IGM Financial Inc. (IGM) Earnings Call Transcript & Summary

Thank you for standing by. This is the conference operator. Welcome to today's special call hosted by IGM Financial. [Operator Instructions] The conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Kyle Martens, Treasurer and Head of Investor Relations. Please go ahead.

Thanks, [indiscernible]. Good morning, everyone, and thank you for joining us today to discuss IGM Financial's acquisition of a strategic equity interest in Rockefeller Capital Management. Joining me on the call today are Jeff -- or sorry, James O'Sullivan, President and CEO of IGM Financial; Greg Fleming, President and CEO of Rockefeller Capital Management; and Keith Potter, Executive Vice President and CFO of IGM Financial. Before we get started, I would like to draw your attention to our cautions concerning forward-looking statements on Slide 3 of the presentation. Slide 4 provides a summary of non-IFRS financial measures and other financial measures used in this material. I'll turn it over to James.

Well, thank you, Kyle, and good morning, everyone. And a special welcome, of course, to Greg Fleming. Late yesterday, we made 2, I think, very important announcements. These announcements in a measured, yet meaningful way, I think, are going to help shape the future of IGM Financial. First, IGM is making a strategic minority investment in Rockefeller Capital Management, a U.S. wealth management platform with a truly iconic brand, an exceptional management team and a proven strategy for growth. As a result, IGM's future will include more growth, in particular, more growth for our shareholders. I think Rockefeller's success is best seen by the elite financial adviser team that they have attracted to their firm over the past 5 years. It's also seen in the organic growth as advisers have added new high net worth client relationships, and expanded the wealth advise for existing clientele. For IGM, this investment in Rockefeller is a risk smart entry to the U.S. wealth management market. I use that word thoughtfully, risk smart, how you enter a new market matters, who you partner with matters, and how you finance it matters. Today, we're partnering with owners and a management team with whom we have a shared vision and whom we have come to know very well. We look forward to continuing to engage intentionally with Rockefeller through our 2 board seats and other contractual rights as an owner. These rights give us a seat at the table, and they give us optionality and possibilities into the future. A meaningful stake in a scaled, high-growth platform is very much the right way, the risk smart way for IGM to enter the U.S. wealth management market. We very much see this investment as adding growth to IGM and driving shareholder value over the medium- and long-term horizons. Secondly, with the sale of IPC also announced yesterday, we will continue to maintain a conservative financial profile and a strong balance sheet. Canada Life will be a very strong owner of IPC, and I'm confident they will help IPC achieve its full potential for clients, advisers and employees. I am genuinely excited for IPC and Canada Life. Turning to Slide 6. I'll highlight just a few points. First, our 20% investment in Rockefeller strategically positions IGM to participate in the largest and deepest wealth market globally. It advances our wealth strategy to expand our presence in the high net worth and ultra high net worth segments. This has been a long-standing strategic ambition. Second, Rockefeller has delivered and continues to drive exceptional growth. It's a destination platform with an iconic brand. Advisers are provided with a modern, purpose-built platform and financial services infrastructure that powers their ability to continue to grow their practices. Third, this acquisition further expands on the growth levers embedded in IGM Financial. In addition to our leading IG Wealth and Mackenzie franchises, these include growth levers in China, in private markets and in Fintech. To these, we are very proud to add the high net worth and ultra high net worth wealth segments in the United States. Keith will speak more to the sale of IPC later. Here, I will simply note that we have unlocked value, redeployed it prominently and maintained a conservative financial posture supportive of our A category debt ratings. All the while, setting the business up for success and for growth under Canada Life's strong leadership and ownership. The purchase price is approximately 13.5x 2024 adjusted EBITDA. The purchase price reflects the strong trajectory of growth over the past 5 years. It also reflects our convictions that if Greg and team continue to do exactly what they have been doing, they will continue to grow at very attractive rates. Rockefeller Capital Management is a platform that has solely earned what I would call the right to win. Slide 7 then adds some context to the magnitude of the growth opportunity in the U.S. wealth management industry, in particular, the high net worth and ultra high net worth segments. There are an estimated 25 million high net worth adults in the U.S. with 1 million or more in wealth, representing 39% of worldwide millionaires. And there are approximately 300,000 financial advisers in the U.S., of which Rockefeller would be focused on the elite performers, performers who share in the Rockefeller's vision and who want to grow their practices. With that, I will take a moment to properly introduce Greg Fleming. I'm sure Greg is known to many of you based on his reputation in the global financial services industry, both via Rockefeller and through his past roles as President of Morgan Stanley's Wealth and Asset Management businesses. And prior to that, as President and Chief Operating Officer of Merrill Lynch. Greg has led Rockefeller Capital Management since its inception in 2018 and continues to drive the vision and the purpose of the brand and the business. Greg, thank you for joining us today, and I'd invite you to share the Rockefeller Capital management story.

Great. Thank you very much, James. Good morning, everybody. Great to be here with James, Keith and Kyle. So if you turn to Slide 8, please. As always, we start with the name. Rockefeller is one of the greatest brands in the world, maybe the preeminent American name of all time. It's an iconic brand which stands for innovation, entrepreneurism, philanthropy, excellence and integrity. The original Rock & Co was established in 1882 as the family office for the legendary John D. Rockefeller. It may be the oldest family office in the United States. It became a multifamily office in the 1970s and was bought by us in partnership with Viking Global Investors in 2018. We rebranded it Rockefeller Capital Management to make it clear, yes, we were taking care of the Rockefellers but also many more families across the United States. The Rockefellers are indeed our partner on multiple levels. There are over 300 in the family today in the seventh generation. Many of them are our clients. 2 of them sit on our Board, David Rockefeller Jr. and Peter O'Neill from the fourth and fifth generations, and they are investors in Rockefeller Capital Management. As part of the transaction, the Rockefeller family is increasing its investment in Rockefeller Capital Management. We also take care of many families across the United States, though, and that's why we renamed the company, Rockefeller Capital Management. We wanted to make it clear that we were going to take this iconic name and build it and grow it across the United States. One final point on this Slide 8 is the incredible philanthropy of the Rockefellers over many generations. And we think this is integral to the brand that exists today. John Rockefeller Jr., the second generation, was one of the first great philanthropists in history, and you can see that on the slide here. The Rockefeller started Spelman College, which was named after Laura Spelman Rockefeller, the University of Chicago, the Museum of Modern Art, Lincoln Center for the Performing Arts, National Parks across the country, including Grand Teton National Park, Acadia National Park in Maine. They gave the ground for the United Nations here in New York. The philanthropy on top of the business success that John D. Rockefeller Sr. had really is -- goes into this incredible brand that is Rockefeller today. So if you turn to Slide 9, the heart of our firm is our wealth management business, focused on high net worth and ultra high net worth families. We offer trusted advice and a comprehensive suite of financial planning, investment in lifestyle solutions through Rockefeller Global Family Office, our name for our wealth management business. The advice is delivered to our clients through elite private advisers that are experienced in dealing with wealthy families and the complexity that comes with multigenerational wealth. Our strategy, unique, we think, in the marketplace is to work with these families on the totality of their needs. So we start with investment planning and advice, and then we add in wealth strategies and tax planning, family office services, trust services for generational planning and a broad cross-section of other services to meet all of their financial and related needs. We have complementary strategic advisory and asset management capabilities that are also part of the wealth management advice offering. So on strategic advisory, many Americans make their wealth through starting and running businesses. It's one of the key parts of the success of the American economy. We have experienced and talented investment bankers who can help them with advice and how best to monetize those businesses or to keep running them. We give the client the advice that's in the clients' interest. On top of that, our wealth strategies group is also part of any change of control tax planning if the client that owns the business starts to think about monetizing. Regarding our asset management offerings, the core of our model in Rockefeller Global Family Office is independent advice delivered by world-class elite advisers. We are counselors to our clients. So we are completely open architecture, but where we have great capabilities within our Rockefeller Asset Management business, we make those products and services available to our wealth management clients. If you turn to Slide 10, we have built a great culture at Rockefeller Capital Management that has enabled us to attract a world-class team. The culture is focused on excellence in all that we do, delivered in a collaborative collegial environment. That is clear to every one of the 1,100 employees that works at Rockefeller Capital Management. We talk about it all the time. It is an entrepreneurial firm with everybody in every part of the firm focused on what is best for the client and on growth. We spend a lot of time working to identify and attract the best private advisers in the industry. They are attracted to the legendary Rockefeller name as well as our model of providing a full suite of wealth management services to our clients. Being highly selective in our recruiting efforts has enabled us to assemble the industry's finest group of private advisers and has, we believe, an instrumental to our success. For the record here, that same discerning approach has led us to the Desmarais family and IGM, and it also led them to us. Last thing on this slide, the critical part of the offering is best-in-class technology. It's 2023. You have to have it. We have an experienced, deep technology team that has been delivering a state-of-the-art technology stack to advisers, clients and our firm. This team is led by Mark Alexander, who did this for many years at Merrill Lynch from 1991 to 2015, many of those years overlapping with me and working closely with me there. Turning to Slide 11. We set out in 2018 to take our iconic brand and bring it to major wealth centers across the United States. We started with 3. We are now in 44 cities where there is concentrated wealth, including the cities that you would expect over the decades, places like New York and Los Angeles and San Francisco, but some of the high-growth cities in the United States today as well, Austin, Nashville, Orlando, hiring close to 100 teams since we started. We expect to double that number over the next 3 to 5 years. As I said earlier, we are looking and spend a lot of time on diligence in getting to know teams for those that bring the expertise to council wealthy families. The cultural fit to be part of Rockefeller. All advisers, everybody who comes to this firm are employees of Rockefeller Capital Management and embedded in our culture. They are proud of the name. They are proud of the firm. They are proud of the culture and the things that we find important here. One firm, one culture, a relentless focus on serving clients and growth. We are quite pleased with the teams we have brought to Rockefeller Capital Management over the first 5 years of our firm's history. We are confident we can maintain that high bar going forward. Turning to Slide 12. I want to talk about growth here, and I want to be clear upfront on how we categorize growth. So we talk about inorganic growth, which is bringing a new team to Rockefeller Capital Management and helping them onboard the clients that they've been working with for many years. Then organic growth, when we talk about organic growth, we're talking about growth away from the market, where we get a greater share of wallet with an existing client, where we get a new client. And then the market is on top of that. So we look to grow both, inorganically through recruiting new teams and organically through the teams that are now at Rockefeller. As I've said on the inorganic side, we work closely with the teams, we hire to help them transition their clients to Rockefeller as expeditiously and seamlessly as possible. That's a big focus for us and for the teams. They come here, we work with them to get the clients on board as quickly as possible. Once that's done, our elite private advisers are all focused on growing the business. And when I say all focused, we mean that, because that's what we look for in the teams that we recruit, both share of wallet with existing clients and new clients. The strong 2-pronged growth has fueled a 38% annual growth in client's assets over the last 5 years and a 55% annual growth in firm revenues. Now our 2 complementary businesses, strategic advisory and asset management, are part of the growth in Rockefeller Global Family Office. So elite advisers are attracted to Rockefeller Capital Management, because we have an investment banking capability that's accessible to their clients. They know that many of their clients' own businesses and are building businesses. They know when they come here, our investment bankers are going to work alongside those clients and provide them advice and help them. And that close connectivity is not something that's readily available in the marketplace. On the asset management side, our fixed income offering within Rockefeller Asset Management is accessed by many of our private advisers and their clients. So there's a connectivity across all of our businesses with Rockefeller Global Family Office at the center and the heart of the firm with Rockefeller Strategic Advisory and Rockefeller Asset Management working hand in glove and feeding through to those clients. On top of that, as stand-alone businesses, Rockefeller Strategic Advisory and Rockefeller Asset Management have clearly helped with the growth profile of Rockefeller Capital Management. Turning to Slide 13. We have grown consistently since 2020 when we put the building blocks in place to begin to recruit on a broader basis. We expect to continue to onboard $120 million of adviser production per year, recruiting elite advisers in the major wealth centers we have targeted. In some of the wealth centers that we're in, the 44 that I listed, we've just started. So we might have 1 or 2 teams in some of those places, and we'll build them out and grow there. We may end up in 50 wealth centers, maybe slightly more. United States has concentrated wealth in many places, as I mentioned earlier, in some of the traditional cities that have had wealth for many decades and then some of the fast-growing new cities, primarily in the South and in the West. This inorganic growth will be complemented by strong organic growth, which has been higher than industry averages. We focus across the firm on organic growth. Everybody here is focused on doing more with our existing clients and bringing in more clients that we can help with the full suite of capabilities and counsel that exists in Rockefeller Global Family Office. The continued execution of this strategy with the accompanying build-out and growth of Rockefeller Strategic Advisory and Rockefeller Asset Management will drive continued strong rates of top line and EBITDA growth. We need to keep doing what we've been doing, but there's no acceleration required, the formula is intact. Now I often get asked, why are your asset conversion and historical organic growth rates so high? It's not complicated, but it's very difficult to replicate. I attribute our past success and confidence in the future to 4 main points. One, our brand built on the Rockefeller name and over a century of service. And the brand is a differentiator, and everybody here knows that, and our private advisers love working under that brand. The best advisers in the country, two. Three, a relentless focus on putting clients first and meaning it and having it be embedded in the firm's culture, so that everybody takes it on board. And then four, broader and better solutions than competitors, including an importantly, world-class technology. So I just want to close and we'll take -- happy to be part of the Q&A at the end, reinforce you that we're quite excited about the partnership with IGM and the Desmarais family who have I've known for over 20 years. And we believe this partnership over time will add to our growth potential and trajectory. So with that, I'm going to turn it over to Keith, who's going to pick up with Slide 14.

Thank you, Greg, and good morning, everyone. As Greg demonstrated Rockefeller's successful executing on [indiscernible], we plan to consistently recruit high-quality adviser teams with a real focus on organic growth. And on the left chart, it does demonstrate consistent historical growth in revenue and EBITDA with the forecast, as Greg mentioned, simply requires the team to continue doing what they are doing to grow revenue at 30% to 40% in 2023, and 25% to 35% in 2024. and this in turn is expected to lead to EBITDA growth of 75% to 80% in 2023, and 50% to 65% in 2024. As we look at this from a valuation perspective, the strong growth profile drives down the 2024-enterprise value to adjusted EBITDA multiple of about 13.5x. And anything forward this trend has continued as we head into 2025. Turning to Slide 15 on the summary of the transactions. First, we have signed and closed the Rockefeller transaction yesterday with payments due on June 2. And you cans see on the Point B, on the Rockefeller transaction, we intend to fund the purchase with $575 million in proceeds to proceed in connection with the sale of IPC, and the remaining amount will be funded from the issuance of senior unsecured debt. Because of the timing difference between the payment, Rockefeller on the close of IPC, we will be reporting a bridge facility in place. We are very pleased with the conservative financing approach, which maintains leverage metrics of [indiscernible] A category rating and expect to maintain debt-to-EBITDA ratios below 2x once all transactions close. In terms of earnings impact of 2023, we do expect the combination of the transactions to reduce 2023 earnings by approximately $20 million to $25 million. That's really primarily driven by transaction financing inclusive of the short-term financing. However, with the strong growth forecast that we see, the proportionate share of [indiscernible] earnings would fully replace IPC earnings and cover the financing costs in 2025 and on that basis, will be slightly accretive. And finally, IGM Financial would proudly be the second largest shareholder in Rockefeller besides Viking Global Investors. Turning to Slide 16, a few comments on the sale of IPC to Canada Life. First, we view this as a win for all parties involved. For IGM, we believe it's unlocked value. It strengthens focus on IG Wealth Management in Canada and enables us to diversify our wealth and management capabilities in the U.S. with what we believe is a leading U.S. independent financial services adviser firm. For IPC employees, advisers and their clients, we maintained strong and stable ownership, staying with power family and benefit would be part of Canada Life who is committed to building out their wealth management platform, for Canada Life's transaction complements and accelerates their wealth management strategy. And I'll just finish by saying we couldn't be more excited to have such a great partner in Rockefeller, Greg and his management team. And with that, we'll open up the line for questions.

[Operator Instructions] Our first question is from Nik Priebe with CIBC Capital Markets.

Maybe a question for James. Are there any potential synergies of this investment with your existing business? Like does Mackenzie win shelf space on this platform here? Are you planning to cross-sell your own investment management capabilities into that channel? Is there anything else we should be thinking about in that sense?

Yes. I would not be thinking in that direction. I think there's very much going to be an operation -- or sorry, the possibility here of what I'll call collaboration of learnings, moving kind of south to north and north to south. I think as we take our seats on the board and we get to work with Greg and his team ever more closely, I think the quality of what we deliver in Canada is only going to improve, but I would not be thinking about asset management opportunities. Other than, I would point out that historically, Rockefeller Asset Management has been a sub-adviser to Mackenzie and that's a possibility. But this is not about kind of integrating wealth management and asset management at all. That is not part of the thinking. This is really about IGM expressing both, a long-term interest in the United States and expressing a long-term interest in Rockefeller Capital Management. And so there will be learnings, and there's lots that we will share, but this is not about synergies per se.

Understood. Okay. And then you had also alluded to an option that would enable you to increase your investment in Rockefeller over time. Are you able to elaborate on that and the path towards expanding your interest?

Yes. Well, look, thank you for that question. I will share with you that it is a private agreement, as you might expect. We will have and will occupy 2 seats on the Board of Directors. Beyond that, we -- what we will have is what I would describe as a package of rights, a package of protections. Those will give us a seat at the table and what I would describe as some optionality as the future unfolds. But I would be thinking about this kind of temporarily as several years down the road. But given that we're expressing a long-term interest here, the agreement and the package of rights and protections was and is very important to us.

The next question is from Scott Chan with Canaccord Genuity.

My first question refers to Slide 13. Greg, you talked about organic growth, [indiscernible] the AUM CAGR. I'm just trying to reconcile your organic growth when you talked about 19% in '21, 8% in '22 and 7% forecasting, when I look at the disclosure, it seems like it's this client asset movement, but I think you talked about organic growth being just like incremental clients and net flows. And maybe you can just confirm that for me.

Thank you. What we talk about and we measure this after we onboard a team inorganically, once they've been here for a certain amount of time and the clients that they've worked with for years over here, they're then really in steady state and moving forward. And we will start to measure organic growth from that point forward. So the organic growth that we're looking at there is within Rockefeller Global Family Office. And it's, again, assets brought -- additional assets brought for existing clients or new clients that come on board with the market taken out of the calculation. So that's what those percentages are. And the historical ones are what they are. Going forward, we've said that we can do this 7% or 8% year in and year out, and we believe that's the case.

Okay. That's what I thought. And then in terms of the other big strategic owner, Viking Global, can you give us a background on how they got their stake and if they got board's seats like anything in terms of what they are they're thinking strategically at Rockefeller?

Sure. So I started working with Viking, I left Morgan Stanley in 2016, and they reached out to me, and we started looking at the wealth management industry. I was interested in doing something like this, and they were interested in backing me as the leader. And when we had an opportunity to go out and buy Rock & Co, we did that together. They've been a terrific partner from day 1. They were an integral part of the whole transaction here to bring IGM and the Desmarais in. They continue to own a majority of the company, and they have no current plans to do -- to sell down any additional stake in any timeframe. They're quite pleased with how we're doing and the growth trajectory to date and are confident in the growth trajectory going forward. So they've been with me since day 1 and a great partner.

Great. And just lastly, just trying to reconcile like just the robust growth in 2018. Last year, your adjusted EBITDA margins were 15%. I can kind of see the adjusted EBITDA growth forecast for '23 and '24, but at what point do you think or what target do you think you can get adjusted EBITDA margin? Are we kind of still at the inflection point working kind of still grow for several years? Or does it kind of top out at some point over the next few years?

It does and if you look at the scale players in this market or even the smaller, more [indiscernible] players at some point, obviously tops out, but we see margin expansion from here along with continued top line growth. And we're very focused on both sides of that. We've been investing heavily in our technology platform, which as you've heard me say, is a key critical success factor for supporting the growth and what we're doing with clients. So over time, we expect to continue to grow on a top line basis and to expand margins. We'll see over time where they start to top out.

The next question is from Tom MacKinnon with BMO Capital.

Question for James and maybe Keith here. The EV to EBITDA multiple you're paying at 21x 2023 implies like just through the growth assumptions you've kind of laid out in your slides that there is some net debt you're picking up or not you're picking up, but there's some net debt at Rockefeller that's in that calculation. And I estimate it to be around $370 million or so. I mean, the question is, first, is that right? And secondly, if I look at that $370 million net debt divided by that $88 million EBITDA that you have, that's over 4x leverage, net debt to EBITDA. That's -- and you are below 2x company. So what would you say to investors that would say, hey, you're paying a pretty steep multiple for something that's twice as leveraged as what you guys would be looking at. So yes, if you can help me with that, that would be great.

Sure. Well, thank you for the question, Tom. I will start. Keith will speak to the specifics, and I'd ask Greg to speak to the trajectory of leverage if that works for you. What I would say in terms of what we paid, Tom, is this, we paid for growth. And you watch client assets, you watch adviser teams revenue, adjusted EBITDA, net income, whatever measure you choose to focus on in the quarters and years going forward, there is going to be growth, and it's going to be considerable growth. As I said in my remarks, Greg and team only need to continue to do what they have been doing to achieve what I think is going to be, for this industry, a very, very impressive level of growth. Second thing I would say is we paid for quality. I may have said it too many times, and I'll say it one more time. This is an iconic brand. And this is, I believe, a -- not only an iconic brand, it's an iconic global brand. And it's a brand that I think in the fullness of time will travel very, very well. Thirdly, I'd say we paid for optionality. This is a strategic investment, it's not a financial investment. And we coined the phrase, risk smart, very deliberately. What is the right way for IGM Financial to enter the U.S. market? I think this is the right way. One step at a time, not a giant leap into the swimming pool. One step at a time where we get to rely on Greg and his team, the brand and the layers and layers of relationships that underpin this strategic investment between the Desmarais family and the Rockefeller family, between Power Corp. and Rockefeller Capital Management and laterally between IGM Financial and Rockefeller. So I feel very, very strongly that we have bought well here. I think this is strategic. I think it's risk smart and I'm proud of what we accomplished. I really am proud of what we accomplished, but I say to you, I recognize that we paid a big price and we need to deliver growth. And with the leadership of Greg Fleming and his team, you will see that growth. And so I'll have Keith speak to the specifics on the debt number, and then I'll let Greg speak to -- or I'd ask Greg to speak to the trajectory of leverage in this business.

Thanks, James. Tom, yes, your amount of about $360 million for 2022 is pretty much bang on. You did mention about 4x leverage is the one creating both of the business is around 30 teams per year. And so when you think about what debt leverage is required to drive this business forward, it's fairly moderate. And you can think about that leverage. And James mentioned this, and Greg could comment too, but that leverage is coming down, and it's already coming down. So it's a company that's early in its years in development, has a long runway here. And at 4x, it's going to be coming down from there. So we're quite confident in the business and the business model that's not reliant on significant leverage to succeed. Maybe I'll just pause there, and I'll let Greg add to that.

Great. Thanks, Keith. Yes, I'd say a couple of additional things here. We've been financing our growth through a combination of equity and a borrowing base credit facility over the past 4 years. We've been thoughtful in executing our growth plans and our debt coverage ratios have improved significantly over time as our business has grown. And going forward, our EBITDA is projected to grow at rates well in excess of the cash needed to finance our projected continued investment in teams. So that takes me back to where Keith just ended. So the leverage ratios will continue to come down going forward.

Okay. That's great. And a quick follow-up here. You're -- what's this going to do to free cash flow? Assuming you're going to equity account for this, you're just booking kind of noncash earnings here. Are you getting a dividend at all? You were getting free cash flow from IPC, but you're not going to get free cash flow from RCM, and -- but are you going to get a dividend at all?

Yes. Thanks, Tom. I would not expect a dividend for several years. This is a growth company. And it's very important to us that they achieved their growth plans. With respect to IPC, it's -- IPC, of course, was generating earnings, but IPC was at this -- is at this very interesting point in its evolution where what Canada Life now has the opportunity to do, Tom, is invest anywhere between $35 million and $50 million a year in helping to put that business on a true growth trajectory. I mean, you and I have spoken about this in the past, we're at an interesting kind of spot in Canadian Wealth Management demographically, sort of the demographic of advisers that built this industry in the '80s and in the '90s are retiring or are ready to retire. And that's presenting an opportunity for firms like IPC to create new models, to create different kind of economic structures between the house and the adviser. And what we did over the last few years in IPC, it cost us money, cost us money and it suppressed earnings, is we built pinnacle, which is a corporate adviser, the salary plus bonus adviser, that has stood up and ready to go. We built IPC 1 which is the ICPM or Private Investment Counsel model, discretionary fee-based solutions plus advice. That's ready to go. And so the real opportunity with respect to IPC, it's not a free cash flow opportunity, because had we continued to own IPC, I think we would have put more capital into that business each year than we would have received in free cash flow. And look, we would have been happy to do it, but for IGM, the capital well is deep, but it's not bottomless. And Tom, I was regularly faced with, do I invest in IG Wealth, or do I invest in IPC? I think the real opportunity here for Canada Life given their size and their scale and their leadership is to invest in IPC to support IPC. And if they support those 2 platforms at IPC, pinnacle and IPC 1, I'll tell you that I think IPC 1 is truly ready for lift off.

The next question is from Jaeme Gloyn with National Bank Financial.

First, high level, what are the long-term intentions for the U.S. strategy? Is this the only platform and you'll build out through Rockefeller? Or are you thinking longer term that you would have other wealth management assets in addition to Rockefeller?

Yes. Good question. No, this is the one and only. Our -- as I said earlier, we are expressing a long-term interest here in the U.S., and we are expressing long-term interest in Rockefeller. But Rockefeller will need a vehicle through which we kind of express those strategic goals. So I would not be expecting anything in the United States in wealth management other than Rockefeller and perhaps over time, a larger stake in Rockefeller.

Okay. Understood. Second question is maybe more for Greg. Just want to get a sense as to the cost to attract and acquire advisers. So if I'm thinking about the production that's been acquired over the past several years, would you be able to give us a sense as to the compensation, either upfront or contingent compensation to attract advisers and retain those advisers over the last several years and how it's evolved? I guess, are costs going up? Are they stable? A little bit of color around that part of the business.

Sure. And the market is competitive for the elite teams. Although candidly, we've seen players come in and out of that market. So there are large firms that will compete as well. And then there's been -- there's some other firms that are -- that have different models that have been active in the marketplace that have pulled back more recently given changes in their positions. So it's a competitive marketplace, but we see firms come and go, but generally, it stays quite competitive. We're always on a frankly more disciplined side of the financial terms to attract advisers here. We want them to come here because of the brand, because of the leadership team and the experience that we bring, because of the technology platform, because of the broad-based set of capabilities, because they can work closely with great investment bankers, if their clients' own businesses. These are all major points of attraction to be here rather than somewhere else, and we use that quite actively in the recruiting process. We also -- as I said, it's not for everybody here. This is a very particular culture. We're starting with this world-class name, and we have this culture that I described that everybody is part of, it's 1 firm. Everybody works at Rockefeller Capital Management. Everybody wants to work under this iconic brand. So it's not for every team either. So when I put all that together and come back and answer your question on financial metrics, we do put in place -- we do buy the books to bring them over and then we amortize that over long periods of time. And we stretched those amortization periods when we started Rockefeller Capital Management well past where they were in the industry, because we wanted advisers that wanted this to be their last stop, and that's how they think about it. Frankly, the business model that they're able to implement here with their clients, also leads them to want to be here for the rest of their careers. So we extended the amortization periods, and we created incentives, back-end incentives for growth. On the upfront, I think we're in and around 2x for the books that we bring over, but we then have incentive hurdles. And some of those extend quite far out beyond 5 years, so that the teams are quite focused on growth. So in the final analysis, we are careful about who we bring on board. We want them to fit into Rockefeller, the name, the culture of the firm, and we want them when they get here and they move their business over, get their clients on board to focus relentlessly on growing.

Okay. And just to clarify, when you said 2x, that was 2x production, would be the upfront outlay, did I understand it correctly? So if I'm thinking about the forecast over the next 3 years, like $360 million, you've just brought in $620 million plus whatever the family and management is kicking in as well. The view is that you have sufficient capital today to fund this production acquisition forecast. Is that correct?

Yes. We -- the transaction with the Desmarais and IGM is a transaction that we entered into, because it's the Desmarais and IGM. We could have with Viking and our existing capital structure, continue to invest in and grow this business going forward. So we're comfortable, as I said earlier, that our EBITDA will grow at rates well in excess of the cash needed to finance our continued investments in teams.

[Operator Instructions] The next question is from Graham Ryding with TD Securities.

Just wondering about run rate EBITDA, just given obviously there's some acquired EBITDA in 2022 and then there's some projections in 2023 for acquired EBITDA as well. Could you give us an idea of what your sort of run rate EBITDA of the business is currently?

Yes. No, I think, Graham, what -- we're disclosing '22, '23 and '24. And we're going to limit the disclosure to those numbers.

Okay. Fair enough. And then when we talk -- when we sort of think about the margins, there's clearly been some margin expansion that you've realized and are projecting, where -- what's a realistic sort of target looking maybe to 2025 or beyond for where you can get the margins for this business? Like is 30% to 40% a realistic target? Or how are you thinking about the margin outlook?

Sure. Please go ahead, Greg.

Okay. So let's -- remember, we have 3 pieces of Rockefeller Capital Management. So let's talk about the wealth management piece, Rockefeller Global Family Office. So if you look at the scaled competitors in the marketplace here and maybe the one I'm most familiar with having run it for 5 years since Morgan Stanley Wealth Management, but if you look at the scaled players, they get to mid- to high 20s on their business. So that's a proxy for you there, whether we could do better than that given the way we run our firm and the quality of the technology team, et cetera, that's in front of us. But remember, Rockefeller Capital Management also has Rockefeller Strategic Advisory and Rockefeller Asset Management margins in that business as we continue to scale, it can be north of that. So we're right now focused on continuing to invest and expand margins, and we'll see where it starts to settle over the next few years. So we're not -- the investment in the technology platform that we're making now is quite significant. So at some point, you get real scale economies there and we will. We're not trying to aggressively go after those yet, because we want to have world-class technology. So -- but on the wealth management business itself, if I circle all the way back to where I started, you can look at some of the scaled competitors here to see where they get.

Okay. That's helpful. My last question, I just want to be clear I'm understanding the message here. The projections for acquiring assets and revenue in 2023 and 2024, do you have the capital today to fund that with the business? Or would you still have to increase your debt levels to fund that, but the run rate EBITDA would be sufficient to bring leverage down?

We've got the capital.

We have a follow-up from Jaeme Gloyn with National Bank Financial.

Two follow-ups, actually. On the adviser acquisition outlook, I just wanted to get a sense as to where the pipeline sits today? And how does that conversion of that pipeline typically trend just to give us a little bit more confidence around that inorganic growth projection, if you can?

Sure. James, I'll take that if you're comfortable with that. Listen, the pipeline at Rockefeller Global Family Office is as strong as it's been since we started. The name, the quality of the teams that we've onboarded, the breadth of the offering that you've heard me talk about at length here, the dynamics of the competitive marketplace and challenges that exist there for others, we have a broad and deep pipeline and are in dialogue in many directions. We've set our structure up. You saw the map with the 44 cities. There are 7 regions embed -- that those cities are embedded in with 7 different leaders that are out recruiting in those regions, leaders that have been in those regions for their whole careers. Many of them recruited from places that I've worked in my past. So the pipeline is broad, and it's deep and, we feel quite good about it. And as I said, it leads us to be discerning and careful, because we're -- as I've said many times, we are very focused on growth, but the most important thing for the firm that we're building is that we get the right elite advisers in here. So -- but the short answer is it's quite strong.

Okay. Great. And then my second question, and I'm not sure who's best positioned to answer this, but thinking about 2 items that seem to be a drag on earnings; share-based compensation and loan amortization. Maybe you can walk through how you think about share-based compensation? Is that to advisers? Is it to management team? And then the loan amortization figure, like I would interpret that, I guess, has some of that incentive consideration amortizing through the earnings. So how should that kind of -- how should that build in the next few years?

Yes, James, it's Keith here. I'll just start with loan amortization. So Greg described how the payment to advisers works upfront. It's in the form of a loan and an asset on the balance sheet, and that's amortized over a long period of time. And so you can think about that continuing to build through the course of time. In terms of the share-based compensation, there is, I'd say, a legacy program. There's a program in place now. And importantly, as you look to Page 14 -- or sorry, 15, where we've referenced what our expected [indiscernible] share of associated earnings expected to be with RCM. All these numbers, the adviser base -- or sorry, the amortization as well as the equity-based compensation are considered in those numbers and we'll be reporting quarterly report share of earnings, and that's going to be a key metric that we're focused on to demonstrate growth. Craig, I don't know if there's anything you wanted to add to that.

No. On our side, we're just going to continue to focus on all the growth that I've talked about here and continuing to move this forward.

This concludes the question-and-answer session. I'd like to turn the conference back over to Kyle Martens for any closing remarks.

Thank you, [indiscernible], and thank you, everyone, for joining us this morning. And with that, [indiscernible], I'll ask that you close the call.

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