The Future of Investment and Wealth Management

Franklin Templeton recently hosted its annual Innovation Forum, which was anchored by its inaugural Industry Advisory Services Annual Survey, and brought together leading minds in investment, fintech and digital assets like Sandy Kaul and Robert Crossley from Franklin Templeton’s Industry Advisory Services; Margaret King, Franklin Templeton’s Vice President of FinTech Partnership & Corporate Strategic Investments; Raoul Pal, CEO/Co-Founder of Real Vision Group & Global Macro Investor; and Ric Edelman, Founder/CEO of the Digital Assets Council for Financial Professionals. The forum covered topics ranging from how artificial intelligence can improve portfolio customization, how the re-engineering of the financial infrastructure can support further development of the digital asset ecosystem, what the intersection of artificial intelligence and blockchain mean for the future of investing, and how digital social identity and investing are becoming increasingly intertwined.

Introduction

On October 25 and 26, Franklin Templeton hosted its annual US Innovation Forum event in San Mateo, CA. The forum brought together leaders across Franklin Templeton’s businesses, including representatives from the Digital Wealth, Digital Assets, FinTech, Industry Advisory Services, Investment Solutions, Product Solutions, Venture Capital, Alternatives and Equity Investment teams.

Attendees included wealth management industry luminaries like Ric Edelman, Founder/Chief Executive Officer (CEO) of the Digital Assets Council for Financial Professionals; Robert Crossley, EMEA/APAC Head of Industry Advisory Services at Franklin Templeton; and Margaret King, Vice President of FinTech Partnership & Corporate Strategic Investments at Franklin Templeton. There were also representatives from more than 15 fintech companies that are engaged with Franklin Templeton in a number of ways, such as those that are part of Franklin Templeton’s Silicon Valley and Singapore FinTech Incubator programs, which were founded in 2019 and 2022, respectively.

Topics discussed included the future of investment management and generational differences among investors as well as trends and technologies transforming the industry, including artificial intelligence (AI) and digital assets.

Key findings from Franklin Templeton Industry Advisory Services’ inaugural Annual Survey anchored the event and some of the core themes that were shared during sessions include:

An overview of current industry dynamics that will set the stage for where investment management may be headed – today’s industry looks much different than the pre-2000s era and competitive differentiation is now based around proprietary tech platforms that take advantage of cloud computing, big data processing and the Phase I AI toolkit—machine learning, natural language processing and predictive analytics.
The future of investment and wealth management and the importance of partnerships – the combination of a new financial infrastructure, the digital social investing trend and the “Better Living through Investing” evolution in investment portfolios will come together to alter the mission and focus of investment and wealth managers.

The past, present and future use of AI in investment and wealth management – AI has helped drive the evolution of investment, solution and wealth platforms—examples of future use cases were presented.
Investment portfolios of the future – portfolios of the future will require new financial infrastructure and use quantitative modeling of nonfinancial behaviors to deliver “Better Living through Investing.”

The full paper on the Annual Survey can be found online here: On the verge of transformation: The state of investment and wealth management in 2023–2024. Highlights are available in the same link.

Other notable discussions at the forum included:

The macro outlook for a new age of investing, where Raoul Pal discussed the explosion of opportunity enabled by technology and the growing influence of investment communities.
Investing in innovation through digital assets where Ric Edelman shared why he thinks all investment professionals need to care about the space.
AI in action, which featured a demo of using AI for thematic indexing (investment indexes that track the performance of companies that are tied to specific investment themes), with contributions from Chandra Seethamraju, Head of Systematic Strategies Portfolio Management for Franklin Templeton Investment Solutions.

AI and tech for bespoke analysis and solutions with Max Gokhman, Head of MosaiQ Investment Strategy for Franklin Templeton Investment Solutions.
The next wave of customization in wealth portfolios featuring Roger Paradiso, Head of Product Solutions at Franklin Templeton.
Making alternative investments work for wealth portfolios with Dave Donahoo, Co-Head of US Wealth Management Alternatives for Franklin Templeton.
The next frontier opportunity in emerging digital nation states and finding alpha in altcoins from Franklin Templeton’s Tony Pecore, Director of Digital Asset Management, and Christopher Jensen, Head of Research, Digital Asset Management.

The investment management industry is evolving rapidly as innovations in AI and digital assets continue to be implemented. Thus, it is vital that investment managers keep abreast with trends in portfolio construction and adapt to their clients’ changing needs.

The 2023 Franklin Templeton Industry Advisory Services Annual Survey was conducted between March and August of 2023 by Sandy Kaul and the Franklin Templeton Industry Advisory Services team. It reflects the key findings from qualitative interviews with 83 financial and technology executives and thought leaders representing over US$45 trillion in assets under management (AUM).

To obtain comprehensive investment viewpoints, interviewees were drawn from a wide range of industry roles including asset owners (public pensions, corporate pensions, endowments, sovereign wealth funds, insurers, family offices); intermediaries (wealth managers, private banks and consultants); investment managers (asset managers, hedge funds, venture capitalists, alternative firms); founders of fintech, blockchain and digital asset firms; industry thought leaders and academics. Interviews were done globally with about two-thirds of discussions held with domestic and global leaders of firms based in the United States, and the other third spread between Europe and Asia.

Participants were encouraged to share their own views on interesting developments and expectations for the future of wealth and investment management. Discussions were wide-ranging and candid. Select anonymized quotes from interviewees are included throughout the final report.

The underlying aim of the survey and papers are to help Franklin Templeton’s clients understand how the wealth and investment management industry is changing and better prepare them for the future.

WHAT ARE THE RISKS?

All investments involve risks, including possible loss of principal.

Equity securities are subject to price fluctuation and possible loss of principal.

Investments in fast-growing industries like the technology sector (which historically has been volatile) could result in increased price fluctuation, especially over the short term, due to the rapid pace of product change and development and changes in government regulation of companies emphasizing scientific or technological advancement or regulatory approval for new drugs and medical instruments.

Blockchain and cryptocurrency investments are subject to various risks, including inability to develop digital asset applications or to capitalize on those applications, theft, loss, or destruction of cryptographic keys, the possibility that digital asset technologies may never be fully implemented, cybersecurity risk, conflicting intellectual property claims, and inconsistent and changing regulations. Speculative trading in bitcoins and other forms of cryptocurrencies, many of which have exhibited extreme price volatility, carries significant risk; an investor can lose the entire amount of their investment. Blockchain technology is a new and relatively untested technology and may never be implemented to a scale that provides identifiable benefits. If a cryptocurrency is deemed a security, it may be deemed to violate federal securities laws. There may be a limited or no secondary market for cryptocurrencies.

Digital assets are subject to risks relating to immature and rapidly developing technology, security vulnerabilities of this technology, (such as theft, loss, or destruction of cryptographic keys), conflicting intellectual property claims, credit risk of digital asset exchanges, regulatory uncertainty, high volatility in their value/price, unclear acceptance by users and global marketplaces, and manipulation or fraud. Portfolio managers, service providers to the portfolios and other market participants increasingly depend on complex information technology and communications systems to conduct business functions. These systems are subject to a number of different threats or risks that could adversely affect the portfolio and their investors, despite the efforts of the portfolio managers and service providers to adopt technologies, processes and practices intended to mitigate these risks and protect the security of their computer systems, software, networks and other technology assets, as well as the confidentiality, integrity and availability of information belonging to the portfolios and their investors.

IMPORTANT LEGAL INFORMATION

This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice. This material may not be reproduced, distributed or published without prior written permission from Franklin Templeton.

The views expressed are those of the investment manager and the comments, opinions and analyses are rendered as at publication date and may change without notice. The underlying assumptions and these views are subject to change based on market and other conditions and may differ from other portfolio managers or of the firm as a whole. The information provided in this material is not intended as a complete analysis of every material fact regarding any country, region or market. There is no assurance that any prediction, projection or forecast on the economy, stock market, bond market or the economic trends of the markets will be realized. The value of investments and the income from them can go down as well as up and you may not get back the full amount that you invested. Past performance is not necessarily indicative nor a guarantee of future performance. All investments involve risks, including possible loss of principal.

Any research and analysis contained in this material has been procured by Franklin Templeton for its own purposes and may be acted upon in that connection and, as such, is provided to you incidentally. Data from third party sources may have been used in the preparation of this material and Franklin Templeton (“FT”) has not independently verified, validated or audited such data. Although information has been obtained from sources that Franklin Templeton believes to be reliable, no guarantee can be given as to its accuracy and such information may be incomplete or condensed and may be subject to change at any time without notice. The mention of any individual securities should neither constitute nor be construed as a recommendation to purchase, hold or sell any securities, and the information provided regarding such individual securities (if any) is not a sufficient basis upon which to make an investment decision. FT accepts no liability whatsoever for any loss arising from use of this information and reliance upon the comments, opinions and analyses in the material is at the sole discretion of the user.

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