Franklin Resources (BEN) 28 Jul 202020 Q3 Earnings call transcript

Company Profile

Participants

Jenny Johnson	President and Chief Executive Officer
Matthew Nicholls	Chief Financial Officer
Greg Johnson	Executive Chairman
Dan Fannon	Jefferies
Patrick Davitt	Autonomous Research
Mike Carrier	Bank of America
Glenn Schorr	Evercore
Ken Worthington	JPMorgan
Craig Siegenthaler	Credit Suisse
Chris Harris	Wells Fargo
Brennan Hawken	UBS
Bill Katz	Citigroup
Robert Lee	KBW
Alex Blostein	Goldman Sachs
Brian Bedell	Deutsche Bank

Call transcript

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Operator

Welcome to Franklin Resources Earnings Conference Call for Quarter Ended June 30, 2020. My name is Joanne, and I'll be your call operator today. Statements made in this conference call regarding Franklin Resources, Inc., which are not historical facts, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve a number of known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from any future results expressed or implied by such forward-looking statements. These and other risks and uncertainties and other important factors are described in more detail in Franklin's recent filings with the Securities and Exchange Commission, including in the risks and factors of the MD&A section of Franklin's most recent Form 10-K and 10-Q filings. participants a all mode. time, this are listen-only in At is reminder, [Operator a conference being Instructions] As this recorded. CEO, time, turn to and the this call Johnson. At I over Franklin would Resources' like to Jenny President Ms. Johnson, you may begin.

Jenny Johnson

landmark joining for Quarter your will as in everyone Executive geographies. on pleased growth hope one, are of near scale, strategies, Fiscal functions I'm acquisition by Chairman; margin Legg acquisition you thank since Matthew Today, and us to our Templeton's staying strategic greater quarter, Results. across widest our Johnson, safe It powerful completed announce ones and strengthened with some flagship for close our outperforming and including distribution which the our announced channels leadership ahead stabilized the been discuss the driven Greg we February. has two this combination by The and of the We're stocks by is Friday, that Nicholls, diversification to quarters, to this has teams loved opportunities, balance investment funds. and markets the today healthy. day Financial corporate having joined work unlock Significant our past schedule. and call Third stocks expected impacted rationale Franklin our We value record Mason Hello CFO. for growth we during only that and this over on of groups. distribution global announced original

U.S. Flow continued generating have this all positive equity funds notably income year-to-date. our in key quarter. across and most several into our XX positive strategies. investment turned in side, with momentum trends U.S. we and bond largest Flows asset positive On eight flows strong seen strategies net improve objectives and of performance the fixed to municipal classes, equity

will on We are we role increasingly to this. well client capitalize positioned continue active believe important an that portfolios, to play management in and

provide to our to balance us evolve with tremendous sheet business. Additionally, continues our strong flexibility

keep operating financial to clients Finally, the our level business I'd highest goals. all for like their employees of them our our to at achieve assist effort thank and help significant their to

Now up it your open like for questions. I'd to all

Operator

Fannon the [Operator Instructions] line Dan first comes Jefferies. question from of from Your

now Your open. is line

Dan Fannon

My guess, updated Legg BEN Mason. is Thanks. I question, targets first for the integration on and

You entities that. talked kind about, And guess, and disruptive just of as business? what's execution curious that flows in normal not too to I business terms driving ensure XX% to also I'm impact synergies, faster-than-expected integration then to lower of do the combining course these as of you it's you're how costs.

Matthew Nicholls

Yes, thanks Dan. It's that. Matthew, I'll take

So the part synergy execution latter realizations. is the which of question, around the about the

that year of in a XX other within the remarks, the streams prepared of one, XX% organized XX the first end outlined talking savings were transaction. organized: of in months distribution, the confident functions; around the the around work two that holding to closing by company We're in able the end the way first that run part, a pretty it days about XX% these XX we of quite where, – the we've realize by the product risk distribution front rest being As we're we days, rate XX% we the the being and at as sort you think around and basis. what manage think achieved coverage those that talked the of then be the quickly. of execute of exactly a think all be about can about pace management, within XX% across will slower can savings business. to those marketing on We to And of XX% end client around of

that in methodical about months execute here. we and over how XX upon careful talking very the that being we're So we're

size the transaction, sales things of the to or our group. that is relative across business The XX% are sales reduction mention reductions on side to we front-end indicated I combined this thing quite of XX% and think between that other modest,

an is being how think, of I that, execution. important quite we indicator So careful manage we the how

Jenny Johnson

this I ways, some which complicated teams. independent simpler and what it – just it's is structure the I'll makes Legg it mean, to makes Well, investment is add of with that. in the Mason

gate, we, we so of out said And right had intention any of that. of the no that disrupting

slow clients, that first aren't as much disrupted the long and smoother. goes that no making we're foremost as methodical on on So focused investment and sure we teams think and distribution, the on we're impact

a you're you a combine to If where you of investment trouble. take where that's lot into trying transaction think get teams, I

Matthew Nicholls

Yes.

complicated more lot the than person-by-person, think anticipated. helps. words, on that is itself that structural time we're things to able of data close end, now of transaction. thought of a of having about announced had that, more than payments we And $XXX the the much We to we're all And terms be the in at lower transaction, million. severance we retain announcement. on like analysis execution arrangements structure, payments, didn't costs, the than that's at that now sort extension we million. execution how the have the to it's estimated And I around and think we made group-by-group we we really the other the at based When So folks no have other we to in $XXX cost a pay

reason execution for the costs. the So that's lower

Dan Fannon

you. Thank

Operator

line of comes the Your Patrick question Davitt next Research. from Autonomous from

Your line is now open.

Patrick Davitt

everyone. Thanks. Good morning,

on tax refinancing. First the cash the new benefit on question guidance of and kind

already refinancing, XXs in to $XXX then include your the had should we into EPS accretion? tax cash First, it your that the you does adjusted are benefit million Or reported that of consider and combination of And incremental? EPS? high tax factored cash planning guidance benefit the

Matthew Nicholls

below line. it's actually It's incremental, the and

shares equivalent of get having a would the The it in that say three debt. us we'd down we we sheet. cash $XXX million, invest first that just years. of on XX%. cash we've I'd the or in of think back where the to pay probably have the and additional way, And could XX%, balance in So say buy is it's business, our more is half XX%, modeled way it way the I

clear, to is about to sheet the lower cost million quite to be it, we that is In high balance structure, in million, first of intend the the quarter on XXXX. of $XXX on delevering let's $XX that is that terms payments Mason's Legg of that half, interest refinance debt or $XX just not million first capital call

Patrick Davitt

Great. And high that's the incremental as point? well to

Matthew Nicholls

of in We Yes, accretion didn't estimates. Yes. Correct. either incremental. those have our

Patrick Davitt

know outflow focus do thoughts updated on the past income trend to they stickiness potential My But have about Great. similarly that bit talked you in yield it's the given to Global up, like investors. Bond after I the wherever the accelerate any bad more the experienced fund, looks that underperformance. sticky starting for the when you've the recent of more being a performance? had – relative Fund follow

Jenny Johnson

generate here in in it. that space. it's Yes. nature And But that years it had But supposed rated been to which total managed is opposed does as directly because for is do, and category love not as it it's is – I competitors of and has it's mean, there return. because there's exactly stable that is again yield income. what to impacting retirees the lower its always the still product, many here, income XX fund, the just some we for underperformance that it

Patrick Davitt

you. Thank

Operator

line of America. Mike Bank the Carrier from comes question of next Your from

open. now Your line is

Mike Carrier

and the on expenses. the want period thanks that you the range shifted base guidance looking is similar in of you comparable for X% taking Because through given mentioned then And Can morning, bit range the the your from some longer we've a to Good thinking exact the The term, Matt, late you've adjusted, is. make mentioned just sure, transaction. other the little first, of of as initiatives. sort to flip whether just terms side question. at then that's the expense also X%. probably in what investments you're you're in I year,

update thoughts Just on some get on the on wanted of your longer-term opportunities expense those an side? to

Matthew Nicholls

Yes, thanks Mike.

the So to it way that $X.XXX at is billion. I about think base the is look

and And non-GAAP comp this reflect $XXX the quarter. is Last million, at, And and full quarter. industry. that our million the it, we remains of more comp that's base X% in which adjusted increased in and We the quarter, significant quarter, and our our by accruals, XXXX that between $XXX obviously accruals very in the the exactly market reflects and we we business that this momentum versus to XXXX the our expect notwithstanding same, to were the quarter, before where So our we started between where reduce where we exactly reductions upwards comp uncertainty accruals that, expenses. fact frankly, second guidance quite ended we on X%. quarter in aggressive the based across in been had

in to thing based appropriate or we quarter. pressurizing we areas the where line expect terms reversed in so to the what absolutely we business the below on of are we it foot haven't And we momentum the was we thought the frankly, in think So there. other All have we leverage. taken those gas we've aspects off have expenses of be, that did this do

a complicated Mason and of that quarter Legg is addition what's you've million. course, Of into Mason, noticed by the $XXX little going has to expenses reduced Legg bit our also be going fourth the

of of the cost Legg between talking million, We're reducing deal, $XXX million. So basis. $XXX around doing Mason It's by another million by reductions on to and we're a $XXX $XXX rate quite million million $XXX reduced upwards million substantial. is we're $XXX run so

across all combination, more firm and benefit saving some capital we I've opportunities support we area, without mentioned the tax what that do cash can the the to to and additional the functions points the the do at However, you. structure looked area, of addition operations finance see the we've things, in company the potential destabilizing

Mike Carrier

just then the Okay, that’s helpful. up And follow on a flows.

income a that challenged. you strength in International, equity the still on U.S. and meetings the equity So both and mentioned. you side, the fixed good some on saw bit

to still is the mostly performance wanted get of of by are Or on driven performance. dictated starting we that going by trajectory see be see like on, some improvement? any your to Some chain? it's like thoughts looks front? can you I trends it just then to improving And that

Jenny Johnson

the the a the and Well, Growth I'd and Funds Franklin side, traction. – funds that our international getting just say more on lot attention technology are

strategies. in in macro seen you're we've We redemptions – uplift seeing like sales good the strategies. seeing those we're on redemptions reduced So slightly global less things as

say, global there's a that overall, been taking sales net improvement sort equity. net redemption a in with got of institutional improvement. account a But large same $X sales. would I billion trend we in out, so you've the July, And hit seen otherwise, in and

Matthew Nicholls

Yes.

funds on that the being a couple have are fact strategies it point They're positive the for the large, doing reality the we so are of inflows bigger eight that XX It's is of a that one. bigger getting is very also, very our lot the our well. think, actually important largest I just they're funds dominate But but and story. tends of smaller, is a just incrementally. to us

a making it's So difference.

example, for $X talking only year, billion we that were about billion, where, fund. DynaTech billion, It $X billion. $X last was – So $X

we bit reflects the a the the billion, that – Now front. the up bigger the is little larger larger, part of and favor so performance They're some it's things just things. can a larger then story bad it's been as it that story Legg tell they're of those things much get on so things, around $XX – have Masons, and which manage we out the that becoming Gradually, not strategies, flow. of add helps flow where

want larger those that – quarter those on things, have the significantly even but that's fallen on we quite really redemptions this is important point things. – the for So

Greg Johnson

And it's can a that's as are have where headwinds flows. you really with offset for the in category see fund. on the really number of the to could take they fund cross-border for which some defensively new And that the quickly add, market of it's swing today very a global deeper value equity positioned. pretty side well accelerating see you in technology are three the is from those downturn as going just to bond, I in the and flows would And kind global the how fund any us quickly

Mike Carrier

a it, Got lot. thanks

Matthew Nicholls

Thanks Mike.

Operator

the comes Glenn Evercore. question of from line from next your And Schorr

Your line now is open.

Glenn Schorr

on lead away people's Thanks. is there's a that global segment. more Maybe Part the of little preferences to then it that's some environment, want ask in. there. product a international of little I the good from category. issues bond do where And performance – a

cyclical Thanks. the turn if avoiding differentiate preferences? maybe that that anticipate help you component what is importantly, So then And a us client what's ideal between could maybe, the think backdrop the people of for we in you category. can strategy

Greg Johnson

the product, the think a backdrop, Greg. flat Yes, having number this that selling you mean And strategy fund if is after I accelerated that look kind. against versus was global flows its equities that think, XX-year of really was I last crisis is where period the in – – the one and I at decade the was macro

So in talk has, we a risk-off the that more equities and class the of portfolio. environment risk really about it a the today. where have backdrop your risk fixed same really of lower is positioned. it's Non-correlated kind can how doesn't of income how you that kind That's and that's asset

I have So start a to don't think you'll risk-off When there. category. markets really when people the a pay strong, global shaky, to to it's lot fixed little a be renewed see today, of things you continue that interest environment, and extremely attention get

are I to, people allocating before, was asset it class. And it's key. I a asset relatively where where think regardless percentage today, think really class very it small a an of that's the

Jenny Johnson

But bond look just at big category the global global that is now. is categories, not right flow point, Greg's a if – fix full you to

Glenn Schorr

Thank you.

Matthew Nicholls

I think, but Glenn, – sorry, Glenn.

so market have it's relationships in having the global now part fact. are is think your it's base, quite I risk long, that. exactly and attributed assets surge lofty. that do being very downside that another is to long to been is question of now in client because risk probably we around some it's management management with the of It's under of macro management decent bifurcate and a the hard what category protection a that's or client foundation flows But portion is the that base to just these of

Glenn Schorr

Great, can quickie I Benefit? one ask on

Matthew Nicholls

Yes.

Glenn Schorr

being thought I I was Sorry. cut. Street. Benefit

of Thanks. how opportunities what guys backdrop, curious capital Just some they've crazy this on side? performed on credit in raises, in their you they're the where see at private

Jenny Johnson

Yes.

million, quarter, in they other about there, the million $XXX – capital, the up coming $XXX So numbers well, $XXX for they in last they called have million called deployed in.

they won't they It be have and there. that show will won't Then close raised second actually June which this closed So a of numbers CLO, August, also but July million, until in was in in be a in reflected. reflected quarter. that'll CLO so $XXX

about million that they're that's lot $XXX a to So in in was raised They raised, CLOs. of a And unique two also million $XXX dislocation and was have somewhat of there what close fund. a first is trying Street Benefit and that market, by a into trying, time and our were Australia for to been it. sophisticated long to a Australia not institutional just market break is team. had very do have been able

opportunity. of combination great Benefit just with team So the our Street was a

In million their commitments. close in addition raised $XX to which that, are they opportunities these Again, commitments. into fund, with $XXX senior million another they'll

raised Kong it's Hong and drawing capital. our so on So China, institutional by piece But the that was team in of that. dependent a of

write-down have in don't had part. some BDC, on both the opportunities well so of importance leverage kind good in – see the experience have had because that a assets having as the on it. they've distressed the distressed think I and the and as other their have had was there. So on they they active traction of to an They really write-down some manager But AUM people having sales also But to good an around But space this actually as flows. down side. hand, the of their of take troubling they've some

Greg Johnson

if I greatest the pipeline, into look strong all very opportunity, we for rest that on add I on coming just still side, Thanks organic of optimistic it's appreciate institutional growth year. our would it. the at we're that. the our and

Matthew Nicholls

you. Thank

Operator

from comes question Worthington line JPMorgan. of the from next Your Ken

now line is Your open.

Ken Worthington

taking my question. Hi, thanks for

talk what be leadership as envision Global appointment term about terms achieve Spector or distribution distribution any Franklin or kind structure Adam's changes comp and and for deliverables new of to longer what to management's may combined Adam is mandate make you in with You the for Maybe his vision companies, he'll that his the goals? Head. of announced of adjustments in

Jenny Johnson

his his business about worked Brandywine. sort approach both on manager with an search as position the regional of did – much very and we Adam practical as had experience. really with thinking been the as picking trying were unbelievable way candidates And to approaching role more all, of ended is his of is particularly impressed several global clients, to been on business first distribution we're really, agile for just $X.X reasons. attracted talk One emphasis we've opportunities distribution on acumen industry a build in understanding trillion side, a him to up well to in organization. and and Well, as with The active a a people things – we within the more and he's and we've this

historically, while little central product flexibility, to centralized, a Franklin central. are data yet the and functions, bit more marketing out group be a kept Templeton analytics regions provide those So more many like still that be things into to that'll even had distributing and we and for have

So that's Adam's to do our vision kind how that. around and of

bringing it, can how pay the together, together the at and to We as will optimal Franklin imagine, Mason team team Legg out distribution evaluate trying figure is. for you evaluate we're looking what it, approach the really and

depending little been process we've so by on what's may region and that vary appropriate. a in And – bit

that Adam's whether one hire. that are are the, process the really of leading be be work six, two Legg to tremendous So in coming are external Adam, there's of or actually, will be undetermined one internal announcement been there there'll Mason, reporting an see, – into up it's restructuring all from real and let's that's of two amount that five in this. that there leadership – will And positions Franklin Templeton, external

been that organizations. two a we've or month real so, And that both we, make over to organizations. able that, you'll combination, the announcements leadership excited as from it's next around really see also we're together the So bring

Matthew Nicholls

collaborative the investment the – other part of become can efficiencies I to addition the this Templeton. strategically organization, itself. in organizations think being has the to going combined many for work company together are on his fashion come so including Adam, Adam's relationships and of highly vision up worked very across so how across But things in all in relationship-wise, combining fast, parts important position, infuse and additional to can has Adam, we our on knowledge years, for a And of Ken speed investment one these fact groups. be point for of that other to as being worry that things. to of to hit have able running qualified It's the opposed together to very he to is, that, Franklin impressive that ground make and exciting have and existing us they've cultures and all integration about to

So very good.

Ken Worthington

Great, thank you.

Matthew Nicholls

you. Thank

Operator

Your Craig Siegenthaler from question comes line the of Suisse. Credit next from

line now open. Your is

Craig Siegenthaler

demand talk morning, seeing funds. equity in the to U.S. was future or to good clients just as if these passive and for in certain the underlying DynaTech this everyone. equity technology see Outside Hey, flows traction strong rebound are funds, you can stronger It navigate two quarter here? also you're of your about industry looking and any relative less a active green across to shoots U.S. nice

Jenny Johnson

Yes. performed It's have funds underlying that's fund, have There's sector biotech. income, well. utility couple well, I or a funds sector interesting, some we that U.S. guess – do fixed our of

although fund Matt you're as a thematic, little thematic DynaTech very, early kind Moberg, the on. so does are out those, of interest ETFs And traction and managed seeing in by we very that bit rolled of seeing in who some

of funds. the emphasis a within that lot has – and had always tended group the has again, be group to Franklin sector strong So in

been seeing that there, extent traction. And you're so the to good there's performance

Greg Johnson

I that certainly exposure think just more many to would that want from world work trends technology they clients get the to COVID people around this are use technology mean, this as how the I theme accelerating adviser, of home, from these And I Yes. sector. add, their to and in more

in of as think, such had the on very capitalize said Silicon of, in our one tremendous we a So this unique that optimistic heart position because Valley, the think we're to on earlier, we're area, I back tremendous right And seeing, has performance. positioning. history you're I Franklin really in a obviously, that. And that, on long growth

Craig Siegenthaler

Thanks.

other do to your Benefit interest when can will income? the Just the comment bigger bond the do investor segments if reduce, as many And Just how close for have its low which zero. institutional class, and follow-up, high-yield the potential over change my is reduced asset change like environment rate also allocations segments? you I'm thinking privates demand fixed Street? a think are very you, across segments we you managed segments pretty other future And you allocations, see here, given retail, you that in return maybe stronger do or expect of credit to at of or across

Jenny Johnson

categories. has I looking I I categories, – report is funny, just Mason tracks – five-rated six, one that of in front I'm we seven to funds flow category. which of I'm in looks top like the stars. rated of eight or stock four is or bond interesting out actually top – So and that And the data flow categories, the Legg point, it of the four And at a just me eight and zero the me five have in categories, reason one kind them is think have chart Morningstar's are it a

to distribution I this we've always channel. favor combination is with things broad of always in, important that just have the a which is strategically, bringing is a diversified you want that breadth are a so what said so focus. in retail product emphasize So benefit that

moving bringing definitely bond that benefit. retail, real about when be add that to down the that just know, with it's had environment, much be flows, answer And But so there, our emphasis. combination think people the that you you to remains Legg see, want anything? Whether I in original will your seen. Mason we rates this stays how of if even to in low strong a don't question rate come an think was Greg,

Greg Johnson

and fixed at look running a that. from hard I the if think, world, mean and away one, income fiduciary very institutional bonds to you get I that's it's

bonds, a in importance maybe more put on say is Clariant certainly trend bigger away BSP with has you even the would like real rate like environment. a estate. But little but from alternatives walk what portfolio, what low risk offers, of can't I a can You the

supplemental government all rate type very zero a these important think environment to kind alternative income I security. of categories become providers traditional in your as

think lot just of being a side, institutions accelerates the already I both investors. it on that what's important happening So alternative for not retail more and much

Jenny Johnson

be mean I'll just governments to munis. spend that's because COVID I And increase that, going or is had add And the to this who where to and have to demand is we selecting what opportunities higher think reason people on states. that active to that's have in is to continue translate, manager states that – think an why in I want their – you more environment, support munis; muni those many one translate two going their taxes going into economies internally, in think bring are. all

Craig Siegenthaler

Thank you, Jenny.

Operator

from of comes line from Fargo. Wells next Harris Chris question the Your

now is open. line Your

Chris Harris

have to million Coming Are a Mason up the basis, $XXX synergies. now correct? from previously? would and Yes, $XXX be I back Do net guys thanks. on saying Legg that you million that

Matthew Nicholls

there's stress more we're what so from obviously, invest statement appropriately be But the million Yes. million. portion But from, our in into about, an industry, part the will amount you company. in so convinced if we changed, going that We important across savings still looking that want but And at amount of $XXX That's and the is a what invest the to terms we'd that about minimum, a thought I'm other gross reallocated, $XXX from that felt are earmarked back was notion really places portion the net organization. guide. was mean, we create made a for the in million that. move the the this reinvesting adjusting – going reinvesting didn't going that will. talked the we're we the we I away business, to $XXX be get to of statement. of just Chris, that million and $XXX it of to transaction we're the market's appropriate we since the

Chris Harris

maybe cost was the to that the already beyond to follow-up. what's you opportunity In with earlier mentioned had an going question, identified. And my Yes. more be do been

So in you what elaborate a have can mind. on maybe you might bit

Matthew Nicholls

going this think I not through the have it's just investment the we yet, capital that into even both transaction. Obviously, a feel a single we've Yes. company there's different of in get I components opportunities, for to on conservative mean cost our be don't because want company. now to been we're but into on demand this side. we'll the very But the reinvesting front, working

incredibly focused are on retention. client We

– a of deal, in this we, in And so very virtually, on no so closing again, transaction, in one far, there's have but got Maybe the to we've as Asia, the but we're run-up Friday, far, the transaction. redemptions consequence very, it's small.

the we're that doing functions, are certain various around on of show that areas. moved there for things the higher cost cost areas So we're that But in instance, projects very lower focused be to integration there going that. on could are

and an big may last a choose have that business we or outsource line. big know, the India a you there we certain down We outsourcing announced potential And there. Poland, As have so in things we are to year. center

We're to save As going know, over that regard. executing in we're XXX you million XX that. years

So I today, a guidance be to think of good there'll these things of through. wouldn't But more be work think, idea. that, I to on types announce

cost to up those capital got substantial are already cash and So can costs that – making used future. Execution I've structure, the We've the in we going around on so mentioned very synergies but be good reinvested side amounts minimum $XXX see or to things of a of tax. to the net. we're back think got shares money the add be And million the we We lower. on. that around opportunity other is point buy

Chris Harris

Got it. Thank you.

Matthew Nicholls

Thanks, Chris.

Operator

line Brennan the question from next Hawken of comes Your from UBS.

Your is open. now line

Brennan Hawken

my rate for quarter. Thanks Good to the pressure fee wanted question. taking on touch I morning. this

curious So about the source. maybe some of

when I you on included waivers, some expectation. but But some in also you touched knew India. remarks, your gave last there was think prepared quarter which about you – mix, the us India

fee on So some or previously? expected maybe waivers fees hadn't Street, hear deferring additional Benefit there failing. about you that Maybe was we tests COOs incremental OC

a factor that would contributing that was down well? break So you that could bit, a Maybe as if be helpful.

Matthew Nicholls

sure, Yes, Brennan.

So to of basis points X.X points going U.S. fee About India, to X.XX waivers, going and that's answer attributed to point attributed the that's basis to about a rate. about shift X.XX points from basis EMEA specifically, fee X.XX because non-GAAP basis points and is basis, effective is of your XX.X the on – question down basis between is reduction regional

It management, it is in see other the little pipeline. wealth if of fee fees little moving wouldn't coming – in fee credit basis the points. We a other in India surprise points rate bit the until merged and that we've fee you But things the XX% on some in for different can obviously, mainstay. with the will rates Legg mix basis break movement we bit that more we that up generally, the within slightly to ticking – it but don't gives where the India around be things X.X around movements of charged, compartmentalization. sort which of is, so be see other But down won't tries we we that's a have a quarter, for business We up that sort see business is with a it build some further the or next make saw waivers. – what staying change on based the to us even when that's change some Mason, really don't further you. that X.XX more X.XX

Brennan Hawken

Matthew, my related about Street that market. might just that hearing COO the Is you Benefit that, and waiver we're as for And deferrals it helpful. was at that’s bad it fee And that is it you from fee impact, as the be some that is suspected as get? of Thank can that Okay. supposition get? might very there? bad that Or as

Matthew Nicholls

that, right? you that, of come aware not I have actually back will I'm on to to

Jenny Johnson

us none Yes, of are.

Matthew Nicholls

that. We'll come back to you on

Jenny Johnson

anything. heard haven’t I

Matthew Nicholls

But anything we that on haven't front. heard

Brennan Hawken

Okay. Thank you.

Matthew Nicholls

you. Thank

Operator

Your comes line Citigroup. from Bill the question from next Katz of

now is line Your open.

Bill Katz

very much. you Thank Okay.

about expectations. expense core updated the for core are growth So as ex-Legg at you XXXX? thinking year-on-year How look the appreciate Mason, business you all synergy

Matthew Nicholls

So Templeton for talking stand-alone? you're XXXX, just about Franklin

Bill Katz

Correct.

Matthew Nicholls

to to our so growth. We be expenses reduction, flat expect no

Bill Katz

to back going just then CLOs. And Okay.

who has themselves the Is it done CLOs you're You're some What backdrop. the to you're the those seeing one Franklin of there in that opportunity firming? ability And kind Benefit the actually of is distribution Is this just unique specifically location what seeing some few actually or it offered markets up opportunity? managers get maybe that Street in? offers?

Jenny Johnson

Class A So purchased the They Street equity two investors these the Japanese of that think CLO Benefit U.S. platform. majority new had on that purchased investors well-known relationships XXX% were came in had. a notes. I and that investor were of by The that

weapons also ESG some it had, well-known the around second of new but But couple really that CLO, through So who I'd about say that this on has is raised BSP like and was things. it restrictions mean as deep team. included Benefit that know Street this that the I joined. controversial tobacco much were had. these relationships a relationships I their they've and ones that

Bill Katz

if about Okay. And know flows. speaking the that just overall. had one mentioned or clarifying equity I global to specifically don't footprint you're you

$X mandate You July. sort in out of had had one coming billion mentioned you

the rest firm? that overall segment? that the said to Or improving. of equity of You the business sort was the was Was global

Jenny Johnson

flows. the But mandate take that that a – fund $X I redemptions progressively global kind saying was you That billion you have otherwise, in What that see improving improving. and was increased the our out equity. was of The see trend came billion out some did income you is $X of July.

Bill Katz

you. Thank Okay.

Operator

from question Robert Lee the next of line Your comes KBW. from

now Your line is open.

Robert Lee

Good for thanks thanks. Great, questions. my morning, taking

Legg and first one affiliate. with the is The

Now of of in transaction, the the there any keeping their just the change early independent, of doing kind changing shares, be is that's the contractual to we kind particularly at of of thing. investors, and type of that is all already I'm bench part all? retention focus revenue curious, affiliates affiliates the kind their relationships the since as will understanding giving

Matthew Nicholls

specialist our as investment Templeton. holding companies don't shares, teams change what that at we revenue needs the the the investment shares to need arrangement described. things which our Or we've with them, The managers, sense we on call that Franklin means we forced make uptick that there make eliminating internally group work nothing may call are be any Rob, adapted It costs. described take some those group, No, be out a of investment calls, collaboration company we Over to desire across groups. but us. to accretive we these we're to based the the with different the to see time, there's across because of the as effectively to coordination revenue are the as the very consistent on is in have structure

Robert Lee

to know about as you the and also your kind update of of have And of but where just couple affiliate. tiny in investments Great. perspective the Can think can maybe follow-up, Midway processing I'm curious some adviser, try on tracker you acquisition platforms I then financial had a Because same, spotty. it's there? of peers I'd a a of make kind kind in AdvisorEngine. us success is say have like my you you look

and about end much gain have You is goes it to And momentum. really have BlackRock one then others it. on stand riding taken it a

do like and So of this kind flows? how the you can work make drive help feel you

Jenny Johnson

Yes. through already, fiduciary, we custody kind I a have RIAs. for business of mean, high-touch

you're And has possibility wealth and figuring tools is strategy how RIAs, And just also so the out But pushed, fiduciary be more more gone doing managers. segment. to the they're additional as add towards these to that. AdvisorEngine that of as more of being having independent to part fee-based, world's

fee, tax month clients efficiency. mean? a It education demanding every clients does and the that just more management, what not doing investment for they're paying you're So that financial means you seeing errors, are planning,

RIA very other or X,XXX to in to that a communicate tool and users it's ways, XX,XXX with again, think those that just firms I the because the fragmented with, a XX% relationships. market. us deeper XX,XXX think AdvisorEngine part almost so has, some CRM actually RIA piece of of communicate Because, difficult they're was allow market, X,XXX, I of build And and

So build with. and gain relationships able business, mind share to it's can support that their we a be tool

we how the with that's toolbox so build And see it. growing a that deeper It's just channel. in tool relationship one to

Matthew Nicholls

this tremendous is distribution. us area. owning AdvisorEngine AdvisorEngine our has efficiencies business, asset and way, now for terrific of And thing, team of that, have And the terms some I think investment were future wealth almost technology that type a focused for like all the say investing for for on of year millions in of in is our those which completely on in of area. in our other is what management to a dollars company, investing we business already we type an things Rob, entrepreneurial mean frankly, increased it combined

Robert Lee

don't follow-up And know Great. I on distribution. one add I can maybe if quick other

investment that minimize trying off. have combined, understanding So we get sales the combined transactions focus disruption distribution forces seen – where that, distributions of wholesalers, whose distribution in the marketing people to that your are other often realigning team function, fund, fall and

some One had distribution your issues guess, peers, courses. I around their of technology combining

how your avoid So you sales of are taking disruption in couple minimize kind some to of do that? thinking you Just thinking. or of short-term that actually be how quarters? may curious Or as of you're

Jenny Johnson

when slower on have company synergies, very distribution And very, that's we why, because I the were that holding client-facing being we any the point, to much mean implication. Matt's – the about a capturing we're think side doesn't the that careful bit the I we're caught client much on Yes. faster on faster individuals. a because side synergies talking

a any – bit again, the the just institutional integration. much then So in ensuring unique and one not that's piece base that would And disruption number sits of part they're minimize transaction sales in there of of that this this. this affiliates, there. little two, And is, what's

in nothing's our there So investment changed management specialized groups.

other than different little think unique a you that's transactions see to that's this. so I in And

Matthew Nicholls

the client we're across it. intensity in and in-person between – organization. the regard. most the sales closing our sure And that and remains focus we sales quickly, you and management as that we've you distractions, – of collective you haven't mean connections I retain in right team by monitor were this coverage and coverage announcing things remains where energized we're on talk our was adding it manage function And through one can how what quickly making very having a think more And done Yes. I get think more also should it groups incredibly worked actually of And and that it's to the client think, thing. and the had that Rob, adding decisions we tells put exactly made I have place really powerful be. calling certain of this people service away transaction cases, course, really teams I different relationships, but that sort greater that top-notch, fact on in emphasis meeting helps of remotely. transaction a across and the about, transaction talented

you're hope that talking any taking So steps we're the we minimize about. right to disruption

Robert Lee

so Great. for taking Thanks Thank you my much. question.

Matthew Nicholls

Thank you, Rob.

Operator

from comes the Your Blostein Sachs. from Goldman of next question line Alex

is Your open. now line

Alex Blostein

Great. Thanks, good morning.

Just a quick follow-up expenses. on

XXXX guess, effect the the revenues et I looks relative timing like and based on XXXX. of flow stand-alone rate I revenue of cetera, it So averaging the market, to for the and mean Franklin, the run could trends. decline still

or $XXX of the in conjunction above that the more should opportunities in number. take on BEN that expenses scenario with million savings little core color a maybe flat why would be potentially from we Matthew, being transaction, So cost really net

Matthew Nicholls

these over – we then alone. have our that that we almost not guidance It that we with or we we be is in the million, XXXX very mean in anything internationally, a of significantly, functions. months when keep focus retain significantly the decade, we're it, making for right We half more the is larger And business the That be guidance quite that months I better continuity start it's growth have than places, now providing certain the $XXX And that. a of you XX in when going be frankly, other the much appropriate down our on in upon of a a to very really, of – as company say – much giving to ahead, that whatever, XX months terms in but focus the now, feel as to have we look million. cost firm really a in largest all fallen of half the sorry it's repeating expense won't see what expense through the won't improve right much But what franchise our to worse it's one bit the opportunities doesn't for us, than think we to we think lowest going – I appropriate better and think, flat. we're But already, particular, tough across mean that example. we need then alluded right what of think transaction. on the sure doesn't and we think, where work and because pay, based across quite can strategies. think business. the But our but engines. on half have we to with But to to larger our our I stability – combine almost I've fact ahead the redemptions really XX sort as we then number of won't that. momentum and have we're past at business have bend things and some may see offsetting base. large you hard of grown efficient $XXX can the we'll We're going exist outflows to opportunities a modeling, now, We and from of exactly half, it's be strategies, Yes. In number the of we not which

about in there there's is but good a not so… will right be, position a talk we're feeling Our to that shot, now

Alex Blostein

Got it.

makes All Okay. sense.

little So revenue essentially for consensus than a what is predicated you better guys. bit on in outlook maybe maybe baking

Okay.

Matthew Nicholls

Correct.

Alex Blostein

markets. And back dynamics on in the building question, interest second to My of impact earlier income discussion around rates. of fixed the some the just lower

environment are and importantly, of And more guess, these increase fixed effectively today? guess, potentially with positioning lineup the fraction more pronounced? both you given options Franklin essentially passive a Are already you legacy more to how there, charging showing to especially as active I becomes of compete cost is income up products client today? sensitivity just that low I in conversations Legg Mason lower fees, what lineup wouldn't out some So the client pressures seeing rate the

Jenny Johnson

jump management, challenge. of now, me and just that on company So I do necessarily things the say more passive a To mean investments let fixed income I that's it's – taken my a that's one to Greg, increase would is think way of in the concept good to the here debt, too.

a states think, dangerous what we on the the all think more it reasons there's long you bit munis, right, solutions this an because now to of that that does to going be I see – greater matter just thinking going equal apply shifted to is in And to no so is to thing. creditworthiness companies to you that to who's conservative their going time be It's that, and going a case. sustain I where to mentioned And than is, a that themselves look – pressure going to thing more be continue And about go you're should environment to through on And how able no approach And active to in scale's income. I for be on? fees. probably it? fixed so an just of approach the in we're at think are one as our environment we COVID had some the some of multi-asset passive

to… do passive have assuming a thing. fixed a scale good you danger Greg, to to think so going be that and you're going is the I And there's approach a to is adjust important, to But to just And fees. want income

Greg Johnson

Yes.

the of Legg But different best are unconstrained – to and say active obviously, And lower when deal may And going you'd capabilities between the in continue be group. that out benefit full have ones probably three you'll to years, I a look gain pick and income fees I think pressure It think out the survive income others extremely hopefully, x a look lot we players at fees, spectrum see array our It's a be. industry but think be we of I mandate to we is fee think from it's in I the a with along allocations more what giving fixed Western categories think that. is the tactical to the I And there. fixed has when peer we under in we for trend, number fixed small flexibility amongst the on the that that. I large And across to have lineup, the look lose Street result, broader that it's think and and and real. just in not will of and of fixed with a two share. net broad or would I alpha would available. as, rate, going logic to income at move portfolios been up largest smaller in income the really Benefit the And very positioned leader really standing flexibility and well we're managers. market for the at we

Matthew Nicholls

course, And also, of doesn't harder to – completely hedge substantially now management pressure assets under fees, larger we do commoditize of a have, out added it have but obviously, the fee, company. we on as a much portion combined higher

alternative significant an When asset Benefit perspective, important together billion businesses the map have think group alternative of And on of has Clarion ourselves how we and not you that all other some And think alongside getting Weston few you are credit from and fee like the us, are Weston we think real have alternative Street roughly estate low being on things. income. of assets, combine in side. it's which as $XXX fee very categories. for KX, a that important to regard. of fixed I just we in higher we're

Jenny Johnson

strength. very, this of broader that's diverse performance coming thing. a good also Clarion a base again, because real and think overweight feel lineup touched that the they lot going massive, And think, of couple concentrated has on out it. distributors. of were in it Clarion coming because some to where They Matt your we But industrials that highly bring be are as question, we've managers. while but the they having And is retail opportunity to to a happens I expanding on – actually, channel is very a mean I that with retail combination talked underweight of this with distribution

taking that And tremendous retail product that's has so channel. through it we just higher opportunity, think fee our – that

Alex Blostein

Okay. Thank all you detail for the there.

Matthew Nicholls

Thank you.

Operator

Your next comes question Bank. of from Deutsche the from Bedell Brian line

now open. Your line is

Brian Bedell

have Great. the folks. wanted I couple this. might that clarify of detail on some just Thanks, I a morning missed good to of things

First think stand-alone that's Franklin of all, I in billion the on for implying core $X.X XXXX. expenses,

If that's much the if then you packages me think, you about right not. And you talked if said just retention Matt, or – can I initially. being than can you less tell earlier, expensive

So and if I – so to expectations schedule. around those concluded? you vesting that just, And clarify was initially, think four those Can year $XXX thought can it you now $XXX just is please? million clarify think a if down said that was I – as you to million seven are from you

Matthew Nicholls

Brian. you That's Okay. about matter a were different there, talking

million $XXX in the not savings. mentioned mechanisms is I the in connected So retention place million mentioned cost achieving a of I $XXX ago $XXX a moment million ago. the that are with moment The the

the the of basically, the cost The changed shares. remained the same has the the a you're termination the time talking since bit severance costs of down payments, the – piece cost number is. share transaction. about, the transaction, to price other announced that's awarded what that the at So That's of the of payments and related were The reductions, the thing downsizing company. headcount that of we they grants only come is the that's share

Board We our on this and likely talk that hedge very we with later the discussion year, will capital about when we have position management.

are So two to things, be that's clear different they – about that.

yes, that's than million. bit cost little It may lower $X.X In XXXX terms of right. base, exactly the be a

Brian Bedell

just billion, on guess terms cost saves the million. then the million both attrition expectation. $X.X $XXX and the then yes, or based And of $XXX I in

coming great, to what sounds you affiliates if from be it's internal attrition and might program. company is some like I anything very deal on operations. Legg cost for the year it levels side, want But could rationalize that their know the first their And Maybe doing longer-term structurally when to a own the said, on been far, your has the that So are holding then extent or side? cost-saving more affiliates little on like, Or obviously, upside you cost of on you attrition. us the hard most the other save two. costs? within did the was updated give of perspective just from thoughts the to overlapping attrition do

Jenny Johnson

Yes.

if lot let's of So them questions there. sorry, I through. there's a quite apologize all, but get go I don't

one last that the starting So first. works memory way. My

moment last the get ago, out that So – the as doing efficiencies, this to to we affiliates first. need need I The they're change mentioned of or organization. the a the to one anything we investment don't transaction, get

somewhat quite quite greater that's of bit means So It but that overall in Mason's. a has is various to our larger than is functions our – capacity Mason, having provide investment the given to all candidly, Franklin ability the different Templeton's Legg to to help. our groups respect bit confidence of of that, and Legg organization company a parts at with friends said

be they're ready. we going line, the worry when too and got ready in and some with organizations that, efficiencies there. many probably the down there will we've but about when now, investment So more – we're do to other probably Right on things will

bit What of if you that's So question. question? was the The is last other – will. a that your tail, little one? a other What synergy

Brian Bedell

– gatekeepers and far. with been conversations better on It was your have the decisions your so

Mason attrition that on on thoughts assets updated Legg prospective? deal-related have You from

Matthew Nicholls

the much of as there's the zero or of it in at and fact coverage in level, of client mean a client client the that we I structure affiliate embedded investment – more terms Yes. think, Jenny I organization the transaction, earlier, mentioned the means of coverage at sort the stability to terms changes support. deal, we have due

that. So, can We to like that focused far, retention those we're the continue client very very, – very has we believe been lines. and along on so high,

one been now, we've that attrition investment the And very minimal in way. remains hope right country in the organizations. of Asia, one had that client that So with has we

focused we're there on more going So forward. revenue synergies

Brian Bedell

you. Thank Great.

Matthew Nicholls

you. Thank

Operator

to further back will There turn the questions. call the presenters. are over no I

Jenny Johnson

call just and again, I for safe. joining Well, And everybody just everybody hope want this to, healthy again, thank in the is today. staying time,

you. thank So

Operator

gentlemen, call. and concludes this Thank conference for you today's participating. Ladies

disconnect. now may You

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