While job growth is improving and the markets are rallying, BlackRock CEO Larry Fink said there’s still a gnawing sense of unease among CEOs and investors.

Confidence is scarce and companies continue to build up cash reserves and investors stay in assets like cash and government bonds. During an event held by the Council on Foreign Relations Wednesday, Fink told attendees that financial institutions can help restore confidence and get investors off the sidelines by turning short-term savers into long-term investors.

“To sum it all up, we’re in a perfect storm right now,” he said. “Aging population, deleveraging economies, shifting jobs, income inequality, wrapped up in low growth and low yield, just when people need better returns and a better economic opportunity.”

According to Fink, FDIC bank deposits grew to $10 trillion by the end of 2011, up from $6 trillion in 2004. In addition, CEOs are sitting on the most cash since the 1960s. But if that saving continues, it will push price-to-earnings ratios down, and individuals will be confronted with the growing gap between their needs and resources for retirement. “No one is talking about the cost of inaction.”

Asset managers, in particular, haven’t done a good job of giving investors a long-term view, Fink added. Investors have got to get beyond a traditional 60/40 portfolio mix of stocks and bonds, which is now inadequate. And rather than sitting in cash or government bonds for the foreseeable future, investors seek other sources of income, such as dividend-paying stocks, higher-yielding corporate bonds, and alternatives. Investors should also be using both passive and active strategies, Fink said.

“We need financial products and disclosures that ensure individual investors know what they are buying, including real risks and real costs,” he said. For example, the growing ETF industry needs better labeling of products.

The government needs to pass more practical regulations that will help build confidence in the markets, such as the CFTC’s new rule to protect the collateral that customers post when clearing over the counter derivatives, Fink said.

There also needs to be a tax structure in place that encourages long-term growth. Fink believes the holding period for an investment to qualify for long-term capital gains tax treatment should be extended to three years from 12 months. He also believe the tax rate should decline the longer one holds that investment.