When the Securities and Exchange Commission (SEC) announced an initiative to reform mutual fund disclosure requirements in 1996, advisers to most of the nation’s more than 8,000 mutual funds took a “wait-and-see” approach. Not Franklin Resources. Franklin immediately saw that prospectus simplification could improve fund marketing and promote closer relations with investors. Instead of waiting for the SEC to come out with guidelines, Franklin seized the opportunity to create a new disclosure system that would be user-friendly and make business sense.
Creative thinking improves the disclosure process
Teaming with Stradley Ronon lawyers, Franklin reviewed its disclosure documents from the ground up. Rather than simply translating the existing legal language of the documents into more understandable English, Stradley Ronon lawyers went back to basics. Surrounded by stacks of finance dictionaries, textbooks and law books, and with the input of investment professionals and investors, they worked for six months to rethink and recast Franklin’s prospectus disclosure language and policies. Questions such as “What are the principles underlying this fund?” and “How can we most clearly communicate those principles to the investor?” pointed the way toward informative, easy-to-understand disclosure documents that would also be effective marketing tools.
By June 1997, Stradley Ronon had created four simple, powerful document templates for Franklin. Franklin staff were trained to adapt the standard language for use in prospectuses for all their funds, resulting in high-quality disclosure with a smaller ongoing investment of time and money. When the SEC’s new prospectus disclosure rules went into effect two years later, Franklin’s system was well on the way to complying with them.
New insights lead to new products
Discussions with brokers and investors had brought deeper insight into the personality and needs of fund investors. Franklin developed new products to match those needs, including funds focused on areas of current interest, such as biotechnology and emerging markets, and “fund-of funds” products to give investors a convenient way to diversify their portfolios. The company also created new retirement savings vehicles in response to aging baby boomers’ desire for a variety of options. And a revised quarterly products guide, created with the help of focus groups, has made it easier for registered investment advisers to explain and market Franklin’s selection of products.
Today, Franklin is the largest publicly traded global investment management organization in the United States, with approximately $226 billion in total assets under management.