IGM Financial Inc

TSX:IGM

Earnings Call Transcript 2020-Q4

[Operator]

Thank you for standing by. This is the conference operator. Welcome to the IGM Financial Fourth Quarter 2020 Earnings Results Call. [Operator Instructions] I would now like to turn the conference over to Keith Potter, Senior Vice President, Finance. Please go ahead.

[Keith Potter, Head of Investor Relations & Treasurer]

Good morning, and welcome to IGM Financial's 2020 Fourth Quarter Earnings Call. Joining me on the call today are James O'Sullivan, President and CEO of IGM Financial, Damon Murchison, President and CEO of IG Wealth Management, we also Barry McInerney, President and CEO of Mackenzie Investments and Luke Gould, Executive Vice President and CFO of IGM Financial.Before we get started, I'd like to draw your attention to the cautions concerning forward-looking statements on Slide 3 of the presentation. Slide 4 summarizes non-interest financial measures used in this material. On Slide 5, we provide a list of documents that are available to the public on our website related to the fourth quarter results for IGM Financial. And with that, I'll now turn it over to James.

[James O'Sullivan, President, CEO & Director]

Well, thank you, Keith, and Good morning, everyone. Before we jump into the quarter, I'll start with the highlights for the full year 2020. As we reflect on the year, it was certainly unlike any we've seen. Yet despite the challenges our business and people faced during the pandemic, we continued to build momentum. We achieved record high AUM&A of $240 billion, which was up 26% from last year. We achieved record high new flows of $7.1 billion, up from net redemptions of $1.7 billion, and we delivered strong adjusted EPS of $3.2, which is up slightly from 2019.As I spoke to on the Q3 call, we also made significant progress on business transformation initiatives, with the objectives to enhance back office efficiency and elevate the client and adviser experiences. To build on this, I'd say we are about halfway through our modernization journey and have much to do in 2021 and beyond to digitize our back office and hit full stride on our outsourcing and productivity focused initiatives.Finally, we were very active adding scale and new capabilities to drive future growth through acquisitions. And in the case of personal capital, monetized an investment that we believed was the best way to create value for our shareholders. We were able to achieve these results by quickly transitioning to a work from home environment in March and focusing on the health and well-being of our people and clients during 2020. On behalf of the leadership team at IGM, I'd like to thank our employees, consultants and advisers for their commitment and resilience throughout 2020.Turning to Slide 8 on Q4 2020 highlights for IGM, overall I would say business momentum accelerated in Q4. We achieved record AUM&A in the quarter of $240 billion, up 6.7%, excluding acquisitions. We also achieved record high total net flows of $2.2 billion, with strong results from IT wealth management and record high net sales at Mackenzie. IGM's Q4 earnings per share were $0.96 and adjusted earnings per share were $0.86, up slightly from last year. EPS included a non-IFRS adjustment, primarily consisting of a gain on the sale of the Quadrus Group of funds.I'm proud, I'm very proud in fact, that IGM was recognized by Corporate Knights as one of the top 100 most sustainable corporations globally and is the top-rated investment services company. The Global 100 assesses several performance factors, and IGM's strong showing was based on above-average results for clean revenue, female representation at the Board and executive level, racial diversity, carbon and energy productivity and certain important HR practices. Finally, to close out a busy year, we closed the acquisitions of GLC, Greenchip and Northleaf during the quarter.Turning to Slide 9 on investment returns. Q4 2020 saw strong equity market increases across all major indices with low volatility, while fixed income returns were flat. Overall, IGM's average client investment return of 5.5% was strong during the fourth quarter. We've seen equity markets increase further so far in 2021, with client investment returns averaging approximately 2.4% year-to-date February 9. Turning to Slide 10. Q4 long-term mutual fund net sales were $16.4 billion for the total industry and $7.2 billion for the advice channel. This is the best fund industry Q4 net sales in history. We're encouraged by the momentum of the industry and at IGM as we complete the RSP season and look forward into 2021.Turning to Slide 11 on results for the fourth quarter. Average AUM&A of $202.2 billion increased 7.9% year-over-year. With the closing of GLC on December 31, we add scale to our platform and ended the year with AUM&A of $240 billion. IGM's Q4 2020 adjusted net earnings per share of $0.86 were up slightly from last year. As I commented, net earnings per share of $0.96 primarily reflects a gain on the sale of the Quadrus Group of funds.Slide 12 highlights quarter-over-quarter and year-over-year EBIT contributions from our segments. The year-over-year increase in adjusted EBIT was driven by the Asset management segment and China AMC, which were up 14.5% and 63.9%, respectively. Slide 13 details the strong improvement in net flows across all segments during both the fourth quarter and full year 2020. Q4 2020 consolidated net inflows were an impressive $2.2 billion and $7.1 billion for the full year. I've spoken before about the momentum that is building across our businesses. This slide very well demonstrates it. We are well positioned to complete the modernization of our businesses and the business processes, with a strong focus on net flows, net sales and expense management, we look forward to delivering a strong year for our shareholders.I'll now turn the call over to Damon to review IG's results.

[Damon Murchison, Executive VP & Head of Retail Distribution]

Thank you, James. Turning to IG Wealth Management's Q4 2020 highlights on Slide 15. We are pleased to report record high AUM and AUA. AUA ended the year at $103 billion, up 5.9% during the quarter, driven by strong client returns and net flows. Record high gross inflows for the period were driven by a combination of new client acquisition and contributions from existing clients into IG investment accounts. From a consultant productivity perspective, gross sales per consultant practice increased 19% relative to the same quarter last year. And as we've talked about in the past calls, we are attracting more experienced advisers with existing client relationships in AUA that is being transferred to IG Wealth Management. IG's fourth quarter net sales were positive, $485 million, the best Q4 in over 2 decades.I want to turn to Slide 16. It demonstrates the building momentum in net flows across various time periods and on a 12-month trailing basis. The chart on the right illustrates how COVID has masked some of the momentum we have in this business. We entered 2020 with a strong upward momentum in both gross and net flows until COVID sent everyone home. We had a transition period, allowing us to develop tools, skills and the expertise to provide advice remotely. And our momentum returned in August through to the end of the year and has continued into 2021. In January, we had net inflows of $182 million and over $1 billion on a 12- -- on a trailing 12-month basis, fueling our net sales of $105 million in this past month.Turning to Slide 17. This shows our typical overview of operating results for the quarter. Here, you can see positive net flow momentum is driven by higher gross inflows and lower gross outflows rate. Our IG net flow rate was 1.1% on a 12-month trailing basis, showing our progress. But let's be clear here. It's still early days, and we're building momentum, and we have not hit our stride yet.Turning to Slide 18. I'll take you through a deep dive into our AUA growth and net flows and explain how AUA transitions into AUM. To orient you to this slide briefly, we have a table on the left, which shows a change in our AUA during 2022. On the right, we break down our Q4 2020 net flows into 2 key components to describe what we're seeing. The first component of net flows are [ buy, sells ] and switches within IG client accounts. The second component are in-kind transfers from other dealers. And just as a reminder, we earn an advice fee on AUA, which represents 65% of our revenue. So looking at the first point on the page, we're [ hulling ] the net buys of $140 million into Mackenzie investment funds. IG consultants and clients have access to an approved list of select Mackenzie products to cover categories where IG currently does not offer solutions. IGM earns full margin on these assets, but these flows do not show up as mutual fund net sales at IG. And as you can see, 95% of the total investment solutions sold at IG Wealth Management, are IGM solutions.The second and third point deal with third-party funds and securities. So let's go to point number one, and we'll highlight the $373 million in third-party funds and securities transferred in-kind to our firm. This is directly connected to our success in building new client relationships and consolidating existing client investments at IG Wealth. With our focus on mass affluent and high net worth, we expect to continue to see momentum here. [ 0.3 ], as we continue to transfer in securities in-kind, we expect to see a significant portion migrate to our IG managed solutions. As you can see, in the quarter, $125 million migrated to our solutions.And the fourth item, on our AUA growth, as expected, we are seeing an increase in cash balances as we migrate our clients to our nominee dealer platform. While we had a migration in the high interest savings account in the first half of 2020 and cash transition to client accounts in December from year-end distributions, we do expect this level of transferring cash balances to increase over time given our attractive rates. This provides a tremendous opportunity to put this cash to use as our consultants work with their clients.Turning to Slide 19. I want to focus on the productivity growth of our network, something that is key to our strategy. We are a more focused business, driving to work with more mass affluent and high net worth Canadians. Our belief is that as we match our financial planning skill and expertise with the complex financial planning needs of these segments, our consultants' productivity will grow as we bring more clients on board with more meaningful assets. We continue to see significant increases in productivity across the board. Productivity over 1- to 4-year consultants was up 8% versus Q4 2019, and our experienced consultants, up 19% year-over-year.We're just getting started here and have lots of upside as we continue to execute our strategy to go up-market, recruit experienced financial planners and complete our transformation focused on the adviser and client experience.Turning to the last slide, Slide 20. Our customer value proposition is rooted in marrying the benefits of a dynamic living plan with a strong long-term adviser relationship and well-constructed managed solutions. Being able to deliver on dynamic living plans is core to who we are. I'd like to highlight the rollout of our next-generation of the IG living plan. We rolled it out in December to elevate our client experience and consider it to be leading edge. The tool allows us to show our clients their entire financial picture in ways that are easy for them to digest. It enables us to work with what if scenarios with our clients in a simplified, accessible way, and it empowers us to use artificial intelligence to determine planning strategies, which are deeply customized to each individual.It's this combination of leading-edge financial planning tool with the deep expertise of a credentialed adviser that we believe gives us our competitive advantage as we strive to work with more mass affluent and high net worth Canadians who have complex financial planning needs.Now I'll turn it over to Barry.

[Barry Sean McInerney, President & CEO of Mackenzie Investments]

Thank you very much, Damon, and good morning, everyone. I'll take us to Page 22, where I'll begin my comments on Mackenzie's Q4 results. Total AUM reached a record high of $186.8 billion, up 10% for the year with a total annual net sales of $6.25 billion. The percentage increase excludes the incremental $30.3 billion relating to the acquisition of Greenchip and GLC and the impact of the disposition of the Quadrus group of Funds.Net sales were a record high $1.7 billion during the fourth quarter. The momentum we're seeing is truly broad-based across Mackenzie, foreign equities, Canadian equities, balanced and fixed income categories; all generating positive net sales. Both our retail and institutional channels delivered positive net sales in this quarter marked our 17th consecutive quarter of positive retail investment fund sales. We enhance the capabilities of our investment management organization with the completion of a number of initiatives during the fourth quarter. We executed our succession plan for past Chief Investment Officer, Tony Elavia, who retired on December 31, by appointing Steve Locke, CIO, Fixed Income and Multi-asset and welcoming Lesley Marks to Mackenzie to take on the role of CIO Equities. I have full confidence that Lesley and Steve will lead our investment management team to build on Tony's legacy of success.As James touched on earlier, Mackenzie acquired Greenchip Financial this past quarter, a highly regarded Canadian firm, focused exclusively on the environmental economy since 2007. The Greenchip team is now set up as a Mackenzie investment boutique, focus on environmental thematic investing and continues to manage the top-performing Mackenzie Global Environmental Equity fund. And lastly, with the close of the GLC transaction, we added a new Canadian equity investment boutique and welcome a number of new investment professionals to the Mackenzie family.Slide 23 demonstrates the exceptional Q4 and full year 2020 investment fund net sales at Mackenzie and how we've seen this momentum extend into the [ RSP ] season. January Investment fund net sales, excluding institutional fund allocation changes, were a record high $779 million, reflecting a continuation of our success in the retail channel.Slide 24 highlights Mackenzie's Q4 2020 operating results. Total mutual fund gross sales of $4.5 billion were up 74% year-over-year with strong increases in both retail and institutional channels. Retail investment fund net sales were $1.3 billion, including $1 billion for mutual funds and $300 million from primarily active and strategic beta ETF's. Mackenzie's long-term investment fund net sales rate was 5.5% as at January 31, 2021. This represents significant organic growth at Mackenzie. And finally, we had 60% of AUM rated 4 or 5 stars by Morningstar, which continues to be close to decade high levels.Slide 25 displays the investment performance and retail net sales across our investment boutiques. I won't review this in detail, but you'll see us -- you get a sense, rather, for the breadth of our momentum, from the information on the slide, and you'll note that new Greenchip boutique experienced strong retail net inflows during the quarter.Slide 26 relates to 2 of our growth catalysts, sustainable investing and private markets. As announced in December, we acquired Greenchip Financial to form a new sustainable investing boutique focused on environmental thematic investing. The team's expertise and energy transition and climate change will help us meet a growing retail and institutional demand that has accelerated in 2020 and into 2021. The Mackenzie Global Environmental Equity fund has net sales of over $200 million in the fourth quarter and an additional $194 million in the month of January alone. We are excited about this offering and our plans to expand upon this with a new Global Balance fund and Global Sustainable bond fund that we expect to launch shortly.And this isn't just a large opportunity for growth at Mackenzie, but also an important step to address climate change and to support the IGM group of company's commitment to the recommendations of the tax force on climate-related financial disclosures.I also talked about Northleaf on our last call and as a brief update, I'm very excited to announce that Mackenzie now has ceded a private credit offering memorandum fund in January. The liquidity sleeve is in place and the first capital call is expected on April 1. We also launched the Mackenzie Private Equity Replication fund, which will be used as the liquid component of the private equity OM we plan to launch later this year, and we also have plans to bring infrastructure products to life in the near term. Stand-alone, Northleaf experienced solid net commitments in Q4 and has made great progress working with IG Wealth and Great-West life to bring additional private market strategies to their respective businesses.Another driver of growth is China and China AMC on Page 27. While we are extremely proud of the momentum we are seeing in Mackenzie, China AMC was in the league of their own in 2020. China AMC organically grew their AUM by 42% during the year and China AMC's Fourth quarter 2020 earnings grew an impressive 49% year-over-year. And as James mentioned, the earnings contribution to IGM in Canadian dollars increased 64% over the same time period. We remain very optimistic about the long-term growth profile of China AMC and the Chinese asset management industry as a whole.I'll now turn the call over to Luke.

[Luke Gould, Executive VP of Finance & CFO]

Thanks, Barry. Good morning, everybody. So a few quick comments on Slide 29. First, on the left, we closed the period with $240 billion. This was a very strong quarter, and the quarter we're proud of. And excluding the $30 billion in acquired assets, our AUM and a grew by 6.8%. Year-to-date, 2021 has obviously been good to us, and we're up over another 3% due to financial market increases and continued strong net flows.On the right, I'd remind that in the quarter, we had record high net sales of $2.2 billion, which was an annualized net sales rate of 4.4%. And on the left, I'd remind you that as a result of a huge V that we all lived through during 2020, our average balance of AUM&A during the year was relatively unchanged for the balance in 2019. And with things where they are right now, we're rolling at meaningful growth into 2021.Turning to Page 30, you can see our quarterly EBIT on the left and our EBIT margins as a percent of AUM&A on the right. On the left chart, I'd highlight here that we have an additional $17 million in our fourth quarter expenses that are driven by strong sales performance during the quarter. The first item we've highlighted is wholesale and commissions at Mackenzie, which were up by $10 million. This $10 million is a true-up for a full year of activity and is driven by retail gross sales and net sales at Mackenzie. As you'll see in a couple of slides, retail sales were up over 50% in the quarter and net sales quadrupled. I'd also remind that these commissions are not capitalized but are expensed as incurred in spite of the fact that we're going to earn revenues over the holding period of units, which tend to average 7 years.Similarly, a component of the corporate bonus is driven by market share net sales activity. And as a result of the strong sales activity in the fourth quarter, this element of compensation increased by $6.5 million. On the right-hand side, you can see that our net revenue rate was stable at 103 basis points. And excluding the expense items I described just a second ago, our EBIT margin was similarly very stable in the period.Going to Page 31, you can see the consolidated income statement for IGM Financial. First, we highlighted in the first 2 points, the geography of the wholesale and commissions and the corporate bonus adjustment in our business development line and our operation and support expense lines, respectively. In the business development line, I'd also remind you that this lines up seasonally in the fourth quarter as we ramp up advertising in advance of the RSP season.In 0.3, in the bottom right, we're also highlighting that the tax loss consolidation arrangements that we've enjoyed with our parent company for a number of years have discontinued in the fourth quarter of 2020. This was running at about $2.8 million per quarter.Turning to Page 32, I'm going to apologize in advance, this is a very busy slide, but it's something I want to make sure we spent a moment on walking through how our Mackenzie business development expenses should be expected to behave in relation to retail sales activity we're putting on, given the significant momentum we're seeing in the business? First, I'd like to highlight in the top half of the page, the retail sales results, and then I'm going to pivot to the bottom where we talk about the expense and how it interplays. So on the left, you can see our last 12 months trailing gross and net sales for retail mutual funds at Mackenzie. You can see in the light blue line, we've been trending at about $1 billion per year in net sales for the last 4 years. And you can see starting in August, something is happening, and we start to see very meaningful improvements.In fact, we net sold $1 billion in the fourth quarter, which is where we've been trending for the 4 previous annual periods. We're pushing with all we got right now, and you'll see we're running at over $2 billion, and the line continues to steepen as we travel through 2021. We've added 4 dots there to give you 4 possibilities to help you understand how expenses will behave in 2021.And in the chart in the middle on the right, you can see our quarterly and annual retail sales results on mutual funds, and this gives you the context to see how Q4 was a breakout quarter and why we did have this unexpected true-up for our full year retail sales commissions. On the very right, we show those 4 sales possibilities for 2021. And you can see in the charts, we are up 53% year-over-year on Q4 at gross sales. And you'll see from our January results that, that's continuing into 2021.On the bottom, we've highlighted the business development expense line. This line is comprised about 20% to 25% commissions that are sales based, about 25% advertising, which is discretionary, and the remainder is other people and promotional expenses. As mentioned, all of this is expenses incurred and generates retail sales that contribute a margin of about 1% of assets per year over an average 7 year holding period.If you follow the business development expense line across, you'll see that extra $10 million true-up in Q4 2020 as the expense was $28.3 million, up from $60 million in the prior quarter. I'd also highlight if you keep following across to the right, you'll see that this line item was $80 million for the full year, unchanged from 2019. I'd note when considering commissions, we reset the bar every single calendar year and for 2021, the bar has been set much higher than 2020.At the right, you can see how this expense is going to vary based on sales activity. If gross sales improved by 20%, you can expect this expense to go up by 5%. If gross sales improved by 50%, this expense will go up by 20%. And we'll keep engaging with you on a quarterly basis to help you understand how this expense is traveling in relation to the sales we put on.Last point before leaving this slide, I should highlight, we're obviously pushing for continued 50% year-over-year growth. As you heard from Barry, we have all the conditions for success, and we're leaning in. We have the number one sales organization in the country. We have a broad range of compelling and relevant products. We have very strong investment performance, and we have a very favorable market environment.Turning to Page 33, and bridging on those last comments, we're giving some guidance to help you understand how expenses will travel in 2021. As mentioned, in business development expenses, there is variability based upon sales and other volumes and there's also meaningful discretion that management has to manage expenses. At IG, we expect this to be under 3% this year, and we're going to manage this. At Mackenzie, we're given guidance for 5% growth. And as highlighted in the prior slide, there's a lot of variability with sales and meaningful discretion in this line, and we'll keep you posted as we travel through the year.You'll see in [ 0.1 ] at the bottom that there's a theme on our expenses next year that there's significant business momentum at Mackenzie, and we're leaning in. In the operations and support line for Mackenzie, you'll see that we're planning for 5% growth before the expenses from acquisitions, and this growth is being driven by investment in a number of product opportunities that we're bringing to light. We'd encourage you to do the math on Mackenzie's earnings trajectory. There's a lot of operating leverage in this business, and we're expecting significant earnings growth based upon where we're traveling where we're sitting right now. And in operations and support expenses, you can see we're expecting IG Wealth expenses to grow by less than 0.5%. We believe we have the resources we need to compete and win. And as you saw in Damon's section, there's strong momentum in the business traveling into 2021.Moving to Page 34, you can see our fee rates for IG Wealth. I have a few remarks. First, you can see that our advisory fee rate was 105 basis points during the quarter. I'd remind that this weighted average fee rate varies based upon the composition of our clientele. As we bring on more high net worth and mass affluent clients, it puts downward pressure on this rate. Similarly, as our clients migrate into higher wealth tiers as a result of investment returns generated for them, it puts downward pressure on this rate.Over the coming 2 quarters, we'd expect this rate to decline by about 0.7 to 0.9 basis points per quarter, and we will keep you apprised of developments on high net worth client acquisition as the quarters traveled through 2021. Second, at the bottom, you can see our sales based compensation rate. While commissions at IG are capitalized and amortized, we want to remind you that we have one final year of these commission rates dropping as part of our migration away from deferred selling commission products a number of years ago. In 2021 and beyond, you can expect this rate to be closer to 105 to 110 basis points of gross inflows; down from the 120 basis points it's been trending at.Moving to Page 35, you can see the income statement for IG Wealth. The only comment I'd make on this slide is to highlight that sequentially, both our other financial planning revenues and/or other product commissions are up as a result of the seasonality and the sale of insurance products. I'd also highlight an increase in business development expenses from Q3 as we did ramp up advertising heading into the RSP season.On Page 36, we have another busy slide, and I do apologize, but we've added this slide to help you understand how our AUM at Mackenzie has changed with the acquisitions of GLC and Greenchip as well as the divestiture of the Quadrus group of funds, and you'll see there's a lot of moving pieces. I'm not going to walk through the waterfall chart in the table, but we make the point that as part of the divestiture of the Quadrus group of funds. And as part of Canada Life establishes their own mutual fund complex, we've had a $13.4 billion transfer out of our investment fund reporting, and we've added $43.5 billion into our sub-advisory reporting of institutional SMA. We put a footnote right at the bottom that pro forma for these transactions, Mackenzie now sub-advises $47.2 billion to Canada Life, and this represents 42% of their Canadian individual and group channel assets under management. On an ongoing basis, we're going to call it this an important relationship for us, and we're going to share the share of their AUM that we represent and the associated revenues that we're generating, and you'll find these disclosures coming in Q1.I'll also advise that you can find a detail of how Canada Life's individual and group businesses are traveling in their entirety within the Great-West Lifeco supplemental information package that's available on a quarterly basis. And this will allow you to see how Mackenzie is addressing their AUM.Moving to Page 37, you can see Mackenzie's operating metrics, and we've given some guidance on the slide how to model the impact of the GLC and Greenchip acquisitions. On the left, you can see our pro forma AUM at December 31 was $186.8 billion. And on the right, you can see that our net management fee rate is stable at 71 basis points. Just to the right of this, we've given a couple of dots where we provided the pro forma net management fee rate of 54.5 basis points, including the $30 billion in net assets acquired as per the GLC acquisition. You'll see in the comment bar at the top, the annualized net revenue we've added at December 31, 2020, was $33 million and the incremental expenses coming on in 2021 are $20 million.On Page 38, you can see the Mackenzie income statement. First point here, as discussed, there's an additional $10 million in wholesale and commissions within the business development line, and this is conspicuous. At the bottom, I'd highlight in that third deck column from the right, you can see Mackenzie's earnings were up 14.5% year-over-year. Excluding that incremental wholesale and commission item, we're up 30%. And I would remind you, there's a lot of operating leverage in this business as the business continues to grow.Page 39, I'm going to conclude my comments on our strategic investments. A few quick remarks here. First, you can see on the right maturing value or the trading value in the case of Great-West is now $2.9 billion. We haven't made any revaluation for [ Wealth Simple ], but you'll see in the appendix that continues to put on considerable growth. I'd highlight in the fourth row from the right, we closed the acquisition in Northwood during the quarter, as Barry mentioned. It contributed $800,000 in the weeks since close in the fourth quarter, and we give guidance for expecting contribution of approximately $10 million after minority interest in 2021. As you saw from Barry, China's AMC growth continues to be considerable, and our share of its earnings are up 63% year-over-year.One last comment I'd leave as I conclude is that we are continuing to evolve our disclosures, and we have one more enhancement that we're going to be launching during the first quarter based upon feedback I've received from several of you and several of our shareholders. Specifically, we're going to be bringing our segment disclosures down to the net income line on the EBIT line where it is currently. We think this is going to be very helpful for those wishing to assess valuation on a PE basis and employ some of the parts approach, and we are going to provide this disclosure retrospectively for 2 years within the quarter. That concludes my comments. I'll turn it open over to questions.

[Operator]

[Operator Instructions] Our first question comes from Nik Priebe of CIBC Capital Markets.

[Nikolaus Priebe, Research Analyst]

I want to start with a question on dividend policy. Dividend has been relatively stable over time. But in the context of pretty persistent market strength and from the momentum that you're seeing on the net flow side, how do you think about dividend policy? Is there a target payout ratio either on earnings or free cash flow that you would be kind of comfortable with there?

[James O'Sullivan, President, CEO & Director]

Yes, It's James. I'll start, and Luke will have a comment. My observation would be that the dividend is strong. And the payout ratio is at a very reasonable level currently. So that dividend, I think, is -- I would describe it as well supported by earnings, well supported by capital. Our focus now is on earnings growth. And as we grow earnings, obviously, the capacity to increase that dividend will emerge. And that's very much a topic that we will take before our board as we execute on our 2021 financial plan.

[Nikolaus Priebe, Research Analyst]

Okay. That's helpful. And then I appreciated the color on China AMC surrounding the strength in net flows, the AUM growth trajectory there. Wonder if you could share your thoughts on how you plan to realize value on that investment over time? I think you are receiving a dividend, and you do participate in the earnings growth of that business, but just from a longer-term perspective, it would be helpful to understand how you're thinking about that one.

[James O'Sullivan, President, CEO & Director]

Well, what I'd say, Nik, is it is a very attractive investment. We're very proud to have it. It has been a source of very impressive earnings growth inside our strategic investments portfolio. Look, I kind of view -- I would view China AMC, as I view many of the investments inside that division or that segment. For each of those investments over some reasonable period of time, we have what I would describe as strategic optionality. And I like that because these businesses generate free cash flow. We can commit that free cash flow to investments in the business, to dividends or to M&A. And so as I look across that strategic investments portfolio, I see optionality over some reasonable period of time, and that's kind of how we're viewing it. We love it. We're open minded, and time will tell. In the interim, it's generating a very impressive and growing stream of earnings for our shareholders.

[Barry Sean McInerney, President & CEO of Mackenzie Investments]

And if I could add on, it's Barry, if I could add on China, we -- the partnership between Mackenzie and [ CNCS ] has been so strong in the last 4 years now. And we continue to look for areas of collaboration and cooperation. So as you're probably well aware, in Canada, we've launched a Chinese equity mutual fund a couple of years ago, which is 5 Star now and bringing about $2 million a day. It's starting to get some half, about [ $250 million ] in size. We plan to launch a Chinese fixed income fund in the very near future because the search for yield, as we all know, continues for not just Canadian investors, but all investors. And looking for other opportunities to bring their capabilities to the second largest stock and bond market in the world to Canada.At the same time, they continue to look for opportunities for us in the institutional role in China, and we've been making some good progress there. We're exchanging ideas on AI, on data management and technology. So it's a really strong partnership. So as James points out, stand alone, it's a compelling investment for IGM. But also what adds to its attractiveness is also the strong business cooperation between the 2 companies.

[Operator]

Our next question comes from Geoff Kwan of RBC Capital Markets.

[Geoffrey Kwan, Analyst]

My first question is on IG Wealth. Just with the focus, having moved to high net worth investors. And I know it's hard to generalize, but just wanted to understand how their behavior kind of differs whether or not [ gross ] sales redemptions relative to the typical client that IG Wealth would have had from before there was the move to focus on high net worth. So for example, like is there any more or less seasonality around their AUA flows? Is RSP season less important for these high net worth investors because they may have, say, higher-paying jobs and with pensions and therefore, the RSP contribution limits are lower? Do they invest in different types of funds, use insurance more, that sort of thing?

[Damon Murchison, Executive VP & Head of Retail Distribution]

Geoff, it's Damon. So I would say that on the whole and generalizing, but the mass affluent in the high net worth space would be less influenced by RSP season. You're generally dealing with larger nonregistered accounts. So they would tend to invest on whatever they had money to invest. Now that being said, you're dealing with a lot of individual executives that get year-end bonuses. And so you're dealing with that. It's obviously at year-end or early in Q1.In terms of the full gamma portfolio, generally, as you get to mass affluent and high net worth, you're dealing with more insurance with higher face values. You're dealing with more tax type situations because you're dealing with individuals that are self-employed or own small and medium-sized businesses. So I would say to you that the profile looks different than mass affluent, but the big takeaway is more nonregistered, less registered assets, higher account balances, more complex financial needs.

[Geoffrey Kwan, Analyst]

Okay. And just my other question was, Barry, I know you talked about it earlier in the call, just essentially, the sales performance has been really strong. I know the overall performance of the funds versus peers has been good. You're also, I think, exposed to a lot of the fund categories that are selling well. But kind of looking into that 2021, where do you see the greatest opportunities to drive even better numbers, is it distribution? Is it selling more into kind of the key accounts that you're doing right now? Yes, any insights would be helpful.

[Barry Sean McInerney, President & CEO of Mackenzie Investments]

Yes, sure, Geoff. Great question. So we do expect, as Luke mentioned, for 2021, if markets hold and conditions hold, which is not in our control, we should nicely exceed 2020 levels. It's just gone very, very well. Industry flows are strong, risk on, zero interest rates, savings rates were up. And then we're gaining market share in an environment where the industry flows are strong. So that's a perfect environment for an asset management firm.And as I mentioned on prior calls, it's broad based, and we look at it kind of 2 pronged. We're really at Mackenzie really accelerating our market share in the really deep pools, global equities, global fixed income, global and domestic balance has gone very, very well. And I might add, by the way, that one of the advantages we feel at Mackenzie is the fact that we do have some very strong growth equity offerings, but we actually are more core in value in our offerings, value, of course, has been disadvantaged for quite some time. So when the market starts to broaden out and normalize, I think we're well -- we're going to be well positioned to take advantage of those types of markets, even though the markets, as they speak today, we're taking advantage of.And then, of course, as I mentioned before, the growth catalyst, the sustainable investing the China, the ETF's, these are -- and the alternatives. All these areas are seeing significant growth across Canadian investors and advisers. We're well positioned. And so we're seeing growth across the board. In the RSP season, it started clearly so strongly from day one. As you know, normally ramps up a little bit into January and gets going in February, but it's been gone consistently day in, day out, with significant growth in gross and net sales for us, broad-based every day, even through February. And again, as we remind ourselves, if markets hold and confidence holds with investors, March was a very difficult month last year, significant industry outflows which we experienced, too. So again, if we can avoid that occurrence, then you should see a very strong Q1 across the board.

[Operator]

Our next question comes from Gary Ho of Desjardins Capital Markets.

[Gary Ho, Analyst]

Maybe just follow-on the theme, the last question. So what do you attribute the industry strength that we've seen over the last few one months, particularly in the advice channel, anything that you guys can point to?

[Barry Sean McInerney, President & CEO of Mackenzie Investments]

Well, I'll start, and I'm sure my colleagues will jump in. As I mentioned with the prior question, again, if you just see what the environment is right now, we've got historic monetary and fiscal support. Right? So that is gaining confidence in the stock market. And the stock market looks forward-looking and looking at earnings a year out. And of course, we can get through this year, and the economy a little more. And obviously, the vaccine distribution and efficacy holds, then that's a positive thing.Second of all, the monetary policy and liquidity, obviously, [ interest rates ] to be very, very low and source a relative game. And again, investors are coming into the marketplace. There was a lot of cash on [ balance ], there still is, and they're going into this risk on environment to get into the stock market. So again, you probably have noticed the industry flows have been record highs. And at Mackenzie, we're, again, gaining market share, and so that's a great combination. We're -- not to say that the markets won't be volatile this year. They will be. They were last year. They will be this year. Nothing is perfect. But this is shaping up to be a very robust year actually across the board. And so we're just really focused to make sure that when these events occur and conditions occur, they're not always in place. When they're in place, risk on, it's for us to harvest it, and we're just completely 100% focused on doing that and that's why we're leaning in a little more this year with Mackenzie in terms of some investments to take advantage of this phenomenon that we're experiencing.

[Gary Ho, Analyst]

Okay. Great. And then my next question for Luke. It's a 2-part question. Just going back to Slide 37 for a bit. At the top, you mentioned, I think, $33 million revenue, $20 million expenses. So $13 million EBIT, let's call it. I thought GLC, when you guys announced it, that was closer to $20 million by itself. Are you netting out maybe Quadrus in there? Or what's changed?And then second, just related to expenses as well. In 2020, benefited from kind of lower travel and entertainment costs that's across all your peers. So what are you building in, in your fiscal 21 guidance? Are you expecting some of that to ramp back up later this year? Or what's in that plus-3% number?

[Luke Gould, Executive VP of Finance & CFO]

So first one on GLC, you've got it absolutely right. So $20 million was the guidance on GLC itself. We did have the divestiture of Quadrus, and that's the $7 million difference. And the lost revenue on the divestiture of Quadrus; that's something that tapers off over time, meaning it's more in the in years, and it tapers off to nothing over 7 years. So that's the impact there.On the T&E, the travel and entertainment expenses, we're expecting very little ramp up during 2021. We're going to navigate the year as we -- as it comes. Right now, I know the whole organization has adopted remote in a very effective way. And so as we've said our 2021 plan, the first 8 months of the year, we have very minimal ramp-up in travel and entertainment. And in the back quarter, we have some, but I'd call it slight.

[Gary Ho, Analyst]

Got it. Okay. And then next question maybe for Damon, just saw the consultant count dipped a bit in the quarter after an increase in Q3. But obviously, we've seen the productivity trending higher. Can you give us your outlook for this year? What's the recruitment environment like today?

[Damon Murchison, Executive VP & Head of Retail Distribution]

Yes. I would say that with our slight drop in consultancy in Q4, it was primarily driven by seasonal retirements. You generally have your advisers, our consultants retiring in late in Q4, some in early Q1. Our pipeline of high-quality financial planning candidates is double what it was last year at this time. So we feel really good about where we are. We continue to see signs that our value proposition is resonating in the marketplace for talent. That being said, and you mentioned it, our primary focus is on increasing the productivity of our existing consultants. Average consultant practices was roughly double the size of the average MFDA adviser practice right now, but we're still only 40% of the average size of the average IIROC adviser practice.So we have a significant opportunity to grow our existing practices as we continue to kind of enhance our client experience and focus going on our market of mass affluent and high net worth. So in terms of guidance, we selectively look to add financial planners to our network. We're not in a hurry. It's more about getting the quality and doing it right and making sure that they're a fit. But our clear focus on KPI is on productivity.

[Gary Ho, Analyst]

Okay. Perfect. And then if I can just sneak one more in, Barry. Can you talk about the new fund launches at Northleaf? What's your expectation for fund size? And also kind of remind me if there's any on balance sheet seed capital that's required to get these funds off the ground?

[Barry Sean McInerney, President & CEO of Mackenzie Investments]

Sure. The -- it's a great question. Because as you know, this is the final leg of the democratization of alternatives to get the private investments in the hands of the individual investors. So that's really exciting. A lot of education, I do want to mention, Geoff, as you can probably imagine, a lot of education that we're rolling out, working with the dealers get approvals. But we will have a full suite this year of OM funds for Mackenzie Northleaf private credit infrastructure and private equity. So they'll be in market, they're being structured so that they can support liquidity, if need be. And each of them have a liquidity sleeve. For instance, the private credit that's up and running. The liquidity side uses our -- actually our high-yield ETF and our floating rate ETF and then it uses the private credit as an example of Northleaf.So it will all be in place, education, but their strong interest early days because just take private credit, for instance, the search for yield. You have to -- fixed income is a terrific asset class, right? It just has to work harder over the next 20 years than it did the last 40 years. To do that, you need to look for additional yield opportunities, corporate yield. Obviously, my emerging markets, China, fixed income, as I mentioned, is very high. And private credit now. So it's a very nice sleeve in a fixed income portfolio and overall portfolio to allow you to meet your retirement needs going forward. So infrastructure and private credit have their own attributes. And I will -- if I put a quick little plug in, which is an interesting one. So the private credit OM, when we launch it, will have, obviously, the direct private equity capabilities Northleaf in that fund, but the liquidity sleeve will be the mutual fund we just launched last month, which is the private equity replication fund, which is a really unique way of replicating private equity returns used in the public markets. So more coming on that one, but we're really excited by it. And after obviously initial per of education and dealers being comfortable with the risk profile. We expect some strong flows.

[Gary Ho, Analyst]

And I think minimal capital requirements on…

[Barry Sean McInerney, President & CEO of Mackenzie Investments]

Yes, it is, actually, yes. Yes, that's correct.

[Operator]

That's our next question comes from Tom MacKinnon of BMO Capital.

[Tom MacKinnon, MD & Analyst]

Just a couple of quick number of questions for Luke and then a follow-up. The additional $20 million in expenses associated with GLC and Greenchip. If I'm looking at Slide 38, where should we put those expenses? Are they sort of sub-advisory business development operations to support just to help with the modeling?

[Luke Gould, Executive VP of Finance & CFO]

Good question, Tom. All of them are in operations and support.

[Tom MacKinnon, MD & Analyst]

Okay. And then…

[Luke Gould, Executive VP of Finance & CFO]

You can think of all those expenses substantively, it's people. It's the investment teams.

[Tom MacKinnon, MD & Analyst]

Okay. And then the 0.7 to 0.9 guidance in terms of -- I think I missed that. That was in -- when you were discussing Slide 34, was that on advisory fees, the 0.7 to 0.9 bps per quarter reduction in advisory fees? Was that what you're referring to?

[Luke Gould, Executive VP of Finance & CFO]

Yes. Right on, Tom. On Page 34. It was the advisory -- the weighted average advisory fee rate. And you can see it was 105 basis points in Q4, and you can see the trend from Q2 to Q4. And so I was just giving guidance that where markets are at going into Q1 and with the continued trend of bringing in high net worth and mass affluent, we expect 0.7 to 0.9 basis points decline during Q1 and Q2. And we'll be circling back in May on how that travel is going.

[Tom MacKinnon, MD & Analyst]

And that -- but there's no impact on product and program fees. Is that correct?

[Luke Gould, Executive VP of Finance & CFO]

Yes, that's right. So advisory fees varies based upon the composition of the clientele, product and program fees varies based upon the nature of the underlying product, and I hold the product and program fees relatively stable.

[Tom MacKinnon, MD & Analyst]

Even though -- but -- and there's no benefit for higher net worth people in terms of product and program fees?

[Luke Gould, Executive VP of Finance & CFO]

No, everyone pays the same thing on product and programs. We differentiate our pricing on advisory fees.

[Tom MacKinnon, MD & Analyst]

Okay. And then a question with respect to the movement up into mass affluent and high net worth at IG with the consultants in terms of -- and then certainly more complicated financial planning with more insurance involved and more tax planning involved. How are you coping? And this seems to be to be a lot of training and mentoring. And how are you coping in a COVID environment with respect to that? And is there a point in time where the ability of these advisers to, especially the new ones that are brought on to really get a grasp of the complexity of dealing with a high net worth client and sort of as they just sort of sit at home or sit in their basement and do this. Is -- to what extent do you have to kind of get back to work and get training and mentoring people into that?

[Damon Murchison, Executive VP & Head of Retail Distribution]

Tom, so in terms of your question, and we call it gamma just being able to provide advice across the spectrum, whether it's investments, insurance, tax planning, cash management, you name it. So it starts with the fact that we're deeply committed to having accredited advisers. And we're pretty much leader in terms of the number of advisers that we have that have their designation, their financial planning designation. So when you have that, you're already off to -- you have a strong start and you have a foundation.That being said, we've invested a lot in IG University, which we believe is an industry-leading knowledge sharing, practice management, sharing and training component of our business. And it goes into kind of all the things that you need to do to be a true financial planning shop through IG University, which predominantly started as a face-to-face program. We've migrated over the years to digital. So we were ready for the pandemic without obviously forecasting the pandemic that was going to take place, where we've been able to train all of our new consultants and our existing consultants on a multitude of things because obviously, you're going through a transformation, and we're changing how they are interacting with their clients on a daily basis all through IG University. So we believe it puts us in an enviable position.Now that being said, if you're new to the industry this year in a pandemic, it's tough. It's going to be tough. And we know that. But the fact that the new consultants have so many other consultants and leaders that they can rely on, that they can rely on all of our training. We do believe it puts them in the best possible position to succeed. But I'll remind you, our recruitment efforts have steered over the last few years to really focusing on recruiting experienced advisers.

[Tom MacKinnon, MD & Analyst]

And as you recruit more experienced advisers, doesn't just the average age of the consultants go up? Like are you eventually missing -- are you eventually just having older and older advisers and then kind of missing out on emerging affluent people that way? Or…

[Damon Murchison, Executive VP & Head of Retail Distribution]

Well, if you were just recruiting anyone, it could. But we're selective as to who we're recruiting. First off, we're looking for someone that fits our model, which means they have to have a financial planning mindset. And not just managing the investment side of the business. And number two, we want someone that wants to grow with us and that we want to go with them. Generally, an adviser would come to IG Wealth Management because they see this as the go-forward platform where they want to be a part of to be able to compete effectively against the competition out there.So when you look at it, theoretically, it could, but for us, that's not the case. And in order to make sure that we continue to have a nice [ farm ] team, we've really expanded the number of associates within our network. That's continued to be a segment within our population that has grown, it's going to continue to grow because, ultimately, we believe that their consultant practice teams, as they grow in size, their capabilities will grow. And as their capabilities to grow, our ability to provide better gamma to our clients will grow.

[Luke Gould, Executive VP of Finance & CFO]

And Tom? Tom, it's Luke. One thing I'd add to what Damon said, I think you asked a really important question. And I do want to highlight the advantage of IG. It's our special support. So we've got a team of advanced financial planning specialists. We've got a team of security specialist, insurance specialists, estate planning specialists, and so when you take this environment of specialist support that each of our consultant practices has and the value that the specialists bring to high net worth and mass affluent Canadians, what the pandemic has done, and this ability to work remotely, it's really amplified the way our specialist and advanced financial planning team can engage in client relationships. And you and I would have seen these people in airports traveling to meet high net worth clients. That's done. We've been able to pivot to a way that we can really leverage these people in ways that we couldn't before. And we have the best minds in the country when it comes to advanced financial planning. It is a real asset in our organization and it's been a real -- a real good amplifier of this talent, having the pandemic and having this pivot to remote.

[Operator]

Our next question comes from Graham Ryding of TD Securities.

[Graham Ryding, Research Analyst of Financial Services]

Damon, if I can start with you, just thinking about IG market share. Who do you -- how do you benchmark yourself? On Slide 17, you showed your net flows rate relative to the advice channel. But I'm just wondering, is that the most relevant benchmark for you? Or the banks a channel that you're trying to [ increasingly ] compete with both at the branch level and the full-service broker channel?

[Damon Murchison, Executive VP & Head of Retail Distribution]

Yes. Our benchmark is truly all the wealth management dealers out there. The key here is that, that information is not readily available. It's pretty interesting in this country. The information on asset management is out there. It's out there from daily to monthly, and you can get it, you can access it, you can benchmark yourself, you can track your progress for Barry's business. But on the wealth management side, it's not like that. A lot of these numbers are held closely to the vest. And we're working with our competitors and with industry organizations to try to open up the reporting so that we can truly have a benchmark that makes sense. Ultimately, at the end of the day, we believe that we should be benchmarked against all of the wealth management organizations across the country, whether it be the banks or the independents. And then we are going to hold ourselves accountable to gaining share against those organizations.

[Graham Ryding, Research Analyst of Financial Services]

Okay. Understood. And then when I look at the recruitment, you talked about recruiting experienced advisers, is there any context perhaps of your 1,837, I think, is what you have with greater than 4 years' experience, how many of those you've recruited from external firms or perhaps in 2020? How many advisers were you able to recruit relative to past years? Is there any sort of color on that front?

[Damon Murchison, Executive VP & Head of Retail Distribution]

Well, I would say to you that we just really started recruiting experienced advisers over the last 12 months. So it would be a little too early to start benchmarking that. But I will say this is that our level of recruitment has dropped substantially over the last 4 or 5 years, where we were recruiting significantly the primary driver of our business in KPI to a point where it's important, but it's not a core KPI. It's something that, of course, we believe in, and we're going to continue to do, but we're going to do it at a measured pace because we want the right people. So it's about getting the right people the right way. But our core focus is on productivity because if we can drive productivity with the 1,800 plus teams that we have out there that are located across the country in everyone's communities where the clients are, we will drive this business and get to a net flows rate where everyone can see that this business is quite healthy.

[Graham Ryding, Research Analyst of Financial Services]

Okay. Great. And then one last, if I could. Luke, just on Slide 34, you mentioned sales based comp, I think, is coming down in 2021. What about asset-based comp? Is that going to be steady at 46 basis points, or is there another uptick again this year?

[Luke Gould, Executive VP of Finance & CFO]

Yes. Good question, Tom. So you can see on Page 34, asset-based comp has been relatively stable. Right now, we're almost at the end of the migration where the legacy deferred selling commission balance has fully matured. I've got in my calendar, it's October 1, 2023, it will all be matured. So we will have some upward pressure on asset-based comp as the mature -- the units continue to mature, and they're entitled to it to a higher trail. But you've seen that that's been slight in the past quarters that we really haven't seen a lot on a quarter-by-quarter basis. And so I wouldn't model or expect any meaningful increase in that line. And I would highlight as well the unmatured DSC, it's a relatively small part of our asset base right now.

[Operator]

[Operator Instructions] Our next question comes from Scott Chan of Canaccord Genuity.

[Scott Chan]

Luke, maybe -- I went back to Slide 37. And looking at the $33 million annualized revenue number based on the net $30 billion from GLC and Greenchip. That would imply, I guess, just over ten bps in management fees. Is that -- is that correct on kind of that [ candlelit ] platform? Ten bps?

[Luke Gould, Executive VP of Finance & CFO]

Yes. I'd say 2 things. So one, as Gary had asked the question too, so that includes the divestiture of Quadrus as well. But I think you're doing the math, the net is requiring $33 billion, and there's [ $33 million ] of revenue coming on. What we will start doing in the coming quarters is we'll give the transparency on GLC. Here's the $47 billion in rising. Here's the revenue, but just over ten basis points, that's the right number.I would highlight that this is an almost $50 billion relationship, and that's [ informative ] fees. I'd highlight that the transfer pricing framework is the same one we're using for IG facing Mackenzie. And I would highlight as well, there's a lot of fixed income in the business that we bought.

[Scott Chan]

Okay. So the transfer free pricing for Mackenzie for IG is pretty similar as well, low double digits, I believe, right?

[Luke Gould, Executive VP of Finance & CFO]

That's -- yes, that's right. And you can think of the IG rate being a little bit higher because it's more weight to equities.

[Scott Chan]

Okay. Okay. That makes sense. And one of your competitors yesterday had more noticeable performance fees this year than ever. Now when I look at your platform, specifically on Mackenzie, which are alt, liquid alt, and perhaps Northleaf within the strategic investments or kind of future funds. Is there like in the future, is there ways that IGM could potentially earn performance fees that we can kind of see in the financials? Or any kind of thoughts on that and on how to think about that?

[Barry Sean McInerney, President & CEO of Mackenzie Investments]

Well, it's good question. It's Barry. Great question. We're always looking for -- when we price products, we're open to any type of pricing mechanism, but we're very thoughtful, again, to your point, to see what's competitive. Also to see what's the future trend and particularly transparency, right? So sometimes you see trends for institutional work in the retail world. And probably, the performance fees are a little more relevant in the institutional world. But I wouldn't say that that trend is accelerating. In fact, I think that probably transparency as they are in ensuring you have alignment between the investor and the asset manager, that's probably not something that we -- you could see a lot of us doing going forward. We're always open to it. We'll always look to see if it's appropriate to align the interest of investor and the asset manager going forward with new products. But right now, we don't have that structure in our products.And then even our -- some of our new liquid alts and others, we decided not to do that. We thought for transparency purposes it was best just to price it with the normal mechanism without the promise of fee element to it.

[Luke Gould, Executive VP of Finance & CFO]

And I would add to that. The one place, and you mentioned alt and private. The one place we do have performance, you can expect to see them is in Northleaf and so that, in many cases, will be us distributing or including their products within the IG Mackenzie and other solutions. But that is an area where we do have performance fees, and we -- it will show up through our share of ownership of Northleaf over time.

[Scott Chan]

And that share of Northleaf, we saw the first contribution this quarter. I think it was about 2 months, $0.8 million. Is that kind of a quarterly run rate? And is there like potentials for special dividends or anything in certain quarters that we should be aware of?

[Luke Gould, Executive VP of Finance & CFO]

Yes. So I'd say, right now, the guidance that we're planning for, and you should expect about $10 million to be our proportionate share of Northleaf's earnings during the year. To the extent that there are performance fees, it would be in the fourth quarter, the calendar fourth quarter of the year. So Q4 2021 would be the next time that we'll be reporting on that.

[Scott Chan]

So this Q4 2020, you guys weren't in the position to earn performance fees because the number was so low and the acquisition close. Is that fair?

[Luke Gould, Executive VP of Finance & CFO]

No. There -- our share of performance fees was trivial. We had a few weeks of having the acquisition. And during 2020, there weren't meaningful performance fees that flew through the products that we participate in.

[Scott Chan]

So the -- if I quarterlized the, I guess, the Q4 in Northleaf, it would be over a million, but you're saying it should be about a $2.5 million contribution per quarter, excluding performance fees?

[Luke Gould, Executive VP of Finance & CFO]

Yes. And I would say it's going to be $10 million next year. We don't have a lot planned for performance fees, and they could surprise. And if there was a surprise, it would be in the fourth quarter of 2021. But right in our guidance is that our 56% ownership of Northleaf will give us an earnings contribution of $10 million over the full year.

[Operator]

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

[Keith Potter, Head of Investor Relations & Treasurer]

Yes. Thank you, everyone, for joining the call today and for the engaging questions. We wish you all a great weekend. And with that, Ariel, I'll close the call.

[Operator]

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.