Florence Narine explains how the global giant convinced IG they could manage for Canadian retail investors
When IG Wealth Management sought external management for five of its Core Portfolio fund products, the test was whether a global financial institution could serve the needs and challenges of Canadian retail investors. Florence Narine, Head of Investment Solutions at IG Wealth Management, says that performance in these core funds was already strong, but that IG wanted an external manager to raise the level of performance to better serve clients in a challenging macro environment. She says that Goldman Sachs won them over.
Narine outlined why IG elected to hand management of these funds over to Goldman Sachs and what that global behemoth can now do to drive performance in these funds. She outlined how Goldman convinced IG they could manage the unique realities of the Canadian retail space and what this new manager will mean for IG’s advisors and their clients. She noted, too, the structural lessons that the wider industry can take from this decision.
“We spoke to a number of global managers as we decided to step forward in this space. And certainly foundationally key was recognizing who IG was, recognizing what a Canadian wealth investor here needs and is looking for, recognizing there was nothing broken with this product or flawed with the product,” Narine says. “We know that clients are becoming smarter and more sophisticated. Goldman has an exceptional ability of not just doing institutional pension-style money management. That’s great. But can you translate that into the wealth needs? Can you translate that into Canadian wealth needs? I think for us that was really underpinning.”
How Goldman convinced IG they could serve Canadian advisors
Narine framed their search for external managers around the core role that a manager plays in the life of an advisor and the life of a client. Advisors, she says, want to make sure they’re not being asked to do the job of an investment dealer. They want dealers who can provide them with a strong shelf of investment products so they can do their job: making sure clients are happy.
Narine says Goldman Sachs offered a clear vision about different asset classes within these portfolios and how they could stand up in a changing world. Perhaps more importantly, in Narine’s view, Goldman offered a tailored view of the Canadian retail market. They understood the dominance of the big banks in Canadians’ financial lives. They fully grasped the realities of Canada’s regulatory landscape and tax system. As much as investment managers like to discuss pension-like investing approaches, Narine says that Goldman understood the unique needs of retail clients and the fact that a pension-like approach can’t always serve individual families with immediate liquidity needs and different time horizons.
Goldman, Narine says, offered clear points of view on questions like how private assets could be integrated into portfolios. They took a stance on whether Canadian or US small-caps are better positioned right now. They offered, she says, a willingness to take “opportunistic risk,” within long-term strategic allocations. While most managers they interviewed talked about protecting assets, Narine says Goldman added to their defensive strategy by looking for ways to capture emerging opportunities.
What IG wants to do with Goldman onboard
Narine says that in assessing the macro risks of the day, managing shifts in interest rates or equity market volatility should be treated as table stakes. The expectation is that any manager, internal or external, can do that. What she says IG wants to do with their Goldman partnership is manage structural demographic changes that impact Canadian investors and advisors. Those include issues like structural home country bias in portfolios, a holdover from decades of RRSP eligibility rules. They include tax realities and the costs that families may suddenly incur during the great intergenerational wealth transfer. They include rising longevity and changing retirement lifestyles, impacting how long people live in retirement and how much ley leave to their heirs.
While Narine says that not all products will solve all these issues, the right management of these products can help support advisors and their clients through them. She adds that as investors become more sophisticated and come to advisors with questions that past generations might not have asked, they need the backing of management teams with the skill and sophistication to provide a strong answer.
IG advisors will also now have to answer questions from their clients about Goldman’s involvement in these funds. Narine addresses the likely most common question up front, noting that the fees associated with these funds will not change under Goldman’s management. She acknowledges, too, that outsourcing to a manager headquartered in the United States might raise some questions among clients in the current political environment. She sees those questions as fair, but frames Goldman Sachs more as a global manager, with presence and insight around the world, rather than just an American firm.
For advisors and wealth management firms beyond IG, Narine says that there are lessons in IG’s decision to partner with Goldman Sachs. Namely, that more sophisticated clients and a more competitive market will push firms to pursue better outcomes. Specialization of management and the onboarding of external perspectives is one way that IG is trying to achieve those outcomes.
“Our investors and advisors are asking for choice, are expecting choice, are expecting that they are getting various views. Right, that they’re not getting one flavour, one version of the world, because we are all different,” Narine says. “They want to certainly make choices that reflect their differences in thoughts, views, and opinions. They want to see who they are reflected back at them across, not just across the advisor table, but in what’s sitting on that statement as well.”
