Advisor Guide
Why Evolution Private Managed Accounts? Be empowered by an innovative solution tailor-made for your clients. Experience holistic wealth management customized to meet your clients needs today and as they evolve. Experience EVOLUTION.
The Evolution advantage: enhanced portfolios and practice management efficiency Comprehensive research and a disciplined investment approach State Street Global Advisors (SSGA) provides comprehensive forward-looking return expectation research and portfolio recommendations. CI Multi-Asset Management uses SSGA s research and recommendations to construct the portfolios, and selects the best managers for each asset class. Actively managed strategic asset allocation portfolios designed to capture evolving market and economic opportunities. Multiple investment strategies Personalized investment strategies may be applied to portfolio solutions and remain actively managed. Premier portfolio management Access to award-winning money managers, including Signature Global Asset Management, Harbour Advisors and Cambridge Global Asset Management, through an industry leader CI Investments. 2
Competitive fee structure Pricing options to accommodate high net worth portfolios. Tax-efficient investing Tax-efficient investment processes. Corporate Class structure distributes only the most tax-efficient forms of income and is designed to minimize annual dividends. Tax-efficient source of stable monthly cash flow with T-Class option. Consolidated simplified reporting Comprehensive Investment Policy Statement. Quarterly statements consolidated at the family group level. Annual detailed tax packages. Wealth planning support Financial and estate planning for clients. Regional wealth planning support with over $1 million of assets. 3
State Street Global Advisors: recommendations and research with global reach Evolution s efficient strategic asset allocation portfolios are crafted to capture evolving market opportunities. The considerable asset mix research and recommendations of SSGA and its Investment Solutions Group are carefully blended with the portfolio construction expertise of CI Multi-Asset Management. State Street stays on top of more than 100 global markets With US$2 trillion* in assets under management, 27 offices worldwide and more than 2,500 employees, State Street Global Advisors is one of the largest investment management companies in the world and operates in more than 100 global markets. *As of June 30, 2016 4
State Street Global Advisors: asset allocation specialists SSGA and its Investment Solutions Group are asset allocation experts. They calculate portfolio mixes that offer the highest return for each level of risk. The key inputs into this process are their long-term asset class forecasts for risk, return and correlation. Their risk and correlation estimates rely heavily on analyzing historical data spanning numerous market environments. Historical findings and relationships are further adjusted for any sustainable changes observed within current market environments in order to establish a forward-looking assessment. SSGA s total return estimates are generated through a combined assessment of current valuation measures, corporate earnings, economic growth, inflation forecasts, and historical risk premiums for the various asset classes. CI Multi-Asset Management uses this research and these recommendations as the basis for designing, developing and constructing the Evolution portfolios. Efficient Portfolios High Risk/High Return RETURN Low Risk/Low Return Portfolios below the curve are not efficient because for the same risk one could achieve a greater expected return. VOLATILITY Under our approach, active management decisions keep all portfolios on the ever-shifting efficient frontier. The objective is to outperform the reference benchmark for any given level of risk. 5
CI Multi-Asset Management builds the portfolios CI Multi-Asset Management is an in-house group of professionals who believe effective portfolio construction is driven by asset allocations that are strategic and forward looking. This provides opportunities to capture maximum return for a given level of risk, and recognizes that investment opportunities and risks change over time. Also, each asset class should be diversified by style so that returns are not dependent on one investment approach. Finally, portfolio managers should be selected because they are the best for that asset class or style. The CI Multi-Asset Management team is responsible for choosing the portfolio managers, ongoing due diligence and overall program management. The team s proprietary program for the monitoring of managers, as well as its portfolio-building techniques, incorporate a best practices approach to ensure the managers adhere to their investment mandates over time. The team oversees $35 billion of assets (as of June 30, 2016) in various managed solution programs for clients of CI Investments. High-quality securities Monitoring & risk control Manager selection Efficient asset allocation Diversification Client portfolios 6
A disciplined investment process designed to achieve results 1. Review State Street Global Advisors recommendations to see if any adjustments to the asset allocations are required so there are no unintended duplications between managers, or inappropriate sector, country or currency exposures. We favour managers who excel at security selection and are not afraid to differentiate their portfolios from the benchmark index. Also, managers of each mandate are given discretion to create their own portfolio that may be concentrated and benchmark agnostic, attributes that we believe add value. 2. Select each manager using our proprietary program, based on: Proven philosophy and process Resources that include team dynamics and experience Historical track record How they complement each other and add value to the overall program. Capital Markets Research Asset Allocation Portfolio Strategy Manager Selection Implementation/ Trading Review and Control 7
Portfolio solutions for any investor Strategic asset allocation is used to create optimized portfolios that are actively managed. Evolution is a comprehensive platform, incorporating portfolios that: Accommodate any level of risk tolerance Are located on an efficient frontier Apply investment strategies that satisfy clients unique needs. RETURN Income focus VOLATILITY Equity focus 8
Diversification: maximum potential in all market cycles Every asset class has distinct characteristics and will perform differently in response to market changes but it s difficult to predict which will outperform. To reduce risk, careful consideration must be given to the asset mix of a portfolio to avoid putting too much reliance on any one asset type. This chart shows calendar year returns for seven broad-based asset classes (in Canadian dollars) and how their relative performance has varied over time. 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Best 38.37% 56.56% 10.23% 8.83% 8.72% 42.71% 16.70% 30.16% 32.98% 19.13% 6.40% 75.10% 38.53% 9.66% 15.60% 48.54% 24.34% 21.0% 29.48% 31.69% 7.41% 8.09% -0.91% 28.89% 14.47% 24.11% 27.24% 9.82% -18.93% 54.65% 20.34% 4.30% 14.89% 41.66% 14.72% 18.8% Asset Class Performance 9.20% 20.28% 7.32% 3.67% -7.16% 26.74% 14.13% 19.69% 18.68% 3.67% -22.86% 35.05% 17.61% -2.12% 13.38% 31.93% 10.55% 14.0% 4.84% 19.76% 0.47% 3.45% -12.45% 21.46% 11.84% 10.30% 17.25% 2.01% -30.28% 14.44% 13.08% -8.71% 13.04% 12.99% 8.79% 3.5% -1.59% 14.07% -5.81% -6.40% -16.69% 14.78% 9.64% 6.47% 16.63% -4.87% -33.00% 9.88% 9.16% -9.84% 7.19% 7.76% 7.38% 1.9% -17.90% 13.87% -10.85% -12.57% -21.47% 6.70% 7.13% 1.48% 16.13% -10.09% -42.66% 9.24% 6.74% -14.17% 3.60% 4.58% 4.46% - 8.3% Worst -19.66% -1.14% -28.10% -16.33% -23.06% 6.14% 2.74% 1.16% 4.04% -16.09% -46.61% 5.42% 2.65% -16.42% 2.46% -1.19% -0.09% -17.5% Source: Bloomberg International Equities MSCI EAFE Index U.S. Equities S&P 500 Composite Total Return Index Emerging Market Equities MSCI Emerging Markets Free Index Canadian Bonds FTSE TMX Universe Bond Total Return Index U.S. Small Cap Russell 2000 Index Canadian Equities S&P/TSX Composite Index Canadian Small Cap. BMO Nesbitt Burns Cdn Small-Cap Index 9
Maintaining diversification while minimizing risk Portfolio rebalancing Over time, as different asset classes perform at different rates, portfolios deviate from the original asset allocation. Portfolios will be rebalanced to keep within the guidelines set out in the customized Investment Policy Statement for each investor. Ongoing decision-making by the investment managers Constant review and management of the investment securities within each portfolio. Anticipate and quickly respond to changing market conditions with their day-to-day tactical actions to capture opportunities and minimize risk. Target Mix 40i60e 40% 22% 20% 18% Income and Real Estate Canadian Equity U.S. Equity International Equity Scenario: Market Fluctuations This results in the portfolio being rebalanced back to Target 28% 22% Income and Real Estate Canadian Equity 40% 22% Income and Real Estate Canadian Equity 20% U.S. Equity 20% U.S. Equity 30% International Equity 18% International Equity 10
Annual portfolio review: actively managed strategic asset allocation We regularly review the portfolios and the overall asset mixes and make use of ongoing support from SSGA as we implement our active management strategy. If required, portfolios are adjusted as market conditions change to ensure they remain efficient because as markets change, so should your clients portfolios. This ensures that your clients continue to fully participate in the upside of the market while remaining within their risk comfort zone. Changes as a result of the active management* through our annual portfolio review are applied automatically, which means your clients never have to worry about portfolios straying off course or having to decide which individual investments to buy or sell as markets change. Ensuring portfolios stay on the efficient frontier Revised Frontier Efficient Frontier Revised Portfolio Original Frontier Portfolio Original Portfolio RETURN RETURN VOLATILITY VOLATILITY The charts show a change to the efficient frontier where returns are revised for the same level of risk. Certain asset classes with the potential for higher returns have become less volatile, allowing more exposure to these asset classes, without altering the level of risk. As such, actively modifying the portfolio keeps it in tune with the current investment environment. * Active management is subject to certain restrictions. 11
Multiple investment strategies: apply five levels of personalization Once the base portfolio is created, Evolution allows you to incorporate personal investment strategies, all with the confidence of knowing that we will still actively manage the portfolio, keeping your client s individual investment strategy on track. After assessing your client s particular objectives, you can apply any of the following five strategies: Every client has needs or preferences that differ from one another; that s why Evolution is built with the flexibility to apply five investment strategies that allow infinite combinations of custom portfolios to meet any objective. 1 2 3 4 5 Geographic Style Alpha Currency Portfolio Manager 12
Geographic allocation Diversifies equities across geographic regions by applying a standard, Canadian or global focus. Standard allocation provides balanced exposure to the markets Global focus offers greater exposure to consumer discretionary and consumer staples, information technology and telecommunication sectors. Canadian focus increases exposure to the energy and material sectors 1 Geographic Style Alpha Currency Portfolio Manager Investment management style Different styles tend to shine in different economic environments. The broad range of available mandates through Evolution can accommodate any investor. Blend of 60% Value, 40% Growth is the default allocation 100% Value style is also available, or Customize any balance between value and growth styles. 2 Geographic Style Alpha Currency Portfolio Manager 13
Multiple investment strategies: (continued) Alpha investing Evolution offers concentrated equity portfolios that invest in select portfolio managers best ideas, with a focus on absolute returns and reducing risk. Incorporate alpha mandates to access portfolios not directly correlated to any benchmark. Managers have been selected based on their proven track record to outperform the benchmark. Mandates available in Canadian, U.S. and international equities. 3 Geographic Style Alpha Currency Portfolio Manager Currency hedging Achieve global equity diversification and minimize portfolio risk with reduced exposure to currency fluctuations. In addition to the standard dynamic currency hedging program employed for the United U.S. equity mandates and the U.S. exposure of the United real estate investment mandates, 100% currency hedging strategies are available for United s U.S. equity value and international equity value mandates. Geographic Style Alpha Currency Portfolio Manager 4 14
Portfolio management preferences Evolution offers a broad selection of award-winning portfolio managers, allowing for the utmost flexibility in meeting your clients objectives with over 50 mandates. The portfolios are built with recommended funds based on the previous four strategies, but a portion or all of a fund can be replaced with any other fund within the same asset class, allowing you to create a more tailored style mix for your client. Alternatively, you can use a fund that falls outside of the asset class, with certain restrictions, if you would like to customize the overall asset mix of the portfolio*. Geographic Style Alpha Currency Portfolio Manager 5 * While all asset mixes are rebalanced on an ongoing basis, selecting a fund that is outside of the asset class may limit our ability to actively manage the asset mix. 15
Separately Managed Accounts Add stability to your portfolio using separately managed strategies Evolution provides for additional flexibility in meeting your financial goals through the use of separately managed accounts. The account is held outside of your long-term portfolio and is focused on cash and income investments. This structure allows you to: Add stability to your retirement strategy by using the cash account for withdrawals during market declines, which maintains the growth potential of the long-term portfolio. Withdrawals during a down market can have an outsized impact on the value of a portfolio and reduce its expected lifespan. This is because the portfolio has less time to recover during retirement, while more units have to be sold to generate the same cash withdrawal. Use a dollar cost averaging strategy, in which regular investments are made into the long-term portfolio over time rather than investing in one lump sum. During periods of volatility, this strategy may result in purchases being made at lower average prices. Have access to CI U.S. Income US$ Pool a true U.S. dollar mandate. This options gives you direct exposure to U.S. dollar-denominated securities by investing primarily in a diversified portfolio of income-generating assets domiciled in the U.S. Incorporate both short-term savings goals and long-term objectives into one investment program. 16
G5 20 in Evolution G5 20 Series uses an innovative approach in which advanced risk management and investment strategies are focused on the goal of generating a stable retirement cash flow and maximizing the value of the investment. A guaranteed cash flow solution offering: Clients can refine their investment strategy by allocating a portion of the managed portfolio to G5 20 in the separately managed account which allows for an additional constant stream of income. Regardless of how market volatility affects the managed account portion of the overall portfolio, a guaranteed stream of income will still be available. 5% guaranteed cash flows for 20 years, backed by Bank of Montreal and the guaranteed asset value is reviewed periodically to lock in a portion of market gains to increase the guaranteed cash flow Flexible investment mandate provides downside protection in bear markets and takes advantage of opportunities in bull markets Tax-efficient cash flow for non-registered accounts (payments are substantially characterized as return of capital) The choice to select between taking income immediately by selecting G5 20i or to start taking income five years after their initial investment in G5 20 By investing in G5 20 series you can refine your investment strategy with a guaranteed income stream solution in addition to your managed portfolio. 17
Access to unparalleled portfolio management We use in-house and external managers based on their proven track record in their areas of expertise. 18
We use in-house and external managers based on their proven track record in their areas of expertise. The performance of Evolution s portfolio management teams has been recognized through 31 Morningstar Awards over the past 10 years and 56 Lipper Fund Awards since 2007. Signature Global Asset Management s Morningstar Awards include the prestigious Morningstar Fund Manager of the Decade in 2010, and Morningstar Equity Fund Manager of the Year in 2009, won by Eric Bushell, Chief Investment Officer. CI Multi-Asset Management won Morningstar s award for Best Fund of Funds program in 2011, 2012 and 2013. The following portfolio management teams have won fund-specific categories from Morningstar and Lipper: Signature Global Asset Management CI Multi-Asset Management Cambridge Global Asset Management Harbour Advisors Black Creek Investment Management Altrinsic Global Advisors Epoch Investment Partners Picton Mahoney Asset Management QV Investors 19
Tax-effective investing To minimize taxes, we manage assets differently than other firms. 1. Mandates are managed across family accounts All registered and non-registered accounts are viewed as a single portfolio, allowing us to strategically allocate investments for the greatest tax efficiency. Investments are allocated across family accounts to take advantage of tax-sheltered registered plans and members with lower tax rates. 2. Corporate Class: tax efficiency for non-registered assets Corporate Class mutual funds are structured as shares of a corporation rather than the traditional mutual fund trust. The Corporate Class structure distributes only the most tex-efficient forms of income and is designed to minimize annual distributions. 20
T-Class: flexible tax-efficient cash flow Evolution offers a flexible T-Class option, providing a solution for investors seeking sustainable and tax-efficient cash flow without sacrificing the potential for growth. T-Class provides regular monthly payments while minimizing the pain of taxation since distributions are classified as return of capital (ROC). The annual payout can be customized to a specific dollar amount or a specific percentage between 0.25% and 8%*. This chart compares the net amount a client can expect to receive of $10,000 worth of cash flow, depending on how it s generated. ROC distributions reduce the adjusted cost base (ACB). Over time, the ACB may fall to zero, in which case the T-Class payments will be treated as capital gains which are still taxed at favourable rates. Please note that T-Class may pay taxable annual dividends. The difference in the after-tax value of $10,000 in income from interest, dividends, capital gains and return of capital* $7,300 $7,800 $10,000 After-tax amount Taxes paid $5,500 $4,500 $2,700 $2,200 Interest Income Dividend Income Capital Gains Return of Capital *Assumes a tax rate of 45% on interest income, 27% on dividend income and 22% on capital gains. Tax rates based on an average of the highest combined federal and provincial personal income tax rates. * The actual payout (which cannot exceed 8%) may vary from year to year since it is based on the fund s net asset value per unit at the beginning of the year. 21
Competitive fee structures Investors can t control the markets or performance of portfolios, but they can control what they pay to invest. Evolution offers a fee schedule that gives individual investors a competitive pricing process. Two pricing options are available: Tiered pricing (Class I) - Ideal for larger accounts given the progressive pricing - Ideal for non-registered assets given the potential for tax-deductibility of the fees Embedded fee option (Classes E and A) - Ideal for registered accounts in IPs between $250,000* and $500,000, given the pricing is equivalent to the second Class I tier Combine both options if your client has both non-registered and registered accounts. * Assets that do not meet the $250,000 minimum, but are over $100,000 may be charged an additional fee to access the Evolution services. 22
Class I (Includes management and administration fees) The Class I option ensures that pricing is applied progressively to larger asset bases. Assets (Determined by the Class I assets in the Investment Policy Group) Money Market Domestic/U.S. Income Fee Classification Global Income Canadian Equity Foreign Equity REIT / Gold / Emerging Markets Tier 1 ($250,000 $500,000) 0.70% 0.85% 1.25% 1.25% 1.25% 1.35% Tier 2 ($500,001 $1,000,000) 0.65% 0.80% 1.10% 1.10% 1.10% 1.20% Tier 3 ($1,000,001 $3,000,000) 0.60% 0.75% 1.05% 1.00% 1.05% 1.15% Tier 4 ($3,000,001 $5,000,000) 0.55% 0.65% 0.85% 0.80% 0.85% 0.95% Tier 5 ($5,000,001 $10,000,000) 0.50% 0.60% 0.75% 0.70% 0.75% 0.85% Tier 6 (Over $10,000,000) -------------------------------------------------- Negotiable -------------------------------------------------- Class I Account Agreement Fees are billed and redeemed quarterly based on daily net asset value of the account(s). The Investment Advisory Fee range is 0% to 1.25%. The fees indicated above are before the Investment Advisory Fee and applicable taxes. Class E (Embedded Series) The Class E option is set up so that all regular fees are included in the daily net asset valuation. Fee Ranges Fee Classification Management Fee Administration Fee Money Market 1.00% Domestic/U.S. Income 1.25% 1.75% 0.17% 0.20% Global Income 1.75% 0.18% Canadian Equity 1.90% 2.00% 0.20% Foreign Equity 1.90% 2.25% 0.21% 0.22% REIT / Gold / Emerging Markets 1.90% 2.25% 0.22% 0.28% To calculate total fees of a portfolio, management fees, administration fees and any applicable taxes must be applied to each mandate. The embedded management fee includes a 1.00% trailing commission for ISC, 0.5% for DSC, 0.65% for IDSC and 0.50% for LL units. * Assets that do not meet the minimum but are over $100,000 may be charged an additional fee of 0.15% for Class I and 0.35% for Class E to access the Evolution services. 23
Evolution simplifies risk management, reporting and tax preparation Evolution Private Managed Accounts includes an Investment Policy Statement, portfolio analytics, quarterly statements and an annual tax package. Investment Policy Statement (IPS) The Evolution IPS offers your clients a comprehensive overview of their Evolution portfolio and investment plan, displaying the following: Their responses to their Investment Profile Questionnaire Customized portfolio, including specific fund targets Portfolio analytics Our portfolio analytics provides you with historical and positioning information for any Evolution portfolio, as follows: Country weighting Historical portfolio returns including requested cash flow per year Periodic rolling returns, and Fund correlation matrix. Evolution s tax optimization process, including the benefits of Corporate Class, and Return expectations. 24
Quarterly statements We produce a consolidated statement at the end of each quarter that consolidates all accounts within an Investment Policy Group. This displays the market values of each account, transactions and the overall asset mix. Annual tax package Our annual tax package offers simplicity and comprehensive reporting for your clients non-registered accounts, by providing information on: Capital gains and losses T5 showing dividend income or capital gains, if there have been any Corporate Class dividends Fees charged to the account, if the client holds Class I shares (and may therefore benefit from tax deductibility). 25
Evolution offers you powerful wealth planning support In order to provide you with flexibility and efficiency to both meet your clients needs and provide easy integration into your practice, Evolution offers you access to wealth planning, depending on the asset level: At $250,000 the Financial Plan and the Estate Plan These two plans are questionnaire-driven and can be completed separately or together by you and your client. Once the questionnaire is submitted, our team of financial planning professionals, and lawyers work on a customized plan based on your client s circumstances. Financial Plan The Financial Plan focuses on providing answers to clients questions about their financial goals and objectives: What do they have today? Will it be enough to meet their needs? What happens if things change, how much more or less can they spend? What is the likelihood of the outcome? (probability analysis, included at your request) The Financial Plan is also designed to offer the option of including a section that will help you to identify insurance needs and opportunities, addressing questions regarding death, disability or critical illness. 26
Estate Plan The Estate Plan addresses the following client concerns: Outlines current circumstances regarding your client s intentions for distribution of assets, and calculate projected tax liability on death Consideration of tax-efficient plans for distribution of assets Recommendations for the will to ensure it reflects the client s wishes and is structured in a tax-efficient manner Recommendations for beneficiary designations for retirement plans, insurance policies and tax-free savings accounts Recommendations for powers of attorney for property, financial and health care decisions. At $1,000,000 our Regional Wealth Planners can help you gather and present the Financial Plan and Estate Plan 27
Evolution Private Managed Accounts: Quick facts Minimum $250,000* initial investment (across family accounts) with preferred pricing State Street Global Advisors research from markets across the globe forms the basis for our strategically allocated portfolios Portfolios are actively managed by CI Multi-Asset Management Award-winning portfolio managers Wide choice of investment mandates, including alpha mandates Dynamic currency management of the U.S. equity mandates Truly tax efficient on multiple levels allocation of investments and corporate class Easy-to-use advisor interface provides portfolio analytics and customized Investment Policy Statement Detailed reporting quarterly consolidated client reporting, annual tax packages Financial Plan and Estate Plan to assess overall financial situation and provide information on tax, financial and estate planning strategies Separately Managed Accounts and G5 20 in Evolution are also available as well Flexible fee options available in Class I and Embedded Series * Clients with investable assets above $100,000 may access the Evolution services for an additional fee. 28
The Evolution six-step process Define investment goals and risk tolerance Determine portfolio Apply investment strategies Implement IPS and account administration Ongoing portfolio support Wealth planning expertise Consider client s investment objectives, tolerance for risk and investment time horizon. Determine which of the nine model portfolios is appropriate for the client. Apply management or style preferences to ensure that the portfolio best suits client s needs. Portfolio analytics are available to support the investment decision. Apply the following investment strategies where applicable: Generate a customized Investment Policy Statement to reflect the client s profile and choices. Submit the order to Evolution Administration via an easy-to-use interface. We will continuously support Evolution portfolios through: periodic rebalancing, quarterly client statements and regular portfolio reviews conducted by CI Multi-Asset Management At $250,000 the Financial Plan and Estate Plan are available. At $1 million, our Regional Wealth Planners can help you gather data and present the Financial Plan and Estate Plan. 1. T-Class 2. Separately Managed 3. G5 20 in Evolution 29
Evolution Private Managed Accounts services are managed by CI Investments Inc. ( CII ), under the United Financial brand. CII provides portfolio management and investment advisory services as a registered advisor under applicable securities legislation. This document has been prepared for use by United Financial and is intended solely for information purposes. It is not a sales prospectus, nor should it be construed as an offer or an invitation to take part in an offer. Evolution Private Managed Accounts are available exclusively through the advisors of Assante Capital Management Ltd. (member CIPF), Assante Financial Management Ltd. Commissions, trailing commissions, management fees and expenses may all be associated with investments in Evolution Private managed Accounts and the use of the Asset Management Service. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Please read the United Funds prospectus and consult your advisor before investing. United Financial and the United Financial design and Signature Global Asset Management are trademarks of CI Investments Inc. CI Investments, the CI Investments design, Evolution, Cambridge, Harbour Advisors, Harbour Funds, Assante Wealth Management and design and Stonegate Private Counsel are registered trademarks of CI Investments Inc. CI INVESTMENTS 15 York Street, Second Floor Toronto, Ontario M5J 0A3 Telephone: 1-888-664-4784 Fax: 1-888-664-4785 E-mail: access@unitedfinancial.ca www.assante.com/unitedfinancial 1612-2183 (02/17)