BlackRock CEO Larry Fink is actually cheerleading a new regulation.
The new fiduciary rule set forth by President Obama’s Department of Labour raises the standards of investment advice for retirement accounts. Meaning that investment advisors have to be more forthcoming about the products they offer investors for the more than $12 trillion in retirement accounts.
There has been some debate over the impact of the bill. Some politicians and onlookers say it will make retirement investing harder for average Americans, others believe it will help drive down the cost.
To Larry Fink, the move makes sense and will actually get more people into investing for retirement.
“Well probably most importantly BlackRock has supported the changes to the financial ecosystem, if we can enhance confidence with investors, I believe through that mechanism is going to increase and promote more investing, less savings in their bank accounts,” said Fink in the company’s quarterly earnings call.
“So the more investing and the more money clients are putting to work with greater confidence and then it’s a benefit actually for the entire industry.”
The biggest criticism of the bill is that by raising the standard of advice, it will make it more costly for advisors to keep or add clients. In turn, these advisors will be less likely to accept clients that may not net them much revenue.
To Fink, however, the bill would prove to the average American that they are more taken care of, that their advisor isn’t just there for the fees, which should make more people comfortable about putting their savings to work.
Here’s Fink again (emphasis ours):
And I think that’s one of the big points that hasn’t been part of a dialog and I think that’s a really important point. We need to have more investor confidence. I think one of the great problems we have with longevity, we in human agent process and importantly with the inability of so many people investing what I would call properly too much cash by their over emphasis in bonds. If they believe the DOL rules will give them better transparency, better certainty that they are treated well, and they invest more money for the long run.
In terms of his own business, Fink thinks that while it may take some getting used to BlackRock will be just fine.
“It’s still too early to determine the outcome for the DOL rule more broadly, but I think we are as better positioned than any organisation,” he said.
We believe it can be very powerful for our entire BlackRock solutions product suite… I think if it means more business in passive [strategies] we will benefited, if it means more business in active we’re going to be benefiting too. So I will just leave it at that and I actually have a happy general council with that answer.”
Surprisingly, Fink thinks that a rule that may inspire average people to deploy more money to financial advisors will be good for his business that offers retirement investing products. Makes sense.