Why the CEO of BlackRock says the retirement crisis is getting worse

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profits rose in 2020, with the world’s largest asset manager benefiting from increased savings and investment, the approaching retirement crisis in the U.S. is getting worse, said 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 for households in the U.S., Fink said he believes the U.S. needs more fiscal stimulus than Europe.

In the first quarter of 2020, the savings rate in Europe was around 15.6%, against 8.3% in the USA in March.

“I am petrified by the silent retirement crisis,” said Fink 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 retirement funds. ”Although those who work for larger companies have savings for retirement, many companies are not teaching financial literacy properly.

“The reason the United States needs more fiscal stimulus than European economies is that Americans do not have adequate savings,” continued Fink. “When you have a crisis like the pandemic, Europe is better prepared because of wider and deeper economies” and a stronger safety net. “The US is less prepared than Europe in terms of financial resilience for families because we are not a society of savers.”

Separately, Fink’s prospects for the stock market remain positive due to the persistence of low interest rates and because he believes that coronavirus vaccines will be “fully disseminated” at the end of the second quarter, producing herd immunity in the third quarter. This will revive parts of the economy that have stabilized and will lay the foundations for better growth at the end of the year.

“I don’t expect [the market] grow as in 2020, but I believe the market base will be fine, ”said Fink. This does not mean that things will be good: Fink also said that he expects a 5% to 10% correction over the year.

Finally, Fink said that even with the US restricting investments in China, BlackRock saw record cash inflows in Chinese investments from global investors.

“Let us be clear: many large American companies are very active in China and sell products, so our trade deficit with China has never been greater,” he said. “We defend our country’s wishes and will do whatever is necessary, but we see that global investors are running towards China, and not far from China.”

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

Fink also said that BlackRock is reviewing its political spending after last week’s insurrection by supporters of President Donald Trump who are trying to prevent certification of President-elect Joe Biden’s victory. The company stopped political spending.

Previously, BlackRock reported that 2020 earnings rose to $ 4.9 billion, or $ 31.85 per share, with revenue of $ 16.2 billion. This compares to a profit of $ 4.5 billion, or $ 28.43 per share, and revenue of $ 14.5 billion in 2019. Net cash inflows in BlackRock products totaled $ 390.8 billion in 2020, compared to $ 428.7 billion in 2019.

The results were much higher than analysts expected, wrote Craig Siegenthaler of Credit Suisse.

Managed assets totaled $ 8.67 trillion, against $ 7.43 trillion a year earlier. “Strong markets, good performance and the breadth and depth of the BlackRock platform should produce more of the same,” wrote Glenn Schorr of Evercore ISI.

BlackRock’s Aladdin division, a provider of risk management and technology solutions, was particularly strong. Revenue grew 11% over the previous year in the fourth quarter, bringing the annual total to more than $ 1 billion in 2020.

Edward Jones expects Aladdin to show revenue growth for middle age in the long run. “We see a long road to demand, as wealth management companies are increasingly turning to BlackRock’s cutting edge technology,” wrote Kyle Sanders of Edward Jones.

BlackRock’s shares fell 4.1% to $ 747.91 mid-afternoon. The shares gained 22% in the three months ended on Wednesday, against 9.2% for the

S&P 500.

Write to Leslie P. Norton at [email protected]