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TAKE YOUR CLIENTS’ RETIREMENT PLAN OFF PAUSE AND HIT PLAY AGENDA • Market realities, changing landscape and retirement risks • How do you take your client’s retirement plan off pause? • G5|20 Series structure and strategies • Advisor support What realities do investors face today, before and during retirement? MARKET REALITIES • Investor fear, market anxiety. MARKET REALITIES • Investors’ response, for more than a decade, has been to choose security over potentially higher returns. Fund Flow December 2000 Equity Source: Investor Economics Inc. Fixed Income June 2012 Balanced Money Market Real Estate MARKET REALITIES • Interest rates are expected to continue at extremely low levels. Source: Bloomberg THE CHANGING RETIREMENT LANDSCAPE • Decreasing financial support from company pensions and government. – Only 25% of private sector employees were members of company pension plans in 2009. – CPP/QPP and OAS combined provide a retirement income of about 40% of the average wage. – Canadians are living longer. RETIREMENT RISKS • Investors preparing for retirement face several risks: – The risk of outliving their money. – The erosion of their buying power caused by inflation. – The opportunity cost of staying out of the market. RETIREMENT RISKS – LONGEVITY & INFLATION • Your clients may need their money longer than they assume. • Your clients may need more money than they assume. RETIREMENT RISKS – OPPORTUNITY RISK • Your clients’ fears may be unfounded. • Why should your clients be invested in the market? RETIREMENT RISKS – VOLATILITY • The damage that volatility can do to assets. RETIREMENT RISKS – TIME HORIZON • Baby boomers don’t have the flexibility to wait out a 15-year cycle. RETIREMENT PLANS ARE ON PAUSE • Many investors are still on the sidelines. • Waiting for the “right time” to get back into the market. • Missing out on opportunities. • Retirement plans are effectively on pause. HOW DO YOU ADDRESS THE CURRENT REALITIES AND TAKE YOUR CLIENT’S PLAN OFF PAUSE? • Market risk – How do you protect your client’s retirement nest egg from market volatility? – How can they draw cash flow and grow their money at the same time? • Retirement risk – How can they be protected from inflation risk? – How can they maintain their standard of living? Guaranteed 20 Years 5% Cash Flow G5|20 IS DESIGNED SPECIFICALLY FOR RETIREMENT • Predictable, sustainable, 5% guaranteed cash flows. • Growth potential by participating in equity markets during the five-year Accumulation Phase and the Distribution Phase. • Preserve capital with the potential for capital appreciation. • Reduce large negative market fluctuations on the investment before and during retirement. • Optimize performance to provide residual value. WHO IS G5|20 SERIES FOR? It’s for investors looking to: • Secure retirement cash flow today. • Draw cash flow in a few years, for retirement or other needs. • Optimize long-term returns. – receive sustainable, guaranteed cash flows. • Gain more confidence and feel secure about their future. G5|20 Series Structure G5|20 STRUCTURE AND LIFESPAN • Each G5|20 Series fund has a lifespan of 25 years with three distinct phases. Issue Period 3 month s Accumulation Phase 5 years Distribution Phase 20 years THE ISSUE PERIOD • Represents the purchase period for the fund. • Targeting three months or less. • Fund assets invested in CI Money Market Fund. • Daily interest accrual, paid out as a distribution at end of the period. • Fixed NAV at $10.00. • Fund closed to new purchases after this period. • New G5|20 Series to be launched each quarter. THE ACCUMULATION PHASE • Represents the growth period of the fund. • Five years. • CI Investment Consulting and Nexus Risk Management manage the fund to take full advantage of all market opportunities: – CIIC: daily tactical positioning. – Nexus: Risk Management Overlay Strategy reduces volatility on equity positions. • Allocation initially 70% equity/30% income: flexible mandate. – Allows CIIC to increase/decrease equity allocation as required. THE DISTRIBUTION PHASE • Investor guaranteed to receive monthly cash flow for 20 years. • Guarantee Distributions paid out substantially as return of capital (classified as income if coming from registered accounts). • Paid out on fourth business day of the month. • Payments may be customized by reinvesting excess into another CI Class A fund. • Guarantee is unitized so redemptions will not affect Guaranteed Distribution paid based on each unit. • Fund is still actively managed by CIIC and Nexus. G5|20 – GUARANTEED CASH FLOW 1. CI 2. Bank of MTL 3. Nexus $12.50 NAV *5% = .625/unit 125k = $6250/yr (20 yrs) 100k = $5000/yr (20 yrs) $MV @ $10.00 NAV =10,000 units 100k Selling Period 2*$6250 $MV 18 5 yr 75k Accumulation (July 2-Sept 30) (2013-2018) 20 yr Cash Flow 30i70e www.ci.com/g520 Target End Date (2038) PRODUCT STRUCTURE G5|20'S TEAMS OF EXPERTS OFFER A ROBUST SOLUTION FOR TODAY’S KEY RETIREMENT NEEDS CI INVESTMENTS • G5|20 is structured as a mutual fund trust, actively managed by CI Investment Consulting (CIIC). • Managed like a tactical balanced fund. • Initially, the fund is approximately 70% equity and 30% income. – – – – Select Canadian Equity Managed Corporate Class Select U.S. Equity Managed Corporate Class Select International Equity Managed Corporate Class Mirrors Select Income Managed 25% 24% 21% 30% THE ACTIVE PORTFOLIO IS TACTICAL Global tactical, balanced and optimally allocated at all times, based on market opportunities, market volatility and investment time horizon G5|20 Fund Mutual Fund Trust Income - Diversified Income portfolio (mirrors SIM) Canadian Equity - Multi-manager Canadian Corporate Class U.S. Equity - Multi-manager U.S. Equity Corporate Class International Equity - Multi-manager International Equity Corporate Class A STRAIGHTFORWARD APPROACH TO MITIGATE RETIREMENT RISKS • The Active Portfolio – designed to optimize growth potential. • Four underlying multi-manager, diversified mandates. • CI Investment Consulting actively adjusts overall asset mix. • Flexible investment mandates. • Starting with a 70% equity exposure. NEXUS Risk Management Overlay – systematic yet dynamic • Reduces volatility and lowers market exposure in downward trending markets. • Incorporates equity risk, interest rates, volatility and time horizon to create a systematic yet dynamic hedging overlay to protect clients from downside. • The strategy hedges the equity exposure. • Enhances probability of client having a residual fund value after 25 years. • Increases market exposure in upward trending markets. NEXUS Risk Management Overlay – systematic yet dynamic • Nexus Risk Management uses a proprietary, systematic yet dynamic hedging strategy. • Same strategy used by pensions and insurance companies now available to retail investors. • Provides protection of the fund’s value in bear markets while taking advantage of opportunities in bull markets. • Optimizes growth potential by allowing fund to maintain significant equity exposure. • Provides a “walk away” value. BANK OF MONTREAL The Guarantee – bringing security to your client’s retirement cash flows •Provides a guarantee to protect the fund’s annual cash flows of 5% over 20 years. • Employs two fail-safes: 1. In a worst case scenario where adverse market conditions cannot be contained preemptively by asset mix changes and the Risk Management Overlay. • Assets will be moved into a Protection Portfolio designed to pay all guaranteed future cash flows from that moment forward. 2. If there is a shortfall in the Protection Portfolio, the bank will guarantee full payment of all remaining cash flows to investors. THE GUARANTEE – BRINGING SECURITY TO YOUR CLIENT’S RETIREMENT CASH FLOWS • If in the Protection Portfolio, client continues to receive cash flows and advisor compensation continues uninterrupted. • Equity markets need to suffer losses in excess of 50% for assets to be transferred to the Protection Portfolio. THE G5|20 STRATEGY: DOWNSIDE PROTECTION • Historical representation of 70% S&P 500 Index + 30% FixedIncome versus G5|20 (2008 to 2012). STRENGTH OF FUND IS ITS STRUCTURE, FLEXIBILITY AND LIQUIDITY • Cash flow guarantee is part of the fund’s investment objective, as outlined in prospectus. – No product features can be changed or removed. – Fees cannot be increased. • No capital requirements. • Growth potential – in contrast to a GIC. • Simplicity of administration and reporting. • Liquidity of a mutual fund. G5|20 Strategies STRATEGIES • Opportunity to lock in current portfolio values to create minimum guaranteed retirement cash flow. • Switch between tranches to re-establish new ACB (delays Guaranteed Distributions). – Provides a reset option without paying for the feature. • Laddering strategy. AVAILABLE FOR REGISTERED AND NON-REGISTERED ASSETS • For client-held and nominee accounts for both non-registered and registered accounts. • Ideal core holding for registered plans, including RRSPs, RRIFs and TFSAs. • Cash wedge strategies for non-registered accounts. • Tax-efficient cash flows for non-registered accounts (payments are characterized as either return of capital or capital gains). • Guaranteed distributions from a non-registered account do not contribute to clawback of Old Age Security. G5|20 CAN HELP MEET YOUR CLIENT AND PRACTICE NEEDS • Distinguish yourself as a retirement specialist. • Provide a ready-made solution that addresses the need of many investors for a predictable, stable guaranteed cash flow stream during retirement. • Offer a guaranteed cash flow without the cost or complexity. • An attractive alternative to move clients from GICs and fixedincome investments. • Retain clients or prospect for investors with a long-term approach. G5|20 CAN HELP MEET YOUR CLIENT AND PRACTICE NEEDS • Easily integrated into practice. • Simplicity of a mutual fund. • No special licensing requirements. • Distinguish practice as a retirement specialist. • Application of sustainable retirement cash flow strategies. • Enhance value proposition as part of new National Instrument 31-103. • Provide sophisticated hedging strategies. • Flexibility and liquidity. SIGNIFICANT POSITIVE IMPACT ON THE VALUE OF YOUR BOOK • Competitively priced • Only 50 basis points more than an average global tactical balanced mutual fund. Active Portfolio: • Management fee: CI 1.90%, Nexus 0.25%, BMO 0.40% (includes advisor comp.: 1% ISC, 0.50% DSC/LL) Protection Portfolio: • Management fee: CI 1.20% (maximum), Nexus 0%, BMO 0.30%(includes advisor comp.: 0.75% ISC, 0.40% DSC/LL) • OpEx: 0.22% • OpEx: 0.15% COMPETITIVE COMPENSATION • Preserves advisors’ revenue stream, regardless of composition of G5|20 portfolio or investor's investment time horizon. Active Portfolio: Commission: • ISC: 0-5% negotiable • DSC: 5%, 7 year schedule • LL: 2.5%, 3 year schedule Service fees: • ISC: 1% • DSC/LL: 0.50% Free unit switches supported (will not affect guarantee). Protection Portfolio: Service fees: • ISC: 0.75% • DSC/LL: 0.40% Competitive versus income products and target date/glide path funds. CI 1.20% (maximum),Nexus 0%, BMO 0.30% (includes advisor comp.: 0.75% ISC, 0.40% DSC/LL). Reduced fees help avoid fund assets moving to Protection Portfolio, reducing calculation of future obligations. Advisor Support ADVISOR SUPPORT Dedicated G5|20 website at www.ci.com/G520. ADVISOR SUPPORT • Dedicated G5|20 website at www.ci.com/G520. • Website includes presentations and an illustration tool for advisors, along with an Advisor Guide, an At-a-Glance, Client Guide, Product Comparison, Case Studies, FAQ, Client Flyer, Prospecting Letter, and an Admat. • Heavily integrated marketing campaign. Thank You FOR ADVISOR USE ONLY Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Except as described below, mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Bank of Montreal guarantees that, following the five-year Accumulation Phase of the fund, an amount equal to the greater of the net asset value per unit or the original amount you paid for the unit will be paid back to you over a 20-year period in equal monthly instalments. This guarantee does not apply to units redeemed before the end of that period. You will receive the net asset value per unit for any unit redeemed early. Mutual fund securities are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer. ®CI Investments and the CI Investments design are registered trademarks of CI Investments Inc. G5|20 Series, the G5|20 Series design and CI Guaranteed Retirement Cash Flow Series are trademarks of CI Investments Inc. BMO Financial Group and Bank of Montreal are marketing names (also referred to as trade names or brand names) used by Bank of Montreal. "BMO", "BMO Financial Group", "BMO (M-bar roundel symbol) Financial Group", "Bank of Montreal" and "BMO Capital Markets" are trademarks owned by Bank of Montreal.