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01 / 05
The Democratization of Investment | Podcast Highlights

Blog Post | Financial Market Development

The Democratization of Investment | Podcast Highlights

Chelsea Follett interviews Jennifer Schulp about how technology and regulation are shaping the future of investment.

Jennifer Schulp —

Listen to the podcast or read the full transcript here.

Tell me about some hopeful trends or progress we are seeing in the financial industry.

One of the most hopeful trends in the financial industry is broader access to financial investment. Traditionally, investment in the stock market has been limited to the wealthy. Investing in the stock market is really important because, over the past decades, the S&P 500 has returned approximately 8 percent per year, which is way more than other non-equity investments.

Financial access has improved tremendously over the last 50 years. In the mid-70s, to make a stock trade, you had to call your broker on the phone and tell them what you wanted to trade, and they would charge you something like $50. So, you didn’t want to place a trade unless you were placing a large trade because otherwise, the fee would overwhelm the trade. And you didn’t want to trade very often. All of it made it very difficult for regular people to invest in the stock market. Over the course of decades, those fees came down as there was additional competition brought into the brokerage space.

In the 1990s, we saw the rise of internet trading, which allowed you to place trades on your own. In 2015, Robinhood started offering no-commission trading on a phone app, which allows people to trade regularly without worrying about fees eating into their profits or adding to their losses. People can now take some money from each paycheck and put it in the stock market. That’s been huge. The entire brokerage industry is now moving towards phone access for easy, cheap trading, and that’s made a huge difference in the number and type of people accessing investment in the stock market.

In 2020, during the pandemic, we saw a massive rise in retail trading that many wrote off to people being bored while they were stuck in their homes. However, a lot of those investors have remained in the market, so what might have started as a pandemic-induced interest in the stock market has become part of a long-term trend towards additional retail trading that has brought in more racial minorities, more low-income people, and more young people.

Easy and cheap trading has also allowed people to experiment with the stock market and learn by doing. There was a study that came out not too long ago by FINRA and NORC at the University of Chicago that looked at the investors who opened accounts in 2020. And they found that those who stayed in the market showed an increase in their financial literacy. Having this access helped them allocate their capital better. So, we have more people invested in the larger economy, and they are getting smarter about it. The benefits will compound over time.

What are some of those potential benefits?

Certainly better personal financial outcomes. Of course, some people are going to make poor decisions. You can’t say, “Because you put money in the market, you’ll be better off.” But for people looking for long-term investment options, the stock market is the greatest wealth generator we’ve ever seen.

I think this could also drive economic growth for a couple of reasons. One, investment gives people a stake in society and the economy, and that itself can drive growth. Two, having retail investors put money that might otherwise be under the mattress or in a low-interest savings account into businesses allows those businesses to flourish.

Are there any benefits for those who are trying to start businesses?

That brings up a new set of questions. What we’ve been talking about so far has been retail investment in public equities markets. But the stock market doesn’t generally provide startup capital. You have to be a mature company to want to bring an initial public offering that gets you listed on the stock exchange. Private market investing is where startup investing happens. And in the United States, far more money is raised in private markets than in public markets. The average person is not allowed to partake in private investment in the United States, as well as in most economies across the world. In the US, you need to be what’s known as an accredited investor, which essentially means you make more than $200,000 a year or you have a net worth of over a million dollars.

This is a very arbitrary standard. You could win the lottery tomorrow and suddenly become an accredited investor, and that doesn’t make you any smarter at investing than you were the day before. It doesn’t make you any more of a capable investor than someone who, say, studied startup investing in their MBA program but isn’t yet making enough money to be allowed to invest themselves. And all of this is a problem because it means the government is standing in the investor’s shoes and making decisions for them. Are they smart enough? Are they rich enough? Is this a good idea for them?

Let’s talk about entrepreneurs, as you asked. People trying to start businesses tend to turn to their community. They tend to raise money from the people that they know best. But if you are a minority or live in a rural or low-income area, you likely don’t know many people who meet that accredited investor standard. You’re already at a disadvantage in raising money and getting your business off the ground. That hurts entrepreneurs in less wealthy communities, the economy as a whole, and potential investors who don’t have the opportunity to share in the growth of that business.

The house recently passed three bills looking to reform the accredited investor definition; two have codified an SEC modification to the rule allowing people who have passed certain securities tests, such as brokers or investment advisors, to qualify as accredited investors, even if they’re not wealthy enough. The third bill is a bit broader; it opens up the testing concept to allow, if passed by the Senate and signed by the President, anyone who passes a test to be able to invest as an accredited investor. There will be costs associated with the testing, and it doesn’t get at the underlying paternalism, but it is a step in the right direction.

Could you talk about ESG?

ESG is actually two distinct concepts, and it’s important to identify which one we’re talking about. It can be broken down into a dichotomy that I’ve borrowed, which is value versus values investing.

“Value investing” in the form of ESG just refers to using environmental, social, or governance factors to analyze whether a company faces risks that might affect its financial performance. Where ESG sounds a little bit different is when we think about it as “values investing.” That kind of ESG is about sacrificing financial return to reach a certain outcome with your investment, like lowering carbon emissions. Of course, investors should be free to invest their money as they see fit. If they want to invest in saving the whales, they should have that opportunity. But it gets trickier when a company or asset management firm makes those decisions about what to do with their investors’ money without being upfront with them. That’s a question of disclosure and whether or not the funds are being clear with investors.

Government mandates are the key place to focus on here because, ultimately, the market should decide whether investing in ESG is the right way to go. Europe has decided, writ large, that the way to tackle climate change is to centrally plan how money will flow through the financial system to choke off funds for non-green investment. Supporting that is a host of European directives on sustainable finance that include a lot of disclosure by companies about how they, too, will meet net-zero goals. Europe has what we in the securities industry refer to as a “double materiality standard,” where European companies are not only supposed to disclose information that might impact the company’s financial performance but also how their company impacts society and the environment. All of this comes with pretty heavy costs.

The United States is now considering how far to follow Europe down that line. The Securities and Exchange Commission (SEC) has proposed a sweeping climate risk disclosure framework. It’s different from the European framework in that the SEC at least recognizes that they don’t get double materiality; the SEC is only allowed to require companies to disclose information that investors might find useful in deciding whether to invest in the company. However, the SEC’s climate risk disclosure rule goes well beyond that. It would require all US public companies to disclose an awful lot of information about climate risk, including scope one, scope two, and, for many companies, scope three, greenhouse gas emissions. What’s important here is that this type of disclosure is not a small undertaking. It’s going to be a massive drag on public companies.

You also oppose government rules that would restrict voluntary ESG-related disclosures. Can you tell me about that?

Sure. There’s been some legislation introduced, some of it passed, from state-level Republican legislatures that prohibits the use of ESG in investment. But this broad prohibition is also not the right answer. In fact, it is itself values-based and seeks to impose an ideology onto investing.

In addition, there are real costs to blanket prohibitions of ESG. One is that ESG as value investing can sometimes yield better returns. Pensions in some states that have introduced legislation to prohibit the consideration of ESG factors have released analyses showing that over the course of 10 years, the pensions might be losing billions of dollars in returns by having their investment pool artificially limited.

Another example is Texas, which prohibits localities from doing business with financial firms that are, quote, “boycotting the fossil fuel industry.” A study done not too long ago showed that the cost of municipal borrowing has gone up in Texas because many firms exited the market, meaning taxpayers in Texas are now paying more for municipal building projects. We shouldn’t forget that narrowing the scope of investment opportunities also narrows the opportunities for growth.

Could you speak about the potential impact of AI on investment and the financial industry?

Many people don’t understand how much AI is already part of the investment industry. For example, AI is already involved with investment research, predicting stock value, and portfolio management. That’s all going on behind the scenes.

I think that there’s real potential with respect to financial advice. AI could make investment advice as accessible as trading on your phone is today. For a long time, we’ve had what are known as robo-advisors, which are essentially chatbots with a narrow tree of advice based on a set of questions. More sophisticated large language models could give individualized investment advice that considers all sorts of circumstances at a very low cost. In the future, you may be able to go on your computer or phone and tell the LLM, here’s what my investments look like; what should I do next? That’s powerful stuff, assuming that the regulators allow something like that to happen.

Bloomberg | Financial Market Development

South Africa Private Investment Plans Triple as Reforms Advance

“Planned capital investment in South Africa surged last year as private commitments tripled, while government projects excluding state companies declined, according to a report by Nedbank Group Ltd.

The value of newly announced plans climbed 16% to 705.6 billion rand ($44 billion), the lender said in its Capital Expenditure Project Listing report released Monday.

Private firms committed to investing 382.5 billion rand, up from 116.2 billion rand in 2024. Major initiatives included Vodacom Group Ltd.’s 85.2 billion-rand expansion and modernization of digital infrastructure through network upgrades and an accelerated 5G rollout, and NT55 Investments’ planned 50 billion-rand inland port in the central Gauteng province…

By contrast, the value of projects planned by the government itself tumbled to 2.9 billion rand last year, from 204 billion rand in 2024, when the authorities announced a 43.7 billion-rand housing and community development program and a 35.8 billion-rand second phase of the Rooiwal wastewater project.

Years of underinvestment and mismanagement have left Africa’s largest economy with a massive infrastructure backlog that’s curbed output. President Cyril Ramaphosa has previously estimated that the country needs as much as 1.6 trillion rand in public-sector infrastructure investment and a further 3.2 trillion rand from the private sector for it to achieve its infrastructure goals by 2030.

The government has sought to crowd in private investment through reforms while shifting spending toward growth-enhancing infrastructure. Measures under Operation Vulindlela — a task force set up by Ramaphosa to address energy and freight constraints — are progressing, with 47% of reforms on track and most of the remainder advancing despite delays, the National Treasury said Friday.”

From Bloomberg.

Banco Bilbao Vizcaya Argentaria | Charity & Aid

1.1 Million Mexicans Lifted Out of Poverty Thanks to Remittances

“During the first nine months of 2025, remittances to Mexico totaled 45,681 million, 5.5% less than the 48,360 million received during the same period in 2024.

Despite this decrease, remittances increased in several states in the central-southern region during the first nine months of the year, notably Chiapas (+1.2%), Oaxaca (+2.0%), Puebla (+1.9%), Guerrero (+4.2%), Veracruz (+0.9%), and Morelos (+1.3%).

1.1 million people in Mexico have been lifted out of multidimensional poverty thanks to remittance transfers. If remittance income is not included in the 2024 measurement, the population living in poverty in Mexico would increase from 38.5 million to 39.6 million people.”

From Banco Bilbao Vizcaya Argentaria.

Blog Post | Globalization

Remittances and Our Freedom to Give

A crucial alternative to foreign aid is being threatened.

Camille Miner —

Summary: Remittances are a lifeline for millions around the world. Unlike foreign aid, these funds cost taxpayers nothing and flow directly to those who need them most, improving health, education, and opportunity. Yet new proposals to tax and restrict remittances threaten this vital support system. Reducing the freedom to give across borders would needlessly destroy opportunities for crucial economic development.

Remittances, the funds immigrants send to family members in their countries of origin, are under political fire. Many US policymakers favor taxing these payments and placing bureaucratic hurdles in the way of those trying to send money home. The rationale? Keep more money circulating in the US economy. It’s a seductive argument for many. Yet this idea is not only shortsighted but harmful.

First, consider the scale of these payments. The average global migrant worker sends 15 percent of their salary back home. That is only about $250 every 1 to 2 months, but it represents one-half the average monthly salary after tax of a worker in El Salvador, and just above the average monthly salary of a worker in Bangladesh. Thus, the flow of cash from a migrant worker can determine who back home can afford a metal roof, a well, pavement, nutritious food, payment of debt, medical coverage, or education. 

The United Nations estimates that one billion people worldwide either pay or receive remittances. The World Bank anticipates that global remittance payments sent to low- and middle-income countries (LMICs) will total $690 billion by the end of 2025. The amount of money sent by migrants more than tripled global foreign aid money in 2021. 

Personal Remittances, Received (Current US$)

Unlike foreign aid, remittances don’t cost US taxpayers a dime. According to Robert Stojanov and Wadim Strielkowski, remittances are absorbed nearly twice as effectively as official development assistance, or foreign aid for development. The absorption rate represents how effectively money is used and traded in the economy it enters. In other words, money given by remittances is often more effectively used in local developing economies than money provided through foreign aid.

Remittances are especially important for families because they can reduce child mortality and child labor. When parents receive steady financial support from family members abroad, they are better able to support their children and afford medical care for them. The children, in turn, are less burdened by the need to work and can attend school.

Remittances are also crucial in times of economic uncertainty. During the COVID-19 pandemic, remittances accounted for more than 30 percent of the gross domestic product (GDP) for The Gambia and Lebanon, providing essential support for recipients and boosting local economic activity.

In the early 2010s, internet and mobile phone access were still limited in many developing countries. However, in just the past decade, the world has seen a 30 percent increase in internet users worldwide, and the World Bank estimates that 84 percent of people in developing countries own a mobile phone in 2025. Importantly, the adoption of mobile phones correlates with the adoption of mobile money accounts, facilitating millions of remittances.

Western Union is the dominant remittance handler in the developing world and has historically used its comfortable market share to impose high fees to transfer remittances. However, because of the spread of mobile devices in the developing world, fintech companies such as Wise and Remitly have since entered the remittance market, offering users lower transfer fees and forcing Western Union to lower its fees in turn.

Prior to the information age, most of Africa suffered from a lack of financial infrastructure, such as automated teller machines (ATM), banks, and tellers. However, since the distribution of mobile devices, companies such as Wave and M-PESA have experienced strong adoption of mobile remittance transfers. These mobile money payments, like those traditionally handled by Western Union, reduce poverty and income inequality in developing countries, but with much lower transfer costs and infrastructure needs. 

Remittances also represent an essential human freedom: the right to give. Just as Americans can freely send money through Venmo and Zelle without government interference, individuals who transfer funds internationally should enjoy the same freedom. However, the recently passed One Big Beautiful Bill Act will put a 1 percent excise tax on remittances.

A world with greater freedom and improved economic development demands that all people are free to send and receive money. As calculated by the Center for Global Development, “for many low- and middle-income countries, the impact of the remittance tax far outweighs the impact of known US aid cuts conducted so far.”

During an interview with me, Helen Dempster of the Center for Global Development stated that a remittance tax could decrease remittances themselves. This decrease in transfers may incentivize banks and lenders to charge higher fees. According to Dempster in the interview on July 4th, 2025:

There’s been a campaign for 20 years now to reduce the cost of sending remittances and many remittance service providers, particularly the large ones like Western Union, are keeping fees stubbornly high. I think if they wanted to keep fees low to encourage remittances, they would have reduced their fees by now. So, my sense is that they will pass the whole amount of the cost on to consumers.

Because of this tax, some of the most powerless individuals will suffer the cost, and the US will earn negligible revenue. As we’ve seen in past decades, greater freedom to migrants and competition between lenders directly improve the lives of the global poor. Ultimately, preserving our freedom to give not only protects our human rights, but positively transforms the day-to-day lives of millions and the future of the developing world.