Influencers with Andy Serwer: Jenny Johnson

In this episode of Influencers, Andy is joined by Franklin Templeton President & CEO Jenny Johnson as they discuss volatility on Wall St, the meme stock frenzy, and why she thinks blockchain technology will be a major disruptor in the world of finance.

Video transcript

ANDY SERWER: Jenny Johnson has ambitious plans for the family business. After stepping into the role of CEO at Franklin Templeton last year, she's taken steps to expand the global investment firm, which now oversees $1.5 trillion in assets under management. In this episode of "Influencers," I speak with Jenny about volatility on Wall Street--

JENNY JOHNSON: There's some of that that's noise, and there's some of that that is absolutely disruptive.

ANDY SERWER: The risk behind the meme stock frenzy--

JENNY JOHNSON: Yeah, you time it right, you know, you're going to do great. On the other hand, you could lose everything.

ANDY SERWER: And why she thinks blockchain technology will be a major disruptor in the world of finance.

[MUSIC PLAYING]

Hello, everyone, and welcome to "Influencers." I'm Andy Serwer. And welcome to our guest, Jenny Johnson, President and CEO of Franklin Templeton. Jenny, nice to see you.

JENNY JOHNSON: Great to be here, Andy.

ANDY SERWER: So I want to jump right in and ask you what sets Franklin Templeton apart from other investment funds? You've said you take a long view because it's a family business so your legacy is tied to the company. How does that affect the fund's approach?

JENNY JOHNSON: You know, I think our great differentiator is $1.5 trillion asset managers-- you get the benefit of that kind of scale, and I'll talk about why I think there's a benefit to that-- but the absolute independence of every investment team. So you really get the sort of boutique manager on the strength of a $1.5 trillion platform.

And you know, we fundamentally believe that things like AI and data-- that active managers are going to have to be as good as Google is and being able to analyze and gain insights from non-traditional sources of data. So one of our approaches is that we have an investment data leg. So let's say a team has an idea of-- we have one team in India that wanted to build models around motorcycle sales and things.

So they go out and they're looking at social media types of ideas, and they bring that in, they build the model. The model's proprietary to the team, the data becomes shared, right? And so our global macro team, for example, uses 14 different data feeds for their ESG type of framework. The framework's proprietary to their investment process, the data becomes available to other teams. So we think being able to have that kind of asset base to share that-- things like that access to data, risk management, compliance oversight-- you just have a great strength when you can build that-- and technology, investment, those types of things.

ANDY SERWER: Jenny, so you talk about the autonomy for the investment teams, but how, really, is that different from, say, one of your competitors? Because wouldn't they say, well, yeah, we have autonomy too. So how is that manifested?

JENNY JOHNSON: Well, I think, you know, in our case, the autonomy-- I can't speak to all the different firms-- I mean, ours are literally companies that have grown up kind of independently. And you know, one of the reasons Franklin was comfortable with the Legg Mason acquisition is because Legg Mason was known for having these investment affiliates.

Well, our Templeton teams, when Franklin acquired Templeton all the way back to 1992, you had two different teams-- an emerging market team and a global equity team. And they remained completely independent-- no co-location. In one of the offices, they even had different entrances, and mutual series were separate.

So we knew that we'd be comfortable keeping the investment process unique and autonomous, but being able to have that shared platform of investment. And honestly, you say others have that, I actually don't know of another asset manager that has that similar type of model. And ours go all the way down to the individual brand.

ANDY SERWER: Right. You took over as CEO last February, which more or less coincided with the onset of the pandemic. What was it like weathering that initial market shock as CEO?

JENNY JOHNSON: You know, I guess this is where that long-term focus-- you know, we have, you know, founders, employees you know, who still own over 45% of our stock. So we announced this acquisition. Within a month-- probably, I think, three weeks, you have COVID hit, the market takes a dive. And you start getting a lot of noise in the media about whether or not, oh, did we make a mistake? Was our timing awful?

But you know, I got to be honest-- when we talked about it, we said, we did this deal because it was a growth story for us. It got us asset classes that we knew we needed to have. We wanted to be bigger in fixed income-- core plus fixed income. We wanted to have alternatives-- we got an amazing real estate manager with Clarion.

You know, we knew that we were getting an institutional distribution network, SMAs-- all these things were important. Well, they were as important the day we announced the deal as three weeks later when COVID hit. And you know, if you're thinking about it long-term, you know that this is going to be a temporary downturn. And, frankly, in the Asset Management businesses, rarely do people sell when there's been a big market drop, right?

They usually have enough income coming in that they can withstand it. So you know, you're going to end up buying as things have done better. So anyway, that's a kind of example. So I was fortunate in that the board continued to be supportive, the shareholders were supportive, everybody thought it was the right decision. And then I run our ops and tech group, and I've been passionate for years about doing videoconferencing.

I mean, we were doing it when it was a separate desktop device, because, you know, Franklin Templeton has offices in-- over 100 offices in over 35 countries. And 70% of communication is that nonverbal. So if you add the cultural distinction of being located in different countries and you're not sitting in the same room, if you can't see each other, you're not going to be able to be effective in that communication. So we had pushed far into that, so it was very easy for us to make a shift into operating remotely.

ANDY SERWER: Being from Maryland, I know Legg Mason well. You got some old school Baltimore talent in there, right?

JENNY JOHNSON: Absolutely.

ANDY SERWER: You've spoken about the importance, Jenny, of making remote work collaborative, and equitable, and flexible. What specific things do you do at Franklin Templeton to foster that environment?

JENNY JOHNSON: Well, so one thing-- well, as far as remote work with COVID, I mean, we shifted to, I think, 97% or something within a matter of two weeks, including our full call center, where folks were working remotely. But then we pretty quickly recognized that it wasn't the best situation for all people. So we actually allowed people, giving a priority to those who didn't necessarily have a great home situation, to come into the office.

And so less than about 5% of employees did that, but there were some that needed to do that. And then we created an environment where it was safe for them to be there. Depending on the situation we might have had in certain markets to provide internet access or laptops home-- and then we created a real wellness site, where-- and you know, I think a lot of companies did this is you evolve, right, where you realize there's a lot more issues going on here.

There's mental health issues. There's loneliness issues. We need to make sure that we're tapping into this and doing surveys and things with employees, and really push managers to, say, check in with your employees. Don't just assume they're OK. Try to have more meaningful one on one conversations that you take for granted when you're in the office.

And so we really pushed a lot to start dealing with kind of the mental health issues that come in that.

ANDY SERWER: And where do you stand right now with people working remotely or working in the office, Jenny?

JENNY JOHNSON: So we-- first of all, we started getting some noise around-- probably around April, even maybe a little earlier, where employees were looking for certainty around their summer plans, because they needed to figure out their child care situation. And they were worried about what our plans were back to the office.

We said, you know, everything's going so well, we're going to say that nobody has to come back into the office before September 7. So let's say there is a team that decides they want to start having people come back to the office, you can opt out. And then after that, we have really, honestly, come sort of full circle on this, where we feel like it's very important for individual teams to make decisions about how best to operate.

We've certainly started out with the investment teams right out of the gate and said, we believe your operating model in or out of the office, hybrid or not, is part of your investment process. So you're going to own that. We're not going to mandate something across the firm. And then what I always say to the executives and the CIOs is whatever policy, you know, we're going to sit here and talk about making, imagine one of your top performing employees coming to you and saying, for my personal reason, I need to go live in x location, will you accommodate me?

And the second you have to accommodate that person, you're going to have to accommodate others. Now, there's some jobs that it really, really benefits for having people co-located, but not every job is that way. And the old manager that used to manage by saying, boy, that guy gets in early, and stays late, and seems to be busy all the time really is doing a great job-- it forces you to manage people's results.

And frankly, the more you can accommodate people's schedules and recognize in the old days when it was work and home and they didn't meet, now it's going to look like this, and it's gotten even more so-- that you're going to have to allow your employees to operate that way. The more flexibility you can provide them, I think you win the war for talent.

ANDY SERWER: Interesting. I love that point about actually managing people on results rather than just FaceTime. Jenny, I have to ask you about what must be a difficult situation for your company. And that is last May, a video went viral of a Franklin Templeton employee, Amy Cooper, calling the police about a Black man who was bird-watching in Central Park. She was fired and has since sued the company. What have you learned from that saga?

JENNY JOHNSON: You know, one of the things that I-- and, obviously, since it's under litigation, I have to be a little careful it in how I talk about it. But you know, I would say just in general, I've been in a couple of situations where social media got it wrong. And it's difficult as a CEO and as a firm when social media doesn't have it right, and you need to stand by people.

In the case of that situation, we stand by our decision. We felt-- we feel confident in the due diligence we did and the process to make our evaluations and our decision. And we stand by that decision. But I think that the world has gotten to the point where social media comes to very quick decisions without all the facts, and that gets hard for companies.

And I had this conversation with some employees over an issue recently, and my comment to those employees was, here's why social media doesn't have the facts right on this particular situation, and here's why we're going to stand by, and I am going to stand by our decision. Because you want to work for a company where the firm has your back. That people don't get the facts right, you know, the company just doesn't throwing under the bus.

And I think the only way that I would feel good or any of my leadership team feels good is we try to make those decisions based on what we believe are being fair, are standing by our values, even though sometimes it means taking the heat in the short run.

ANDY SERWER: Just one quick follow-up question on that-- and I appreciate this-- did you communicate firm-wide about this particular scenario?

JENNY JOHNSON: The one I was referencing?

ANDY SERWER: No, the one with this particular employee.

JENNY JOHNSON: Amy Cooper in May, or the one--

ANDY SERWER: Amy Cooper one-- or both, I don't know. I mean--

JENNY JOHNSON: Yeah, well, so, I mean, it was fairly public, right? We came out pretty quickly. We-- a SWAT team had gotten together that represented a lot of different parts of the firm. We did an evaluation of the situation.

And then we communicated both internally and externally, really, about the same time. I think it's important to do.

ANDY SERWER: Right. What about addressing diversity and inclusion within your own company, Jenny? What have you done, and how much progress do you think you've made?

JENNY JOHNSON: Well, first of all, listen, I am passionate about D&I, because I think it's a real growth story. And it's about getting the best talent. And, you know, Andy, I don't know if you're a baseball fan, but I like to say that the movie "Moneyball" can teach us all a lot about what unconscious bias is-- you know, does.

You know, in that, where they're saying, oh, that pitcher is not good because he's got the side arm, and he won't-- you know, and all these different things. Well, that's honestly what happens in hiring talent, right? And so we're doing a lot of training around that. We hired a Chief Diversity and Inclusion Officer, Regina Curry. She reports to me.

That was, you know, last-- I think it was March or April. We are focused on the entire pipeline. So one is we did an assessment internally to understand how people-- how employees of color, how women-- what are our statistics throughout the firm? What are people's actual experiences? I individually met with our business resource groups to talk to them.

And honestly, I learned a lot in the process about what different groups' experiences and their personal needs are. So I think a lot of it is listening and making sure you are listening. But it also goes all the way to starting at the pipeline. So we actually would do programs at high school level girls to get them interested. And I, you know, tell a story about-- talking to-- I have five children, and I was talking to my daughters about whether or not any of them would be interested in coming into finance.

And my daughter said, no, mom, I want to do something that helps people. And I said, are you kidding me? This is a business that helps people. Talk to people, you know, who don't have enough money to retire. And believe me-- they're worried. Or somebody who has a special needs child and wants to make sure that there's enough money to take care of that child when they're gone-- those are real problems for people. And this is a great business.

And I realized that one is, we have to do a better job at describing what it is that we do in a way in which it resonates with people and they can connect the dots in helping them. And two, we need to get, you know, women earlier-- so we do internship programs, people of color so they see themselves in this business and can recognize that this is a great business for them.

So we do-- in the UK, we're participating in a program called 100 Black Interns. We have done some work with historically Black colleges and universities to do internship programs here. We do a program with a local university where they are all first generation college students. So that's about the pipeline.

So then you got to measure-- are you getting-- are you increasing your pool? Because if you only recruit from-- I would say if you fish from the same pond, you're going to catch the same fish. So if we're not expanding the pools of where we're recruiting, we're not going to change our makeup.

And then once you bring them in, making sure that you're able to retain, and hire, and listen to people's experiences. And so we came out with a corporate social responsibility scorecard. It's a very transparent metrics. And we did it intentionally, because, you know, we want to be held accountable for making improvement in this area.

ANDY SERWER: You know, I never considered "Moneyball" a lesson in subconscious bias like that. That's fascinating. That's great. Let me ask you about the markets a little bit.

We've seen, obviously, a lot of volatility, a lot of crazy new things-- meme stocks, crypto. Give us your sort of 30,000-foot assessment of what's going on right now in the marketplace.

JENNY JOHNSON: Yeah, so, you know, you have to separate sort of the noise and really kind of the fundamentals that are going on. And I think when you talk about meme stocks-- and I'll talk a little bit about my view on some of the crypto stuff-- there's some of that that's noise, and there's some of that that is absolutely disruptive.

But I think, you know, just from a market standpoint, you look at it, you say, all right, you know, we've just come off of a decade where there's just been massive central banks pumping money into the system. You've had interest rates at historically low levels. They're not going-- they can't fall off the floor. They're probably not going much lower.

So they're either going to stay there for a while or they're going to go up. Well, that means how you're positioned-- you look at, like, the passive bond indexes, you know, their durations have expanded over the last 15 years. That becomes a different risk. Equity in markets, where [AUDIO OUT] for 50% of the return in the last 10 years.

So there's a lot that have been great tailwinds for this last decade. And I can say one thing for sure is the next decade is going to have the same tailwinds. And so I think there's going to be some real challenges there. And right now, we are hearing about the kind of resurgence of the Delta virus with COVID.

I think there's a lot of noise there. I think just like-- you know, this is where you got to pick your spots-- I think in the US, where you've had 70% of the population of-- kind of the higher risk population all vaccinated, probably in really good shape. While people will talk about the number of COVID infections, the truth is if you've been vaccinated, the number of people who end up being hospitalized and deaths-- I think of the 154 million people that have been vaccinated, there's been 600 deaths associated to COVID.

You know, listen, it's serious still, but it's not what lockdown is about, right? But in a market like Australia, where 6% of the population has been vaccinated-- India, Brazil-- you're probably going to need to go back to really serious lockdowns. And so I think you have to understand, actually, that level of detail to understand where you want to invest. And so, you know, I think that, to me, you know, we're just a big believer in active management.

And I think this is an environment where that's really important. And then to the extent on the meme stocks-- look, I never like investing where there isn't fundamentals behind it. And I think the challenge with things like the meme stocks-- yeah, if you time it right, you know, you're going to do great. On the other hand, you could lose everything.

I also tend to believe on the digital assets, I think things like Bitcoin-- I'm not a big fan. You know, and I've, obviously, been wrong in so many ways-- although you could have lost 50% if you bought in at the peak noise pre-Elon Musk's tweet, I think. But the tokenization and blockchain are going to be hugely disruptive to the financial services industry.

And I think we are at the very, very early stages of that. I'm not even sure folks completely understand how disruptive that could be. And I think that it is something I'm spending a lot of time and my team's spending a lot of time just trying to think about and understand.

ANDY SERWER: Kind of disrupt your business, you mean?

JENNY JOHNSON: Oh, I think that-- I'll use an example of-- here's where I think it can be really exciting. You know, one of the things that we've seen in the last decade-- let's face it, Andy, if you had money, and you're a qualified investor, and you could take advantage of illiquidity premiums in alternative assets, you did better than the average person-- which, by the way, is a problem.

So we're actually spending a lot of time trying to think about, how can you appropriately get some of these alternative, illiquid assets out to, really, the masses? And we think retirement plans are a good way to kind of do something like that-- bundled in a managed product. But I think that, you know, if you think about real estate, you could sell-- if you own the Empire State Building, you could sell it to a million people, probably get a higher return because you're able to sell it to a lot more people.

And they can then go and sell it without going to the title company and all those intermediaries because the entire contract, including who's managing that building, is built into the token. So that becomes really interesting, right, and start to unlock these illiquid assets. You know, you think about sports teams-- the Green Bay Packers, they essentially sold a piece of the team. It's all tokenized.

It's almost a loyalty program, but you can see how there could be some interesting ways in which you can repackage ownership. And I think that blockchain enables that.

ANDY SERWER: You talk about opening up opportunities to all, really. And I want to ask you, then, about wealth inequality. Because, obviously, it did get worse during the pandemic. How does this connect to your firm?

I mean, some people would say, oh, money management firm, you guys just make wealth inequality that much worse because your clients do great, and there's not enough working people or poor people able to invest in your fund. Is there a role for Franklin Templeton to address wealth inequality, Jenny?

JENNY JOHNSON: Well, it's interesting that you say that, because, Andy, the whole point of mutual funds came out of the fact that only the wealthy could invest in the stock market, right, because you had to have a certain amount of money to invest in the stock market. Somebody finally said, wait a second, if we pool our assets together, we can actually give daily liquidity at a really reasonable price with professional management, right?

So that is as relevant today as it's ever been. I think the vehicles are going to change. Technology is going to enable a lot more really separate accounts. So you won't have to necessarily put it in an ETF or a mutual fund. I think there's certain types of mandates that are better in those types of products. But I think you're going to see that, actually, what technology is doing is it is bringing to the masses what historically was only available to the ultra high net worth.

I do think that one of the issues with the last decade, where it was a real attempt to kind of spur the economy post-'08 by keeping rates low-- that's a great way to spur the economy-- but by the fact that wealthier people can borrow, essentially, at 0 and invest right in itself becomes, you know, an inequality factor. And I do think that changes over time.

But I think more importantly, what makes me more optimistic is that there's going to be these things that traditionally weren't available to everybody that are now, because of technology, are going to actually be available as investment opportunities. And then it comes down to, how do you get to people to get them to invest early?

And if there's one message I like to leave folks is, if you invest $5,000 a year for 10 years, from age 25 to 35, and you get a 7% return versus somebody who invests $5,000 a year from age 35 to 65-- the person who did that 10 years younger, because of compounding, will have more money at retirement. What we need to do is to create policies and ways in which we can get people investing earlier.

And it's honestly going to be more challenging with a gig economy. You know, I think the 401(k) system has done a really good job for people who have a traditional employer. But we have to come up with some policies and opportunities for people who don't have that same kind of employer-based plans.

ANDY SERWER: Right. You're one of the few CEOs in the business who's a woman. And I want to ask you-- what was it like climbing the ranks in the field? And what do you think is the most important thing the industry needs to do to make changes so there's more jobs for everybody?

JENNY JOHNSON: Well, I think that the things that I kind of talked about in our D&I program is really important to attract people who want to be in this business. For whatever reason, I always wanted to be in this business. I'm not sure why, but I did. It was kind of built in, it was part of the family, I guess, but I wanted to be in this business.

And I look at my daughters, and they don't really have an interest in being in the business. So I think that's my family of not describing it in a really good, exciting way. But I think it's about getting girls, getting, you know, historically underrepresented people in doing internships, in with mentors who can talk to them and tell them why this is a great business and why there's a place for them in that business. And I think when people get in, and see it, and see the passion around it, i think we're going to change the makeup of the people who participate in this business.

ANDY SERWER: Let me follow up on that bit about you saying that you wanted to work at the company. I mean, Franklin Templeton was founded by your grandfather, and you started working in the mailroom when you were 14? Have you ever put yourself on the couch, Jenny, and asked yourself, like, why did you want to do this?

JENNY JOHNSON: Honestly, I one time said to my father, I don't know what you did by giving me this DNA, because, you know, I'm not sure I have to work as hard as I work. It's just kind of built in me. I love what I do.

I mean, I get excited about coming into the office. I get excited about what we do every day. And the only other career I considered was actually to be a coach. So I loved coaching, but then I figured out I could volunteer and coach and get paid to work. And so I could satisfy both passions.

But, frankly, a lot of what you do as a manager is coaching. And so I actually find that I get to do that part of my passion as well.

ANDY SERWER: I think someone told me that you said your family isn't like the family on the TV show, "Succession." So what does that show get wrong about wealthy families, or maybe about your family, then?

JENNY JOHNSON: Well, I think they try to make it look as if everybody is pitted against each other and fighting against each other. And that's not my family. We, frighteningly even as adults, still vacation together. I mean, some people laugh at-- I think some of the partners and in-laws laugh, like, really, we're doing another family vacation?

We get along well, and like any family, we have disagreements about things. But you know, I think my parents did a great job at raising us, you know, to get along with each other well.

ANDY SERWER: And final question here, Jenny-- what do you think you'd like your legacy to be with the company when-- or if and when you pass it on to the next generation, or just an outside person to be your successor?

JENNY JOHNSON: You know, I'd say-- I think I just passed my 33rd anniversary-- that's not including my summer stints in the mailroom and things, but my 33rd official anniversary with the firm, and I can tell you, Andy, that there has been no time like the present as far as how I think the pressure for this business to evolve.

And honestly, I look at it and I think that the legacy I want to have is that I had enough insight with-- you know, and got the right team together to be able to understand how this business is evolving, such that it's there for the next generation. Because I do think it's changing.

And it's important that we evolve with it. And that means, you know, in the end, you only exist if you're doing it right for your clients. And so that means getting it right. My father always says, take care of the clients, and the business takes care of itself-- and so being able to evolve to whatever those clients' needs and evolving our business to be able to meet those needs.

ANDY SERWER: Jenny Johnson, Franklin Templeton President and CEO, thank you so much for your time.

JENNY JOHNSON: Thank you, Andy. It's great to-- great to see you. And thanks for having me.

ANDY SERWER: You've been watching "Influencers." I'm Andy Serwer. We'll see you next time.