Top guns call for caution

The worst of the recession may be over, but the financial system still faces risks, Mohamed El-Erian, chief executive of Pacific Investment Management Co., and Laurence Fink, chief executive at BlackRock, warned financial advisers at the Schwab Impact conference last week in San Diego. “I'm more cautious than bearish” about the U.S. approach to its fiscal problems, Mr. Fink told advisers at The Charles Schwab Corp.'s annual conference. Mr. El-Erian, echoing Mr. Fink's sentiments, added: “We still don't have a system yet that can deal with large [troubled] financial institutions.” The effectiveness of new regulations will be mixed, they said. “We'll have a bunch of smart regulations and a bunch of dumb regulations,” once the political process plays out, Mr. El-Erian said. Mr. Fink stressed the need for regulators to ensure greater transparency in the capital markets. With a weak outlook for growth in the United States, both Mr. El-Erian and Mr. Fink urged advisers to make sure that their clients are invested globally. Advisers also need to “pay attention to liquidity a lot more,” Mr. Fink said. And if clients “think they can retire early, they need to think again.” “Today more than ever for clients, it's important to focus on objectives and [avoid] mistakes [clients] can't afford to make,” Mr. El-Erian said. Advisers should look at clients' future liabilities and plan accordingly, Mr. El-Erian and Mr. Fink said. E-mail Dan Jamieson at [email protected].