BlackRock’s Fink calls for industry to raise its game

The asset management industry must raise its game if it is to provide investors with a decent retirement and kick start growth in the economy, said Larry Fink, co-founder of BlackRock, in a speech given at the Council on Foreign Relations in New York.

Fink called on the asset management industry to educate investors on the need to start investing again, and so generate growth in the economy. Far too many assets are currently sitting in cash, he said, and investors need to be turned from “short-term savers to long-term investors”.

Where the asset management industry failed is in its focus on the cost of risk or volatility. Instead, Fink said, the industry should be focusing on “the cost of sitting on cash”.

Fink stressed the need to adapt to changing circumstances. He pointed out three forces that are emerging simultaneously to create a ‘New World’: the Great Ageing, where the over-60s will grow at twice the rate of the rest of the global population; the Great Deleveraging of debt and risk; and the Great Migration of the engines of growth towards emerging markets.

Faced with this challenge, the investor must adapt, said Fink. He called for investors to take a long-term view on their investments, “but I’ll be the first to say the asset management industry has not done a great job of helping investors take a long-term view. We have to step up to offer guidance and provide answers.”

The traditional 60/40 mix of stocks and bonds is no longer sufficient, says Fink. Investment options include new sources of income, such as dividend paying stocks or higher yielding corporate bonds, using passive and active investments, and alternatives.

Investor confidence needs to be boosted, through improved regulations that provide clarity and transparency. “We need financial products and disclosures that ensure individual investors know what they are buying, including real risks and costs. We believe, for example, that in the fast-growing ETF sector, better labeling would boost investor confidence.”

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