Franklin Templeton Investments of San Mateo, Calif., appears to have found quite a sweet spot in the industry. Assets stand at $624 billion, the company says, as of June 30, 2007. And sales through financial advisors have been growing aggressively.
“In the United States via financial advisors, our gross sales are up 50 percent vs. fiscal year ’06,” says Peter Jones, president of Franklin Templeton Distributors. “And our market share has gone up, from 12 percent to 14 percent in the non-proprietary channel [which excludes fund sales made directly to investors]. And net sales have increased dramatically.”
According to the Financial Research Corporation, which tracks fund flows net of proprietary fund of funds and money-market assets, Franklin’s assets stand at $321 billion, making it the fourth-largest fund group in the United States. Net inflows in 2007 through July stand at nearly $12 billion, up from $1.5 billion in the first seven months of 2006.
Performance has been a key factor in the firm’s success, Jones says. “We have consistent, above-average performance and a conservative approach. That allows us to stack up very favorably against the competition.”
As of June 2007, the Franklin Income Fund (FXINX) is up more than 9 percent per year over a 10-year period and more than 11 percent a year on average since its inception in 1948. The fund, which Morningstar gives five stars, is about 48 percent invested in stocks, 44 percent in bonds and the rest in cash. It includes more than $60 billion in assets and 247 holdings.
“The fund has been trading for more than 50 years,” Jones adds. “It offers competitive dividends, and people sleep well with it at night.”
The income fund is one of three funds included in the popular Franklin Templeton Founding Funds Allocation Fund (FFALX), which stands at $15.8 billion in assets. Other holdings in this five-star allocation fund are the Templeton Growth Fund (FGTIX) and the Mutual Shares Fund (MUTHZ). Top individual equity holdings as of June 2007 included Pfizer, Tyco, Siemens, Microsoft, News Corp., and Royal Dutch Shell.
The allocation fund began trading in August 2003. “It’s a package that a wholesaler came up with, because it makes sense,” shares Jones, who has been with Franklin Templeton since 1989 and was the company’s first retail wholesaler.
The diversity of the fund family highlighted in this “turnkey” product is another key factor in the company’s success this year, explains Jones, who oversees U.S. retail sales and investment platform development. “We have good performance across asset classes and can build deep and strong relations with financial advisors, as well as improve their performance and productivity. With 25 four- and five-star funds … we can become the financial advisors’ primary partner.”
Other popular products are the Templeton Growth Fund, Mutual Discovery Fund (TEDIX) and the Templeton Global Bond Fund (TGBAX). The Templeton Growth Fund, says Jones, has a robust international component to it.
Franklin is also benefiting from expanded distribution in variable annuities, through Hartford, AXA, Alliance and other firms. “Again, we’ve had terrific success in insurance products with the Founding Funds,” says Jones, who (before joining Templeton) was president of IDEX Distributors from 1984 to 1988 and oversaw the formation of the IDEX Group of Funds.
To support advisors with retirement-income planning, Franklin recently staged a fixed-income campaign. This helped boost the company’s market share from 9.8 percent to 12 percent in this non-proprietary fund segment in the first half of 2007. “Outreach does have an impact,” Jones shares. “And a 1 percent shift means $1 billion in sales.”
Fixed-income will be more in focus next year for Franklin Templeton, as will retirement income, according to the executive. “We are working on solutions we can offer, such as a fixed-income package or other asset-allocation or equity-allocation funds. We have received requests from financial advisors for retirement-income solutions that will help them address the needs of many different types of clients.”
Technology is playing an important role in how the fund family works with advisors and with its internal distribution team, Jones explains. “We use digital solutions as a communication tool to make ourselves and the advisors more effective.”
The firm also compiles research to pinpoint when advisors are most likely to trade its products. This is helping it to reach out to them before purchases and redemptions happen, says Jones. “It makes us smarter.”
In early 2005, Franklin launched a training program for advisors in Asia, the Franklin Templeton Learning Academy, which it then took to Europe. Early this year, the academy grew to include some cities in the U.S. and Latin America through customized programs for broker-dealers. The emphasis is on helping advisors develop and enhance their planning and business-development skills in order to strengthen client service.
Topics include retirement planning, taxation, advisor-directed trusts, charitable donor-advised funds and other specialized themes. Gail Buckner, CFP, is Franklin Templeton’s financial-planning spokesperson and one of the academy’s key facilitators.
As the firm embraces technology and other forms of outreach to advisors, it seems intent on staying close to its roots. In early 2007, the fund family marked the 30th anniversary of its Franklin Municipal Bond Department, which it says is the nation’s largest municipal bond fund manager with over $53 billion in long-term municipal bond AUM as of December 2006, according to Strategic Insight. Franklin Templeton has some 40 national and state-specific tax-free income funds managed by more than 25 investment professionals.
Janet Levaux is the managing editor of Research; reach her at [email protected]