BlackRock's latest bullseye: The advisors' desktop
CHICAGO ― The world's largest fund company wants a bigger piece of the most valuable real estate in the independent advisory space: the RIA's desktop.
"We need to be closer to the clients, and for us that means closer to the advisor," said BlackRock CEO Larry Fink, who gave the closing keynote address at Morningstar's annual Investment Conference.
The firm intends to deepen its relationships with advisors partly through its technology offerings; Fink said BlackRock is refining a version of Aladdin, its data-mining risk management system, for advisors.
"We can now provide a risk management tool for every single account you have under management, under advice," Fink told advisors at the conference. "So if you are a large scale advisory firm with a million clients, we can now give you an Aladdin for each of those clients."
To date, BlackRock has signed up six organizations around the world to use the new version of Aladdin, and the company plans to roll out the product to custodians in the U.S. in the fall, Fink said.
The tool will become a "bigger component of our clients' desktop," he said. "It's a very large opportunity."
Technology in general will become an increasingly bigger part of BlackRock's business, Fink said, adding that its critical to reaching younger investors.
In addition to Aladdin, Fink cited the company's robo advisor, FutureAdvisor and iRetire, its retirement planning tool. BlackRock will make one or two more tech acquisitions and has a number of new tech products currently under development in house, he added.
"We can't cope with the amount of opportunity we have [in tech] right now," Fink said.
'BIG BELIEVER' IN ACTIVE MANAGEMENT
Fink also addressed the longstanding debate about the merits of active versus passive investing.
Although BlackRock has over $100 billion of assets in its index funds, Fink said that he was also a "big believer" in active management.
The concern that passive index funds account for too much of the market is overblown, he said, noting that passive investing still accounts for around 20% of publicly-traded securities. If a majority of trades were done by passive accounts, the resulting "mis-pricing" would result in "a field day for active and hedge fund managers," he maintained.
Nevertheless, Fink did predict a "big consolidation" of asset managers, although "it will take longer than people think," he added.
"Many managers have a harder and harder time achieving alpha," Fink said.
The BlackRock CEO was also skeptical about the Trump administration's proposed tax plan.
The huge tax reduction and the resulting revenue loss would be "a path to an explosion in the deficit," he said. Proponents argue that the tax cuts would stimulate the economy to potentially grow 3% for the next 10 years, Fink noted.
But, he responded, "I'm not a believer in 3% growth."