The parent company of fund manager Franklin Templeton—Franklin Resources—has acquired the digital wealth platform AdvisorEngine in a recent transaction for an undisclosed amount. This acquisition follows roughly three months after the company acquired asset manager Legg Mason for $4.5 billion and comes on the heels of similar moves by its competitors.
Franklin Resources has been stymied near $700 billion in assets under management for the past year-and-a-half. That’s a decrease from a high of $921 billion in mid-2014, despite the fact that its rivals have continued to grow steadily.
Moody’s Investors Service downgraded Franklin’s credit rating in the middle of 2018, and in 2019, it “expressed concern that Franklin’s reputation for global/international strategies and solid relative investment performance has been undermined.” The threats from low-cost index products continued to frustrate Franklin’s outlook. Insiders saw this as something close to announcing a time of death for Silicon Valley-based mutual fund titan. Given this grim prognosis, Franklin made the obvious move and went on the offensive to quickly get bigger.
The deal for Legg Mason was valued at nearly $4.5 billion, or $50 per share, and was an all-cash transaction. Combined, the two asset managers were estimated to have about $1.5 trillion in assets under management.
“This is a landmark acquisition for our organization that unlocks substantial value and growth opportunities driven by greater scale, diversity and balance across investment strategies, distribution channels and geographies,” remarked Greg Johnson, executive chairman of the board of Franklin Resources, in a statement about the Legg Mason deal.
“By preserving the autonomy of each investment organization, the combination of Legg Mason and Franklin Templeton will quickly leverage our collective strengths, while minimizing the risk of disruption,” commented to Joseph A. Sullivan, chairman and CEO of Legg Mason.
Franklin was founded in 1947, and Legg Mason’s predecessor firm began in 1899. As part of the deal, Franklin agreed to take on some $2 billion of outstanding debt from Legg Mason, which had some $806 billion in assets as of the end of January 2020.
The combined entity is headquartered in San Mateo, California and operates as Franklin Templeton.
AdvisorEngine provides technology and other services to approximately 1,200 RIAs and other firms with about $600 billion in assets. Its open-architecture platform leverages smart automation technology and includes the CRM product Junxure.
WisdomTree Investments previously owned a large stake in the fintech company. However, the WisdomTree opted to sell its interest in the company, according to its latest quarterly earnings report that was released in January 2020. WisdomTree estimated it would take a non-cash impairment charge of $22 to $30 million in Q4 when it exited the investment. The firm initially took a stake in the enterprise digital advice platform provider in 2016 and added another $30 million in backing two years later.
“AdvisorEngine will enable financial advisors in the U.S. to access and implement our best thinking across portfolio construction and practice management,” said to Harshendu Bindal, head of Digital Strategy and Wealth Management at Franklin Templeton.
“This acquisition is an important part of our broader global initiative to enhance support for financial advisors via digital servicing capabilities,” Bindal said.
In the Franklin deal, AdvisorEngine said it plans to add more links with custodians, fintech firms, and asset managers. The company’s management will remain in tact to operate the business as an independent unit of Franklin Templeton, which has some $580 billion in client assets and also owns wealth manager Fiduciary Trust International.
“We’re now better positioned than ever to help advisors transform how they do business, connect more deeply with clients, grow assets and scale their operations,” said AdvisorEngine founder and CEO Rich Cancro, in a statement.