Your Money, Your Rules | Money Mindset, Money Management, Abundance Mindset, Budgeting, Spirituality

153 | Who Really Controls Your Investments? The Hidden Side of Wealth Management

• Erin Gray | Wealth Coach, Former CFP and CFO

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You might think you have a say in the market because you own shares.  In this episode, I break down how the big 3 asset managers: BlackRock, Vanguard, and State Street actually control the voting power across America’s largest companies, and why that matters to you.

In this episode we discuss:

  • How funds centralize voting rights with a few asset managers
  • The scale of ownership concentration across the top US companies
  • The mechanics of shares, boards, and proxy votes
  • Why fiduciary duty can tilt toward fund managers’ incentives


Resources mentioned in the episode:

Ep 152: Money Can't Buy Your Feelings: Here's How to Be Wealthy From Within

Ian Carroll: The Real Blackrock Conspiracy: The Mega Corp That Controls Capitalism




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From my soul to yours,

Erin

ErinGray:

Welcome back to your money, your rules podcast with me, your host, Aaron Gray. Glad you're here. If you're new here, I want to say welcome. If you've been around a while, I want to say thank you. So on today's podcast, we are going to be talking about who actually controls the stock market. It's not actually me and you, like we have been taught. And we're going to dive into who actually controls it, what's actually been going on. And I want to empower you with more knowledge and education so that you can make your own decisions. So let's dive in. Okay, so obviously, this podcast, when I set out to do this podcast, it was to and still is to empower you. And it is to what I call, you know, the 5D, that spirituality, the your wealth consciousness, like your self-concept, what you believe about yourself, emotional regulation, all of that stuff we cannot see. That's really what I want us to focus on. And I also know that we live in this 3D world, meaning the observed world, what's actually happening. And I, like I have said before on previous podcasts, I do this dance, it feels like a dance of okay, really, what are we wanting to go towards? What do we want to create in our lives while also not being completely naive of actually what's going on in the world? Because I truly feel like if we know what's actually going on, we don't need to focus on it, but we do need to see what is actually happening so that we can create something different. And how do you know what you want to actually create if you don't have the contrast? And I think we have beautiful contrast right now. And one of those is in the financial system. So, you know, a lot of us think that and have been taught that the stock market is decentralized, that there's how many millions of investors, and that we are all, you know, sharing control because we own shares, right? But the reality is that's actually not as what has happened over time. So I'm going to share a clip. I'm first going to talk a little bit about the stock market, and then I'm going to pipe in a man named Ian Carroll. And I'm going to put his entire YouTube video up on the show notes so that you can go and watch it. I always say to everybody, go watch it, go do your own research, like whatever book or YouTube video I suggest, like, watch it, develop your own thoughts and beliefs. And like, what do you want to believe? Don't just take my word for it. But Ian actually started off with like questioning like where who actually is making all of these feminine products. That's actually how he kind of got started. He started questioning like, who owns this company and who owns this company and who owns this company. And then before he found out, like before, you know, in no time, what he found out was is that there's just basically three companies that control like who are making the feminine products, who are making our cereals, who are making, you know, so much of what we are purchasing, what we are buying. Then he dove into the financial system and then he started looking into the medical system. So he's just kind of like a spider web of like investigative reporting of like who actually is running the show here and how are we being led to believe that we are when we're actually not. And so I want to talk just a little bit about how Ian is going to share with you in the video that the top 100 companies on the US stock market, and those would probably be considered large cap stocks, they are controlled or owned by three companies. And those three companies are BlackRock, Vanguard, and State Street. Now, BlackRock actually purchased uh State Street. So I guess you could say two, but that's a discussion for another time. So when you look at those three different companies that they own, the top 100 companies, the percentage that they actually make up of owning those companies are 42%. Now, if you actually look at expand your scope, that the the 25 biggest financial institutions, then those three companies actually own 83%, because BlackRock, Vanguard, and State Street actually own some of these financial institutions, right? So when you plug all that together, then really BlackRock, State Street, and Vanguard actually own 83% of those 100 companies. And that's just the top 100 companies. Like that doesn't even include or mention the other companies of like your mid-cap, your small cap companies, your international companies, REITs, which are short for real estate investment trusts, basically real estate that they go and then they put it in kind of like it's kind of like a mutual fund where you put a bunch of real estate in and then you sell that mutual fund. And also like T bills, like it just goes on and on and on. And so one of the things that I just want you to be aware of, which is why I'm always this my previous podcast episode, episode 152, I believe, is like the biggest investment that we can ever make is in ourselves, is in our wealth consciousness, is in our mindset, is in our self-concept, in, you know, our own business. You know, the society will have you to believe to diversify, which I think is another tactic of having us be distracted. But I think the most important thing, and I remember my first coach used to say this, and I and I believed her at the time, but I don't know if she gave evidence for things like this. But now it's like in my bones. Like the most important investment you will ever make is in yourself. And if you are a business owner, it is in your business because you have complete autonomy and complete. And when I say control, what I mean is you control your belief, you control your belief and uncertainty, you control how often you want to spend time thinking about your mindset and changing your mindset and your wealth consciousness and changing your self-concept. Like all of that is within your control because the way that the stock market works, also to the real estate market, but let's just talk about the stock market here. That stock market can be easily manipulated because of the way that it is owned and because for some people, they act from a very fear-based place. So the rest of us that are actually invested in the market, besides Vanguard State Street and BlackRock, if you are making and you are pulling out money when you are feeling fear, then that is also something that like we don't have control over those people, right? So I think that it is so important to one, educate yourself on what is actually happening within the stock market. I'm going to let you listen to just a clip of Ian talk about these three companies and what they have been doing. And the thing that I also want to mention here, too, is you know, since I came from the financial industry, I can tell you that this is not talked about. Maybe it's talked about now, you know, that was 20 years ago, but this is not something that's talked about. What's talked about is like mutual funds and understanding mutual funds. And I mean, I'm very being uh surface level and generalizing, but like, you know, it's not like when I took my CFP that they were actually talking about this stuff. And it's kind of like how big pharma is actually paying for medical, right? It's like you you've got your hand in the cookie jar and you're also, you know, telling us how to do things. It's this symbiotic relationship with it's conflict of interest. That's the word that's coming to mind. Like it's a conflict of interest. And so I don't know if a lot of advisors are actually even aware of this. And if they are aware of this, I don't know if you're actually educating your clients on this. So, like I always say, take what I talk about, take what I teach you, go do your own research, empower yourself, watch the video, read the books, learn from your own perspective, and then make your decision. But one thing I do want to do is to plant the seed so that you are able to actually take the blinders off, right? Like we've been so conditioned to believe that other people know more than us. And the financial industry on purpose has become a complicated industry on purpose to have us doubting ourselves and to have us outsourcing our decision making to someone who, and I'm air quoting, might be more knowledgeable than us. But I think the biggest thing that we can do for ourselves is to educate ourselves so that we can actually learn about what's happening so that we can make very informed decisions. So I'm gonna let you listen to Ian and I'll be back in a bit.

IanCarroll:

So, as I did all this research across basically every industry in the economy, I found the same major thing over and over and over again. It's a big club and we are not in it. So naturally, I got curious just how much of the stock market of all the publicly traded companies do BlackRock, Vanguard, and State Street actually own? Like, how big is their share or slice of the pie? So I took the top 100 companies on the US market, companies that you're very familiar with, like Tesla, Pfizer, Starbucks, Verizon, Lockheed Martin, Home Depot, you know, normal companies, the big ones, the top 100. And I built a giant spreadsheet that scraped their stock ownership information live off the web and into my charts. And then I used all that data to build this sheet showing what percentage of the top 100 companies in America are owned by each of these investment firms, banks, and billionaires. And even though I had already been doing this research for months, this kind of shocked me. Vanguard, BlackRock, and State Street combined represent more than $5 trillion invested in the top 100 companies. On the right of this chart, you can see that collectively, that represents 42.2% of all the shares of ownership in the top 100 companies. If you expand your scope to the 25 biggest financial institutions, they collectively own 83% of the shares. There are hundreds of them above us on these lists. So now it's important to slow down and explain what a share actually is. Like what does it represent? What does it mean? Because a lot of us think of shares of stock as something nebulous, like a form of gambling for white guys in suits, and kind of, but a share is way more than that. A share is a share of ownership of a company, and it's a share of the voting rights for how that company is run. Because, in a sick way, all of these companies are actually run democratically, except that you buy your votes. Like the more shares you own, the more votes you get. So if you own 10% of the shares, you get 10% of the voting rights. It's actually pretty simple. You don't vote on every tiny little thing the company is going to do, like what color the packaging will be, or how many Cheerios go into a box, but you vote on the big things, like major policies that the company is going to adopt or reject. Shareholders can introduce their own items for voting. In the 2010s, one of the most popular ones were like various versions of sustainability initiatives like eco-friendly packaging, zero emission commitments, stuff like that. Almost every company in the American market was voting on those sorts of initiatives over the last decade. And there is a reason why that we will get to. But most importantly, shareholders vote on who will sit on the board of directors. And they are the ones that guide the company and hire and fire the executives that actually run the company on the day-to-day, like the CEO, CFO, COO. It's a lot of C names. Those guys are called the C suite because they're all chiefs, you know? So they, the C suite, are hired and fired by the board of directors, who we elect with our shared voting rights. And all of this is determined by shareholder voting. The more shares you own, the more votes you get. You see where this is going yet? Because this is where we kind of crush the typical BlackRock conspiracy theories that you've probably seen all over YouTube and Reddit and wherever else. This is where the finance bros are all screaming that BlackRock doesn't actually own the shares, and that's that's kind of correct. But let's start by just meeting the big three: Vanguard, BlackRock, and State Street. Although State Street is actually owned by BlackRock now, so it's kind of awkward. But anyways, these guys are investment management firms, and you probably are invested with them. At least if you're old enough and well off enough to have any sort of retirement account or investment savings account or anything like that. Maybe if you dabble in buying ETFs or index funds or the like, the big three mostly manage other people's money for them. They invested across wide sweeping portfolios of stocks to just like minimize risk and make your wealth grow slowly over time without you know losing it all. Vanguard pioneered this mutual fund model decades ago and then BlackRock elevated it with popularization of index and exchange traded funds. So now you buy a share of, let's say, I don't know, BlackRock's Voltron 3000 fund or whatever. I just made that up. BlackRock's Voltron 3000 fund has a whole bunch of shares of 3,000 different companies all across the markets in its portfolio. And you have a tiny little slice of that portfolio and of its profit or loss, right? So because your risk is now spread out across 3,000 different stocks, you're not going to lose it all when Circuit City goes bankrupt because you thought it was going to go to the moon. But you also won't get rich when GameStop does go to the moon. So, you know, whatever. They don't really want you getting rich anyways. So it's true though, most of the money that the big three manage is not their own money. Most of it is actually our retirement accounts, like trillions of dollars of our retirement accounts. So all the half-wits out there that just accept what they're told in business school as like gospel fact think, oh, nothing to see here. It's all good, bro. BlackRock doesn't actually own any of these companies. They're just holding it for us. Like, right? Eh, sort of. You can look this up for yourself. It's not hard to figure out when you buy a share of a mutual fund or an index fund or an exchange traded fund, all the types of products that the Big Free are selling. You sign over your voting rights to the fund managers. To BlackRock. Sure, they are managing your money, but they are also managing your voting power. You are now a beneficial owner of a share of their fund, not the underlying shares of the corporations they are investing in on your behalf. And so when we say that BlackRock, Vanguard, and State Street own 42% of all the shares in the top 100 companies on the market, that means that they control 42% of the voting power. Add in their buddies, and the top 25 financial institutions control 83% of the voting power. That means they control all of these companies. They pick the boards of directors, they pick the policies, they decide how things are going to run, when companies will do share buybacks or dividends, all the rest of it. Obviously, they're not all powerful, but by the rules of their own game, they've basically got it all locked down. And perhaps most subtle and sinister of all, this changes the nature of capitalism in a fundamental way. Because fiduciary duty is a legal term binding these companies and their chief officers to act in the best interest of their shareholders. And honestly, this makes perfect sense. The whole point of a public company is that this company serves our whole community or country or state or whatever it is, and we can all buy into it and have a say in how it's run. And in exchange for taking our investment money, they have a duty to do what's best for us, the investors. But that's not how the world works today. We are not the investors that they are beholden to anymore. Now, all of these companies' fiduciary duty is to the bankers and the fund managers and the Larry Finks of this world. They are legally bound to do what is best for them, not for you. And if it's best for them to sell baby food with 177 times the legal amount of lead in it, well, they're gonna do it. If it's best for them to sell you untested pharmaceutical products, then they're gonna do it. If they'll make more money filling the food with drugs and poisons, not only are they gonna do it, they are legally obligated to. It's their fiduciary duty, and they can actually be fired if they don't.

ErinGray:

Okay, so I will put his information in the show notes. You can go watch the full video on YouTube. He's highly insightful. He has done his research. Like I said, you do your own research, you do your own fact-finding and digging and make your own decisions. I just want to empower you and to educate you as to what is actually happening with the stock market. And if anything, I want to further reinforce that you are your number one investment and that your knowledge and your skill sets and your mindset and your wealth consciousness and self-concept and your financial concept and your financial consciousness and your financial literacy, those are all assets that you own that can never be taken away from you. So when you think about where do I need to put my money, where do I need to invest, I want you to really ponder first within me first, right? Yourself. The answer needs to be investing in yourself first, always. And then wherever else you want it to go. But increasing your financial literacy, your knowledge, and your wealth consciousness and your self concept is numero in a. Okay, my friends. I'll see you in the next episode.