Long-term view key to success, says third-generation boss of fund firm Franklin Templeton

Wealth management success story plans expansion in Asia and China on the back of a growing middle class and ageing population

PUBLISHED : Friday, 21 February, 2014, 11:53am
UPDATED : Saturday, 22 February, 2014, 4:58am

Breaking the curse of the Chinese saying that "wealth will not last three generations", Greg Johnson, chairman and chief executive of wealth management company Franklin Templeton Investments, one of the world's largest financial firms, is living proof that business success can be passed down through the family.

"There is also a US saying that the third generation generally makes a mess," Johnson said with a laugh.

Far from making a mess, Johnson has big plans for his firm. Speaking to the South China Morning Post during a recent visit to Hong Kong, he envisioned strong expansion in Asia, particularly the mainland and Hong Kong.

"Some 70 per cent of new fund flows came outside the US in recent years," Johnson said.

Everybody understands that we should never take any shortcuts

"The big macro trends in Asian markets, where there are a growing middle class, an ageing population that requires investment and the need to develop new retirement planning, combined with high saving rates and low household penetration, would support the growth of the industry," he said.

"Franklin Templeton has been in Asia for 25 years, and now Asia represents about 10 per cent of our assets under management. Asia is a very important region."

The company operates on the mainland via a joint venture and has offices in Hong Kong, Taiwan, Australia, India, Malaysia and South Korea.

In Hong Kong, it offers a wide range of retail fund products, including several under the Mandatory Provident Fund. Assets under management in the city exceed US$10 billion.

Globally, the company's total assets under management surpass US$800 billion.

Johnson believes China's many reforms - including the internationalisation of the yuan, the expansion of the qualified foreign institutional investor (QFII) programmes, and the relaxation of restrictions on investing by mainland insurers in overseas markets - provide many new opportunities for Franklin Templeton.

Greg - who replaced his father, Charles, as chairman in June when he retired at the age of 80 - joined the family firm in 1986 after working for a few years at Coopers & Lybrand, where he qualified as a certified public accountant in 1985. He studied accountancy at university to prepare himself to join the financial industry.

"I was determined to join the investment industry at a very young age," Johnson said. "I found the industry to be fascinating, and there are really no limits, as you need to think of ways to package different ideas to different clients every day."

Franklin was founded by Johnson's grandfather Rupert as a broker dealer in New York in 1947. It was expanded substantially into a fund company by Charles and his brother Rupert Jnr. The firm went public in 1971.

The team of father, uncle and son expanded the firm, turning it from a US fund company to an international investment company after several acquisitions, including taking over Templeton, Galbraith & Hansberger - founded by legendary investor John Templeton - in 1992.

Franklin Templeton is now one of the largest fund houses worldwide, operating in 35 countries and with customers in 150 countries. It offers pension funds, retail funds and investments for insurance companies, government sovereign funds and other organisations.

Running a firm with such an international scope, Johnson said it is important to recruit local talent who understand the needs of local customers.

"The management style I learned from my father and my uncle is that they have never been aggressive or loud. They believe in listening to the staff, which is more important than giving direction," he said.

"Getting the right people to form the right team and to make them accountable is important. I don't make up my mind before I listen to my staff.

"Reputation and integrity are of utmost importance to Franklin Templeton. When I travel around the world to meet all my staff, my message is about corporate values, and it's very important that everybody understands that we should never take any shortcuts and that we have to comply with all the rules and regulations.

"We don't define success based on short-term gain for customers; instead we focus on relative investment performance and achieving consistent long-term growth for our customers.

"Taking a long-term view and putting the clients' benefit as our priority are our keys to success."

Johnson said the main difference from his early days in the industry is the need for more travel.

"I have to travel a lot nowadays, as the business has become international. In the early days, we focused very much in the US market. But the margin was getting thinner in the US, so we had to expand into international markets for new customers and new fund flow," he said.

The travel requirement may well be a key factor determining whether the members of the fourth generation join the company.

Johnson has two children who are still students and are interested in the investment industry, but he said: "My children said they don't want to do it, because it's too much travel … you are away so much, and it's hard."