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- Author
- Cannon Financial Institute
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- Published
- July 30, 2019
Articles
The Six Trillion Dollar Man Speaks And He Isn't Happy
“As a fiduciary to these clients, who are the owners of your company…”
Any Chief Executive Officer (CEO) would pay attention to a letter which began this way. Especially since the writer is a guy named Larry Fink. He recently challenged global corporations to institute major changes in their business models and do so expeditiously. Fink recently issued these challenges in his annual letter to the CEOs of the largest 250 corporations in the world.
You can download the letter here: LarryFinkBlackRockCEOletter2019
Who Is Larry Fink?
Who exactly is Larry Fink, and why do CEOs pay attention to him? He is hardly a household name in America or anywhere else. It’s not like he’s Warren Buffett. He’s not even wealthy. Only a year ago did his net worth exceed a billion dollars. What a relief that he finally made it! [1] But when Larry Fink speaks, everyone in the trade listens or should listen. Reason? His guidance to major corporations on the key issues they need to confront will become top of mind of for CEOs and have an effect on your investments.
Why should you care what this guy thinks?
Because Larry Fink is the Chairman and Chief Executive Officer of BlackRock, the largest investment management firm in the world, with Assets Under Management (AUM) of more than 6 trillion dollars. That’s more than the paltry $4.11 trillion the U.S. government spent in 2018. He sends a letter to CEOs every year with pointed suggestions on how they need to view the world and change direction.
“Each year, I write to the companies in which BlackRock invests on behalf of our clients, the majority of whom have decades-long horizons and are planning for retirement. As a fiduciary to these clients, who are the owners of your company, we advocate for practices that we believe will drive sustainable, long-term growth and profitability.”
He isn’t exaggerating.
According to Business Insider, “…BlackRock, Vanguard and State Street have nearly $11 trillion in assets under management. That's more than all sovereign wealth funds combined and over three times the global hedge fund industry.”
Further, says Business Insider, BlackRock, Vanguard, and State Street…
“have become the largest shareholder in 40% of all publicly listed firms in the United States.”
Of course, they don’t actually own the money, but these three firms vote the proxies which gives them enormous influence. [2]
“Retirement... is an area where companies must reestablish their traditional leadership role…”
Mr. Fink is very concerned about the vast number of Americans who are unprepared for retirement, and well, he should be. Certainly, we in the industry are aware that too many of our clients whatever their age and income, don’t put aside enough money for retirement. 21% of working Americans have no retirement savings, according to CNBC. [3] More stunning, 42% of U.S. citizens aren’t saving any money for retirement, reports the Center for Financial Services Innovation.[4]
Why Should Your HNW and UHNW Clients Be Concerned?
We know that companies must continue to innovate and become more productive. According to Mr. Fink, worries about retirement are having a detrimental effect on this very key goal.
“This lack of preparedness for retirement is fueling enormous anxiety and fear, undermining productivity in the workplace… companies must embrace a greater responsibility to help workers navigate retirement…”
The BlackRock CEO points out that many corporations phased out their Defined Benefit (DB) plans over the last few decades. In their place, companies created Defined Contribution (DC) plans such as the ubiquitous 401k. By doing this, companies shifted the financial responsibility of retirement from themselves to their workers. Twenty-five years ago, 38% of Americans had corporate pensions reports CNBC. Today, only 13% of the workforce in the US are covered by a DB plan. [5]
Fink suggests to CEOs that corporations must use their knowledge and ability to innovate to ease the coming retirement crisis. This is an immense challenge to our country, and we need the best brains we have to ameliorate the situation.
[2] https://www.businessinsider.com/american-corporation-big-three-firms-2017-5
[3] https://www.cnbc.com/2018/05/11/how-many-americans-have-no-retirement-savings.html
[4] https://tinyurl.com/CtrFinSerInno
[5] https://tinyurl.com/CNBCdbplans
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Contributing Writer: Subject Matter Expert Charles McCain
