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BlackRock's Fink: Growth of zero-fee ETFs may be a fix for retirement woes

BlackRock Inc. Chairman and CEO Larry Fink expects more commission-free exchange-traded funds to come to market in the near future, marking a possible fix for Wall Street's concerns over Americans' retirement savings.

Over the last several years, financial executives including Fink have issued warnings that investors are not prepared for retirement, which could cause ripple effects across the broader financial ecosystem. But on a third-quarter earnings conference call, Fink said the recent downward trend in ETF pricing could create a solution to those concerns.

"When you're trying to save for retirement and you're only investing, let's say, $1,000 at a time, the commissions were eating up quite a bit of return," Fink said Oct. 16. "Commission-free ETFs are going to lead to better outcomes for retirement."

A handful of asset managers including Vanguard Group Inc. and Fidelity Investments have started to facilitate trading in ETFs created by BlackRock's iShares division, among others, for free. Fidelity's August decision to expand free trading to 240 of BlackRock's ETFs led iShares to see the strongest inflows in August over the course of its five-year partnership with Fidelity, Fink said.

BlackRock's iShares ETF unit has become increasingly important to the asset management giant, which now manages a total of more than $6.44 trillion in assets.

The unit posted net inflows of $33.67 billion for the third quarter, representing the largest source of flows for the company. As of Sept. 30, BlackRock's iShares ETF business accounted for 29% of its total assets under management.

Fink believes more growth is on the horizon for the ETF industry as a whole. In May, iShares released a report saying it expects global ETF assets to account for more than $12 trillion in the next five years.

The race to slash prices in ETFs and other investment products will likely accelerate demand for such products among investors, including those nearing retirement, Fink said. ETFs have become increasingly popular with retail investors over the last decade, as the low-cost investment vehicles carry broad market exposure in a single tradable security.

"We believe a commission-free environment for ETFs is going to lead to far better outcomes of investing for retirement," he said.