Why BlackRock CEO says retirement crisis is getting worse

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profits rose in 2020, world’s largest asset manager enjoying increased savings and investment, upcoming US pension crisis worsens, says BlackRock CEO Larry Fink.

The three reasons are low interest rates, low savings rates and more part-time and self-employed workers in the economy. Partly because of the low savings rate among US households, Fink said he believes the US needs more fiscal stimulus than Europe.

In the first quarter of 2020, the savings rate in Europe was around 15.6%, compared to 8.3% in the United States in March.

“I am petrified by the silent retirement crisis,” Fink said in an interview with Barron’s. “The big problem is a high percentage [of people in U.S.] in part-time or self-employment without pension funding. Although those who work for large companies have retirement savings, many companies do not adequately teach financial literacy.

“The reason the United States needs more fiscal stimulus than the European economies is because Americans don’t have enough savings,” Fink continued. “When you have a crisis like the pandemic, Europe is better prepared thanks to larger and deeper economies” and a stronger safety net. “The United States is less prepared than Europe in terms of the financial resilience of families because we are not a savings society.”

Separately, Fink’s outlook for the stock market remains positive due to persistently low interest rates, and because he believes coronavirus vaccines will be “fully released” by the end of the second quarter, producing collective immunity in the third trimester. This will revive parts of the economy that have stagnated and lay the groundwork for better growth later in the year.

“I do not expect [the market] to increase like it did in 2020, but I think the foundation of the markets will be good, ”said Fink. That’s not to say things will go smoothly: Fink also said he expects a 5-10% correction over the course of the year.

Finally, Fink said that even though the United States restricts investment in China, BlackRock has seen record inflows of money into Chinese investments from global investors.

“Let’s be clear: a lot of big American companies are very active in China and sell goods, so our trade deficit with China has never been bigger,” he said. “We stand by our country’s wishes and we will do whatever is necessary, but we see global investors heading to China, not far from China.”

He added that he welcomed the prospect of discussing the need for China’s multilateral approach with the Biden administration. “It is necessary that the No.2 and No.1 markets have conversations and multilateralism to build a better world,” he said.

Fink also said BlackRock was re-examining its political spending following last week’s insurgency by supporters of President Donald Trump trying to stop President-elect Joe Biden’s certification of victory. The company has stopped its political spending.

Previously, BlackRock reported that 2020 profits climbed to $ 4.9 billion, or $ 31.85 per share, on revenue of $ 16.2 billion. That compares to earnings of $ 4.5 billion, or $ 28.43 per share, and revenue of $ 14.5 billion in 2019. Net cash inflows into BlackRock products have Totaled $ 390.8 billion in 2020, up from $ 428.7 billion in 2019.

The results were well above analysts’ expectations, wrote Credit Suisse’s Craig Siegenthaler.

Assets under management total $ 8.67 trillion, up from $ 7.43 trillion a year earlier. “Strong markets, good performance and the breadth and depth of BlackRock’s platform should produce more of the same,” wrote Glenn Schorr of Evercore ISI.

The Aladdin division of BlackRock, a provider of technology and risk management solutions, was particularly strong. Revenue was up 11% from a year earlier in the fourth quarter, bringing the annual total to over $ 1 billion for 2020.

Edward Jones expects Aladdin to generate long-term middle income growth. “We see a long trail of demand as wealth management firms increasingly look to advanced technology from BlackRock,” wrote Kyle Sanders of Edward Jones.

BlackRock stock was down 4.1% to $ 747.91 by mid-afternoon. The stock gained 22% in the three months ended Wednesday, compared to 9.2% for the

S&P 500.

Write to Leslie P. Norton at [email protected]