution channels and many still do, relying solely on that arrangement adds risk to an asset management, today's environment. Consider the 2003 acquisition of Assante. At the time, it was a very controversial transaction as CI entered the distribution business. This move has been proven to be farsighted, as Assante and Stonegate are important and valuable parts of our -- of the CI Group today. Although Assante had open architecture platform, mostly catering to high net worth and ultra high net worth clients. We've been able to prove the value of CI-managed investment solutions to these discerning advisers and clients. As a result, a significant percentage of the assets administered by Assante are in solutions managed by CI. This combination has made CI Financial one of the largest high net worth managers in Canada. We're building on the success, with a goal of doubling the assets under advisement of Assante and Stonegate over the next 5 years. We're investing in this business to support its growth, organically, through recruitment and potentially through acquisitions. There is a need and there's an opportunity in the Canadian market for a large, well-capitalized, independent platform for advisers and their clients. That is also why 4 of the last 5 acquisitions also fit into our access to investors priority. We entered ETF market earlier than many of our competitors with the acquisition in 2015 of First Asset, specialist in actively managed and smart beta ETFs. There is a segment of investors and advisers who choose to invest using ETFs, and CI is providing that option for them. We are also leveraging the expertise of both First Asset and CI Investments in our new product, CI Mosaic ETF Portfolios, a suite of funds that invest primarily in First Asset ETFs. With GSFM in Australia, we gained access to one of the largest pools of retirement savings in the world. The GSFM business continues to grow, with its assets shifting towards the more profitable retail business, while the institutional pipeline remains strong.There are other advantages to this relationship. As I've mentioned before, GSFM has just launched a product managed by CI's Cambridge team in the Australian market and one of their managers, Munro Partners is a manager of one of CI's recently launched Liquid Alternative products. Australia is a very interesting and exciting opportunity for CI. Late in 2017, we purchased BBS and Virtual Brokers, its online platform. In addition to gaining extraordinary talent in the fintech space, we acquired 2 platforms being used by investors who may not ever seek the help of traditional advisers. First, the BBS platform is used by other firms as a back office. This part of the business continues to grow and has been shortlisted recently in searches by several third-parties to provide back -- more back offices support for them. So technology is exceptional, and we're also using it to enhance our traditional businesses. Second, Virtual Brokers is an award-winning online brokerage firm for do-it-yourself investors. Virtual is also posing -- posting healthy growth and further diversified CI's operations. And finally, our latest transaction WealthBar. As the second largest robo-adviser in Canada, WealthBar perfectly fits our strategic plans, not only is it an exceptional platform with technology that can be used through other traditional businesses. It supports investors we could not access previously. Investors at WealthBar have chosen this platform for specific reasons, and we will continue to add more products and services to the WealthBar platform to meet their needs. It is also a client of BBS, and we see the potential for valuable synergies as those 2 firms work more closely together.Looking forward, we continue to seek other digital services that fit our strategy. Our goal is to build a large, independent and integrated online platform for investors and advisers in Canada. There is room in the market, and we are positioning CI for this opportunity. Today, we have access to more investors, regardless of age, financial requirements or investment sophistication we want to connect with advisers and investors, providing them with the right solutions today and in the future. Even as advisers and investors need change, our platform will support them in the future. To quickly review our recent business results, CI remains -- remained in the redemption in Q4 due to our Canadian retail and Canadian institutional businesses. Based on data, most firms also experienced redemption in the latter part of the year. At CI, returning to net sales continues to be our top priority. We are more optimistic today as a result of several developments, including performance, the overall performance of our portfolio management teams has improved significantly from 12 months ago. Last year, our portfolio managers were generally positioned conservatively in a very aggressive and growthy market. Today, a number of our teams, including Cambridge, Sentry and CI Multi-Asset Management have posted much improved relative results. This is a typical -- this is typically a leading indicator for sales. Our longer-term performance over 3, 5 and 10 years also remains strong. As I said earlier, we have launched 3 new and innovative investment solutions over the past 4 months, including CI Private Pools, CI Liquid Alternatives and CI Mosaic ETF platforms. Each is very competitively priced, and the feedback today has been very positive. CI Institutional Asset Management continues to have a very strong pipeline with a significant amount of underfunded business, about $1 billion in shortlisted opportunities and a very solid number of RFPs in the works. And GSFM, it continues to have solid sales in both its retail and institutional business with a very solid pipeline on the institutional side in 2019. To conclude, 2018 was a challenging year for asset managers in all markets. At CI, we continue to focus on improving performance and sales in the short term and on building CI to prosper over the long-term. This industry is changing very quickly, and we are adapting CI Financial to compete today and tomorrow. If we focus on what we can control and invest in the future, I'm confident our shareholders will be rewarded. And with that, I'll conclude my remarks, and we'll now open it up for questions.
[Operator Instructions] The first question is from Gary Ho with the Desjardins Capital Markets.
Just wanted to start off with a question on net flows. Just particularly whether you're seeing signs of a turnaround so far this year. I know we're in February, maybe give us an update on how the RFP season is shaping up, please?
Well, I'll say that we continue to be in redemptions. We certainly see some interesting opportunities I said -- as I said before, so I am not going to be able to tell you how long we're going to be in redemptions, but as I said, we still see some -- we still see signs of things that could bring us back closer to positive sales or even positive sales, including as I said before, performance, launching new products and on the activity that we're seeing both on the institutional and the retail side.
Yes, I was particularly looking for kind of RSP and whether kind of a recent volatility in the market has any impact on the kind of outlook for the investors and what you're seeing on the front lines in particular?
Let me -- January, in the industry is always a bit challenging because we -- there's a lot of rep payments, and there is a lot of other payments that do come out. So I think it's a bit early to be able to tell, but I do see positive signs.
Okay. And then just the question maybe for Doug, I think you mentioned the capital planned and the NCIB, so I think on my math, you have executed on just over 70% of your 25 million shares that's allowed under your amended NCIB, there's still a few months to go. Does that mean the pace of the buyback will slow down until June before you ramp that back up? Is that kind of where you're hinting at?
Yes, that's correct.
Okay. And then, sorry if I missed it, Doug, the SG&A guidance. I think I missed it. What was the 2019 guidance versus that $225 million in the Asset Management segment?
Yes, we haven't specifically guided, but we do have a certain target we're aiming for this year, which is another drop in SG&A as well as a long-term plan to trim SG&A. As we see management fees fall a basis point on average each quarter, we need to have SG&A fall not the same amount, obviously, but a certain percentage of that.
Maybe can you give us some color on kind of what, which buckets those would fall under, like examples? I think you mentioned some of the back office and whatnot?
Yes, certainly looking to save everywhere that we can. I mean we have areas of the business that we know need to grow and where we'd like to spend, but in the legacy side of our business, we do need to run more efficiently.
The next question is from Geoff Kwan with RBC Capital Markets.
Just a quick follow-up on Gary's question on the SG&A. So the fee rate is coming down, but assuming that AUM growth happens from markets. You're not talking about the SG&A in an absolute -- kind of continuing to go down in absolute dollars, it just -- it'll move with C rate, but the absolute dollars may grow to the extent that AUM growth is increasing. Is that the right way to think about it?
Yes.
Okay. And then, Peter, on the M&A market, maybe if you can just talk about what you're seeing in Canada and the U.S., and then maybe kind of specifically, I mean you have balance sheet flexibility to do a deal, but just curious how much of the share price, where it's at right now, impacts the willingness to issue equity? I mean I guess at the end of the day, if it becomes accretive, then it can work but just wanted your thoughts on that.
Yes, I mean the share price is obviously a -- is a point of discussion, and I think that there is a -- I am seeing that there are interesting opportunities on both traditional side and on the sort of the new digital side. The -- and so in the years gone by, we would've never paid attention to things like BBS and WealthBar just because they're sort of out of the space of what our traditional business look like. But today, we see there's real opportunities there. So we're certainly looking for that. We are, as I said in the -- on the -- in the -- in my presentation, distribution is really important for us and really relevant the growth of our business, being aligned with advisers today and being on the active side of the market is important, so we're certainly looking at things that might be able to fit into that bucket. I mean if we are -- if we're going to double the size of Assante, or double the size of our traditional distribution business, we're certainly going to have to look at opportunities on that side as well.
Okay. And just one last question with respect to M&A. Obviously, I think you would like to get a combination, and I'm talking about the Asset Management side, a combination of scale as well as, say, a complimentary skill set, but is there one of those 2 that you kind of prefer more if you had to pick one?
No, I mean I think we're opportunistic. And we would look at everything. I mean we certainly look for something that met the net needs of the business today, so no, I think we would we take a look at -- we would take a look at everything from an opportunistic point of view. But I think as I said in my remarks, I think it would have to be at prices that we think are at valuations. And I think that we would be obviously very careful as we always have been with every transaction we've done to make sure that not only met the needs of our business, met our strategic planning but also was a -- also was valued at a price we thought was reasonable.
The next question is from Tom MacKinnon with BMO Capital.
I think one of the things, Peter, that you mentioned, the -- of some positive signs you've seen so far is what you've seen in terms of the new products that you've launched. So maybe you can tell us about how some of the flows have been going in terms of the alternatives in the ETFs and the fixed-rate pools? Just of late, maybe this month and then over the -- what you're seeing over the last couple of months?
Yes, I mean the funded ETF was launched about 3 weeks ago, so it's a bit early to give you some anecdotal numbers, but feedback from the field is that -- it says, that it's been really quick positive and being -- we built that more for financial planning advisers, and we're certainly seeing interest in other places well enough. So that's good. Our the Liquid Alts has -- we're quite -- very encouraged by that. We've seen there's a -- there's more coming in that today than we had planned, and so we see Munroe and the Marret products in particular having some very, very good success and very large and good takeup size. And on the pools, they are perfectly suited for advisers who want a fixed-fee product, and it's a business that meets the needs of IIROC, and we continue to see growth on that. So again, all 3 of them or I should say 2 of the 3 are probably meeting our expectations, and the third -- or surpassing expectation, and the third is too early to be able to give you any details other than the -- anecdotally from what we hear in the field.
Okay. And then a follow-up for maybe Doug. How high do you think you could take your net debt-to-EBITDA or your gross debt-to-EBITDA ratios, which are currently at, I believe, 1.5 or something like that and 1.7. So how high could you take those before you would get any kind of pressure, and where would that pressure come from?
Well, Tom, it's kind of theoretical with what is EBITDA doing and what are spending our cash on and monitoring our buybacks. But we said we don't want to go above 2x net debt-to-EBITDA in the past. Now we're saying we think we can manage it at this level, absent an acquisition. Now if we saw an acquisition and spent some cash, we'd have to have a plan to get back below 2x within a short timeframe for us to be comfortable. I'm not sure whether rating agencies would start to look more closely, probably north of 2x, and out bank covenant is at 3x. So we're not feeling a lot of pressure, but we also like to keep an eye on how much cushion we have in the case of a market drawdown.
So you would take it above 2x as long as you had a plan to get it back below 2x on the net...
Correct.
Okay. Is that the one we should focus on as opposed to the growth one?
Yes. We -- our covenant is based on growth but we like to monitor the net because we have a lot of marketable securities that we could liquidate if we had to.
And the current...
The only other thing it would add to that it would have to be an extraordinary opportunity for us to go over 2x net debt-to-EBITDA, kind of, maybe an opportunity, but it would have to be -- it would have to fit our strategic goals perfectly and as Doug said, we would have a goal to reduce that, reduce the net debt as quickly as possible from there.
And the growth -- and the covenant at 3x, that's on growth, is that right?
Yes.
The next question is from Paul Holden with CIBC.
So first question I want to ask you, so nearly $9 billion of outflows on the Canadian retail product in 2018. How do you think about where that $9 billion went? Like how would you characterize it? You think it was lost share at a passive investments, maybe banks gaining some or maybe just other independents with better performance numbers or a more global bend to them? Is there any kind of way that you characterize that or think about it?
Yes, look I mean -- first of all, I mean, none of us at around this table at this company likes to be in redemptions. It is a -- it's not a position that CI has been in many times in the past, and we're working really hard to return ourself to positive sales. I'm absolutely confident we will. I am not -- there's not one doubt in my mind that we're going to return our company back into positive sales. But as you know as I said earlier that the redemptions are really as a result of several reasons, other than the industry challenges, of course. But we -- our portfolio managers had positioned themselves as -- at very conservatively in a very growthy market. And a large block of for our assets were in -- are in classes that are out of favor. But this is what we sold 5 years ago, so we were the top-selling fund company for a number of years, selling Canadian equity, Canadian balance and Canadian income products. And that's where we're seeing our flows out. But the performance is improving, and I told you, gave you all that data, our -- we're launching new products, our activity level at all levels of our sales channels is as high as it ever has been. And so I see a lot of confidence. Where money is going? Well, I think it's shifting to a number of places, it's certainly I am assuming going to some of our competitors. I think it's probably going to passive, I think it's going to other products, whether it's in SMA or something like that, but that's the industry, and that's why we have to adapt. But we're -- like I said, we're -- we are working to get back to where we wanted to be, and I would say that I'm very confident in our strategy. I think we're in the right place and I'm totally confident in our sales management teams in all parts of our business and our sales team as well, whether it's CI Retail and Institutional, whether it's Assante and Stonegate and Grant Samuel and all of our other sales businesses. So I think -- I don't know -- I think that answers your question.
So the follow-up that I have on that, based on your answer is, do you feel like you have the right product shelf today, given the recent products you've introduced? Or do you think there's further to go and if there's further to go, maybe you can kind of highlight some of the areas where you'd like to broaden the shelf into?
Yes, we were always looking for ways to broaden our shelf. We're always looking for opportunities there. We are, it takes time for people to change, from being a redeemer to being a buyer, but we are -- but what we -- one of the real positive signs that we're seeing is significantly a high number of new advisers that do business with CI. And so, we -- I always thought that there wasn't an adviser anywhere in Canada that does business with us, that doesn't do business relations today. Today, we see -- I think last year 18% of our gross sales came from advisers that had not done business with us before. So there's huge opportunities for that and we're, we continue to look for new channels and new advisers that are looking for opportunities. But it does -- it takes time for firms to move out of -- move out of redemptions and into positive sales. We get that. So we're running our business as effectively and as -- and controlling all of our business on -- in this, looking for ways to build the business in the future. And at the same time, focusing a lot of our attention on sales and on returning to positive sales.
And then, sort of final question on this topic. With the first asset business in the ETF portion of it in particular, that's obviously been a growth engine for the industry as a whole. Do you feel like you're maximizing on that potential or is there more you could feel like you can do there?
Sure, it's Rohit Mehta, Paul. Happy to answer the question. I think there's always more than we can do, and as we take a look at how we can deliver ETFs to advisers, one is we're going to continue to look at the product shelf that we have at First Asset. In addition to that, it's other ways to distribute the ETF product, so as Peter was mentioning, Mosaic is a fund of ETFs, and so through expanding the First Asset lineup as well as getting synergies with the mutual fund business, we're going to continue to look to grow it, and then we brought our sales teams together last year to bring efficiency and maximization to the breadth of Canadian advisers with both the CI sales team and the First Asset sales team.
Okay, good. Then I have a couple questions on the -- going back to the SG&A. As we see the digitalization and the digital strategies across the financial services, more broadly, right? Banks, life insurance, et cetera, so the way the arc of the cost we have seen so far is usually you get a ramp in expenses as you pass these new technologies and it takes several years before you reach the point where the cost savings really started to hit the bottom line. Is that true in this case and basically the strategy is to reduce expenses elsewhere to help absorb some of those expenses? And then you'll see the benefit of digitalization 2, 3, years from now. Is that fair?
I don't know that I see this as large projects within the CI legacy business. This is quick tips on processes that we can simplify the process, digitize the process and start saving money that way. We started already using robotic process automation in specific areas to start to save a lot of time and move people onto more value-added activities. Where we do have a little bit larger spend on the innovation side is going to be our, on the digital side, the distribution side where we've bought BBS and WealthBar and we've moved to integrate product through into those channels.
Okay. And then maybe as you think about the long-term goal here in terms of SG&A relative to AUM, like how significant of an opportunity is this? Is this something that could bring your efficiency down by 1 or 2 basis points or is this more like a 5, 6 basis point opportunity? Maybe you can just broadly characterize it?
Well if we're going to see our net management fee, which is in the high 90s right now, continue to drift lower, say a basis points a quarter over the next 3 to 5 years, we know we have to get our 31 basis points, which is already the most efficient in the industry, even lower. We may be looking at getting it down towards 20 or even lower within the next 5 years.
The next question is from Graham Ryding with TD Securities.
Maybe you could just start with some of the new products of the Mosaic ETFs. Can you give us an idea of how those are priced relative sort of the other sort of larger funds that you would -- mutual funds that you'd sort of prioritize in the end market?
So they're -- it's Rohit Mehta again, so they've priced competitively with other sort of peer groups out there. I think we've tried to bring sort of the best of both worlds together with the CI multi-asset management team running those strategies and providing both exposure to First Asset as well as other ETFs from other providers. So overall, price point wise, we are in line or in some cases, below peer groups.
In peer groups, are you targeting other ETF products when you talk about peer groups?
When comparing fund of ETFs.
Okay. And then a similar theme, just the private pools, like how are those different than your existing high net worth focused products in terms of pricing, but also the product itself?
It's Roy Ratnavel, Head of Sales here, thanks for the question. The private pools that we have are one of the best priced comparative price pools that we have in the industry going and in terms of also the wide range of selection. And these were originally launched to really attract the business of IIROC. But we are starting to see the traction is actually broad range now and you know anything about sales, it's about a positive interaction and also removing obstacles. Then if you look at our business, you mentioned, as Peter mentioned earlier about the performance being positive and to that end, you're starting to see 2 things happening for our sales team and our meeting counts are up, and every meeting we have a positive interaction. Defensively, products that -- of the aspect could have left our books now are being put back into the pool product of funds of ETF or liquid alts, and offensively, is getting us into conversation we would've otherwise not have had with advisers. So we're broadening out our audience, hence the reason for having new people doing business with us and so we are very positive about where we are going with this new products lineup.
And one of the reasons why these are a little bit different is that we set these at fixed-price, so a lot of our platform now is on a, what's called preferred pricing which is tiered, and we heard from mostly IIROC advisers that they found that a bit difficult to be able to use in some of their fee-based accounts. And so that's why we develop them, but the interesting part about it as Roy said, is that we're getting interest from multiple parts of our business and through a different -- from other channels, so that why we're quite excited about it.
Okay, got it. The fixed-price being a key differentiator to your price set, okay. That's helpful. And then my last question just would be on WealthBar. Try to think about how you're sort of viewing the opportunity? Is it more about this gives you access to a different channel of investors that you were not exposed to previously, or is this -- are there some real complementary benefits to your existing CI business, either through Assante or your traditional funds business that you see here? Maybe you can elaborate on those 2 areas?
I would say both, so if I had told the reverse of what -- how you said, is that we have a lot of advisers at Assante and most -- our -- a majority of our clients are high net worth and ultra-high net worth clients. And so we do not have a platform to be able to cater at Assante and at Stonegate for young, small or small asset-based clients. So this creates an opportunity for us, and so we're building a platform at Assante for -- dedicated to those types for clients. On the other side is that the biggest challenge in the industry, I think, is that we have investors who, may be young, may not have enough assets to deal with advisers anywhere today, and they, and so where would -- where do they go? Well, they go to large institutions, mostly in the banks. And the last thing we want is not to have some touch point with these investors. We believe that we need to start to connect to investors earlier than we've done in the past, because we want to be able to have a relationship with them as soon as they're -- as soon as they begin to think about investing, not when they are -- they fit into high net worth category. And so we look at this as a long-term process, and we want to be, have relative to investors, young, new, and also ultra-high net worth clients. So that as they move along that investment timeline. They can actually -- that we can actually continue to work with them. So 20 years from now, or 10 years from now, an investor may be in their 30s or 40s are thinking to use maybe want it, need, now need advice. Well, we can help them there and secondly, if they want to continue to do business with, the way they do it today, well that's fine as well. And between then and now, we will be building other platforms and other distributions, or platforms, I guess the best way to use it that will cater to clients as we need them. So I view this as a real opportunity for us, and it's not a -- to me, it's exactly what we should be doing, reaching advisers, giving them an independent choice down, so down the road, they, where they will continue to be working with or potentially working with an independent adviser or doing something out of it in the [indiscernible]
And just to be clear, you're launching or building out a robo or automated platform within Assante, WealthBar is going to be separate from that? [indiscernible]
We'll use -- it'll be the same platform. It'll look different, but it will have -- it'll be using the same platform as before.
[Operator Instructions] The next question is from Scott Chan with Canaccord Genuity.
On the similar vein of WealthBar, perhaps you can give us an update on Virtual Brokers and kind of how that might be complementary over time into the CI platform?
Well, it's -- right off the bat, there is a whole host of -- so Virtual is the online brokerage trends you know that's connected to BBS and when we bought -- what we saw at BBS, as being able to lever the technology that they had into our traditional business. So instead of building this and taking years to be able to develop, we bought it, and we're slowly moving things over to be able to enhance the experience for advisers and investors for Stonegate and Assante. Virtual is, and sorry, and second of all, the other value to BBS, is as I said earlier, it's a back office for a lot of other businesses, so robo platforms and other Fintech businesses. And so we continue to see that grow and there are an awful lot of searches going on today for exceptional technologies to be able to support other firms back up. So we see that as a positive. On the virtual side, look, it's another touch point for us to deal with investors that may not want to -- that today may not want to use advice. It's a different type of client, but down the road, we'll be able to use, to develop products and technology and services, to be able to offer to this client base.
And just at CI Institutional, I think for the last several quarters you've talked about a positive pipeline similar to today, but when I look at the last 3 quarters, it's over $300 million of net outflows, perhaps maybe you can kind of dissect where that's coming from? Is it pure institutional or strategic alliances? And then, I guess into the current pipeline, what's, kind of what's entailed to that?
Well, it's a little bit of both, I would say. I mean, just as our retail businesses was challenged with performance, so also was CI Institutional for that. That's a business, some of the alliance business we see -- we have seen a bit of flow out. We've actually seen flow in as well. And then third, there is a lot of competition on the institutional side as we see OCIOs step up, so we're, we compete now with consultants as well. So it's a three-part thing, but we see, like I said earlier, we see opportunities there continuing. I mean, we do have quite a lot of unfunded commitments that should, some should come in Q1. We see a lot of finals, more than we seen in a quarter or 2, and then finally, a large pool of RFPs that we are into a significant amount. Did you have anything other, Neal?
No.
Okay.
And just lastly, just on the Grant Samuel's positive flow attractions throughout 2018. Maybe, can you give an update on perhaps inorganic thoughts on the Australian platform and kind of what's driving the positive flows, especially in Q4 when the markets were very difficult globally?
Yes, I mean look and see, I mean, Australia is an enormous opportunity, but it's also significantly different than the environment here. Our businesses there has shifted a little bit towards the retail side of our business, which is where the fees are significantly higher than institutional. It is a -- it's a country and a space where, that we have to be very selective on the teams and the managers that you work with because you don't have access to advisers or super annulation funds unless you're on a recommended list, so. And so today, Grant Samuel has a number of very good, teams of managers that they market to in the Australian space, including [ pain real ] who is a fixed income manager, Munro Partners, which is the team that we also brought to Canada, we see good flows there. So we see opportunities there, and on an institutional side, they represent those firms as well, and we're seeing a lot of opportunities on that space as well. So it means a really -- it's, there's a real opportunity there, but you certainly have to be careful. The Australia market has just got through the, their Royal Commission, we're sort of going through that now, we see opportunities as a result of that for CI down the road as well, so.
And then, just a follow-up. Is there any early traction on some of the Canadian fund managers you have on the Australian platform? Because as you remember that a couple of mandates might be put on there last year.
So today we have Cambridge, which is new, and it's early, so no, we haven't seen traction but they have been recommended on, through at least one consultant, maybe 2. One consultant, and they've got a very good rating there, so which is a great positive sign. The portfolio manager that leads that team is heading to Australia sometime in the middle of, the end or the middle of early Q2. So they'll start doing some presentations and meeting retail and institutional clients there. So that should be a very good sign. So everything is there for it to be a successful launch. It's just getting the portfolio manager there as well.
This concludes the question-and-answer session. I would now like to turn the meeting over to Mr. Anderson.
Okay, well listen. Thank you very much, everybody for the questions, and again if there's any other questions, feel free to reach out to us and we will chat to you at the -- at our next Q1 call. Thank you very much.
Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.