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Friday, April 28, 2017

Fink Paints an Un-Pretty Picture of Asset Manager M&A

Reported by Neil Anderson, Managing Editor

Larry Fink sees more asset management industry consolidation coming down the line eventually, though he's skeptical about the prospects of many of those mergers. And if you try to pitch Fink on any acquisition opportunities, make sure the pitch is about growth!

Larry Fink
Co-Founder, CEO
"Mergers suck! They're hard. They take years of your life off," Fink, BlackRock co-founder and CEO, says this morning from the main stage in the final keynote session of the 2017 Morningstar Investment Conference in Chicago. "I don't want to paint any pretty picture here."

Fink and M*'s Jeff Ptak discussed the markets, the evolution of BlackRock, self-indexing, and where he sees asset management and wealth management heading.

"The whole role of the asset management industry is changing, alongside the role of advice," Fink says.

On asset management M&A, Fink compares the industry to banking and insurance, both of which have seen big consolidation.

"The asset management industry clearly is the last of the major financial services industries that has not seen that big consolidation," Fink says, pointing to democratization of information and the movement towards advice and solutions as big pressures on active managers.

Yet Fink also cautions that asset management consolidation is not going to happen overnight.

"I think it will take longer than people think ... by and large it's been a fantastic industry," Fink says. "There's more talk than substance about mergers, but I do believe it's going to be a tougher and tougher business."

Fink also shared his skepticism about M&A driven aiming for consolidation and scale as opposed to aiming for growth.

"Any merger today that is talking about consolidation I think is really hard to execute. It's very hard to do that," Fink says. "I would never do one like that ... the two big mergers we did, we did them for growth opportunities."

"Mergers are hard," Fink adds. "They tax you to death."

Fink also discusses the ever-rising importance of technology at BlackRock. The company is bringing its flagship risk-management technology, Aladdin, to advisors working with individual clients. Six firms have signed up for the new service, he says.

"Aladdin for Wealth Management ... evolved to give you a risk management tool for every single account you have under management, under advice," Fink says. "That's a big, giant change ... It'll be a component of our clients' desktops, for every single client that's under supervision or advice."

That new version of Aladdin also fits into Fink's vision of a future where financial advisors become ever more important, both to BlackRock and to the industry as a whole.

"How we're trying to evolve, we need to be closer to the clients, and for us that means closer to advisors," Fink says. "The role of a financial advisor is critical more than ever before."

As he's said before, Fink plans to make more acquisitions in the fintech space.

"The opportunity with Aladdin is very large. We have FutureAdvisor [BlackRock's advisor-friendly roboadvisor]," Fink says. "We are going to make one or two other small acquisitions in technology."

And Fink hints at possible changes for BlackRock's iShares business, the biggest ETF provider in the world.

"We're studying things like self-indexing," Fink says. 

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