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Wednesday, October 16, 2019

Larry Stands By Abby

Reported by Neil Anderson, Managing Editor

Larry Fink and his team are sticking with Abby Johnson and Co.

Laurence D. Fink
BlackRock
Chairman, CEO
"Our relationship with Fidelity ... is as strong as ever. Our relationship is way beyond ETFs," Fink, CEO of BlackRock [profile], told analysts yesterday morning on BlackRock's Q3 earnings call (as transcribed by Seeking Alpha). "It's about education. It's about working with their platform."

Fink was responding to a question from Alex Blostein, managing director and equity research analyst at Goldman Sachs, who asked about "the payment and savings potential" of the recent move to NTF for all ETFs at many online brokerages and RIA custodians. Platforms such as Charles Schwab, TD Ameritrade, E-Trade, Interactive Brokers, and even Fidelity have all made moves along those lines in recent weeks.

Abigail Pierrepont Johnson
FMR (dba Fidelity Investments)
Chair, President, CEO
NTF ETF trading at these platforms isn't new, but until the recent changes it had been restricted to specific ETFs from specific fund firms on special NTF platforms at the different brokerages and custodians, and those fund firms paid to be on those NTF platforms. BlackRock and Fidelity teamed up in 2010 to make some of BlackRock's iShares ETFs available on an NTF basis, and they've expanded that alliance multiple times over the past nine and a half years.

Perhaps Blostein thought that, with NTF now available for all ETFs on these platforms, the BlackRock folks might no longer see the need to maintain (and pay for) special relationships like the Fidelity partnership.

"Our relationship with Fidelity is unchanged, if that's what you're trying to allude to, related to what we pay them and other things," Fink countered. "We have a great relationship with Fidelity. We have great opportunities looking forward with them, too."

"And we have other distribution agreements. They're not impacted by this," added Rob Kapito, president of BlackRock. "It really just simply gives us more access."

Earlier on the call, Fink described RIA custodians' and online brokerages' moves to NTF for all ETFs as something that "will accelerate ETF adoption."

"The elimination of barriers to investing is a good thing. It democratizes access and enables more people to save, invest and reach their long-term financial objectives," Fink said on the call. "With the commission-free moves, we now have access to more clients than ever before and we remain confident that iShares' value proposition will continue to drive growth and BlackRock iShares' market leadership."

"As the ETF market leader, this has got to be good for BlackRock," Kapito said. "Commission-free trading is actually accelerating ETF flows in the two fastest growing U.S. wealth channels."

"I don't think there's any question this is a great outcome for well-branded, scaled ETF providers," added Gary Shedlin, BlackRock's CFO.

Yesterday morning, before the earnings call, the BlackRock team reported Q3 2019 diluted EPS of $7.15, beating expectations by $0.16. BlackRock's Q3 net inflows totaled $84 billion, and its AUM rose eight percent year-over-year to about $6.964 trillion. iShares ETFs account for 29 percent (about $2.047 trillion) of BlackRock's AUM. 

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