# Franklin Resources (BEN) Financial Model Free Excel 3-statement financial model and company analysis for Franklin Resources. - Canonical: https://finamodel.com/companies/franklin-resources - Industry: Asset Management - Downloadable model: Yes - Excel download: https://finamodel.com/company-models/BEN.xlsx ## Model Purpose This model provides a comprehensive equity valuation and scenario analysis framework for an analyst covering Franklin Resources, focusing on forecasting Assets Under Management (AUM) flows, fee compression, and the margin impact of recent acquisitions in the alternative asset space. ## Company Overview Franklin Resources, operating globally as Franklin Templeton, is a premier global investment management organisation. The company provides investment management and related services to retail, institutional, and high-net-worth clients across over 150 countries. Business segments are primarily defined by asset class (approximate AUM mix): - Fixed Income (35-40%) - Equity (30-35%) - Alternatives (15-20%) - Multi-Asset (10-15%) - Cash Management (1-5%) The company operates an asset-light, human-capital-intensive business model typical of traditional asset managers. Its competitive position is anchored by its massive global distribution network and scale, ranking among the top 10 global asset managers with over $1.6 trillion in AUM. Recent major events include a string of acquisitions to diversify away from traditional active management, including Legg Mason, Putnam Investments (closed January 2024), and Apera Asset Management (closed October 2025), alongside significant regulatory and outflow headwinds at its Western Asset Management (WAM) subsidiary. ## Revenue Deep Dive ### Investment Management Fees - **Segment name**: Investment Management Fees (reported by asset class: Equity, Fixed Income, Multi-Asset, Alternatives, Cash Management). - **Revenue driver formula**: Average AUM x Effective Fee Rate (bps). - **Historical growth rate**: Flat to low single-digit growth (0-3% CAGR), heavily dependent on market appreciation offsetting net outflows. - **Key growth levers and headwinds**: Growth is driven by scaling higher-fee alternative assets and multi-asset solutions. Headwinds include persistent industry-wide fee compression, passive investing shifts, and severe institutional outflows at Western Asset Management. - **Pricing dynamics**: Highly competitive. Traditional active equity and fixed income face downward fee pressure, while alternatives command higher, stickier base fees. - **Revenue recognition notes**: Recognised over time as services are performed, calculated daily or monthly based on AUM balances. - **Seasonality**: Not highly seasonal, but Q1 (December quarter) often sees higher performance fees crystallising at calendar year-end. ### Performance Fees - **Segment name**: Performance Fees. - **Revenue driver formula**: Eligible AUM x Performance Return x Performance Fee Rate. - **Historical growth rate**: Highly volatile; ranges from $100 million to $400+ million annually depending on market conditions. - **Key growth levers and headwinds**: Driven by absolute and relative fund performance, particularly in alternative and hedge fund strategies (e.g., K2, Clarion). - **Pricing dynamics**: Contractual high-water marks and hurdle rates apply. - **Revenue recognition notes**: Recognised only when the fee is no longer subject to significant reversal (typically at the end of the measurement period). ### Sales and Distribution Fees - **Segment name**: Sales and Distribution Fees. - **Revenue driver formula**: Gross Sales of Load-bearing Funds x Commission Rate + Average AUM x 12b-1 Fee Rate. - **Historical growth rate**: Declining (negative 2-5% CAGR) due to the industry shift towards no-load funds and institutional share classes. - **Key growth levers and headwinds**: Regulatory scrutiny on 12b-1 fees and the shift to fee-based advisory models are structural headwinds. ## Cost Structure ### Variable Costs / COGS Franklin Resources does not report traditional COGS. The closest equivalent is distribution expenses. - **Line-by-line breakdown**: Sales, distribution and marketing expenses (largely pass-through costs paid to financial advisors and broker-dealers). - **Gross margin range**: Not applicable in traditional terms, but "Net Revenue" (Operating Revenue less Distribution Expenses) is a key internal metric. - **Key input costs**: Broker-dealer commissions and platform fees. - **How COGS scales with revenue**: Highly linear with Sales and Distribution fee revenue. ### Operating Expenses - **Compensation and Benefits**: The largest expense (typically 40-45% of operating revenues). Includes base salaries, bonuses, and stock-based compensation. Highly variable based on company performance and M&A integration. - **Information Systems and Technology**: 6-8% of revenue. Covers cloud infrastructure, trading platforms, and data feeds. - **Occupancy**: 2-3% of revenue. - **Amortisation of Intangible Assets**: Significant non-cash expense (3-5% of revenue) due to the serial acquisition strategy (Legg Mason, Putnam). - **Stock-Based Compensation**: Typically 3-4% of revenue, used heavily for retaining key investment talent. - **Restructuring / one-time charges**: Frequent in recent years due to M&A integration (e.g., Putnam integration costs) and severance programmes. ### Margin Profile - **Operating margin (GAAP)**: 10-15% (depressed recently by intangible amortisation and impairment charges). - **Adjusted operating margin**: 24-27% (adds back acquisition-related amortisation and restructuring). - **Net margin**: 6-10% (GAAP). - **Margin trend**: Compressing slightly on a GAAP basis due to fee pressure and M&A costs, but management targets stable adjusted margins through aggressive cost synergies. ## Balance Sheet Structure - **Total assets**: Approximately $22-25 billion. - **Key asset categories**: Cash and cash equivalents, Investments (seed capital and co-investments), Goodwill, and Intangible Assets. - **Goodwill & intangibles**: Extremely material, representing 45-55% of total assets, reflecting the acquisitions of Legg Mason, Putnam, and various alternative managers. - **Working capital profile**: - **Days Sales Outstanding (DSO)**: 30-45 days (fees billed monthly or quarterly). - **Days Payable Outstanding (DPO)**: 20-30 days. - **Net working capital as % of revenue**: Generally positive but not a primary driver of cash flow. - **Funding growth**: The company generates robust free cash flow and does not rely on working capital to fund growth. - **PP&E**: Minimal (1-2% of assets), primarily leasehold improvements and IT equipment. - **Right-of-use assets / operating leases**: Material due to global office footprint, representing roughly $400-500 million. ## Capital Expenditure & Investment - **Capex as % of revenue**: 1-2% (highly asset-light). - **Maintenance capex vs. growth capex**: 80% maintenance (IT refresh, office leases), 20% growth (new software platforms). - **Major capex programmes**: Cloud migration and integration of acquired IT systems. - **Capitalised software**: Material component of total capex, amortised over 3-5 years. - **M&A pattern**: Transformational and serial bolt-on acquirer. The company uses M&A to buy distribution (Putnam) and alternative capabilities (Lexington, Alcentra, Apera). - **Typical acquisition multiple paid**: 8-12x EV/EBITDA or 1-2% of acquired AUM. ## Debt & Capital Structure - **Total debt**: Approximately $3.5 billion. - **Net debt**: Roughly neutral to slightly positive net debt when excluding consolidated investment products (CIP) cash. - **Debt/EBITDA ratio**: Current net debt-to-EBITDA is approximately 0.8x. - **Credit rating**: A- / A3 (Investment Grade). - **Key debt instruments**: Senior unsecured notes with staggered maturities. - **Maturity profile**: Well-laddered, with recent repayments of 2025 notes using cash and revolving credit facilities. - **Interest rate profile**: Primarily fixed-rate bonds; weighted average cost of debt is approximately 3.5-4.5%. - **Covenants**: Standard investment-grade covenants (interest coverage, leverage limits); the company operates with massive headroom. - **Share repurchase programme**: Active but opportunistic. Typically repurchases $200-300 million annually to offset dilution. - **Dividend policy**: Progressive dividend policy. Yield is typically 4-6%, with a payout ratio of 40-50% of adjusted net income. ## Cash Flow Characteristics - **Operating cash flow conversion**: OCF / Net Income is typically 1.2x - 1.5x due to heavy non-cash amortisation charges. - **Free cash flow margin**: 15-20% of revenue. - **Major non-cash items**: Amortisation of intangible assets, depreciation, stock-based compensation, and impairment of indefinite-lived intangibles (e.g., recent WAM impairments). - **Working capital cash flow impact**: Minimal impact year-over-year. - **Capex intensity**: Very low. - **Cash tax rate vs. GAAP effective tax rate**: Cash taxes are generally in line with the GAAP effective tax rate of 28-30%, though deferred tax liabilities related to acquired intangibles create some divergence. ## Sheet Structure 1. **Assumptions**: Hardcoded inputs for AUM flows, market appreciation, fee rates, margins, and capital returns. 2. **AUM Roll-Forward**: The most critical sheet. Tracks Beginning AUM, Gross Sales, Redemptions, Net Flows, Market Appreciation/Depreciation, FX impact, and Ending AUM. Broken out by the five asset classes (Equity, Fixed Income, Multi-Asset, Alternatives, Cash Management). 3. **Revenue Schedule**: Calculates Average AUM by asset class and multiplies by specific effective fee rates. Includes performance fees and distribution fees. 4. **Income Statement**: Mirrors the 10-K. Operating Revenues, Operating Expenses (Compensation, Distribution, Info Systems, Occupancy, Amortisation), Operating Income, Non-Operating Income (Investment Income), Taxes, and Net Income. Includes a GAAP to Non-GAAP (Adjusted) reconciliation. 5. **Balance Sheet**: Assets (Cash, Investments, Receivables, Goodwill, Intangibles), Liabilities (Accrued Compensation, Debt, Deferred Taxes), and Equity. 6. **Cash Flow Statement**: Net Income, Non-Cash Adjustments (Amortisation, SBC), Changes in Working Capital, Cash from Operations, Capex, M&A, Dividends, Share Repurchases, and Debt Issuance/Repayment. 7. **Debt Schedule**: Tracks senior notes, interest expense, and maturity schedule. 8. **Valuation (DCF & Multiples)**: Unlevered free cash flow build, WACC calculation, terminal value, and EV/EBITDA peer comparison. ## Key Financial Relationships 1. **Ending AUM** = Beginning AUM + Gross Sales - Redemptions + Market Impact + FX Impact + Acquired AUM. 2. **Average AUM** = (Beginning AUM + Ending AUM) / 2 (calculated at the segment level). 3. **Investment Management Fees** = Average AUM x Effective Fee Rate (bps) / 10,000. 4. **Total Operating Revenue** = Investment Management Fees + Performance Fees + Sales and Distribution Fees + Shareholder Servicing Fees. 5. **Compensation Expense** = Total Operating Revenue x Compensation Ratio (historically 40-45%). 6. **Distribution Expense** = Sales and Distribution Fees x Distribution Payout Ratio (often >90% as it is a pass-through). 7. **Adjusted Operating Income** = GAAP Operating Income + Amortisation of Intangible Assets + Impairment Charges + Acquisition-related Restructuring Costs. 8. **Adjusted Operating Margin** = Adjusted Operating Income / Total Operating Revenue. 9. **Interest Expense** = Average Debt Balance x Weighted Average Interest Rate. 10. **Effective Tax Rate** = Provision for Income Taxes / Income Before Taxes. 11. **Shares Outstanding** = Beginning Shares - (Share Repurchases / Average Share Price) + Shares Issued for SBC. 12. **Dividends Paid** = Shares Outstanding x Annualised Dividend Per Share. ## Cross-Sheet Dependencies - The **AUM Roll-Forward** is the engine of the model. It feeds directly into the **Revenue Schedule** to calculate Average AUM. - The **Revenue Schedule** feeds the top line of the **Income Statement**. - The **Income Statement** generates Net Income, which feeds the top of the **Cash Flow Statement**. - The **Cash Flow Statement** calculates ending cash and debt balances, which feed the **Balance Sheet**. - The **Debt Schedule** calculates interest expense, which feeds back into the **Income Statement** (creating a minor circularity that should be managed with a circuit breaker or average balance toggle). - The **Income Statement** GAAP to Non-GAAP reconciliation relies on amortisation figures from the **Cash Flow Statement** and **Balance Sheet** intangibles schedule. ## Sign Convention - **Revenues and Assets**: Positive. - **Expenses**: Entered as positive numbers in the Assumptions and Schedules, but subtracted in the Income Statement totals (e.g., Operating Income = Revenue - Expenses). - **Cash Flow**: Inflows are positive, outflows (capex, dividends, share repurchases, debt paydown) are negative. - **Net Flows (AUM)**: Inflows are positive, outflows (redemptions) are negative. ## Things Most Likely to Go Wrong - **AUM vs Revenue Disconnect**: Using Ending AUM instead of Average AUM to calculate management fees will result in incorrect revenue, especially in volatile markets. - **Western Asset Management (WAM) Outflows**: Failing to model the severe, specific institutional outflows at WAM will overstate Fixed Income AUM and revenue. - **Fee Rate Compression**: Assuming flat fee rates across the forecast period ignores the structural industry trend. Equity and Fixed Income fee rates must decline slightly year-over-year. - **GAAP vs Non-GAAP Confusion**: Valuing the company on GAAP earnings will severely penalise it for non-cash amortisation related to Legg Mason and Putnam. The model must explicitly forecast Adjusted Net Income. - **Market Impact Assumption**: Assuming a flat market impact on AUM is unrealistic. The model needs an equity/fixed income market appreciation assumption (e.g., 5-7% annually) to reflect underlying asset growth. - **Consolidated Investment Products (CIP)**: Franklin consolidates certain sponsored funds. The assets and liabilities of CIPs gross up the balance sheet but belong to third-party investors. The model must isolate CIP impacts to find true corporate cash and debt. - **Performance Fee Volatility**: Straight-lining performance fees will misrepresent the lumpiness of the business. - **Crypto Asset Accounting**: The company recently adopted new crypto asset accounting rules affecting retained earnings; ensure historical equity bridges correctly. ## Validation Checks - "Total Ending AUM must equal the sum of Ending AUM across all five asset class segments." - "Adjusted Operating Margin should remain in the 24-27% range based on management guidance; flag if it drops below 20% or exceeds 30%." - "Effective fee rate for Alternatives should be significantly higher (e.g., 60-80 bps) than Cash Management (e.g., 10-15 bps)." - "Balance sheet must balance: Total Assets = Total Liabilities + Equity in every period." - "Net debt-to-EBITDA should remain below 1.5x; flag if leverage spikes, indicating a breach of typical internal targets." - "Dividend payout ratio should remain within 40-60% of Adjusted Net Income." - "Cash flow from operations must exceed GAAP Net Income due to heavy intangible amortisation add-backs." ## Key Assumptions (Default Values) | Assumption | Default Value | Unit | Rationale | |---|---|---|---| | Equity AUM Market Appreciation | 6.0 | % | Long-term average equity market return assumption | | Fixed Income AUM Market Appreciation | 3.0 | % | Long-term average fixed income return assumption | | Equity Effective Fee Rate | 45.0 | bps | Based on recent historical blended equity fee rates | | Fixed Income Effective Fee Rate | 32.0 | bps | Based on recent historical fixed income fee rates | | Alternatives Effective Fee Rate | 65.0 | bps | Higher fee rate reflecting private markets and hedge funds | | Multi-Asset Effective Fee Rate | 38.0 | bps | Blended rate for multi-asset solutions | | Cash Management Effective Fee Rate | 12.0 | bps | Low fee rate for money market and cash products | | Compensation as % of Revenue | 43.0 | % | Historical average and management target range | | Info Systems as % of Revenue | 7.0 | % | Reflects ongoing technology investments | | Effective Tax Rate | 30.2 | % | Actual reported FY2025 effective tax rate | | Annual Dividend Per Share | 1.28 | $ | Based on recent declared regular dividends | | Share Repurchases | 250.0 | $M | Estimated annual run-rate to offset SBC dilution | | Cost of Debt | 4.2 | % | Weighted average interest rate on senior notes | | WACC | 9.5 | % | Typical discount rate for traditional asset managers | | Terminal Growth Rate | 1.5 | % | Conservative long-term growth rate reflecting fee compression | ## Data Sources & Benchmarks - **Filings**: SEC EDGAR (Form 10-K, 10-Q, 8-K) and the Franklin Resources Investor Relations website (monthly AUM releases are critical). - **Key Peers**: BlackRock (BLK), T. Rowe Price (TROW), Invesco (IVZ), AllianceBernstein (AB). - **Industry Data**: Morningstar direct fund flow data, BCG Global Asset Management Reports. - **Consensus Estimates**: FactSet or Bloomberg for forward AUM and EPS consensus. ## Sources - Franklin Resources Investor Relations (Monthly AUM Reports): https://investors.franklinresources.com/ - SEC EDGAR Database (Franklin Resources 10-K FY2024/2025): https://www.sec.gov/ - Seeking Alpha (BEN Financials and Peer Comparisons): https://seekingalpha.com/symbol/BEN - Investing.com (BEN EV/EBITDA and Capital Structure): https://www.investing.com/ - StockTitan (Franklin Resources Earnings Reports): https://www.stocktitan.net/ --- ## Frequently asked questions ### What does Franklin Resources (Franklin Templeton) do? Franklin Resources, operating as Franklin Templeton, is a premier global investment management organization. It provides investment management and related services to retail, institutional, and high-net-worth clients across more than 150 countries, managing a diverse mix of asset classes. ### How does Franklin Resources generate its revenue? Franklin Resources primarily generates revenue from fees charged on its Assets Under Management (AUM). The company's revenue drivers include AUM flows, fee compression dynamics, and the strategic impact of recent acquisitions in the alternative asset space. ### What are the key capital expenditure assumptions for Franklin Resources? Franklin Resources operates an asset-light business model, with capital expenditure typically assumed to be 1-2% of revenue. This capex is predominantly for maintenance, such as IT refresh and office leases, with a smaller portion allocated to growth initiatives like new software platforms. ### What are the main growth assumptions in the Franklin Resources financial model? The financial model for Franklin Resources forecasts revenue growth, with a top assumption of approximately 8.47%. It also focuses on forecasting Assets Under Management (AUM) flows, fee compression, and the margin impact of recent acquisitions in the alternative asset space. ### Why are goodwill and intangible assets so significant on Franklin Resources' balance sheet? Goodwill and intangible assets are extremely material for Franklin Resources, representing 45-55% of total assets. This reflects the company's strategy of growth through transformational and serial bolt-on acquisitions, including Legg Mason, Putnam, and various alternative managers. ### What is the primary focus of the Franklin Resources financial model? The Franklin Resources financial model provides a comprehensive equity valuation and scenario analysis framework for analysts. It specifically focuses on forecasting Assets Under Management (AUM) flows, fee compression, and the margin impact of recent acquisitions in the alternative asset space. [Interactive forecast calculator](https://finamodel.com/companies/franklin-resources/forecast)