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The latest wave of Wall Street’s “democratization” pitch is more aggressive than ever, arguing there is something almost virtuous in offering assets previously accessible only to wealthy individuals to middle America. Firms like State Street and BlackRock have launched new exchange-traded funds (ETFs) to offer retail investors private credit strategies. Empower, the nation’s second-largest retirement services provider, opened access to private equity, private credit and private real estate funds to its 19 million participants in May 2025, noting that “87% of companies in the United States with revenues over $100 million are private” and that “125 million defined-contribution investors have had no access or exposure to those companies.”
But that’s only part of the story. “There’s a lot of money in mom and pop, mainstream investors,” Barry Ritholtz, the chair and chief investment officer of Ritholtz Wealth Management, told Investopedia. “Wall Street has a tendency to dangle the shiny new object in front of people, to hit that FOMO button, and a lot of people end up chasing things they really shouldn’t.”
As often as not, the “democratization” pitch, critics say, is less about equal opportunity and more about grabbing your money.
Key Takeaways
- Investment products that were previously reserved for wealthy individuals are now being made available to retail investors.
- The promise is that these investments offer higher returns, diversification, and a more equal playing field in the market.
- Wall Street calls this democratization, but skeptics say they are just after your money.
Money Grab
Ritholtz said he’s skeptical whenever the big financial institutions invite the public to join them.
“The intention is to make money. That’s the motivating factor,” he said. “Whenever I see a… ‘hey, this is an institutional product, let’s offer it to mom and pop,’ a red flag pops up. It smells a little bit like a capital grab. The thought process is, ‘Well, we could sell this to institutions as we always have,’ or ‘Hey, there’s a giant pool of capital, let’s go for that.’
Fast Fact
At the end of 2024, Americans had $12.4 trillion in assets in their defined contribution retirement plans, such as 401(k)s. That’s a massive market for those offering up private market assets.
Peddling Assets That Are Often Unsuitable Rubbish
Wall Street has long been chasing retail investors’ money—America’s 401(k)s make up a substantial amount of what’s invested in America’s capital markets. Chasing money isn’t necessarily an issue if retail investors would also benefit from the arrangement. Fund managers offering the new private market assets for Main Street access argue they’re giving everyday Americans a chance to make better returns. Not everybody agrees with that assessment. What the clever marketeers on Wall Street fail to mention is that many of these investments charge steep fees, are hard to get your money out of, and don’t deliver as advertised.
Ritholtz said he can see why some might see some appeal in the new investments being pedaled by Wall Street. However, he warned that they aren’t suitable for many investors, due in part to a lack of liquidity (the ability to buy and sell easily), and that there’s no such thing as a perfect asset class. Some investments will outperform, he said, but most will not, citing the special purpose acquisition company frenzy a few years ago as an example.
“If you are a Main Street investor… with a modest portfolio, you have to ask yourself, ‘What do I get out of investing in alternatives? Is this something that meets my needs in terms of cost? In terms of liquidity? In terms of access to the best managers?’ And all too often the answer is ‘not really,’” he said.
Profiting from Inexperience
Prince Dykes, the founder and chief investment officer of Royal Financial Investment Group, agrees that there’s more to Wall Street’s democratization pitch than meets the eye. He applauds that the market is offering greater accessibility, but the potential consequences are a concern.
“While this opened new opportunities, it also attracted industry efforts focused more on profit than genuine accessibility,” he said. “True democratization isn’t just about opening doors; it’s about empowering investors with knowledge, tools, and safeguards to participate responsibly.”
Tip
“Democratization alone can make individuals poorer if it isn’t accompanied with financial literacy and regulatory oversight,” Dykes said.
The Bottom Line
Sometimes, all it takes is a couple of success stories, jargon, and a bit of mystery to make the big institutions on Wall Street lots of money. Not all the alternative investments now being offered are bad. However, many of them don’t live up to their hype and use “democratization” as a way to pitch their wares to potentially naive retail investors who just need a solid bedrock to retire on.
