There was an editorial from BlackRock (NYSE:BLK) CEO Laurence Fink in the Wall Street Journal this morning about restoring investor confidence. And while you may think that Fink would be banging the typical investment bank drums of loose regulations and easy money, that wasn’t the case.
Rather, the chairman and CEO of Blackrock – an institution with over $3.5 trillion under management – was actually chiding the mutual fund industry for its stubborn position on money-market fund reform. He writes the following:
The stiff opposition of the mutual-fund industry to efforts by the Securities and Exchange Commission to reform the regulation of U.S.money-market funds does not instill the sort of trust we need. Financial firms have a responsibility to be crystal clear about how their interests are aligned with those of their clients, and should be transparent about the fees and risks associated with the products they sell—from investment vehicles such as mutual funds to credit cards and mortgages.
Financial education and transparent investment products that are easy to understand and apply can allow investors to capture market opportunities and achieve the returns they need to achieve their objectives even in a complex and challenging new world. This too will help restore trust in the markets, and help those who doubt in the future today take their first steps back to being investors again.
I was thrilled to see this, because it proves that even the well-heeled investment banks with high net-worth clients understand that healthy capital markets are build on well-informed financial consumers. As Fink points out, this doesn’t just include demystifying kinky derivative investments for big-time traders – this includes making housing loans and credit cards and 401k investments accessible and understandable.
We all win when investors know what they are buying. The idea of “efficient markets” hasn’t been in favor thanks to the financial crisis, but even if you disagree with the notion that markets will correctly value information over time it is impossible to deny that incomplete or misleading information will only result in chaos.
And given that we need confidence and stability above all else, Wall Street needs to start erring on the side of more information.
Even the bigwigs at Blackrock seem to think so these days.
- Read more about the importance of money market reform here, and how these funds are NOT as good as cash (InvestorPlace)
- Read SEC Chair Mary Schapiro’s statement from August about the importance of money market fund reform, and her disappointment that the process has broken down (SEC)
- Speaking of confidence… a great article about how investors are too afraid to leave the comfort of their bonds – even if the house may burn down. (Bloomberg)
Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP. As of this writing, he owned a position in Alcoa but no other stocks named here.
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