BlackRock, Vanguard, and State Street: Do They Really Own the Market?

BlackRock, Vanguard, and State Street manage trillions of dollars, but they do not own the market. Ryan explains what asset managers actually are: intermediaries who run funds on behalf of investors. When you put money into a Vanguard index fund, Vanguard holds the underlying shares in trust for you. They charge a fee to do it; they do not own what is inside the fund.

The more legitimate concern Ryan raises is not ownership but influence. Because these firms hold voting rights on behalf of massive pools of assets, they have significant say in corporate governance. Ryan and Aaron walk through why this matters, how it compares to how any advisory firm operates, and why low-cost, diversified investing in these funds is still a sound strategy for most people. A calm, clear response to something that often gets exaggerated online.

Find "Your Fiscal Physical" the book on Amazon

If you have suggestions or feedback, please email us at: Podcast@AlchemyWealth.com

And, as always, Stay the Course!

Transcript

Welcome And Financial Literacy Mission

SPEAKER_00 0:01

Welcome to the Fiscal Physical Podcast. Jonathan C2E is Richard Town with the founder of Alchemy Wealth Management and author of your Fiscal Physical, Ryan Nelson. Tune in to gain valuable insights and practical tips as we simplify complex financial concepts into digestible lessons. From budgeting to retirement planning, this podcast is your go-to resource for mastering financial literacy.

Aaron Hoisington 0:33

Welcome everybody to this week's episode of the Fiscal Physical Podcast. My name is Aaron. I am here with Ryan Nelson, founder of Alchemy Wealth Management. Uh, my financial guru, that's what I call him. And uh I'm uh I'm excited to uh to have us here today to uh bring you guys some uh financial content. And uh Ryan, how are how how how's everything going in your life today, man? Uh it's going really well. How about uh how's your world? You know, can't complain. Can't complain too much over here. You know, another day above ground, and you know, excited to uh dive into this week's topic. Uh you ready to get started? Let's do it. Awesome.

The Big Three Ownership Myth

Aaron Hoisington 1:08

So I I do have to preface this. I I was actually listening to a different podcast, and this topic was brought up about like it was revolved around like who owns everything, or everything's owned by like, you know, there's a few companies or whatever. And the the podcast made reference to the the big three um asset managers known as BlackRock, Vanguard, and State Street. Okay. And I I was I honestly I I'd heard of Vanguard before. I I don't know if it I just in general, but I hadn't really heard of BlackRock or State Street before. So I was like, well, this is interesting. So I did a quick Google search and I was like, holy smokes, like it has a lot of information on like what these companies own or where they're invested in, or or how exactly it kind of works in relation to like the S P 500. And you know, the the the podcast I was listening to, I don't, I mean, I think it was more of like a getting clicks on it or whatever, but they were like, oh, this they own everything, everything you you buy that's owned by them. And I was like, I don't know how valid that actually is, or uh yeah, I guess it's maybe a way of looking at it. So um I'm curious, Ryan, to uh if you can shed some light on on into these companies and provide some you know context about how they operate and what what that actually means by I guess owning everything, if you will.

How Index Funds Actually Work

Ryan Nelson 2:22

Yeah, so um yeah, I think I I've definitely heard similar things, and I think it's oftentimes presented far more dramatically than maybe the reality is, right? Um but um yeah, they are three massively large companies, and they're not the only three big companies. There's certainly other other large uh companies out there. Um but really so what each of those three you mentioned BlackRock, Vanguard, and State Street, um, what they all have in common is they're what we call asset managers. So they run like mutual funds or ETFs exchange traded funds and retirement accounts and institutional portfolios and things like that. Um so what's interesting is is there might be like Vanguard, like you said, most people are probably familiar with Vanguard. So Vanguard has a fund, and then you and I might put our money into that fund, right? And what's interesting is so that fund is buying a combination of different underlying securities. So that fund might go by Apple and Google and Walmart and Target and Amazon and right, all those big companies we know of. So we go buy uh let's say an SP 500 fund from Vanguard, SP 500 fund goes and buys the 500 biggest companies. Um, so what's interesting is it's like, well, and we own the share of Vanguard. So so who owns that? Right, yeah. I mean, is it Vanguard that that that owns all that stuff, or is it our money and we own it, and they're just the intermediary that created a fund and charges us a fee to allow us to conveniently buy the S P 500. Um so the reality is like Vanguard doesn't own those shares. We, you and I, own those shares. Right. Vanguard is running a business um that profits and takes a fee out of the out of the SP 500 fund, right? Um, but they don't really own those shares. So I do think it's like very misleading. You hear you see this stuff all the time. Um and it's yeah, and it and they make out these like companies to be like the enemy or the the secret ownership or like the Yeah. So I mean the the reality is like it's it's relatively misleading, I think. Um, but the fact of the matter is these are massively large companies, they are asset managers. So that what that means again is we they they create some sort of fund um that can be invested in. We as individuals choose to put our money into that fund, and then that fund is invested in you know apples and Googles and Walmarts. So really they're the intermediary. So I take my $100 put in the Vanguard fund, the Vanguard funds putting that money into an Apple, Google, Walmart stock, right? Whatever. Um, and they're again just the intermediary and they're taking a few to do that. So that kind of paints the picture of like what they actually are. Um, but uh they do own a lot of these index funds and they they a lot of these companies by way of these index funds and stuff. So they do definitely have um some power, so to speak. Um, and um they are involved in a lot of these transactions. Sure. Um so what I would say though is um yeah, like they don't so they don't own the m the market. They really are a giant like middleman.

Aaron Hoisington 5:33

Um I would put I think that's a good way to put it. That that really kind of rang true for me. It's like it's like hey, they they are a middleman in this, so they do play a role in that. But it's they profit from it. They they profit from it, exactly. Yeah, so that sorry, that just like really clicked for me. I was like, oh, okay, like that that's kind of what you think of them as.

Ryan Nelson 5:49

It's in some ways not too dissimilar from like Alchemy Wealth. So like my clients, um you know, like I manage some of the my clients' money, um, and but I, you know, so I manage millions and millions of dollars. Um I don't own that money. My clients own that money, right? And I take those millions and millions of dollars and we invest in these different companies, yeah, but I don't own those companies. Exactly. My clients do. And I charge my client a what I believe is a fair fee for that service, so I profit, but I'm not the one that owns these companies.

Aaron Hoisington 6:21

So it's it's a very, very similar thing. Yeah, yeah. You break it down to more of like a I guess a relatable level like with that too. But I no one's going out there and saying alchemy owns the world or anything like that. No, not yet.

Ryan Nelson 6:32

Not yet.

Proxy Voting And Real Influence

Ryan Nelson 6:34

But so the real issue, it's not really secret ownership. Where though there could be um where I think like if you're going to kind of go down this uh rabbit hole, so to speak, uh the real issue, so to speak, is influence. So these are very, very large institutions, and these firms often have the voting rights that are shared to the funds that they manage. So if there's you know billions of dollars in these funds and BlackRock is the intermediary, the middleman here, um, they then might have all the voting rights. And so even though you and I put our money into it, BlackRock or Vanguard or I share or uh Strait Street might have the voting rights. So you can see how much influence they have. So to me, that'd be more of the like theoretical potential concern is that these companies do have a lot of influence. Now their influence is directly tied to it's almost like us voting with our money. Like we choose, do we want our money to be in Vanguard or State Street or BlackRock, right? And so it's like hard for me to have too much of an issue with me choosing, say, Vanguard and then being upset that they have my money. Like I chose to put my money with them, right? Um, like if I didn't like their the way they manage their votes, I could have put it with State Street or one of the other hundreds of different providers out there, right? But oftentimes we say, like, oh no, I like Vanguard because it's low fee. Well, okay, then you're if that's what you value, perfect. The repercussions are Vanguard now is going to vote on your behalf. Um if you don't care about the low fees and you just want to go find some provider that votes in alignment with your values, like that's also completely reasonable. And if you're fine paying a higher fee to do that, that's completely reasonable. Um, but that it is important to realize that these companies do hold a lot of voting power. Um, and that could I can completely understand how somebody could be kind of maybe surprised or taken aback or um not super uh thrilled with how powerful these companies have been from a voting standpoint, right?

Aaron Hoisington 8:38

If that makes sense. Absolutely, yeah. And that kind of kind of feeds in. I think I don't want to look at it like I'm I'm not a real big conspiracy guy. Sometimes I'll get into a rabbit hole. I'm like, whoa, what are we working with here? kind of piece of it. But like I feel like with this, um I feel like one of the main takeaways is is is not panic when it comes to these, like like being like, oh my gosh, because you could just Google like how much and it's funny that I always think it's funny that we use the word Google as like a verb too. That's how I look my information up. But like um you you look at it and you're like, oh wow, they can they are invested in so much of their these major stake or shareholders in these things. It's like yeah, but does that really I guess like the the influence piece of it is I guess more of what's maybe a little concerning if it doesn't align with your values, right? Um, but it's not like this is a new thing, I suppose.

Low Fees As Delegation Choice

Ryan Nelson 9:32

Yeah, yeah, yeah. So like like you said, it it's really this is really yeah, m it it's not about like some grand conspiracy, it's really about like the rise of these low-cost investment options. Um and when you hire a con so like you could go out and buy each of the 500 different companies in the SP 500. Now it's not practical to do. So what you do is you want you want to delegate some of that. So you buy an ETF, a fund that will hold that you've delegated the responsibility of buying the 500 companies to this fund, and you pay this fund like 0.02 or 0.03%. So you pay them this tiny little percentage to delegate this to them. Like you're this buying a fund is an is uh an act of delegation. And most clients don't vote, like it most clients who own individual stocks don't vote. They don't vote, right? Um, so like this really is an act of delegating some responsibility. And so as you delegate these responsibilities and you delegate some of them to the Black Rocks and the Vanguards and the state streets, um, like it sort of makes sense. Like we've had thousands and thousands of people delegate responsibility to these companies. Now these companies are responsible for voting for thousands and thousands of people. Yep. Um, so yeah, it's it's not like a conspiracy theory in any way. It really is just the result of a lot of people trusting these companies. Um and now these companies they've you know, they've kind of we've voted for them in some way of investing our money with them, and now they have like a lot of power. And um, you know, my takeaway is it's not really good, it's not really bad, it just is what it is. And these companies happen to be the biggest companies in the world or some of the biggest asset managers right now. Will they be 50 years from now? I don't know. They weren't necessarily 50 years, it wasn't necessarily these three companies all 50 years ago. Um, so I'd say, yeah, no need to panic, no need to really stress about this at all. Really, my two cents. Totally.

Aaron Hoisington 11:21

Yeah, but that really kind of puts my mind at ease just because like you hear that, you see it, and it like once it gets broken down, it's like, well, yeah, I think it's something to be aware of, but like, does do you need to lose sleep over it? Probably not.

Ryan Nelson 11:32

But but it is good to be aware of. Yeah, so it is good to know when you own these companies, yeah, you are delegating sort of um that you these managers are like stewards for you and they are gonna do proxy voting for you. Um, so yeah, you're you're outsourcing these decisions, and that's completely reasonable. In fact, I think it makes sense for most people, but just know that yeah, you are delegating these decisions, and and um I don't see any necessarily issue with that as long as you're aware. Um, so yeah, I'd say BlackRock, Vanguard, State Street, you know, any of these other big asset managers, you know, they don't actually literally own the market. Um, they do manage trillions of dollars. That's a wild word, yeah. Yeah, yeah, yeah. Quite literally trillions. It is yeah, and they sit in the middle of these enormous amounts of capital, and so they do have a lot of influence. So you can't deny they have a lot of influence, but it's also not accurate to say they own all right all of this themselves. Um so yeah, I'd say just be an informed investor, pay attention, ask these questions, kind of staying focused on that long-term outlook, right? Staying the course, if you will, um, and continue to focus on like these low-cost solutions that are perfectly can can be perfectly acceptable to delegate as long as you're okay with the repercussions of giving up things like the proxy voting and stuff is is a completely fair trade-off for a lot of people. Um, so yeah, just being an informed investor, I think, is important. Um, you know, uh oftentimes I think these stories around this are a little overblown as well. Yeah.

Aaron Hoisington 12:58

Awesome. Well, I appreciate it, Ryan, as always. I I really uh you break things down and kind of I mean break it down in the digestible way where I'm like, oh, cool, that makes sense to me. Like uh versus like if I hear it maybe from somebody else or some from a different source, I'm like, now that's just gotten me worried, right? And a piece of it. So I I I think that's awesome how you're able to do that. So really appreciate it, and hopefully listeners feel the same way. And uh um, thanks for hanging tight with us here during this one. I think it's it was this was a cool one. I really enjoyed like when we can kind of break down these things and like I don't want to say we you know that you uh you know debunk them per se, but it's like hey, you actually like actually talk about what they actually mean, and that's a that's a that's a big piece of you know obtaining that financial literacy that I think that we're all about here on the physical physical podcast.

Most Painful Injuries Storytime

Aaron Hoisington 13:43

So um thank you everybody for listening and uh we'll be right back on the other side of this with some uh personal stuff. Uh hang tight.

SPEAKER_00 13:48

And now to put the personal in personal finance.

Aaron Hoisington 13:55

Welcome back, everybody, this side of the physical physical podcast. I got a little bit of a uh some might call it a little bit of a morbid question for you, Ryan, but it could be a fun discussion. Uh you ready? Let's do it. All right. So uh uh listeners out there, really, really think on this one too. Hopefully this one gets the brain a churning. Um, what is the most painful injury you have ever sustained, Ryan?

Ryan Nelson 14:17

What would that be? I mean, I've been pretty fortunate, really, and in all honesty, I haven't had like any crazy, uh, crazy, crazy injury. So I've been really, yeah, really lucky. Um in in I think this is one of those things where like I swear, anytime you're sick, every single time you're sick, you're like, this is the worst I've ever had. And then the next time you're sick, you're like, this is the worst I've ever had. I feel like the human brains like we're just so like programmed to live in the moment that like whenever you're uncomfortable in that moment, it's like that is the only thing you can think about and focus on. And so it's really hard to like kind of go back in time and like think about like what actually is like the most like painful, so to speak. A couple that come to mind one time when I was doing the RTO, I was doing a night leg and I stepped in a uh uh pothole and I rolled my ankle and it was like not great. Uh, but then went and played fantasy football or not fantasy football, uh flag football and stepped on somebody's foot. So I wasn't healed yet, but I thought I could just power through it, whatever. And I stepped on somebody's foot and like re-rolled it again. Yeah. And I got uh what's called a high ankle sprain, which I hear about these like NFL athletes getting high ankle sprains and stuff. And I never, I was like, I don't know what that I've sprained my ankle lots of times, like stop being a baby. Um, but uh like I didn't realize like the bruising like came all the way up to like you know, basically the knee. Right. Uh so like my entire calf was bruised and stuff from this ankle sprain, which is yeah, so that's what a high ankle sprain is, apparently, which yeah, was news to me. So that wasn't great. Um, and then I I actually tore both of my hamstrings at different times in college. Oh wow. Yeah. So those those suck like the whole thing, you know, like uh bruises up and you can't really walk, have to be on crutches. So that's not fun. Um, but and then more recently I burnt my hand really bad. Um and um like where it like had a blister and they had the you know, the emergency room had to like cut it off and um you know, took I don't know, long time to heal. Um so that that was up there as well. Um yeah, I don't know.

Aaron Hoisington 16:15

There's a handful of I mean you just like named off of uh relatively you know, some good injuries there. Sure, yeah.

Ryan Nelson 16:21

I mean nothing like super serious, like I'm still like all of those healed like well, actually the hamstrings haven't healed 100%. But yeah, those they're still like there's like scar tissue in there, I think, and they're still like sore and like the sore voluntary I got a handful of small ones, but nothing serious. But what about you?

Aaron Hoisington 16:38

Yeah, uh yeah, it's it's funny to think back. Um I I feel like I'm like I I've just never I I'm not I'm just never healthy. There's always something that's going on with me. And and I think you made a really good point of like the human brain, like did you know, dials in on whatever that thing is, and it just like, oh my gosh, like my knee is really hurting. It's like, oh, this is the worst pain. I hate knee pain. Then it's like, oh, you know, I tweaked my shoulder, and I'm like, shoulder pain's the worst, like kind of thing of it. But I one of the things I think about that I I I remember is is one of my friends, I think I was a sophomore in high school, I was playing lacrosse and um I I jumped or I raised really high to get uh to try to get a ball, and uh and somebody ran, like checked me, but they like lowered their head and it went right into my collarbone, and they went right under the pad I was wearing and it just snapped my collarbone. And uh I knew as soon as it happened, I was like, oh no, like something's wrong here. Like I can't like raise my arm, like this is like and I could like feel like it, and that was really, really painful. And like I was like on the ground, and then like uh one of the one of my teammates came and like like pulled me up by like my arm. Like that was and that just like I remember like everything like going like white, like it was just like and it was weird because people like say you black out or whatever, but like for me it was just like everything was just screaming. You white it out, white. I yeah, I white it out, which I don't real normally do. Like, and that for sure was like the worst like instant like pain that I've ever had. I was like, oh my god, like this is and like walked off the field and I was like, we gotta go to the hospital. And my parents were like, Oh gosh, and we went and like the x-ray was just like uh snapped, and I was like, Oh golly, like this is bad. Like, so that for sure was pretty bad. Um but uh sounds terrible. Yeah, that was that was and it's still like one of those one of those things that like sometimes if I like you know play a lot of like catch or something like that, with because it's my left arm, like I still like feel it, like and I can still like feel like just with my finger, like where like the dent almost in it. So it almost like reminds me, and I get like kind of sweaty thinking about it. So um anyway, uh fun fun little topic there that we kind of discussed there. So I I'm curious to get the listeners' uh uh ideas on or hear their stories about what the worst injury they've ever had is or most painful, if you will, that you've ever sustained. So could be some good dinner conversation there for sure. As you're sitting around, definitely listening to this podcast during your meal. That's that's the best time to do it. Helps the digestion. So um awesome, Ryan.

Listener Prompts And Closing Notes

Aaron Hoisington 19:04

We'll appreciate it, man, as always. Um, everybody out there, please continue to check us out wherever you get your podcast every Tuesday. Uh email us, podcast at alchemywealth.com, send us a text, whatever you guys want to hear. We'd love to love to cover it. And uh I'll turn it over to you, Ryan, for the final words. As always, stay the course.

SPEAKER_00 19:22

Thank you for joining us for the Fiscal Physical Podcast. Until next time, happy listening. And as always, stay the course. If you have a question or topic suggestions, please email us at podcast at alchemywealth.com. If you enjoyed today's discussion, subscribe to the podcast to ensure you never miss an episode. And consider leaving us a rating and review on your favorite platform. This helps other listeners like you find the channel. For more resources, you can visit Alchemy Wealth Management's website at www.alchemywealth.com or find your fiscal physical the book on Amazon.

Disclaimers And No Advice Reminder

SPEAKER_00 20:00

We'd be remiss if we didn't mention the personal finances just then. First of all, please don't take anything we say as advised. The pre-fitting content is for informational and entertainment purposes only. It's not an offer or a solicitation, nor should it be construed or relied upon for tax, legal, or investment advice. It doesn't consider your personal financial situation or objectives and may not be suitable for you.