The Future of Asset Management

Jenny Johnson, CEO of Franklin Templeton, tells us of the coming innovations

Ric Edelman: It's Friday, June 14th. On today's show, a new Alzheimer's study that confirms something we've been suspecting for years. And it's great news if you or someone you love has this terrible disease. Plus, we're going to have a conversation with Jenny Johnson, CEO of the $1.3 trillion asset manager, Franklin Templeton.

First up, it was the first clinical trial to see if intensive lifestyle changes can slow or even reverse the progression of MCI, mild cognitive impairment. 51 people were involved in this trial. All of them have Alzheimer's disease and all of them are in their 70s. Intensive lifestyle changes? What am I talking about? Diet, exercise, stress management, group therapy, and supplements. You know, it's really interesting. I mean, I don't think at the, you know, off the top of your head that you would consider diet and exercise and stress and therapy and supplements to be something involved in intensive lifestyle changes, but let's face it. I think we can all agree that the overwhelming majority of Americans are scoring pretty poor on all five of those things. And it's our sedentary lifestyles. It is our lack of engagement in healthy lifestyles that is contributing to our poor health. I mean, we certainly know this about heart disease and respiratory illness. 

What this study has now demonstrated is that those very same issues affect our brain as well. So what are we talking about here specifically? Well for diet, we're talking about a plant-based diet. Whole foods that are low in harmful fats and refined carbohydrates and sweeteners. For exercise, we're talking about walking 30 minutes a day, mild strength training exercises just three times a week. 

Stress? We're talking about meditation, gentle yoga poses, stretching, progressive relaxation, breathing exercises, and doing all of this for just an hour a day. Group therapy? One hour session, three days a week. And supplements. Omega 3 fatty acids with curcumin. Multivitamin and minerals. Coenzyme, vitamin C, vitamin B12, magnesium, and super bifido plus probiotics. Is any of this sound massively extreme? I don't think so.  

So in this study of 51 people in their 70s with Alzheimer's, their diet was modified. They began exercising. They engaged in stress management reduction. They met as a group to talk about life, and they took supplements. And after 20 weeks, all of the people in this study showed improvement in cognition and function, and had significantly less progression of the disease than a control group did. In fact, all of the people in the control group, another group of several dozen folks in their 70s with Alzheimer's, everybody in the control group had over their 20 weeks, those folks had their symptoms get worse. 

So maybe, maybe, just maybe, a big way that you can delay the onset of symptoms for Alzheimer's, that you can reduce the impact of your symptoms and even reverse the symptoms of Alzheimer's... just simply get your act together. We don't need drugs that cost tens of thousands of dollars a year. We don't need surgeries. We don't need implants. Simply diet, exercise, stress management, group therapy, some supplements, and maybe this can help us reduce the scourge of this disease. Be sure to talk with your doctor. 

Coming up next, a fireside chat with Jenny Johnson, President and CEO of Franklin Templeton. I interviewed Jenny in a fireside chat at my Wealth Management Convergence conference back in March. This was a fascinating conversation I really want you to hear where Jenny talks about what she has learned, where the financial services industry is headed, and what it all means for financial advisors and investors. Stay with us for more here on The Truth About Your Future. 

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Ric Edelman: Thanks for staying with us here on The Truth About Your Future. The following interview is with Jenny Johnson, President and CEO of Franklin Templeton from my Wealth Management Convergence back in March.   

Ric Edelman: The first session we have is a keynote, fireside chat with one of the most important people in the asset management field Jenny Johnson, the Chief Executive Officer of Franklin Templeton. Please welcome her to the stage. You run Jenny, an asset management firm. That's one of the oldest 75 years. You're celebrating your anniversary. One of the largest $1.6 trillion in assets now. Start off, just give us the broad trend. What got you here is not going to get you there, right? This industry is radically rapidly and radically changing. Investment management is being reshaped. Project out over the next 10 years... what's the asset management field going to look like?  

Jenny Johnson: So let answer that in two ways. One is kind of immediate industry trends that I think are happening and two is investment trends that I, obviously in this business, if it's related to investments, it's going to impact the industry. So on the industry side, I think that it is this move to private assets is real and permanent. Banks in the United States will never be big lenders again. Because of the capital requirements on them, and so this creation of private credit isn't going away. If you're a public company CEO, as I am. 

Ric Edelman: As I was. 

Jenny Johnson: As you were. You know, it's a challenge in that you are so held to quarterly earnings. In times of great technological innovation, I think there's a hesitation of some CEOs in public companies to spend the money. Because, honestly the work we're doing in blockchain is probably not gonna pay off for 7 to 10 years. And so there's a short-termism in that, and you see it in the numbers. You have half the number of public companies from the last decade, five times the number of private equity backed companies and, companies in 2000 were going public after three years. 2019, it was 9 to 10 years, 2023, 14 to 15 years. That is here to stay, and so figuring out how that works as you're thinking about client portfolios is important. And then I'm going to say that in the investment side, look, I think that the last decade it has been dominated by passive because you had zero interest rates, so money was free. Where were you going to put it to get recharged? You couldn't put it in fixed income. You went into equity markets. Equity markets kept going up. And you basically, as long as you stayed beta, you were going to be fine. Nobody talked about how beta changed from a risk standpoint. But now I call them the five D's of these broad trends that are going to require, from an investment standpoint to consider as you're thinking about investments. One is demographics. Aging populations, you're talking about longevity is going to be really important from investment opportunity, but it's also going to be a drain on economies. Younger economies have to make sure they can educate their force, otherwise they're a drain. In India, they got some of the top schools in the world, but they drop off after the tier two schools. They got a massive population age, 56% of the population is under the age of 25. They've got to educate them to make them productive, right? So demographics, de globalization, we'll call it the China plus one story. Figuring out which economies are going to benefit from it. I just met with somebody in Hong Kong who basically said, this guy's a supply chain logistics guy. And you basically say what's happening in China is you have all these mid-sized companies and she is very supportive of smaller mid-sized companies. He just doesn't like the big companies and what they're doing to get around the tariffs in the US is they are setting up businesses in Vietnam, Indonesia, Mexico, India. They're constructing whatever it is that they make enough to meet the WTO requirements, and then they can stamp made in Mexico, made in Vietnam. And so they're just bypassing that. But that's going to mean there's real beneficiaries of these other economies. I would say disinflation, just being able to navigate a changing interest rate environment. And I'm going to put out this whole US debt in that, which is, I think that there's, it's going to be tough to completely get rates down to the level that they need to be with the overhang of debt. And then the third is, digitization, right? So that's AI and blockchain, those types of things are going to dramatically, impact. And then. Finally, decarbonization. And while that concept of sustainable finance around renewable energy and others is so political in the US, outside the US, it is a massive, it is a continued focus of investment. Now, governments who control 90% of the world's GDP have said they want to get to net zero by either 2050, 2060, or 2070. Doesn't matter whether they get there or not, there will be a lot of money put towards those kinds of investment opportunities.  

Ric Edelman: Let me drill down into some of the things that you just mentioned. First, go back to the private credit conversation. The banks are not going to be the major lenders going forward. The extension of that is private equity as well that the stock market right now has what half the number of publicly traded stocks that we had 15 years ago. Companies used to go public to raise capital. Now they go public to cash out. And so the investment opportunities aren't really there for the average investor. And they're turning to private equity, the VCPE, world. And now you're saying it's going to extend to the private credit side. So explain the logistics of how that's going to really work and the translation of investment opportunities for these folks, where clearly half or more than half of a given portfolio is in fixed income.  

Jenny Johnson: Yeah. So, I honestly think that you're going to have this convergence ultimately. Today, private credit is put in this alternatives bucket because it's got the illiquidity issues around it. I think over time, there just becomes a convergence between traditional fixed income and private credit. And you're going to have to deal with this illiquidity as one of the risk factors in that pool. But you take like leverage buyouts. There's been one that's been done the traditional securitization way and all the rest in I think 2023 and even 2024 are now being done by private markets. And from a return standpoint, that illiquidity premium is significant right now. So today you can get 5% in your money market fund. You can get 7.5%, if spreads widen, you can get 9% in high yield, but right now it's like 7.5% spreads are pretty narrow. You can get 12.5% to 13% to 13.5% in private credit. It's better credit on average than your high yield portfolio. So just think about that risk return. Now, if you could withstand the illiquidity, premium, it's the illiquidity nature of it, that premium's really significant. And so I think you're gonna start to see these blended products. Today, a mutual fund can hold up to 15% in private assets. And so you're going to start to see that creep in more. I think in the 401k channel, managed accounts are going to start to have more private assets. If we don't, we as a society have a real problem, which means if only the rich people can get these excess returns... and I'll talk about private equity in a second, because I think that's a little bit of an issue right now... but if they can access the excess returns, then society feels like it's not fair and the system's rigged. So we have to make sure we can work through that. 

Ric Edelman: Well, that's what's increasingly happening is the access to these products require huge account minimums, massive lock up periods, which renders everybody other than accredited investors out which means 99% of the country doesn't have access to these products. 

Jenny Johnson: I mean, that's why I'm passionate in the 401k space because the hard part about doing these interval funds and other things, and you saw it with BREIT where, suddenly everyone's like, I didn't know I couldn't get money. I mean, it's a little hard. You're like, come on, you had to have known that that had its gates and things, but people always, end up when there's a problem saying, I didn't know. But in a 401k plan, you have flows every paycheck, and that will keep flows into the managed account so you can increase the allocation of the private markets. And there's always that mechanism to be able to borrow money. So a big believer there, but also in our talking with our, major partners, they have a real desire to figure this out. And so we're coming up with more interesting vehicles that I think will try to address some portion of the illiquidity.  

Ric Edelman: So raise your hand if you're currently doing private debt with clients. So, at least half the room is saying yes. So what kind of products is Franklin Templeton offering that is facilitating access to this? 

Jenny Johnson: So you can do BDCs, interval funds. We're working on interval funds. I think those are probably the two and then some portion of kind of a hybrid where you do traditional and, private. So we have $78 billion in private credit with a firm Benefit Street Partners in El Centro, which is European. So those guys are talking with our product development groups to work with either Western Asset or Franklin Fixed Income to come up with some of these hybrid type of products.  

Ric Edelman: One of the key 5Ds you mentioned, may I have to talk about it, digitization. Franklin Templeton is one of the originals of the new spot bitcoin ETFs. Why did you do that? Why did you have the company launch in that initial inaugural group of these ETFs? 

Jenny Johnson: So it's funny so I'm third generation.  

Ric Edelman: I have to say, this is not intuitive that you would have done this. Most fund companies didn't.  

Jenny Johnson: Right, and it's funny because... so I'm third generation, my grandfather started Franklin Templeton, but my father really built it. I often, I'm fortunate he's 91 years old, and I'll often talk to him about ideas in the business, and I didn't talk to him about the bitcoin ETF, and when he found out he was like, I don't like it. I said, dad, trust me, we need to, this is an important space. But I often, as you know, say bitcoin is one of the greatest disruptions that's happening to financial services. It's a distraction, but to me, it's very relevant. Now our job is to provide diverse product capabilities for whatever interests our clients have. I can tell you why I bought the Franklin EZBC ETF, because I believe that bitcoin, there is a market for this. Not everybody's going to love it, but there is a market for this. And it's not that it's a bunch of nefarious behavior going on. Yes, there's those who can own the key, and be able to access without anybody knowing they are. That is definitely still going on, but a lot of traditional investors are interested in it. It is to me, what is a massive trend going forward. And the reason bitcoin in particular, if you look at it, there was $8 trillion traded in bitcoin, I think in, 2023, maybe that might be a two-year number. The equivalent time period had $6.5 trillion in Visa and $2.5 trillion in MasterCard. So just think about the sheer numbers. And when I travel around, we have clients in 160 countries. I was talking to one of my distribution people in the Middle East and he said, Jenny, I always keep half of my savings in bitcoin because if I say something wrong, here I could have my savings frozen, right? I talked to clients in Israel who say my parents and grandparents had their money taken away by governments. They will always keep a piece in bitcoin. So that becomes a bit of the floor and then if you think about things like US debt and others a nervousness around how much you can control inflation. This is a currency on its own and it clearly has demonstrated that there's tremendous support for it. So we look at it as it's our desire. Our job is to provide diversity of investment opportunities, clearly communicate the risks of those opportunities and let investors make their choice. And that's why we did it.  

Ric Edelman: This wasn't your first foray into the crypto space. You launched the first on chain money market fund a couple of years ago now, Benji, and you're doing a lot on the tokenization field. So elaborate for everybody on what you're doing.  

Jenny Johnson: So I used to run our operations and technology group. So I'm very familiar with the costs of running the business. And we were first going to do a tokenized money market fund. We went to go find somebody who could handle the shareholder records on blockchain. Nobody was able to do it. There's no infrastructure there. We built our own. We are even surprised by how cost effective it is to run a financial application on this. And then we created a hot and cold storage wallet. So that was our first foray into it. And then we realized because these chains are built, you need validators. And so you have to validate your own transactions. And so we realized, wow, we need to own coins we did it on the stellar network. We need to own coins to be able to validate these transactions. So then we started to get in the validation and being able to hold some of those coins on our treasury, so that we could do the validation. And then what we realized is, wait a second, the amount of information you understand... and for those who don't understand the space, just let me take a second here. So think of Ethereum as a platform, like the iPhone. So when the iPhone first came out, you were like, this is pretty cool. I've got music, camera, email, and whatever. We got on the original... 

Ric Edelman: Oh, by the way, you can make a phone call. 

Jenny Johnson: Thank you. And you can make a phone call. What Apple was doing at the time was they were opening up this platform for creativity of the masses, right? That's what Ethereum is. So Ethereum is layer one, and then businesses are being built on that. Okay. So as these businesses are being built, they have to, when there's a transaction, a financial transaction, they pay for it in ETH, right? So it's their own little currency that allows this validation to happen. And by the way, it's like a group of programmers who get together and agree to build this thing, right? So they create this foundation, they agree to build it. As we started to buy ETH and put it on our balance sheet and be a validator, we started to realize we're seeing all this information about the transactions. We can tell you which business is growing the best. So then we realized, wow, this is important to be able to understand our research on the underlying companies. So then that moved us today. We validate on five different platforms. And if you look at the research that we do in the crypto space, it is as thorough as any research that you'd see from our equity analysts or our fixed income analysts, and then in that recognition, we started to see real innovation around companies that are to be disruptive. I always say to my equity team, you've got to pay attention to what's going on in this crypto space. By the way, I hate that term in this digital asset space because it's going to be disruptive to traditional businesses that exist today. And so for us, again, probably 7 to 10 years before it's material, but we think you have to know it because it is absolutely going to disrupt traditional type of delivery of assets. 

Ric Edelman: So given all of this, it was a pretty easy decision for you to say, we need to launch a spot bitcoin ETF. We need to be in that pack.  

Jenny Johnson: For sure.  

Ric Edelman: So tell me why they should choose yours.  

Jenny Johnson: So, ours is growing. Look at performance, fees, and the bid ask spread. And EZBC is the best performer in the narrowest bid ask spread today, so that's what I would argue as to why. Look, we looked at this as, and again, when you know the ecosystem, you can get into the plumbing in a way that others who are not playing at that ecosystem understanding, they end up buying it at a retail price where we have the wholesale pipes would be how I describe it.  

Ric Edelman: I've heard you speak, on the subject of AI, which is... 

Jenny Johnson: I like your socks. Wow. I think you've, are they two different ones too? You really, wow.  

Ric Edelman: Why should we wear this? You know, you see women have this huge advantage because you get to wear like anything. You change your hair color, your length. You can put on incredible amounts of jewelry. You can wear dresses or blouses or pants. You can have colors like just, you have such a wonderful opportunity and advantage over men... we get to wear black. Or navy blue.  

Jenny Johnson: So you're really bummed that the tie is gone because you at least could make a statement with the tie. 

Ric Edelman: Oh, I used to have great, you know, as my team knows, I had, they were all outlandish money related ties. Yeah. But so, so it came down to colorful socks and then I realized why should they be the same? The greatest thing in the world is that if I lose one, which we always do in the washing machine, it doesn't matter because I just... 

Jenny Johnson: Don't care. Just whatever.  

Ric Edelman: I've found it is a real hassle if I have hotels do laundry because they go crazy looking for the sock that’s lost. Anyway, so talk about AI you've talked about this a lot in the past. The natural innovation that is, encompassing everybody. But you have connected the conversation of AI to that of digital assets. I don't think that's intuitive to everybody.  

Jenny Johnson: Well, look, I look at both of these things as a tool to achieve an outcome, right? And so if you're building a business then AI is going to have to be a really important tool to that, right? And so, I look at it and I think AI is going to be really disruptive in the asset management business because if you can't buy the data and you don't have the creativity to think about how to use it, you are not going to compete. And, so I think AI and blockchain and I'll talk more about why I think that's so disruptive, are going to be two things that hugely disrupt this industry. And just to give you an idea, I always ask my team, come on, give me something I can say on stage that will resonate with people. And my real estate group shared this and I said, I probably couldn't ever say that on TV, but here's what's happening today to give you an idea with AI. So if you're buying a building in real estate and it's an office building, you can look at the cellular data prior to COVID. You can go down to the level where you're tracking that cellular data, right? They'll sell you just the data. But you can actually see where people are staying in the office building at night and where they go home. You could cross reference that and actually figure out who it is in that office building, right? If you wanted to. That's just the creepy part of it. But then you look at it post COVID and you could start to see, okay, let me compare that cellular data to now. Are we really seeing the comeback, right? If you're buying a building and you're not looking at this kind of information, you are going to be at such a huge disadvantage. I used to do consumer lending, and in consumer lending, we looked at basically six pieces of data, actually the investors looked at six pieces of data when we'd securitize... payment to income, down payment, debt to income, FICO score, how long you're employed, and how long you lived at your residence, right? That was hugely predictive of how that loan pool would perform. We then acquired a company called Random Force that used machine learning AI to backtest data of lenders like a Lending Tree or a Lending Club. And so when people come in, they'd open up these massive pools of data and massive pools of loans and you tag them very quickly. They found things like if you didn't capitalize the name of your employer and these three other micro signals existed, you were 25% more likely to charge off. So if you're the lender who understands micro signals, and you're the old lender who's still lending the old way, the old lender's going to have adverse selection. They're only going to get the ones that don't fit these other pools, and their numbers are going to be much worse. I think that becomes relevant with AI with every type of investment, and it's going to be those who are creative to understand one is they have the expertise internally, two is they can buy the data, and three is they're going to be creative to understand how to use it, and that's why I think it's disruptive. 

Ric Edelman: And how does that compare or integrate with digital assets?  

Jenny Johnson: Well, so digital assets, where I think it's so significant is, today, the huge cost that happens in the financial services industry, and I, again, I ran it so I know it, is you're reconciling a bunch of data between your own systems, and when you go get a source of truth, you gotta know the timing. Was it updated by the time I'm grabbing it? With blockchain, because it's one single ledger that we all share in the industry. Right? When a transaction's done on Ethereum, every business, everybody who's a party to that knows that that's the source of truth. Whereas today, what happens when you have trade breakage, we think we have the source of truth in our firm, the counterparty thinks they have the source of truth in their firm, and then we have to deal with reconciling that. That completely is eliminated. Now, if you can eliminate the question about the source of truth, and it happens immediately, think of how much more efficient you can be. So you could have ultimately atomic settlement, right? You can settle on the spot. And the smart contract embedded in the token will execute all of the agreements that were built in there... that today we require lawyers to go through and back office people. If you do a foreign exchange contract and suddenly it's out of the money and somebody's got to put up collateral, there's somebody that has to recognize that and go make sure the bank pays you the collateral. And if they disagree that they owe it to you, you have to sit there and reconcile. All these things are frictions in transactions. That's completely eliminated with tokenization. And again, tokenization, it does three things and I'll get to the AI piece in a second, but it does three things. It has this source of truth. It has the ability to execute the smart contract, it's just code, and it has an ability to pay. And to this day, my favorite example of how you can think about opening up new types of investment opportunities is when Rihanna came out with her NFT. Each one is worth .00033% royalties to one of her biggest hits. Why can she do that? Because when Spotify plays that song, one is, if Ric owns that NFT token in his wallet, Spotify, the smart contract kicks off, it says Ric has the rights to this, it goes and it pays him fractions of pennies to show that he has the right to it, and there doesn't have to be anybody who validates that. So if you think about all the ways in which you're gonna be able to get new types of investments, because the frictional cost of a transaction goes away dramatically, you're gonna open up new opportunities. And if you think about AI from an investment standpoint, it's going to find newer opportunities for you to invest in, and it's going to create efficiencies in that. 

Ric Edelman: That's two more D's to your five.  

Jenny Johnson: Well, I say digital assets. 

Ric Edelman: It’s demonetization and democratization. Now, all of a sudden, instead of Rihanna being the sole beneficiary of her music, all of her fans can, as well. So we have now democratized access to what had been previously closely held, resources. 

Jenny Johnson: And what becomes interesting from your client's portfolio standpoint is actually their investment pool, because blockchain is actually going to have a loyalty program. So not only are you going to look for the financial return, but you're going to say what else do I get for this? There's a, and this one is poorly executed, but the concept, I think, will play out going forward. I think it's Four Seasons or some, one of these maybe St. Regis.  

Ric Edelman: St. Regis... 

Jenny Johnson: Thank you, in Aspen, right? And the REIT was tokenized, which is why I don't love it, but you will see hotel chains, when you buy their stock, say, hey, so in the case of the St. Regis, when you check in, they say, oh, you're an owner. Gosh, I gave you a room upgrade. You got a room upgrade because you're an owner. So you're going to start to see these loyalty programs. Nike today, you can buy an NFT that gives you a right to get certain types of sneakers. And so you're going to start to see, and they'll be able to sell them at a premium because of those loyalty programs. 

Ric Edelman: Nike earned $100 million last year from the sale of NFTs. Pure profit. There was no cost of them to issue the NFTs and just dropped $100 million of their bottom line.  

Jenny Johnson: And it's just because you love the brand.  

Ric Edelman: What are the impacts of all of this on the mutual fund ETF world? Are these products going to survive in the future? Are they going to be replaced by the next gen? ETFs have essentially become the next gen of mutual funds. Is tokenization the next gen? 

Jenny Johnson: Yeah, so let me break both the mutual fund and an ETF. Well, I'll start with the ETF. So today, an ETF, what, prices twice a day but trades market hours. Wouldn't you want to buy an ETF that gives you exactly what the underlying NAV is at the time that you transact? Why should you accept a two-hour delay in the data on what the underlying valuation is? And so I do think that the ETFs get replaced by a tokenized blockchain kind of mechanism because it's more efficient. I've always said that ETFs and mutual funds, people will talk about ETFs being synonymous with passive. That's not correct. It's just a different vehicle to deliver a pooled investment capability. Mutual funds in the US have a disadvantage from a tax standpoint, but they have an advantage from a non-transparency standpoint. So, if you're running an active small cap portfolio, and you have to share every day what you're purchasing, if you're a really good performer, everybody's going to front run you. So an ETF isn't necessarily the best way to deliver that. You would want to be able to accumulate in a mutual fund where you have a delay in the reporting of what your transactions are. And so, I think both of those get fueled, just like our money market fund is a mutual fund, built on the stellar blockchain. I think you could buy our money market fund for $20 you can open an account with $20, right? So it's gonna give more access just because it's so cheap to run the show.  

Ric Edelman: You don't need a brokerage account. You just download the Benji app from your online store.  

Jenny Johnson: Right from the Apple store you just go into Benji and you open it right and it's $20 on that. And so that's gonna be and by the way, we're trying to work with partners to get that embedded because ultimately, I think you'll have traditional ETFs, traditional mutual funds and wallet, and it'll feel like it'll be in your investment portfolio and the end client won't really think about it as different. It'll just be embedded in there, depending on the way in which you want to deliver these assets.  

Ric Edelman: So what does that translate to for advisors in this room? What should they be thinking about in terms of the way they're building portfolios, recommending assets to clients?  

Jenny Johnson: So we have active portfolios that we, as I mentioned, have very thorough investment, be like an SMA, in that space to be able to advise on it. Ultimately, you're going to want to partner where you can advise on it. You cannot ignore this space, because of the potential disruption to traditional business models. And I can give plenty of examples of that. And so, I think that keeping your eye on how it is evolving is going to be very important. And Ric, I have to say Ric has been ahead of this. There's so few people who understand the depth of it. And Ric, it brings the combination of understanding the advisor's role and understanding this space. And there aren't a lot of people who do that. 

Ric Edelman: Just a couple of more thoughts here, Jenny, I don't think most people would have expected Franklin Templeton to be as forward thinking and innovative as you are. I mean, it's a 75 year old company. It was basically built in the bond market. And yet you have really transformed the company into focusing on this innovative technology that is incredibly transformational. Look ahead, what's the world going to look like, for the advisory field. A lot of folks are fearful that Chat GPT is going to make advisors irrelevant, that we're going to have AI running financial planning software, that we're going to be doing all kinds of stuff that is going to upend and eliminate the need for advisors. Give us your future, not of the asset management world, your side, but of their side, the wealth management world. And dealing with clients directly. What's that look like?  

Jenny Johnson: Yeah, in 1997, the cover of Businessweek had the death of the broker because the internet was gonna completely disintermediate the broker. TurboTax came out and remember, there weren't gonna be any more CPAs because you were just gonna use TurboTax. It was gonna be easy to do. What ended up happening with TurboTax is who are the top users? CPAs, who have learned to use it to make their business more efficient. Our experience and my genuine belief is that people still like the advisor. They want to have a person tell them that it's the right move. And that all these tools are going to help you grow your business. And we have high net worth business called Fiduciary Trust. It was started by five wealthy families. And I'm always intrigued by the fact that we have these really wealthy clients who are quite sophisticated. Many of them made their money in the financial services business, but they recognize they're sophisticated enough to know it's not a part time job. You have to stay on top of this and they turn over their financial decisions to Fiduciary Trust because they have enough money to go do other things. And they know that it's not a part time job. I don't see that going away. And the problem and challenge with AI is that it can only be built on historical data. So when the trend changes if you're looking at the last decade and you looked at an environment where interest rates for the Fed was cutting rates and there, or they were zero, and you think that that's going to project the next decade, and you have two wars going on, and you have US China relation tensions. There's no way the environment has changed too much. You have to have the human that actually looks at it and says, let me make sense of this data and shift. I ran a credit card business. The FICO score that you see that is often used, your credit score, has to be revalidated every two years. Why? Because the moment you create it, the data starts to, move away from it and it becomes less and less predictive to the point that two years later, and this was many years ago, so it might even change now, two years later, it was no longer predictive enough to be worth it. And so that to me is why the advisor is so critical in understanding not only the changes in the environment, but also the individual needs of the client. And let's face it, I'm sure that your clients are not totally forthright. The first few times you meet him, it takes time to get to know him to understand what really drives them and understand what they value to be able to truly customize that portfolio. And all of these are gonna be important tools for you to be able to deliver that customization. And the exciting thing is you're gonna be much better at it because you're gonna be able to customize portfolios for your individual clients in a way you haven't historically.  

Ric Edelman: Part of the problem, I think, is that most advisors have been doing this for a really long time. 20, 30, 40 years. They're very successful. They're managing a lot of money for a lot of clients. Their clients are really happy, right? Your returns have been great over the last decade. Practices are stable. You're probably playing golf once a week or more or whatever it is you feel like doing. And you're talking about the need to reinvent the practice or how they deliver investments and advice and services to the client. What a pain.  

Jenny Johnson: It is, believe me, mutual fund business, when I started, we used to make 26% return on equity. It's a great business... doesn't last. Right? I mean, I do think you have to engage and you've got to find the right partners, but the good news is it doesn't happen overnight. And the tools get better and better. We've invested in a lot of fintech tools to be able to provide them to advisors. So you get to spend more time being client service, developing your business and less time having to worry about whether you have, the perfect solution for that client. Our goals optimization engine, which is an AI based dynamic asset allocation, is designed for, the end client where the client articulates specific goals. Maybe I want to retire with enough money, I'd like to help my kids with college, and if things go really well, I'd like that second home on the beach... and this thing dynamically allocates and waterfalls down based on your own priorities. That's a much better conversation with a client than did you beat the S&P 500, or why it's better that you didn't beat the S&P 500 because you're worried about concentration risk. Like who wants to have that? By the way, the client that doesn't mean anything to the client. They care about their goals. These types of tools are going to allow that type of customization and then things like, tax optimization where you'll be able to say to your client, I know you're paying me a fee. Let me show you how much the active management that I did in your portfolio has saved you in taxes, far outperforming any kind of, or far saving you more than any kind of fee. It's all those things have to be driven by, they're being driven by AI. And then of course those new types of investments are going to be blockchain based. 

Ric Edelman: And advisors who don't make these shifts in their practice management?  

Jenny Johnson: I think you have to, I went to the Apple store the other day to look at the new Apple it, Vision Pro? I'm telling you, bought it on the spot. It's absurd. It's like buying half a car. Okay, but why did I buy it? I bought it because I looked at this. I was, and by the way, I use the Oculus. I play on the Oculus. I'm a Jedi Knight, Immortal Vader 3, I tell people. So I know what the Oculus does. I put this thing on and for me, I was so shocked by the quality of the 3D. It's like nothing I'd ever seen. You can go in and demo this in the Apple store and you sit there and you're at a table and a little girl's blowing out her birthday candles. You feel like you're part of this experience. So I bought it because I want to be able to record my parents it has 10 cameras so that next generations can feel like they spent time with my parents. But my point in this is you actually have to push yourself a little bit into the uncomfortable zone to make sure that you're staying on top of the pace of change. I think this is going to significantly impact how people work together and communicate with each other. And so I just feel like I need to stay on top of that. I don't have a better answer, but I think you have to be in this environment.  

Ric Edelman: It's like an airplane. There's no coasting. It's row or die. I encourage you to take a serious strong look at everything that Franklin Templeton is doing because it can really offer you some incredible ways you can innovate your practices. Jenny Johnson, CEO of Franklin Templeton, ladies and gentleman.  

Jenny Johnson: Thank you. 

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Ric Edelman: Hey, did you miss VISION this month in Austin? It’s my premier crypto conference for financial advisors, investment firms, and accredited investors. But hey, if you missed it, don’t worry – we're uploading to DACFP.com all 18 sessions. You can get CE credits. The sessions will be available starting Monday, June 17th, everything online. So, if you missed VISION, this is Double VISION! Exclusive online replays from industry thought leaders like Michael Saylor and former CFTC Chair Chris Giancarlo, known as CryptoDad, Congressman Wiley Nickel of the House Financial Services Committee, and so many more great speakers. Just $24.99 gets you access to every session, getting you the latest in the new spot bitcoin ETFs, the new Ethereum ETFs, tokenization, the Digital Dollar Project, how institutions are handling crypto, and so much more. These videos are only going to be online for just two weeks. Use the link in the show notes to get all the details.  

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Ric Edelman: I’m glad you’re with me here on The Truth About Your Future. Ric Edelman here. If you like what you're hearing, be sure to follow and subscribe to the show, wherever you get your podcasts, Apple, Spotify, YouTube – and remember leave a review on Apple podcasts. I read them all! Never miss an episode of The Truth About Your Future. Follow and subscribe on your favorite podcast app. 

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