CI Financial Corp

TSX:CIX

Earnings Call Transcript 2019-Q4

[Operator]

Good morning, ladies and gentlemen. At this time, I would like to welcome everyone to the CI Financial 2019 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. Kurt MacAlpine, CEO of CI Financial. Mr. MacAlpine, you may begin.

[Kurt MacAlpine, CEO & Director]

Good morning, and welcome to the fourth quarter earnings call for CI Financial. I'll be joined by Doug Jamieson, our Chief Financial Officer. On Slide 3 is our agenda for today's call. First, I will review the highlights and challenges for the quarter, followed by Doug, who'll discuss our financial results for the quarter and the fiscal year. After that, I will update you on our sales for the month of January and on our corporate strategic priorities and select strategic initiatives that are now underway, then we will take your questions. We had strong financial results in the fourth quarter, with record earnings per share of $0.66. This represents an increase of 10% from the previous quarter and 16% from the fourth quarter of 2018. This was driven in part by significant reduction in our SG&A expenses as we focus on controlling costs, while continuing to invest in new strategic initiatives and other areas of growth. In fact, our SG&A at $113.8 million was significantly below our target of $120 million. This helped to generate a 16% increase in free cash flow to $168 million. Our sales remain in net redemptions, but there were some very encouraging developments in the fourth quarter. There was a dramatic change in our Canadian retail net flows, which improved by $1 billion over the third quarter and by $1.9 billion over the fourth quarter of 2018. Unfortunately, this was offset by redemptions in the institutional space, which included 2 large redemptions that we disclosed several months ago in advance of them occurring. We continue to see success in our ETF business, which has had record quarterly gross sales of $1.7 billion. We ended the year with ETF assets of $8.6 billion and have seen continued growth in January. On our last quarterly call, we announced that we'll be acquiring WisdomTree Canada's ETF business. This transaction is expected to close next week. And post close, our combined ETF businesses will have over $10 billion in AUM. Our wealth management businesses, Assante, Stonegate and WealthBar continue to experience strong sales and asset growth. We ended the year with record assets under advisement of $49.8 billion. During the quarter, we repurchased 6.9 million shares worth $142 million and remain active in buying back shares. The Board also declared a quarterly dividend of $0.18 a share with a record date of June 30. As a reminder, last quarter, the Board declared a quarterly dividend of $0.18 per share with a record date of March 31. On our last earnings call, I introduced a new strategic direction for the company. Later in the call, I will recap our strategic priorities and discuss the progress we've made in executing that strategy. As part of that, I will share additional details on 3 key initiatives that we have underway. Now I'll turn the call over to Doug, who will discuss our financial results.

[Douglas J. Jamieson, Executive VP & CFO]

Thank you, Kurt. CI's fourth quarter average assets under management of $130.9 billion were up 1% from both the third quarter and the fourth quarter last year. Ending assets at $132.1 billion were up 2% over the quarter and up 6% from December 2018. Assets under advisement grew 5% during the quarter and are up 19% from 1 year ago. This is due to net sales and recruited assets in the Assante channel. Net income of $147.5 million was up 6% from last quarter's $139 million and up 5% year-over-year. Earnings per share of $0.66 was up $0.06 per share from the third quarter and $0.09 per share from 1 year ago. Free cash flow was up 16% to $168.3 million from $144.7 million last quarter and up 8% from $156.5 million in the fourth quarter last year. This jump was driven by the increase in earnings and a reversal of future tax provisions recorded in the past 2 quarters. CI's SG&A in the fourth quarter was $113.8 million, down 8% from $123.5 million in the fourth quarter last year and down from $124.6 million last quarter. Spend in the Asset Management segment was down $10 million to $88.7 million compared to the third quarter. This is due to lower compensation expenses, negotiated reductions with vendors and the reversal of accrued discretionary spend on advertising and promotion. SG&A in the Asset Administration segment was $25.2 million, down from $26 million last quarter. Next, we are comparing the level of free cash flow to the amount paid out as dividends and buybacks for the past 5 quarters. The level of buybacks moderated to $142 million from $150 million last quarter, but we have now front-loaded the purchase of 15.5 million shares out of the 21.7 million share normal course issuer bid that runs until mid-June. These shares were purchased at an average cost of $20 per share and at a price earnings multiple of between 8 and 9. CI trades now at around 10x trailing 12-month earnings, and we still see the stock as undervalued. We expect to acquire the remaining 6 million shares under the issuer bid in the first and second quarters, absent the need to direct cash flow elsewhere or a significant change in CI's valuation. With the reduction in shares outstanding each quarter, the $0.18 of dividends paid has declined from $45 million 1 year ago to $41 million in this past quarter. In the fourth quarter, dividends and share buybacks exceeded free cash flow by $14 million. And CI's gross debt moved up $35 million during the quarter to $1.6 billion and net debt up $42 million to $1.38 billion. The increase in annualized EBITDA to $888 million lowered CI's debt-to-EBITDA ratio to 1.8x. We anticipate the completion of announced acquisitions and the share repurchase plan will not significantly increase CI's net debt over the next 2 quarters. I will now hand it back to Kurt.

[Kurt MacAlpine, CEO & Director]

Thanks, Doug. This slide shows our preliminary sales results for January. Note that January has historically been a difficult month for net sales for CI due to the fact that risk withdrawals and other redemptions are often made at the start of the year, which impacts our large legacy business. Our Canadian retail net redemptions were $366 million, which represents an improvement of $340 million over January of last year. Our Canadian institutional business had $111 million in net redemptions, while our international business had a very strong month with $239 million in net sales. In total, we had $382 million in net redemptions in January, an improvement of $706 million over January of 2019. We are encouraged by the recent signs of improvement in our sales and believe that better fund performance and updated distribution and marketing strategy, powered by advanced analytics and enhancements we've made to our product lineup, should generate stronger sales this RSP season compared to last year's. Given that our new strategy was rolled out just last quarter, I thought it'd be helpful to provide a brief recap of our strategic priorities. The 3 strategic priorities are: modernizing our asset management business, expanding our wealth management platform and globalizing our company. These priorities are designed to maintain and extend CI's leadership in the rapidly changing asset and wealth management industries. This slide shows you a timeline of our key strategic initiatives that we've embarked on since last September and their alignment with our strategic priorities. While all of the initiatives on this page have been disclosed publicly on an individual basis, I thought it'd be helpful to show the extent of the changes collectively on 1 slide. Keep in mind that while these are our highest profile initiatives, there are many other initiatives underway within CI as we work to transform our business. For example, new product launches and improvements to our operational efficiencies. Now I'd like to provide more depth on 3 initiatives that support our corporate strategy. First, I will discuss our DoubleLine relationship. I'm sure you've heard of DoubleLine and Jeffrey Gundlach, who's one of the world's most influential and successful asset managers and the most well-known bond investor globally. In this exclusive partnership, we'll be working with DoubleLine to launch 3 new income mandates for CI, modeled on funds they offer in the U.S. These include the firm's flagship strategy, the Total Return Bond Fund, as well as the income fund and the Core Plus Fixed Income Fund. We expect to launch these mandates in mutual funds and ETF structures within a couple of months. We have received very positive response from the advisers following this announcement. And based on the strategies we've chosen, we expect to see strong demand. The launch of the DoubleLine funds will diversify our lineup and help promote our entire suite of fixed income solutions. We want to be recognized for the strong expertise and the significant presence that we have in fixed income today. Currently, CI is one of Canada's largest fixed income managers with about $40 billion in assets under management. Turning now to our partnership with Dr. Joseph Coughlin. He is the founder and Director of the MIT AgeLab and the most recognized global expert on aging and longevity. Dr. Coughlin offers unique research-driven insights into how retirement is changing and how this may impact investing in financial planning. This partnership will position CI to become the leading provider of solutions to the retirement marketplace. We will leverage his expertise and research to develop new investment solutions and products, enhance our financial planning services to include aging and longevity planning and educate advisers and investors on how to best plan for and live well in retirement. This unique partnership and the world-class expertise it brings to our clients also helps to differentiate CI relative to our competitors. Lastly, I will discuss our RIA strategy, which is a critical part of our globalization initiative. On our last call, I outlined the reasons for entering the U.S. RIA market and positioning CI as an RIA aggregator. To briefly recap, the RIA market represents a tremendous opportunity for CI. It accounts for 23% of the U.S. wealth management market and is growing at 18% a year. Because it is highly fragmented, there is great potential to realize economies of scale. In addition, these businesses are profitable and cash flow positive starting in the year of the acquisition. CI has a strong fit with these businesses because of our existing capabilities in wealth management and our financial strength, which will provide them with stability and capital to accelerate their growth. In addition, this is allowing us to offer robust cross-border solutions to our existing Canadian client base. So far, we've announced the acquisition of majority stakes in 2 RIAs, Surevest Wealth Management and One Capital Management. Surevest has offices in Arizona and California and about USD 400 million in assets. It is focused on high net worth clients and has experienced, ambitious leadership. This acquisition has closed recently. One Capital is based in California and has about USD 1.7 billion in assets. It has excellent capabilities across wealth management with divisions focused on athletes and entertainers and an existing cross-border service offering. This transaction is expected to close next month. I'm also pleased to announce today that we've signed letters of intent to acquire 2 additional RIAs in strategic locations in the U.S. I look forward to disclosing more details on these firms in the coming weeks. And with that, we'll be pleased to take your questions.

[Operator]

[Operator Instructions] We'll take our first question from Geoff Kwan with RBC Capital Markets.

[Geoffrey Kwan, Analyst]

My first question. I was just thinking about the RIA strategy, that has a potential to accelerate the net sales turnaround just penetrating the AUA with CI's AUM. But just wanted to get your thoughts in terms of -- I think there's generally a tendency for a home country bias to invest in funds of your own country as well as the fiduciary standard. What CI products do you think could be candidates to add to the RIA shelf?

[Kurt MacAlpine, CEO & Director]

Geoff, it's Kurt here. So as it relates to the RIA marketplace, there's really kind of 2 parts to the overall strategy. The first one is to scale the business to an appropriate size to start to think about launching local product. I believe after we've completed the next 2 acquisitions that we have signed letters of intent, we will be in a position to start to look at local products in that marketplace. As we think about what we're bringing to market, I would say it's not going to be existing products that we have here, but they will be customized and bespoke products that we would launch for those RIAs, leveraging the capabilities that we have in-house today. So you're right on the domestic bias, Canadian investors tend to have a heavy domestic bias towards Canadian strategies. So that wouldn't work as well in the U.S. But when you look across our global investment platform and the underlying capabilities that we have, all the building blocks are there to offer customized and bespoke solutions for the RIAs that we're working with today.

[Geoffrey Kwan, Analyst]

And with the lack of track records impact in terms of what you can roll out? Or is there another way that you would kind of address any sort of fiduciary questions around new fund launches?

[Kurt MacAlpine, CEO & Director]

Yes, the way that the most markets work today, and particularly in the U.S., what you see is RIAs and part of the real strength of the business model is to focus on clients and to focus on financial planning. The clients essentially complete their financial plan and goes through that robust planning process with their adviser, and then the adviser is left to choose a series of individual products or building blocks that may or may not fit with that plan specifically. So what we'll be doing is launching customized strategies that are designed to meet the specific outcomes of the financial plans that clients have with their particular adviser. So we wouldn't be launching a U.S. large-cap equity mutual fund, as an example, there are a lot of choice in that marketplace. But think of it as more of an investment solution designed to help that investor meet the outcomes of their plan. So as an example, part of the reason we were so excited with partnering with Dr. Coughlin from MIT is because of his unique perspectives on retirements, aging and longevity. So we'll be using those insights to not only enhance our planning process, but then also to be more thoughtful about how we're delivering retirement outcomes to investors. So as an example, we would use those insights to help build products. So when you think about it in that context, the track record isn't necessarily as important. We will have underlying track records in each of the building blocks or the components that make up the fund. But the fund itself will be new and bespoke or the strategy itself will be new and bespoke to the investor.

[Geoffrey Kwan, Analyst]

Got it. Second question was on the SG&A kind of doing better than what you may expect or what we were looking for. Was the full impact of those expense reductions in the run rate that we saw in Q4, is there going to be some incremental benefit that we'll see in Q1 '20? And then just any guidance for SG&A on 2020?

[Kurt MacAlpine, CEO & Director]

Sure. So if you kind of unpack the SG&A savings, mainly came from the asset management business, as you heard from Doug. It was primarily driven by 3 things: some renegotiating and repricing vendor relationships, some restructuring that we had done internally and then compensation impacts. I think it was important for us to rightsize the cost base to reflect the rapidly changing marketplace that we're in today. Looking forward, I think we're going to continue to realize operational efficiencies through a productivity transformation that we have underway currently. But we're also going to be using some of the savings to be more offensive strategically as we execute against our core 3 corporate strategic priorities. So I would say we realized part of the savings kind of in advance of making the investments, and now you'll see us continuing to push productivity while we invest in growth of our business.

[Geoffrey Kwan, Analyst]

And then, sorry, just -- do you have any sort of outlook or guidance crystal ball for 2020, what the SG&A might look like?

[Kurt MacAlpine, CEO & Director]

No crystal ball, but I would say the guidance that we've provided to you, historically, is probably an appropriate range to think about.

[Operator]

And we'll go next to Gary Ho with Desjardins.

[Gary Ho, Analyst]

Maybe just continuing with that SG&A theme. Maybe I can ask it the other way. So you mentioned there's a few kind of investment opportunities in fiscal '20 for your new strategy. Kurt, can you maybe lay out kind of what those -- or maybe the bigger ticket items are and kind of walk us through the timing of that as well?

[Kurt MacAlpine, CEO & Director]

Sure. I mean so as you think and what we've been trying to do since rolling out the new strategic priorities, we're trying to map everything we do back to at least one, if not, more of those overall priorities. So whether it's M&A, whether it's new product launches, whether it's platform enhancements, everything should map back to the overall strategic priority as we look to really advance and progress and differentiate ourselves relative to our competitors. So I would say, Gary, just given the nature of our business, there's not -- there's nothing that would require a significant financial investment outside the realm of what you've seen historically. It's obviously a capital-light business as well. So I'd say we're just continuing to make progress against each of these different priorities and kind of use the guidance we've given in the past as an appropriate range to do so. Anything more meaningful than that, we'll provide an update as we start down that path. But I'm very confident that we are able to -- I think we've demonstrated since we've launched up the strategy so far, albeit early days, that we can do a lot with a little amount of cash flow and a lot of creativity. And we'll keep doing that as we progress going forward.

[Gary Ho, Analyst]

And so just to clarify, the previous guidance, you talked about that $120 million. Is that what you're thinking, looking out for 2020 on a quarterly basis?

[Kurt MacAlpine, CEO & Director]

It's probably in the range of that. I think there's really 2 things at work: one is our ability to achieve the savings from the productivity transformation and then the timing by which we make some investments strategically. So what we wanted to do is, first, rightsize the cost base, get below the $120 million. Now it will be a combination of strategically investing, but also realizing savings as the productivity transformation takes a little bit longer to take shape. So I'd say in that range is a reasonable way to think of it.

[Gary Ho, Analyst]

Got it. Okay. And then maybe switching gears, maybe talk about the institutional business a bit. I think you guys have roughly $15 billion or so in AUM. We saw the $1.4 billion, $1.5 billion net flow this quarter and when I look back, I think, for the full year of 2019, the number was $2.4 billion. Kurt, just wondering how you think about the institutional business? My understanding is it's a bit of a different animal. You need different sales distribution team kind of dealing with the consultants, et cetera. Just want your thoughts on that, please?

[Kurt MacAlpine, CEO & Director]

Yes, absolutely. So we are in the process as part of this overall transformation on modernizing our asset management business of leaning into our institutional capabilities. As you mentioned, Gary, we had some redemptions in 2019. Most of it was driven by firms internalizing those mandates. But what we're looking to do now is to really kind of build out a modern institutional distribution strategy, combination of targeting asset consultants, which not only benefit you in Canada. But also benefit you globally, given how those capabilities, funds and products are screened, but then we'll be selectively adding to our institutional distribution team as well. I'm very optimistic over time about our prospects about being successful in the institutional marketplace. I think it will require us to refresh some things, which we currently have underway. But over the medium and long term, I'm very excited about the prospects there.

[Gary Ho, Analyst]

Great. And then just the last one for me. The net management fee declined roughly 1 basis point sequentially. Now a bit of a bigger decline than I had expected. Is there anything to call out in the quarter, kind of what drove that shift? And how should we think about the evolution of that over the next coming year?

[Kurt MacAlpine, CEO & Director]

Sure. So that was primarily, if not entirely, driven by mix shift. It was just what investors were choosing to purchase from us, I guess. So as you know, depending on market cycles, market conditions as investors take on more risk or reduce risk, you should see our management fee flex up and down a little bit based on that. So I would say it depends on the market conditions and then how people are choosing to put their cash to work. But the explanation is really mix shift this quarter.

[Gary Ho, Analyst]

So the previous kind of guidance, roughly 2 to 3 basis points, that still holds over course of the year?

[Kurt MacAlpine, CEO & Director]

Yes.

[Operator]

And we'll go next to Graham Ryding with TD Securities.

[Graham Ryding, Research Analyst of Financial Services]

Can I just start with the new fixed income manager that you're doing a partnership with? How do you position that manager with your existing fixed income sort of line up and management teams? Is there any overlap there?

[Kurt MacAlpine, CEO & Director]

The way we see it is, given the mandates that we've chosen and the partnership that we struck with DoubleLine, it's highly complementary to what we're doing in fixed income today. One of the things that surprised me when I look within our organization, we have phenomenal fixed income capabilities and manage over $40 billion in the asset class today. The market perception of us in the fixed income isn't as great as our size. So you almost want the opposite to happen. You'd want your brand to be bigger than your capabilities. In our case, our capabilities in fixed income far exceed our brand awareness. So part of the reason for the partnership with DoubleLine and Jeffrey was to create awareness of CI as a market leader in the space, which we are today. The second reason was he's an absolutely world-class investor and the best-known bond investor, so it'll help to create awareness and also complement what we're doing with his specific strategies. So we see it internally as all additive to what we're doing today. The other important piece, which you'll see a lot more of us, is as we try to be the most consumer-centric asset and wealth management company. We're trying to make sure that we're bringing strategies to market that are available in a variety of different structures for how people want to invest. So the plan is to simultaneously launch them in both mutual funds and ETFs, which you'll see us doing a lot more of across fixed income and the rest of our product lineup.

[Graham Ryding, Research Analyst of Financial Services]

Yes. Okay. Makes sense. My second question would just be the U.S. RIA market and your comment around it's fragmented and there's opportunity for economies of scale. Can you elaborate on that a little bit? Is there -- how do you actually integrate wealth management offices that are in perhaps different locations or different states in the U.S.? And where did the economies of scale actually come from?

[Kurt MacAlpine, CEO & Director]

Sure. So first on the fragmentation piece, about 90% of all our RIAs in the U.S. have no, call it, corporate owner or a major platform kind of backing or supporting them. So relative to what you would see in the traditional wealth management space, incredibly, incredibly fragmented, which creates a lot of opportunities for us to grow. As we think about the economies of scale, and this is part of what makes us such a unique buyer. And I think the -- part of the reason we've been able to move so quickly in the space relative to other firms that are looking at it. We really have 4 different synergy opportunities that are very appealing to RIAs that help to drive our economies of scale. So the first synergy is, call it, asset and licensing-based synergies. So the larger you get, cheaper things get, right? So whether it's custody fees, software licenses and things like that. So without essentially doing anything, it's a matter of just acquiring them and moving those relationships from the RIA up to the parent. Things get cheaper for them, which is the first kind of cost synergy. The second piece is, as you look across the different RIAs, all these are individual businesses today. So they have to do their own HR and legal and payroll and admin and benefits and things like that. So I think of the total suite of corporate services. As soon as we complete an integration, we have the ability to essentially -- they have the ability to offload those services on to us and realize some efficiencies there as well. So you have the asset and licensing-based synergies, then you also have the corporate services synergies. Where we really start to differentiate ourselves relative to everybody else is, we have the ability to provide expertise in both asset allocation and investment management. So immediately, these firms, once again, similar to corporate services are responsible for doing their own asset allocation manager, due diligence manager selection and things like that. So immediately upon acquisition, they can either outsource that to us or partner with us for that. So whether it's cost savings in the short-term or cost avoidance in the long term, that's certainly something that's interesting to them as well. And then the fourth synergy we get, where we're the only firm that gets this synergy is cross-border. So if you look at our wealth management businesses in Canada today, we're the primary financial adviser for over 300,000 Canadian families. Most of those families are mass affluent, high net worth or ultra-high net worth and at or near retirement age. Most Canadians that fit that profile, spend a significant amount of their time in the U.S. And what we found is that for our high net worth and ultra-high net worth clients, they actually have fragmented adviser relationships. So they have their Canadian money in Canada, and they have separate adviser relationships in the U.S. So now that we've acquired these 2 firms in the U.S. plus, specifically, One Capital, in this instance, which has a great cross-border capability in service today, we'll be able to service clients north and south of the border and keep a larger share of their wallet than what we've had historically. So just to recap, 4 synergies. So you have the asset and licensing synergies, you have the corporate services synergies, you have the asset allocation and asset management synergies and lastly, we have the cross-border opportunity as well. And all 4 of those generate economies of scale for us.

[Graham Ryding, Research Analyst of Financial Services]

Great. I appreciate the thorough answer. My last quick question, if I could? Lots of acquisitions that are closing in Q1, can you give us an idea of how much capital you're deploying or -- and how you're going to fund it? Is it free cash flow...

[Kurt MacAlpine, CEO & Director]

Yes. So we won't speak specifically about the financials of the acquisitions because they're not material. But what I would tell you is, if you look forward the next couple of quarters, we have enough cash flow to complete all the acquisitions we've announced, all the letters of intents that we have signed, pay our dividend and complete the remaining buyback. So I'd say we're in very good shape. But that should give you a sense for, kind of, in total, how much these are costing.

[Operator]

And we'll go next to Scott Chan with Canaccord Genuity.

[Scott Chan]

Yes, Kurt, you talked about the 2 additional LOIs in the U.S. market. Maybe you can talk about the pipeline you're seeing right now in terms of continuing to grow that wealth management platform?

[Kurt MacAlpine, CEO & Director]

Great. Yes, Scott. So we have the 2 LOIs signed, I'm hoping to be able to announce those in the next couple of weeks. The 2 things that are really exciting for us at this point. So when we announced the first 2 transactions, we were starting from essentially a standstill. We now have momentum in this space. The marketplace has responded incredibly favorably to us. There's been a lot of local media in the U.S., particularly around the RIA marketplace about CI entering. So our pipeline, it's a combination of us being very proactive. We're actually taking a similar approach to targeting RIAs to our advanced analytics and wholesaling effort in data. So we've acquired databases, and we're doing some targeted marketing efforts there to create awareness. But we're also starting to realize and receive some inbound calls. So as we continue to do acquisitions, people, it reinforces the strategy and the value proposition and gives RIAs confidence that we're a natural buyer in this space. So I would say, over the last few weeks, we've really seen the inbound pipeline increase, which is quite exciting as well. The third piece, which is maybe the most exciting piece is, as you look at the firms that we're acquiring, one of the benefits of the strategy is we're an acquirer, ourselves, but also we're capitalizing the firms to make other acquisitions as well. So as you look at the firms we've either announced or ones we're about to announce, we're already starting to partner with them on acquisitions of their own. So I think that, that will take on a life of its own very quickly and will be another great source of leads for us. So I'm hopeful that the pipeline remains strong. We're being incredibly selective with who we're partnering with. We're looking for RIAs with very dynamic management teams, with above-average growth rates, great capabilities and strategically important or unique locations for us.

[Scott Chan]

And these RIAs that you're pursuing, would there typically be a competitive process like for them to -- like these entrepreneurs to exit? Or are these kind of -- what kind of one-offs and just dealing with CI in terms of discussions?

[Kurt MacAlpine, CEO & Director]

It's both. It's both. Most of what we've done so far have been very targeted acquisitions and outreach. We have been included in competitive processes. I think we show incredibly well there, given that very unique synergy profile that I just mentioned a few moments ago. So I think we'll be competitive either way. But to date, just given how specific we are about who we're acquiring and the capabilities that we're looking for, it's been more selection on our side. Once we have the initial infrastructure built with these really high-quality teams in the important locations, it'll be easier for us to do tuck-ins to those businesses, which then will probably be more active in the competitive process as firms look to hire an adviser and sell their book.

[Scott Chan]

And on the international side or Australia, just kind of noticing positive net sales quarter-over-quarter. Now that you bought Redpoint, perhaps an update on that platform and kind of where you see it going?

[Kurt MacAlpine, CEO & Director]

The Australian market in and of itself is a very attractive market. The challenge for us has been growing and scaling the market just given it's small in size relative to our business more broadly. But I would say we have a great team in place on the ground in Australia with phenomenal relationships. And I think they're starting to see the power of combining what they're doing with our asset management and investment management expertise. So we're optimistic about continued growth in the platform. We've been pleased to see an uptick in our flows in the region. And I can say, for what it's worth, activity has remained very, very strong. There's a lot of demand for us to be in the region with our investment professionals having conversations. So if that's a sign of things to come, hopefully the momentum continues.

[Scott Chan]

And maybe just looking at capital priorities, maybe looking out beyond June when your NCIB expires, any early thoughts on kind of continuing that aggressive buybacks like CI has done over the past 2 years?

[Kurt MacAlpine, CEO & Director]

When I think about the buyback, our approach has been opportunistic, and we've been looking to take advantage of the low multiple that we have relative to our competitors. Just take the fourth quarter as an example, our approach worked out incredibly well for the investors that continue to be shareholders of CI. As you heard from Doug earlier, our average cost was around $20 a share to buy back the shares, and we're in the marketplace above $24 now. So I'd say as long as we see a disconnect between our multiple and the multiples of our competitors that we don't feel is warranted, you'll continue to see us actively buying back shares in the market.

[Operator]

[Operator Instructions] And we'll take our next question from Tom MacKinnon with BMO Capital.

[Tom MacKinnon, MD & Analyst]

I got on the call late here, so I'm not sure if you gave any SG&A guide for 2020? And just a couple of follow-ups.

[Kurt MacAlpine, CEO & Director]

We did not give any SG&A guidance for 2020. But to recap, when you look at our SG&A for the fourth quarter, it came from 3 different places: renegotiating and repricing vendor relationships, some corporate restructuring and some compensation. We wanted to get in front of and rightsize the cost base in our asset management business to reflect the rapidly changing market. But as we move forward, I would say it's going to be a combination of strategically investing against the priorities, but also continuing down this productivity transformation that we have. So I would say the range that we had quoted before is probably a reasonable range for you to think about going forward as we blend productivity transformation and some strategic investments.

[Tom MacKinnon, MD & Analyst]

And when you talked about your multiple relative to competitors, who are -- are those competitors banks, are those competitors a couple of the other independents? I mean we've got some varying degrees of competitors and multiples, so can you share any color with respect to that?

[Kurt MacAlpine, CEO & Director]

Sure. I think the -- I mean, the first ones, which I look at as our domestic competitors, which I would define as other asset managers. And then I look at the marketplace globally, the profile, the business mix that we have and the cash flow that our business generates relative to firms in our industry in different markets as well that are trading at a different multiple. So I'd say, first, domestically, asset management competitors and then second, globally.

[Tom MacKinnon, MD & Analyst]

Okay. I mean some -- you got some diversion in global competitors in terms of multiples as well. Are there -- can you help us focus on -- you've got some that do really well and some that don't. So how do you -- we just look at an average of them? Or should we -- or do you look at -- how do you compare your -- how do you make your comparison when you look at your global competitors?

[Kurt MacAlpine, CEO & Director]

I mean, look, there's a lot of different global firms with different profiles. If you're looking for the, I guess, the easiest or the quickest comparison, there is a multiple differential between us and our domestic competitors. So that's probably the first place to start. And then I would say, it's firms that are global that have a similar business mix and similar cash flow to us.

[Tom MacKinnon, MD & Analyst]

Okay. And then the last one is, really, just if you can give us some color with respect to the rebound in Canadian retail flows? Is it better penetration in IIROC channel? Or is it better product? How broad-based is this? Is it sustainable?

[Kurt MacAlpine, CEO & Director]

So I don't see the guidance going forward on flows. But what I would say is if you look at the trend line over the last several months, you've seen some very considerable improvements. The improvements have come from everywhere. They've come from the IIROC channel, they've come from the MFDA channel. They've come from other pockets of strategic relationships that we have in the market as well. I'd say it's a combination of improved investment performance, strengthening and evolving our product line, and you'll see us being very active with things like DoubleLine with Dr. Joe Coughlin and things like that, really pushing the envelope. And also our new distribution strategy. So we are officially rolling out our machine-learning model and our advanced analytics program in March, but we've been beta-testing it for a while. And we've seen some very good early results in terms of our ability to get in front of people in advance of them either buying or selling and changing and shaping that conversation. The other thing you'll see us do a lot of, which gives me a lot of great confidence is, we're really going to be leaning into digital and marketing and really making an effort to continue to get in front of as many investors as possible there as well. So I'd say it's really a combination. It's across the board and not attributable to a particular segment or profile.

[Operator]

And we'll take a follow-up question from Geoff Kwan with RBC Capital Markets.

[Geoffrey Kwan, Analyst]

Yes, just on RSP season. I know you mentioned your expectation of, I guess, improvement year-over-year. But just wondering your take just broadly speaking of what you're seeing in the industry around this year's RSP season? Just one of your competitors that seemed to have more muted expectations around what they thought the industry was going to be able to do this year?

[Kurt MacAlpine, CEO & Director]

It's an interesting one, Geoff, I try not to guess in terms of where the industry is going to go. What I would say is that when you look at how well prepared we are to capitalize on the RSP flows? I would say, improved investment performance, the distribution strategy, plus a new suite of innovative products to be very offensive. I'm very confident. So whether -- part of your ability to grow is dependent on the industry, the other part is on taking share from others in the marketplace. And I feel like part of our improvement has been us taking back share from our competitors. And I think you'll continue to see us do that as we evolve our strategy, launch new products and really kind of push the organization forward.

[Geoffrey Kwan, Analyst]

Okay. And then just more from a modeling perspective on the RIA strategy. Will we eventually get, I guess, some numbers around ownership stakes of the various RIAs that you're acquiring, the capital that you've used to make those investments? But as a separate one, too, do you have any sort of guidance or thoughts on how to model that, like the revenue per dollar of AUA?

[Kurt MacAlpine, CEO & Director]

So in terms of guidance, what I would say is that as we complete the next couple of acquisitions, so we've only closed one so far, very small. What I wanted to do is get a couple more done, show you what the platform is going to look like and I'll provide a lot more detail at that time. In terms of the economics, and Geoff, we can take more of this off-line. But just at a very high level, the way to think of it is the average fee capture for an RIAs is, give or take, 100 basis points for the cost of financial planning and client service on the revenue line. The cost of investment management is passed through at cost for whatever those underlying asset management firms are providing. So the real big difference between once you're looking at it from a financial perspective, from an RIA, from a traditional independent is, an independent advisers taking a commission and typically a very large one-off the top line, where an RIA is allocating bonuses off the bottom line performance. So you can think of it as 100 basis points in the door relative to it from an AUM perspective and then essentially that business model ensures profitability by paying it a bonus on the bottom line as opposed to on the top line. But I'll provide more guidance in the coming months, maybe next quarter, maybe the quarter after, depending on how quickly these close. And then some of the detailed modeling, I'm happy to take offline with you and go through it.

[Geoffrey Kwan, Analyst]

Okay. Just maybe if you can just clarify, because you talked about some of the pass-throughs from an accounting perspective. Would that be showing the 100 basis points? Or whether there will be a gross up and then there's just -- to the point there is that pass-through, there will be either a net number of the revenue that gets recorded separately or it's going through an expense line?

[Kurt MacAlpine, CEO & Director]

I'm not sure I fully understand the question, Geoff. In terms of how we -- if you're looking at how we're reporting our U.S. Wealth Management segment, we're in the process of taking a look at that. It's not material at this point, but we will give guidance in the future.

[Operator]

[Operator Instructions] And we'll take a follow-up question from Graham Ryding with TD Securities.

[Graham Ryding, Research Analyst of Financial Services]

Yes, I'm just interested in your comments around the revised distribution strategy for your asset management business? Is there something you can elaborate on and exactly what the key changes are?

[Kurt MacAlpine, CEO & Director]

Sure. So last quarter, I had announced that we had started down the path of building an advanced analytics machine learning model to help us segment the entire Canadian universe of financial advisers. So essentially, we started that project in October. We're finishing it in the next couple of weeks. And essentially, what the output will be, will be a stack ranking of all Canadian advisers that exist in the database, which is essentially exhaustive of the marketplace. It will rank them from most attractive opportunity for us to least attractive opportunity. It will identify the source of the attractiveness is this a new sale or an asset retention opportunity. It will then tell us or give us guidance in terms of what specifically that adviser might be interested in, whether it's a specific product, a specific solution or something practice management-related. And it will give us guidance in terms of how to best engage with that adviser given historical behavior. So that essentially will be a machine-learning model with 3 different predictive elements, who we talk to, what do we talk to them about and how do we talk to them. So if you're an Amazon or a Netflix user, they have machine-learning models centered around 1 predictive element, which is what to buy? So because you've done this in the past, because people with similar behaviors or profiles have done this in the past, here are some things you should do in the future. So we've powered that database with inputs from our sales team, captured via salesforce, all of our marketing efforts and third-party demographic information. So that model will update or be refreshed on a monthly basis, which is the machine-learning component. So it takes a look at all the different elements that have occurred over the month, have we engaged with them in person? Have they visited our website? Have we sent them an e-mail? Have they come to a conference? And we see how they respond to different things and then it refreshes and repopulates that database. Once that's done, which is very close to being done, that will power how we think about sales coverage, client coverage, territory mapping, but also marketing. It allows us to be a lot more aggressive and offensive in digital marketing, which we don't do a lot of today. So we'll really be ramping up those efforts. But we'll be doing it from a very informed starting point, given all the data and the insights that we have captured. We -- I believe we will be the first and only firm in Canada using capabilities like this. In my previous role, we were the first firm globally to do it. And we have realized great results there, and I'm very optimistic that we will have similar experience here at CI.

[Graham Ryding, Research Analyst of Financial Services]

Okay. I appreciate that color. Have you adjusted your size of your wholesale team at all?

[Kurt MacAlpine, CEO & Director]

We have tweaked the size and the coverage model of our wholesale team a little bit. I think what -- we are still, obviously, have broad cross country coverage, but also supported by expertise and specialists, whether they're ETF specialist, asset class specialist or product specialist.And also leaning into national accounts as you -- as the platform kind of buying process has evolved quite a bit in the marketplace, and as I touched on earlier, we will be evolving our institutional strategy as well.

[Operator]

And it appears there are no further questions at this time. Mr. MacAlpine, I'll turn the conference back to you for any additional or closing remarks.

[Kurt MacAlpine, CEO & Director]

I just want to say thank you all for joining our call, and I look forward to connecting with you next quarter. Thank you.

[Operator]

And this concludes today's call. Thank you for your participation. You may now disconnect.