Franklin Templeton (BEN) Q3 FY26 earnings call: guidance and Q&A

Franklin Templeton's "One Franklin Templeton" strategy is driving strong results, with the firm ahead of its five-year plan. This approach emphasizes integrated solutions across public and private markets, deepening client relationships, and expanding access to investment expertise. The strategy has led to broad-based performance and multiple sources of organic growth, positioning the company well for future opportunities. The company announced a corporate name change to Franklin Templeton, Inc. effective August 17, 2026, to align its corporate name with its global brand.

The private markets platform continues to be a significant growth driver, with alternative AUM reaching a record $294 billion and fiscal year-to-date fundraising hitting $33 billion, exceeding the original full-year target. Fundraising is diversified across 30+ strategies, with a notable increase in the wealth management channel, which now accounts for 20% of private markets fundraising year-to-date. The firm aims to grow this to 20-30% of total private markets fundraising, leveraging its advisor relationships.

Franklin Templeton is integrating its public and private fixed income capabilities, aiming to present a unified $620 billion platform to clients. This strategy recognizes the increasing convergence of public and private credit markets, with the firm believing future fixed income managers will need insights into both. The firm has seen 10 consecutive quarters of positive net flows in its fixed income platform (excluding Western Asset) and recently won a multi-asset credit mandate, while also developing new products like a target-date fund with private market exposure.

The Canvas custom portfolio solutions platform has grown from $2 billion to $30.3 billion in AUM since acquisition, driven by its advanced tax overlay capabilities and ability to handle concentrated stock positions. The platform continues to onboard new partners, reaching 220, and recently launched a preferred partner program, extending its tax overlay to other firms' active strategies. Management sees significant future growth potential by integrating Canvas with its large SMA business.

Franklin Templeton is strategically investing in AI across investments, distribution, and operations. The "intelligence hub" partnership with Microsoft has resulted in a 25% increase in client visits/contacts and an 11% uplift in sales for territories where it's deployed. In investments, the firm is using AI for research, portfolio construction, and full AI investment strategies, viewing these as R&D sandboxes to gain insights and efficiencies. Management expects meaningful long-term efficiencies and new opportunities from AI.

The firm views blockchain as an increasingly important part of financial markets and is an early mover in digital assets, with $3.2 billion in digital asset AUM, including $2.4 billion in tokenized funds. Strategic partnerships with MoonPay and Payward (Kraken) aim to expand access to tokenized investment products, leveraging existing wallet infrastructures. The firm is exploring commercialization of its underlying blockchain infrastructure, including its wallet and shareholder recordkeeping system.

The company is ahead of its margin expansion plan, expecting to reach close to 30% operating margin in Q4 FY26 and 29-30% for full year FY27, assuming flat markets. This improvement is attributed to higher average AUM, disciplined expense management, and efficiency initiatives, including strategic investments in scalable businesses like ETFs, Canvas, and alternatives. Management believes 30% is a stop along the route, with further upside potential, especially with the long-term impact of AI.