Part 1 what is NOT democratising Wall Street

There is a lot of the hype around “democratising Wall Street”. In this 4-part series we look at what is needed to really democratize Wall Street and why that is so important.

Some subjects are too complex for our short attention spans, so we do 4 posts one week apart, each one short enough not to lose your attention but in aggregate doing justice to the complexity of the subject. Stay tuned by subscribing.

We start today with 3  propositions that pitch “democratising Wall Street”, but which benefit the Wall Street firms more than the customer:

  • our great UX will let you beat the market. A great UX that is designed to make you trade a lot so that you can “beat the market” makes the brokers who create that UX a lot of money – even when you lose and even if their service is “free”.
  • time in the market beats timing the market. Patience does not mean passive. The pitch that “time in the market beats timing the market” benefits those intermediaries living off the Assets Under Management (AUM) fee.  Low cost passive patient index investing (now more than 50% of assets) is better than trading a lot, but you also get the volatility of the index (aka you lose a lot if money printing stimulus slows and the market falls).
  • we let you invest like the big money with a small minimum. If Wall Street sells you an asset such as Private Equity, which usually has a very high minimum (such as $1m) with a low minimum (such as $1k) – watch out.   

Many of these pitches come from “disruptive” Fintech startups – despite a pitch that they are better for you than those evil old incumbents.

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