We, the investors, have fallen asleep.
Sure, we occasionally wake up to glance at our portfolios. We look at our zigging and zagging account balances. We file—or, more likely, recycle—our monthly statements. Our investments grow or wither.
But there’s really nothing for us to do about it. So, back to sleep.
Sometimes our sleep is disrupted by uneasy dreams or nagging doubts. How exactly does this whole investment system work? Why did we buy that mutual fund? What caused our account balance to go up or down? What hap- pens to the money we invest?
We toss and turn, uncertain of who is managing our money. We hope our financial adviser is the omniscient captain, expertly navigating ever-shifting market currents. But perhaps our portfolios are simply bobbing along the surface of the Dow Jones Industrial Average, ascending when the tide rises and sinking as it retreats.
On occasion, we are gripped by nightmares. We fear our own money has been turned against us, invested in companies we deplore. We worry that our capital has made us complicit, endowing the perpetrators of environmental ruin, financial apocalypse, and political dysfunction.
There is just so much we don’t know as we sleep.
We are only one generation removed from a financial world that was far simpler, more transparent, and less risky than the one we live in now. But the landscape for investors continues to evolve into one that’s more complex, opaque, and speculative. And we grow ever more dependent on financial instruments that are a mystery to us and on money managers whose incentives are obscure.
We lie with our eyes closed now, deep in our reverie, but with a dawning awareness that the sheep we are count- ing are being fleeced. And that they are us.
Financial firms and money managers have intentionally made investing overly complicated and then convinced us that we cannot do it on our own. They have elbowed their way into every corner of investing, cultivating a financial intermediary complex that disconnects us from our capital and charges us handsomely for it.
Money managers control trillions of investors’ dollars, which makes them highly influential in social, environmental, financial, and political matters. As we have seen after two scandal-driven recessions, their strategy has been to leverage this influence primarily to advance their own interests.
Having interacted with the financial sector throughout nearly every phase of my career, I was not surprised to learn of the ethically dubious activity that led to the most recent economic downturn in 2008. Though many well-intentioned financial advisers and money managers serve their clients with integrity, unscrupulous activity has long been pervasive in this industry, though it has been due to systemic deficiencies as much as the behavior of bad actors. What did surprise me, however, was the passivity of investors.
Even in the decades preceding the most recent downturn, very few investors enjoyed financial success equal to that of their money managers. Given this, I have long wondered why investors don’t pull their money out of the system en masse.
I suspect that it is because most feel powerless. Unaware of the implications of their investments and unable to penetrate the excruciating complexity of the system that facilitates them, many seek refuge in their money managers’ aura of sophistication, pretense of competence, and projection of certainty. It seems to me that most investors are simply sleepwalking through the investing process.
They have become uninvested.
Robert C.S. “Bobby” Monks is a serial entrepreneur who has founded, led, and grown many businesses in the financial services, real estate, media, and technology sectors.
Monks was chairman of Spinnaker Trust, managing over $1 billion in assets. He was chairman of Institutional Shareholder Services, the leading provider of corporate governance and proxy services, and founder and director of Atlantic Bank. He lives in New York and Maine.