BLACKROCK SAVINGS SUMMIT

The call to action: Decisive leadership in uncertain times

Nov 12, 2020
  • Frank Cooper
  • Larry Fink

BlackRock CEO Larry Fink and CMO Frank Cooper discuss the future of saving, and the role we must all play in building a more secure, inclusive savings system in the US.

  • Moderator: Thank you and, err, good afternoon and good morning, to, to, everyone out there. Err, thank you for joining us in a-, in a discussion with our chairman and CEO of BlackRock, Larry Fink, err, to talk about decisive and I would say even courageous leadership in uncertain times and how that applies to the savings crisis. Larry, welcome. Um, let's jump right in, let's jump in and, um, yeah, you know we have a, we, we're in the midst of overlapping crises, we see the coronavirus pandemic, we see the climate crisis, there's, there's racial equity issues, there's populous movements driving nationalistic behaviour in various parts of the world. With so many different crises happening at the same time, why are we here today talking about savings?

    Laurence Fink: Well, I have always said I'm a long term optimist, but my long term optimism is because we talk about problems, and you just discuss some of the most apparent problems that we're facing as, as a globe, as a society, as humans. Err, the global pandemic is maybe the greatest crisis in all our lifetimes in terms of the impact of our world, um, the crisis of inequalities, they're, is growing because of that. Um, the climate crisis is something that we're living with and we're seeing more evidence everyday. But we're talking about these crises, we're talking about racial equity which we never talked about before. We have the deepest, broadest dialogue about the, about climate change today. And obviously because of the impact of, of the virus and the pandemic we're certainly, we have a narrative every moment about that.
    But there's one crisis that we don't talk about and that's the crisis of retirement and savings, and this is why I've called it the silent crisis. We spend so little time talking about preparedness, preparedness for retirement. We spend so much time focusing on our health and as human beings we, we all have this deep desire and hope that we can live longer, and in most cases most of us spend a lot of time trying to improve the probabilities of extension of life. Whether it's eating healthy or exercising or just having a lifestyle that, that allows you to, to live in a-, in a elongated way. But we have no conversation about, 'Oh my gosh can we afford that elongation of life?' It's almost like, it's, it's so ironic that we spend so much time about trying to find ways to live our life longer, and we're trying to find, we have so many solutions now of talking about how to fix the pandemic and the outcomes.

    And think about the, the results of having a, a, a vaccination nine/ten months into the virus, that generally takes tens of years. So, we can do it as a human species, we can improve the quality of our life, but the area that concerns me the deepest, 'cause it's not in the paper, it's not like we're fixing it, we're not addressing it, is the crisis of savings and the crisis of retirement. And as a result of that, the problem is getting worse and worse and worse. And I, I believe, and this is why I applaud this, this session that we're having and all the-, all the other sessions that are on this, we need to make this a front-page issue. We need to get our governments to say, 'This is a problem.' Because we all know, Frank, this is about compounding of your savings.

    Moderator: Yeah.

    Laurence Fink: And the sooner you begin savings, and I'm not talking about emergency savings, we can talk about that too, savings for the out-, long term outcome of retirement, the more money that will be earned during that period of time. The last thing I would say, there is corruption in the financial services area about the velocity of money, when you-, when you watch the financial medias, the CNBCs, the Bloombergs, it's about the velocity of money. All the narratives, is, is the market going up or down? And when you're talking about a 30/40 year outcome, the velocity of money is a meaningless concept. You know, whether the market goes up and down, whether we have president elect Biden or we have a president Trump, in the long run it really doesn't matter. And yet if you think about the persistence of the narrative about the moment, about the-, and we need to change the dialogue, we need to educate, we need to inform, we need to make sure that this is not something we're frightened of, but this is something that we address, and we're not addressing this crisis.

    Moderator: So, look, totally agree that you can't change, err, err, anything unless you face it, right? Um, but here, how do you break the silence, 'cause this silence is so deeply embedded, you know, we, as, as you mentioned we have physical longevity that's increasing but financial longevity that's probably decreasing. Err, and, and so we have that gap, but how do you break the silence and, and who, who has the responsibility to use their voice to, to, err, kind of raise the voices around this issue?

    Laurence Fink: Well I think it's both public and private. We truly do need our government to focus on this, we need to ask ourselves, are our retirement systems adequate? Do we, is, we have to admit that the over reliance on social security is, is a real drawback. We need to have employers take more responsibility, as we moved away from defined benefit to defined contribution the employers have less responsibility in terms of their employees relationship to their retirement money. We should inform all companies who have just as much more morale responsibility, maybe they don’t have that financial responsibility, but it has to be a morale obligation, an obligation, and I do believe the best companies by the way are doing this, the best companies are more focussed on, on the obligation of making sure that their employees have a way, a means, a knowledge to prepare for retirement. The biggest problem we have in society is really not the big public companies, the biggest problem we have is in all the private companies where we don't have a conversation, we don't talk about this. There are other systems like Australia where it is, you know, they have addressed those issues, we have not addressed those issues in America today and we put all the responsibility on the individual, and most individuals don’t understand the concept of money, the concept of compounding, the need for savings. And, you know, we are living in a world today, or in a country today, where even most Americans, especially people of colour and Hispanics, don't even have enough savings for emergency reasons, you know, purposes. And so it's way beyond just the need of savings, I mean some people just don't have enough emergency savings, and so how do we address this? Look it, we are a society of consumers, um, you know-, you know and that's one of the big foundations.

    We are, we have, you know post World War 2 America was about consumption, we led policies post World War 2 about making sure Americans can enjoy the cheapest products at the, you know, the best products at the cheapest price. And so we've all been a society of consumers and we never incorporated this factor of, of retirement along consumption. And so we need to re-change the narrative, we need to, you know-, you know introduce that narrative. We still can be consuming but we need to think about, you know, partially consuming and partially savings. And, you know, there are, look there are many reasons for our problem and I, I could tell you Frank, I don't have all the answers, I wish I did. But I do know if we don't have a dialogue, if we don’t start talking about it, we don't addressing it, we don't say that this is (TC 00:10:00) a national emergency, that we need to focus on it, we need to have a conversation, we need to really dig deep emotionally about how to build better retirement systems for Americans. How to making sure that we have a retirement system that is good for Americans who work at public companies and who work in private companies, how to make sure that even if you're a self employed, you know, that you have a conversation about your own, err, your own savings for retirement. We have no conversation about it, we're not talking about it and, and so I do believe that it's about courage, it's about admission, we have to admit that just like I think many companies admitted about racial, you know, racial equity and how we have to elevate that, we all have a responsibility elevating the conversation about making sure that we have as a society that is focussed on, on our citizens and their life path and their life journey. And making sure that more Americans can live in retirement with dignity.

    Moderator: You touched on something that's really fascinated me, this, this idea of a morale obligation. And, and, and when I think about ESG, you know, the E is very clear, the environmental piece of it and people have gotten their minds wrapped around what that is. The G, the governance, that's fairly clear. But the S is really messy, and it's messy in part because the social factors includes a bunch of different things, right, from labour rights to, to wealth and equality. Um, but it's also messy because there's an underlying morale issue in most cases, um, for social factors. What would your advice be to, um, CEOs, corporate leaders, in terms of how they, how can they find the courage and confidence to move forward? Because most CEOs, most, most corporate leaders don't want to confront a morale obligation. Um, so how do you-, how do you move forward with courage and confidence?

    Laurence Fink: Say, Frank, I think that's changing, in my conversation with some of the most exceptional companies, most exceptional leaders, they're more focussed on stakeholder capitalism than ever before.

    And stakeholder capitalism is all about your employees and your clients and your community. So, if you think about stakeholder capitalism about how to enrich your employees, we have, you know, we have a-, we have, every company wants the best talent pool, and to get the best talent pool those employees must feel that they are connected with their company, that their company is looking out for them, they're helping them, educating, helping them in their life journey. And I, I could tell you some of the best American companies today are more focussed than ever on how to re-look at this. And, but we need to have it as a national dialogue, I mean we're going to get, I know in our conversations at BlackRock with some of the best companies, we are moving that, that narrative. I could tell you there are more CEOs who are saying, 'I need to address this, this is a big problem for me and it's a big problem for my employees.' We're going to get there, maybe it's going to take, you know, I think the pandemic by the way has slowed

    those conversations on because we're trying to making sure that our employees are healthy, and that's a more immediate issue. But post pandemic I, I truly believe more and more great companies are focussed on how to address this crisis. In my conversation with them they're saying, 'We know this has been a crisis and we're not doing enough, and we must do more.' We need to now make sure that this is not just, um, a crisis in which public companies are addressing.

    Moderator: Yeah.

    Laurence Fink: We need to make sure that every company is addressing this. And in my conversations, I know later on today we're gonna have senator Portman talk about it. I've had conversations with senator Portman about this issue. How to enrich this conversation that, this is not just a public company problem, but this is a problem for all companies, public and private.

    Moderator: So, you mentioned earlier, err, um, that, err, the shift from defined benefits to defined contribution, the, and some people would say that that's the core, that's the basis of, of, of the, the problem. Err, whether that's true or not, um, the question-, the question, um, that I have for you is, is, is, you're shaking your head so obviously you don't believe that's true, which will be interesting to hear your response to that. But assuming, um, that there's some responsibility on the employers part, are there options for employers other than going back to defined benefits that can-, that can help their employees, err, increase their savings?

    Laurence Fink: The reason I shook my head about defined benefits, only the larger companies had defined benefit plans. So, once again if we're going to address this societal, it's more than just the large big companies it is the-, it is society. This has to be a, a conversation for society, for every community. And, we're never going to address this fully. If we say we're all going back to define benefits, small companies, you know, err, self employed companies, you know, that's just not going to happen. Let's get real, let's talk about it, how to make sure-, you know, how do-, how do we make this as a policy for all companies, all employers? How do we make sure that we are making sure that we are-, we're having a conversation that affects all communities? And, that's where we have to go. We have to-, as I said, we have to be willing to say this is not working. We have to say that we have to improve our retirement platform for all. If we just do it for public companies, we are still going to have a very unequal society, and since this is such a big crisis, we need to be thoughtful about how we do this for more. So, we have more inclusiveness, in terms of the addressing this crisis, and to me that is what's so important, but it's going to come in a dialogue with public companies and policy makers in Washington.

    And, we don't have to go back to define benefit plans. I do believe some companies are talking about it again with different options and different ways of doing it. We can do that in the defined contribution plan, if every company focuses on how one's communicating to their employees, really educate on the virtues of compounding. Actually having fewer options than hundreds of options. We can't-, it's not about confusing, it's about providing them with the best outcome so-, and, and quite frankly, it has to be done with more managed type of accounts, you know, glide past high equity concentration in the early years, taking into account longevity and changing the mix of CROM equities to more certainty in the investments as, as you get closer to retirement. But then, also, companies need to think about what is the relationship with their employees post-retirement? Do they just provide a lump sum and, and let the employee tend to what he or she must do? I believe there has to be elongation of that-, of that moral responsibility, and that's the thing-, those are the types of things we need to talk about. The-, the duration of that responsibility. The, you know-, having seminars, having conversations about how to elevate the knowledge, or how to navigate this long process of retirement. We need to, you know-, almost you need to-, and now with technology you can do that. I mean, what we witness all the time, employees run out of markets where they see a crisis.

    Generally, in all our crises in our lifetimes, when the markets are at the worst position, you want to run into the markets, not run away from the markets, and unfortunately we've seen so many people do the opposite, and that's where there should be some okay, if a-, if firm sees, you know-, employees start-, is disposing or changing the mix of their options and their 401K plan, or their IRA, there's a flash saying to the employee 'is this-, are you sure you want to do it this time?' There needs to be more engagement, there needs to be a better connectivity, and we create that if we create better information, better structure. I actually believe, getting back to stakeholder capitalism, I actually believe those companies that are more engaged, more connected with their employees, are going to find that their employees have a deeper sense of loyalty to their company, and which that leaves more engagement, more productivity with your employees.

    Moderator: You know, it's interesting, Miso (ph 19.18), it's no longer just about a foosball table and free snacks. It's really this ongoing relationship, um, that it actually helps the financial future of employees, which I love. Um, I know we're short on time, so I have two more questions I want to ask you, and one I want to shift to the political context.

    Laurence Fink: Oh, wonderful.

    Moderator: Um, you know, many people would think-, yes, I know, I know. This is the easy part. Err, no controversy here.

    Laurence Fink: Oh, okay. Oh okay, good.

    Moderator: But look, how many people would say that, you know, the recent presidential-, US presidential election, may be the most consequential in our live time. Um, you know, we, we saw that, um, you know, more people, more citizens are, um, um, turned out for voting this year since 1900. But, it also highlighted deep divisions (TC 00:20:00) within the country. I think we-, we're currently up to 77 million votes for, err, Joe Biden, and 72 million for Donald Trump. Um, the gap is still significant, but it's still a lot of votes on each side, in a highly polarised world. Curious, what's your view on how this recent election will inform the discussion around the savings crisis in the United States? Laurence Fink: Well, first I would say nothing's changed from four years ago. Obviously more, more people voted, more people, um, believed in this as a time to vote. But, we were just as divided four years ago. So let's-, you know, to me, we-, I don't want to be that dramatic, and I've heard many times this is an election of our lifetimes, and I think this is not a repeatiation (ph 20.51) of any one political party, it wasn't. It was-, it was a validation as you framed it, Frank as-, that we are-, we have a divided view where we should take our country. And, unfortunately, in this narrative, there is no conversation about retirement or savings, or preparedness. I, err-, if the outcome is that we have a President Biden, I do believe erm, that we need to focus on better preparedness. we need to work towards-, working with the department of labour of improving, err, the quality of retirement and narrative. We need to go back and relook about how we are talking about fiduciary responsibility, which was fortified under the President Trump, with the-, you know, and President Obiden (ph 21.51) was trying to role back some of the stuff, so we have err, the-, some forms of retirement assets become very politicised. Um, but in-, but, we've never had a conversation about retirement, and that's one of the things that I've been very much worried about, and I hope, if there is a President Biden, that his administration will focus on these issues.

    Now, let's be clear, whoever's President, and right now we think it's, err, President Biden at err, the BlackRock Investor Institute, that's who we were-, that's how we are framing our thoughts going forward it is about making sure that we conquer in the pandemic. It's about job creations, it's about trying to find ways of bringing more inclusion back into our society. Let's be clear, this recession created more inequalities than the prior recessions in our lifetime, because of how this recession was created. This recession was created by the pandemic, and every industry that is an-, that focuses on the aggregation of human beings, whether it's culture, or travel, hospitality, lodging. Some of those industries were the largest industries of lower paying jobs and so, this-, we are witnessing the greatest spike in inequalities and differences, and divisions than any other recession. That's not a political statement, that's just a fact, and so, whoever's the President, and we think it's President err, (mw 23.35) Biden, these are the things we're going to have to be addressing. I wish, I hope, I'm going to urge them, to focus on retirement too.
    Moderator: Beautiful. Larry, erm, the last minute and a half, err, one last question. Um, you know, crises can lead to catastrophe, or it can lead to new beginnings. If you think ten years from now, what do you hope our saving system, err, looks like here in the United States?

    Laurence Fink: If we truly have a conversation, if we truly make this a front page, consistent conversation, if we could get Bloomberg and CNBC talk about this all the time, just as much about the TikTok of a marketplace, we will have an improved system for America, and for all Americans. We have to just make this the narrative. I don't-, you know, I could give you my opinion, whether to be-, you know, it's we need to have this corrected, or we're going to have more and more people living in poverty, living in fear, in retirement. And, we can't have an America like that. We need to be addressing this now, this has to be something that we focus on. We need to transform ourselves of being fearful of the conversation of money, to a conversation that we can be prepared. A conversation that could say 'I am going to be loving my retirement. I have, you know, I'm prepared.' That would be my hope, that should be our hope, our desire, for America of the future.

    Moderator: Larry, that's a great way to end this conversation. Err, really appreciate your time, you know, thank you for joining us, err, and err, always great to, to, hear, hear your thoughts on this topic err, and I'd love to continue it.

    Laurence Fink:  Thanks. Thanks everyone.

    Moderator: Um, everyone else, you know, thank you so much for, for, um, for participating, um, we're going to hand it off to Deborah Winshall (ph 25.32) and Dan Arielly (ph 25.33), and they're gonna talk about the psychology of saving. Um, but before we get there, we have a video to introduce them.

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Larry Fink
Chairman and Chief Executive Officer, BlackRock
Frank Cooper
Chief Marketing Officer, BlackRock
BlackRock Savings Summit

BlackRock Savings Summit

At the recent BlackRock Savings Summit, we brought together some of the world’s leading thinkers and decision makers on financial health, tech, and policy to discuss how we could build a more inclusive and secure savings system in this country.