In newly published paper, Sandy Kaul, SVP, Digital Assets and Industry Advisory Services, anticipates changes in Web3 economy

Franklin Templeton is excited to announce that Sandy Kaul, SVP, Digital Assets and Industry Advisory Services, is launching her first Franklin Templeton Institute research series since joining the firm in April 2022: Five Tech-Driven Megatrends Reshaping Society & Investing. The paper will be published in three parts over the coming months, starting with Part 1: Evolution of Commercial Technologies & Impact on Business Delivery which is now available in full and summary form, followed by Parts 2 and 3, laying out the megatrends and their impact on investing.

Kaul’s in-depth research examines the three cycles of commercial tech-driven innovation that have taken place since the 1960s. The paper also outlines how the emerging fourth wave—Decentralization—will lead to a new peer-to-peer economy and mark the culmination of the megatrends that have been building since computerization moved into the commercial realm.

“Tech-driven cycles have already re-shaped both society and investing on three separate occasions—changing the nature of the technology we use, the way that business is delivered and businesses’ approach to building their commercial infrastructure,” Kaul notes. “Though the changes have occurred within each cycle, there have been a set of megatrends that have emerged and become amplified across the three cycles we have already completed. These megatrends will reach their culmination in the coming fourth cycle of innovation, enabled by Web3, blockchain and smart contracts.”

The five megatrends Kaul outlines are:

• Democratization of access – Today, incentives diverge—as network effects take hold on platforms, owners look to maximize profit and users seek to enhance the experience and utility. Web3 commercial protocols align incentives as the users of the networks also become the owners through direct investment and participation rewards.
• Decomposition of business delivery – Today, businesses compete by aligning alongside other businesses/apps to create a proprietary ecosystem to attract users. In Web3, competition shifts to offering composable and interoperable offerings that combine processes in new ways that get delivered directly to the user.
• Expanding power of the crowd – Today, marketing and consumer demands are shaped by feedback between businesses and consumers. Web3 puts the crowd in control as services and goods can also deliver utility and thus need to appeal to crowd factors: prestige, influence, access, exclusivity, reward.
• Institutionalization of the individual – Today, users can share their assets and resources, but platforms control the access, data and money flows. Web3 lets individuals create tokens that embed their assets, utilize them as collateral, control access and join protocols that leverage their resources to directly monetize them.
• Quantification of behavior – Today, customer behavioral analysis focuses on specific actions and assigns consumers to cohorts based on pre-defined journeys. Web3 adopts a life-centric model where each user’s assets, resources, actions and behaviors inform the presentation of goods and services.

Kaul���s research suggests that the asset and wealth management industry has already been profoundly altered by the first three tech-innovation cycles. The fourth tech-driven innovation cycle may look markedly different as decentralization disrupts many aspects of the traditional finance landscape over the next decade.

“Today’s focus on delivering tailored, customer-centric portfolios that deliver not only risk-adjusted returns, but also other goals-based outcomes and optimizations is a direct result of the AI, big data and cloud-computing capabilities enabled by the third cycle of tech innovation that began in the mid-2000s,” said Kaul.

Franklin Templeton has embraced this new solutions-focus with offerings such as the firm’s dynamic portfolio construction tool Goals Optimization Engine (GOE), its custom-indexing solution Canvas, and a suite of AdvisorEngine offerings.

“As the fourth cycle unfolds, investment portfolios will expand to include more types of digital and physical tokenized assets, and investors will look to obtain a more multi-dimensional set of returns including a broad-set of income opportunities and utility—special access, unique offers or exclusive benefits—from their portfolios,” Kaul continued.

Roger Bayston, Head of Digital Assets for Franklin Templeton, said, “Franklin Templeton is committed to providing innovative investment products, technology and services in the asset and wealth management space. We have already built out our infrastructure to facilitate Web3 engagement, have designed and launched future-state digital investment products and token-focused research, and have developed and implemented a proprietary blockchain-integrated system for mutual fund recordkeeping that maintains official fund transactional records on the public blockchain. We are continuing to build new tools in our digital asset ecosystem.”

Franklin Templeton’s first listed digital asset SMAs were announced earlier in September and will be available with a single-click access to wide variety of wealth advisor networks this fall.

All Investments involve risk, including loss of principal. Past performance is not guaranteed of future results.

Separately Managed Accounts (SMAs) are investment services provided by Legg Mason Private Portfolio Group, LLC (LMPPG), a federally registered investment advisor. Client portfolios are managed based on investment instructions or advice provided by affiliated subadvisors of Franklin Templeton. Management is implemented by LMPPG, the designated subadvisor or, in the case of certain programs, the program sponsor or its designee.

About Franklin Templeton

Franklin Resources, Inc. [NYSE:BEN] is a global investment management organization with subsidiaries operating as Franklin Templeton and serving clients in over 155 countries. Franklin Templeton’s mission is to help clients achieve better outcomes through investment management expertise, wealth management and technology solutions. Through its specialist investment managers, the company offers boutique specialization on a global scale, bringing extensive capabilities in equity, fixed income, multi-asset solutions and alternatives. With offices in more than 30 countries and approximately 1,300 investment professionals, the California-based company has 75 years of investment experience and approximately $1.4 trillion in assets under management as of August 31, 2022. For more information, please visit franklintempleton.com and follow us on LinkedIn, Twitter and Facebook.

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