Franklin Templeton, the $1.4 trillion global asset manager, has teamed up with Finnomena, a Thai digital-wealth platform.
The deal will allow Finnomena to leverage Franklin Templeton’ technology to power its own business.
It follows a memorandum of understanding that Franklin Templeton signed in September 2020 in Singapore with Razer Fintech, to innovate together in digital wealth for younger investors. The deal was signed before Razer lost a bid to win a digital-banking license from the Monetary Authority of Singapore.
The benefits of the new relationship seem obvious for Finnomena: access to world-class, huge resources that a Southeast Asian fintech could not hope to marshal by itself, and a means of extending its business to new markets.
What’s in it for Franklin Templeton?
Dora Seow, the firm’s Singapore country head, who is responsible for business in Southeast Asia ex-Malaysia, told DigFin it’s, first, to penetrate new customer segments and, second, to allow Franklin Templeton to introduce new ways to distribute – in particular by supporting segregated managed accounts or other strategy-based tactics.
“The business strategy of digital is about partnerships,” she said, noting the banks that distribute mutual funds are already advanced in their own collaborations with fintechs.
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Seow says the opportunity with Finnomena could be to go after customer segments that Franklin Templeton doesn’t access via banks. She says Franklin Templeton chose to work with the company because it is established in Thailand and has a good reputation.
“They have amazing educational content,” she said. “They’re an up-and-coming player in Thailand who want access to the global investment arena. Franklin Templeton is also a pioneer in investing and investor education. The two companies complement each other and there’s a huge need in Southeast Asia for financial literacy.”
The products and services for customers will remain Finnomena’s. “It’s their business, their products, their service, even their education,” Seow said. “These are powered by our insights and solutions.”
Finnomena will incorporate content from Franklin Templeton Academy for a curriculum on investing.
The fintech then plans to launch new customized portfolio services partly based on Franklin Templeton’s investment solutions.
Seow says the relationship is to grow into customer segments not served by banks serving off-the-shelf fund products.
The first Finnomena portfolio program will target the Thai private-banking segment, for investors with a minimum of Bt10 million ($333,000). This sounds like traditional customers. But Finnomena’s CEO, Jessada Sookdhis, says in a press release that previously, investors needed at least Bt50 million to access the funds of a global fund manager.
Later in 2021, Finnomena plans to launch what it calls an “innovative approach to wealth management” aimed at the mass market with client assets of at least Bt500,000.
Seow wouldn’t detail the specifics being planned, although it is likely to be something Finnomena can use to expand into other Asian markets.
Franklin Templeton will provide “digital and investment solutions” to this effort, using strategies and capabilities from across the firm, including the Legg Mason franchise that it acquired in 2020.
That $6.5 billion acquisition took Franklin Templeton’s total assets under management over the $1 trillion mark. The firm has been plagued by outflows over the past several years, however, losing nearly $42 billion from its retail business in 2020.
Seow says partnerships like the one with Finnomena and Razer Fintech are meant to help the firm find a new way to address consumer segments. However, she says it is unlikely at this point for the firm to sell directly to retail investors in Southeast Asia. “We prefer to work through intermediaries,” she said.
Rather it is using partnerships as a new form of distribution. “Our multi-asset teams have done a lot, particularly in the past five years, and now with Legg Mason we have even more building blocks. Digital platforms can put these together in new ways to create new services.”
DigFin asked if this might see Franklin Templeton moving into segregated managed accounts or other business models other than just putting funds on a distributor’s shelf. “Yes,” Seow said, “it’s all about that.”
SMAs are popular in the U.S. (where tax breaks help) but have not taken off in Asia. SMAs offer clients a customized portfolio of strategies, individual securities, and investment styles.
The Thai market for asset management is dominated by such off-the-shelf products, and the new partnership is meant to help Finnomena introduce different ways to engage with retail and high-net-worth investors.