Franklin Templeton has taken a significant step in reshaping its Canvas custom indexing platform by opening it to outside asset managers for the first time. The San Mateo, California-based firm announced the Canvas Preferred Partner Program (P3) on Wednesday, allowing competitors such as Federated Hermes, MFS Investment Management, and T. Rowe Price to distribute tax-managed versions of their proprietary strategies through the technology. This move marks a strategic pivot from Canvas serving solely as a vehicle for Franklin Templeton's own products to becoming an open infrastructure layer for tax-aware portfolio management across the separately managed account (SMA) industry.
Under the P3 structure, participating managers contribute their existing investment strategies, while Canvas applies its tax overlay technology—including tax-loss harvesting, tax-aware transitions, annual tax budgets, concentrated stock diversification, and client-specific restrictions—at the individual account level. The goal, according to Franklin Templeton, is to preserve each partner manager's investment philosophy while wrapping it in systematic after-tax optimization. Roger Paradiso, head of Franklin Templeton Custom Client Portfolios, stated in the announcement, "We built Canvas to help advisors deliver more personalized and tax-efficient portfolios at scale. Canvas P3 further expands our strategy suite and gives advisors a way to access strategies from other select asset managers they also want to work with while adding tax-aware implementation at the individual account level."
Mark Lavan, head of wealth management at Franklin Templeton, framed the initiative as a way to change the nature of manager conversations with advisors. "By bringing other managers' strategies onto the platform, Canvas can help transform a manager's conversations historically anchored in performance, into a more personalized and integrated portfolio experience for advisors and their clients," Lavan said. The initial P3 strategies will be offered as SMAs, which are gaining traction among advisors to affluent clients who demand account-level customization. A February 2024 survey by Escalent Financial Services found that average SMA allocations among financial advisors were expected to rise from 18% to 26% by 2025, with high-net-worth advisors projected to push their SMA exposure from 23% to 31% in the same period.
The decision to extend Canvas to third-party managers represents the latest chapter in its evolution since Franklin Templeton acquired O'Shaughnessy Asset Management in late 2021. At the time of that deal, Canvas—originally developed by O'Shaughnessy as a direct indexing and custom indexing solution—had accumulated approximately $1.8 billion in assets since its 2019 launch. In June 2024, Franklin Templeton struck a partnership with UBS Wealth Management to introduce Canvas-powered tax-managed SMA strategies—including offerings from ClearBridge Investments—to the wirehouse's single and dual contract SMA platforms. By July last year, Franklin Templeton had added managed options capabilities, enabling advisors to implement risk management and income generation strategies within a single Canvas account. That September, it followed up with the introduction of tax-aware long-short strategies, starting with a U.S. Large Cap 130/30 structure.
As of mid-2025, Canvas had grown to approximately $13.8 billion in assets, against a total SMA platform of roughly $155 billion. The P3 launch arrives at a moment when the wealth management industry's appetite for managed accounts shows little sign of slowing. According to Cerulli, managed account assets in the U.S. reached $13.7 trillion in 2024, a gain of nearly 20% from the prior year. Cerulli expects that figure to grow at an annualized rate of 12.3% through 2028, reaching approximately $21.8 trillion. This trend underscores the growing demand for tax-efficient solutions among advisors and their clients, particularly as high-net-worth investors seek personalized portfolio management.
The Canvas P3 program also aligns with broader industry shifts toward open architecture and platform-based distribution. By opening its tax overlay technology to rival managers, Franklin Templeton is positioning Canvas as a key infrastructure provider in the SMA space, potentially attracting more assets and partnerships. The program's initial participants—Federated Hermes, MFS, and T. Rowe Price—are well-known active managers that can now offer tax-managed versions of their strategies without building their own technology. This could accelerate adoption of tax-aware investing among advisors who prefer to use established managers' strategies.
For advisors, the P3 program offers a way to access tax-managed SMAs from multiple managers through a single platform, simplifying due diligence and implementation. As SMA allocations continue to rise, tools like Canvas could become essential for delivering after-tax returns. Franklin Templeton's move also reflects a broader trend of asset managers leveraging technology to differentiate themselves in a competitive market. The company's earlier partnership with UBS and its expansion into managed options and long-short strategies demonstrate a commitment to evolving Canvas as a comprehensive platform.
Looking ahead, the success of Canvas P3 will depend on how many additional managers join the program and how effectively Franklin Templeton can scale the technology. With $13.8 billion in Canvas assets and a growing SMA market, the platform is well-positioned to capture a larger share of tax-aware managed accounts. However, competition from other direct indexing platforms, such as those from BlackRock and Vanguard, remains intense. Franklin Templeton's willingness to open its platform to rivals may prove to be a strategic advantage, fostering a broader ecosystem that benefits advisors and their clients.
