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Manulife’s: Buy Hold and Prosper era gone with AIC

MONEY.CA: Manulife Buys AIC

Manulife’s purchase of AIC highlights just how much has changed in the mutual fund industry in the last decade. According to a couple of analysts, to reverse a near decade-long trend of redemptions will require addressing the new realities of the business.

In the late 1990s, AIC’s fund family was a top performer, posting strong returns on its core financial stock holdings — its message of “buy, hold and prosper” was a winning motto for advisors. At its peak in 2002, AIC administered more than $15 billion in assets under management and was available through almost every advisory firm in Canada, says Peter Loach, an independent mutual fund analyst.

A higher fee model that drove revenues and consistent double-digit returns from financial service stocks are a bit of a relic of the last decade.

For almost seven years, assets have been drained on a consistent basis as advisors and investors alike have become disenchanted by the performance of the funds that are historically dominated by financial service names, and the firm’s unwillingness to alter its management philosophy. At the time of sale, the firm managed roughly $3.8 billion in retail assets.

Loach says AIC ended up with a gross sales problem as advisors abandoned the fund family. The advisor channel became more interested in shorter-term performance and more cost-efficient products, once clients came off their deferred sales charge schedules at the mid-point of this decade — having purchased the funds in late 1990s.

“When you have a lot of deferred sales charge schedules getting down to the 1% level, it’s much easier for advisors to make the switch out of the funds. It’s a lot more difficult when it’s a 4% or 5% DSC, and back in the day AIC funds were primarily sold as DSC — as were most mutual funds in the mid- to late-1990s,” Loach says. “Back in the late-1990s, you [projected] net sales by taking a look at the two to three year annual compounded returns. Now that measure is more like the three to six month returns.”

Dan Hallett, another independent in the fund industry and president of Dan Hallett and Associates, attributes much of the firm’s early success to capturing the right theme at the right time. He says the firm’s refusal to change its management style didn’t sit well with advisors.

“In my view the firm, overall, didn’t prosper on its heel of its portfolio management skill — but rather they caught the right theme at the right time, which I’m sure they would disagree with,” he says. “To a large extent, they really rode the financials and wealth management theme — it’s funds have been pretty dominated by that sector. It’s so concentrated there [that] the funds are pretty specific plays on Canadian wealth management and global wealth management.”

Loach says the concentrated nature of the mandates AIC offers have suffered from the challenge posed by exchange traded funds, both active and passive.

Manulife must stop redemptions

Both Loach and Hallett say the key to this acquisition being a success for Manulife is to retain the remaining assets at AIC.

“When you take a look at the monthly numbers as far as net sales and net redemptions, that’s something leadership and management can address. If you have a gross sales problem — you have a significant problem,” Loach says.

Loach believes Manulife’s purchase of AIC comes at an interesting time, because while AIC is still suffering redemptions, most of the DSC money is gone. He says there’s a real possibility that many of the retail assets at AIC are from investors committed to the firm.

“Ultimately I think it’s a not a bad fit. You have Manulife and their existing relationships and their existing clientele and you have the AIC brand,” he says. “AIC certainly needed the partnership to try to strive to be where they once were. Right now they have been stuck in redemptions for a long time.”

Loach adds, “I don’t know what the margins would be on the existing assets. It may be that the worst is over, in terms of redemptions, and the assets that remain are relatively sticky at this point.”

Hallett points out that, at the very least, Manulife now has a huge product shelf of other funds to capture the assets redeemed out of the AIC brand, should that trend continue.

“From a business perspective I think there is some real change coming that will stem the flow of redemptions or will reverse that trend, and at the very least direct all the redemptions to other Manulife funds,” Hallett says. “One of the reasons redemptions have been so persistent since the peak in ’02 is advisors haven’t seen a whole lot of action to turn the ship around. This sale certainly speaks volume about that. That will help the redemption issue.”

There is a sub-advisory agreement in place between Manulife and AIC that will essentially see Manulife distribute and AIC manage many of its flagship mandates. Hallett believes there will be some paring back of AIC’s fund management input.

Manulife will want to cut out a lot of the infrastructure and some of that will be the money management. Manulife has a fair sized team on its own now, and it’s pretty rare, you see an acquisition in this industry where funds and teams stay intact,” he says. “You’re going to see some dwindling of the portfolio reins at AIC as we know it today. I don’t view the AIC team as particularly strong, which makes this an even higher likelihood.”

AIC team sticking around

It should be made clear that not all the management team at AIC is going to Manulife. AIC’s CEO, Jonathan Wellum, told Advisor.ca that his firm will continue to manage institutional and discretionary high net worth assets.

The firm currently manages separately managed accounts for high net worth investors, and Wellum says his firm will be looking to possibly create some additional investment pools for accredited high net worth investors and institutions.

“Manulife is strictly buying the retail fund business. That’s the lion share of our assets of course. For us, if we’re going to sell the retail mutual fund business prospectus type of fund it would be through Manulife, they are our distribution partner,” he says. “If we do something with institutional or accredited investors, that will be done separately through our firm.”

Part of AIC’s turnaround plan had been to create a number of strong sub-advisory relationships with an internationally renowned roster of value and sector specific management firms, such as Brookfield Asset Management and Third Avenue Management. Wellum says there is no word yet on whether Manulife will continue these relationships.

“All those relationships remain intact,” explains Wellum. “Manulife has expressed interest in them and will evaluate them. Keeping them is going to be Manulife’s call.”

Microsoft Money: Closing a window of opportunity

Important notice: Microsoft Money Plus is no longer available for purchase. All purchased Money Plus products must be activated prior to Jan. 31, 2011.

With banks, brokerage firms and Web sites now providing a range of options for managing personal finances, the consumer need for Microsoft Money Plus has changed. After suspending annual updates of Money Plus in 2008, Microsoft ended sales of Money Plus on June 30, 2009.

We would like to thank the many dedicated users who have been enthusiastic supporters of Microsoft Money over the years, as well as our partner financial institutions who helped pioneer a digital vision of financial management.

Microsoft remains committed to helping customers chart a course to financial well-being. The MSN Money Web site will continue to provide personal finance information and advice plus comprehensive market news and quotes. We will continue to evolve and enhance the online MSN offering in the coming months.

Current Money Plus customers who have questions or concerns can find additional information here.

Additional Content

MSN Money – Stay up to date with the latest market news, handy tools and objective information from some of the Web’s leading financial columnists at http://www.msnmoney.com.

A Canadian History of Money

CANADIAN-MONEY.COM

Canadian money in Canada where did it come from and when did it really start. Find out what every Canadian should know; the origins of their money. Money is so important today as a currency in our daily lives we should know some very important things about money in Canada and especially for Canadians. The Bank of Canada thought it was so important that they commissioned a book on it. Today ‘A Canadian History of Money’ is available for only $1.00 with purchase of any exclusive MONEY Membership package.

 

CANADIAN-MONEY.COM

CANADIAN MONEY
CANADIAN MONEY

Canadian Money 1-800-789-1011 Money Canada Limited all about Canadians and all about Canada. In the worst economic times people tend to cut back on things that are luxurious and things that are too expensive.  MONEY is lucky to be one of a few recessionary proof businesses; in the toughest times when retirement portfolios hit all time lows and the entire monetary and financial system was near collapse, that’s when MONEY was regularly telling MONEY Members what not to do, was now switching gears to tell people what to do and saving up to 30% in anticipated losses. Get MONEY Magazine or exclusive Online MONEY Membership and save thousands especially in tough times.

‘The MONEY Book’ Reading between the Lines

The MONEY Book: Reading between the Lines for ‘You and Your Money’. Now available at The MONEY Store the simple and definitive Personal Finance Workbook that tells a valuable story about you and your own personal odyssey with money. Start with all the right questions and you will get more defined answers to your questions and concerns. From a work sheet to a completed and finalized net worth statement.  Personal detailed information itemized ready for will and final testament and every other detail in between. Personal financial organization is very important and yet so simple to avoid.  MONEY.CA is a great starting place to showcase what the MONEY Book can do for you. This invaluable gesture and important financial planning tool will help you plan and be aware of all the things you need to look out for when creating an overall financial plan regardless if you are just starting out or are a seasoned pro. Look to the longest running MONEY and Personal Finance Magazine in Canada for smart answers to stupid questions. ‘Knowledge is Power.MONEY.CA we wrote the book on money. Published by Money Canada Limited.

www.themoneybook.ca

You and Your Money®

You and Your Money
You and Your Money

Top keyword searches on the Internet are probably sex, love and money but we are only here to talk about “You and Your Money“.

As we begin our journey in describing every aspect of money possible I look to promote our business and philosophy in the best way possible. We now that the internet is exploding; computers are faster and cheaper and more and more people will have them as band with and security grow.  In Learning how to get better rankings for  money.ca and Money Canada Limited we may have to use some of our writing and editing prowess.  I have studied some key words in order to position our own key word of ‘MONEY’ at the top of internet search engines like Yahoo.ca, Yahoo.com, google.ca and google.com. MONEY.CA should join some of the top sites simply because its quality, content and presentation. We are simply promoting a well documented product, service and commodity as well.  Money is an important subject, at MONEY.CA for obvious monetary reasons. Sex for Love not Money…as we all know ‘sex sells’, also literary and literally; meaning that the greatest amount of look ups or searches done on the internet on search engines like Yahoo and google are in the following order…love than money than sex…love comes ahead of sex, but really sex is second to love, also noting that money is between love and sex, often this is typical  of love and sex because people do confuse sex for love and vice verse love for sex. That being said we I have shown you that the internet is as smart as the people who use it. There is an obvious play on words here, and they are meant playfully yet they are also meant to be significant in order to rank highly on search engines every where showing that as humans we might not always have our priorities right and we do enjoy the subjects of Love, Sex and Money. Our philosophy to get noticed maybe unorthodox but our target market is varied, and we would like to be where real people are in order to help them to determine their priorities and tell them about ours. We are promoting money, Canadian money and Canadian money services and products; we are promoting money education and creating wealth through many wonderful offers.  Join us to tell people the simple truth about money through our MONEY Magazine, MONEY Newsletter, MONEY ezine. Find out more on how you can participate in documenting this important subject of MONEY for the benefit of others.

Money Canada Limited

1-800-789-1011.ca Call Now – Easy to Remember – Hard to Forget

Tax-Free Money for What Matters to You

Budget 2008

Responsible Leadership
February 26, 2008
Tax-Free Savings Account

Canadians need to save for many different purposes over their lifetimes. Reducing taxes on savings can help.
That’s why the Government has introduced a new Tax-Free Savings Account (TFSA). It’s the single most important personal savings vehicle since the introduction of the Registered Retirement Savings Plan (RRSP).
The TFSA will allow Canadians to set money aside in eligible investment vehicles and watch those savings grow tax-free throughout their lifetimes. TFSA savings can be used to purchase a new car, renovate a house, start a small business or take a family vacation.
Canadians from all income levels and all walks of life can benefit.

How Is a TFSA Different From a Registered Retirement Savings Plan?
An RRSP is primarily intended for retirement. The TFSA is like an RRSP for everything else in your life.
Both plans offer tax advantages, but they have key differences.
Contributions to an RRSP are deductible and reduce your income for tax purposes. In contrast, your TFSA savings will not be deductible.
Withdrawals from an RRSP are added to your income and taxed at current rates. Your TFSA withdrawals and growth within your account will not—they will be tax-free.

Benefits of Saving in a TFSA
Because capital gains and other investment income earned in a TFSA will not be taxed, a person contributing $200 a month to a TFSA for 20 years will enjoy additional savings of $11,045 compared to saving in an unregistered account.

Responsible Leadership Budget 2008
Early Savings to Meet Many Needs
Canadians will also benefit by using the TFSA to start saving early for future needs and goals.

A Flexible Account for a Lifetime of Savings
Not everyone is able to save each and every year.

Those who cannot contribute $5,000 in a given year will be able to carry forward their unused contribution room to future years.

In addition, Canadians may want to use their savings— to buy a new car or a cottage, or start a small business— and the full amount of withdrawals can be put back into the TFSA in the future. Couples often save and plan together, so Canadians can contribute to their spouse’s or common-law partner’s TFSA, depending on the spouse’s or partner’s available room.

A Warm Welcome To The TFSA

Effective in 2009, Canadians 18 years of age and over will be able to accumulate money on a tax-sheltered basis in a TFSA and ultimately withdraw the proceeds tax-free for any purpose over their lifetime. While contributions are not tax-deductible, you will acquire $5,000 of TFSA contribution room each year. In addition, the $5,000 will be indexed to inflation.

Equally important, unused contribution room can be carried forward indefinitely to future years, without limitation. For example, if you contribute $2,000 to a TFSA in 2009, your contribution room for 2010 will be $8,000 ($5,000 for 2010 plus $3,000 carried forward from 2009). One interesting twist is that you can “recontribute” amounts taken out of the plan. In other words, any amount that you withdraw in a particular year will be added to your contribution room for the following year.

The ability to accumulate investment capital in the TFSA on a tax-free basis, and pay no taxes when you withdraw all or a portion of the proceeds, will allow you to use the TFSA for many purposes. Beyond the obvious use of building a pool of retirement capital, particularly for those who have maxed out their RRSPs, we envision these plans being used to accumulate a downpayment for the purchase of a home, to save for an automobile, to set aside money for a wedding – you name it. A TFSA would also be an excellent vehicle for capital that you want to keep liquid for emergencies.

While qualified investments will be the same as for an RRSP, I can see the TFSA being an excellent vehicle for fixed-income investments (GICs, bonds, money market) to eliminate the heavy tax burden of interest income as much as possible. Or alternatively, to hold investments generating foreign dividends which do not receive the benefit of the dividend tax credit and hence are taxed at a much higher rate.

Furthermore, the income generated within the TFSA will have no impact on our income-tested benefits such as the Canada Child Tax Benefit, the Goods and Services Tax Credit, and the Age Credit, nor will it impact the clawback of Old Age Security benefits. And, if you give money to your spouse or common-law partner to take advantage of TFSA contribution room, there is no “attribution” of the income earned, as is the case when you transfer property to a spouse or common-law partner.

Here are some other TFSA details worth noting:

A TFSA plan can be transferred tax-free on death to a spouse or common-law partner as the “successor account holder”. Or, the assets of the plan itself can be transferred regardless of whether the survivor has available contribution room, and without reducing the survivor’s contribution room.
In the event of a marriage or common-law partnership breakdown, an amount may be transferred from one spouse’s TFSA to the other’s, but this will not reinstate contribution room of the transferor, nor will it impact the available contribution room of the transferee spouse.

The Canada Revenue Agency will track TFSA contribution room when you file your annual income tax return, just as they currently do for RRSP contribution room.

You can have more than one TFSA.

Capital losses won’t be deductible against capital gains.

As you read this, the question that probably comes to mind is: “How does a TFSA compare to both an RRSP and unregistered savings?” The chart and commentary on the previous page is from the Federal Budget documents. It assumes $1,000 is available for investment and details the effect of contributing to a TFSA, RRSP or a traditional unregistered savings account.

What is interesting about this comparison is that it assumes that your effective tax rate will be the same at the time you contribute and on withdrawal. In any individual situation it will be important to look at all future potential sources of income, say on retirement, e.g. pensions, non-TFSA investments, and the effective tax rates that result, in order to further analyze the pros and cons of TFSAs and RRSPs.

For example, if an analysis determines that you will have a lower effective tax rate in retirement, then the RRSP is the preferred, first choice savings vehicle. Alternatively, if you will have a higher effective tax rate in retirement, then the TFSA is a good vehicle for you. On the surface, however, it seems to me that the TFSA will be an extremely useful vehicle for most Canadians.

Kirk Polson, CFP, CLU,CH.F.C., Fee-Based Financial Planner, Polson Bourbonniere Financial Planning, Markham, ON, (416) 498-6181 or (800) 263-0120, kpolson@pbfinancial.com, http:// www.worryfreeretirement.com.

Dale’s note: The TFSA may replace or precede the RRSP as one of the best ways to save for your retirement. However, each person should crunch your numbers for the future tax effects of these investment vehicles. What investments you put in the open, registered and tax-free accounts take on even more importance now.
Canadian MoneySaver • PO Box 370, Bath, ON K0H 1G0 • (613) 352-7448 • http://www.canadianmoneysaver.ca • JUNE 2008